Article 43


Sunday, October 09, 2005

Truths On Global Trade

Image by Matt Wuerker

Neoliberal ideology claims that international trade is an important factor for the development of poor countries and their integration into the global economy. Rich governments’ promotion of these ideals has lead them to develop an array of new trade agreements such as the FTAA and CAFTA. These bilateral, multilateral, and regional accords strongly affect people at all levels of the economy - from growers and workers, to processors and consumers - by regulating pricing, tariffs, export levels, and methods of production. Though supporters claim that trade agreements bring sustainable development and economic integration, this is not the case. Rich countries maintain protections of their own exports, while their competitors in poor countries agree to open their markets. Beneficial norms, such as human rights or environmental standards, are set aside. This leads to a “race to the bottom,” in which the only priority is cost effective production, at the expense of workers, resources, and sustainability. Due to these failings, the agreements tend harm development and pull poor countries deeper into poverty.


Since the North American Free Trade Agreement (NAFTA) took effect in 1994, the U.S. trade deficit with Canada and Mexico ballooned to 12 times its pre-NAFTA size, reaching $111 billion in 2004.

· Imports from the United States NAFTA partners outpaced exports to them by more than $110 billion, displacing workers in industries as diverse as aircraft, autos, apparel and consumer electronics

· U.S. workers lost more than 1 million jobs due to growing trade deficits with NAFTA countries during the past 11 years. During the same time, real wages in Mexico fell, while the number of people in poverty there has grown

· In August, President Bush signed the Central American Free Trade Agreement (CAFTA) after it passed the U.S. House of Representatives by just a two-vote (217-215) margin. It expands NAFTA to the Dominican Republic and five Central American countries. In Central America, 40 percent of workers earn less than $2 a day and workersҒ rights are routinely abused in the region.

U.S. Trade Deficit

The U.S. trade deficit in goods and services reached a record $617.7 billion in 2004, or $1.69 billion a day. For the first six months of 2005, the trade deficit was a record $343 billion and is on pace to reach a new record $728 billion in 2005, nearly $2 billion per day.

·In 2004, the trade deficit with China skyrocketed to $162 billion, a 30 percent increase in one year and about double what it was in 2000. This is the largest bilateral trade deficit between any two countries in history. China is on pace for an annual deficit of $213 billion in 2005.

· The record trade deficit with China and our NAFTA partners is a key factor contributing to the loss of nearly 3 million manufacturing jobs since 2001. The rise in the United States trade deficit with China between 1989 and 2003 alone caused the loss of 1.5 million U.S. jobs, nearly 410,000 in the past two years.

Global Economy

· Worldwide, nearly 1.2 billion people live on the equivalent of $1 per day or less and 3 billion live on less than $2 per day.

· One billion people are unemployed, underemployed or working poor; 60 percent are women.

· The richest 1 percent of the worldҒs population earn as much as the poorest 57 percent.

· One in six children work, some 245 million between the ages of 5 and 17.

Credit: CWA

The following is the text version of presentations by the author at the Asian Regional Workshop on Bilateral Free Trade Agreements, held in Kuala Lumpur August 26-28, 2005 and organized by the Third World Network. The entire policy report is available HERE.

Last year was the tenth anniversary of the North American Free Trade Agreement (NAFTA), and nearly all evaluations of the agreement conceded that the period showed negligible or negative results for Mexico. As the developing country partner of the agreement, Mexicos experience under NAFTA has major implications for other developing nations negotiating FTAҒs, particularly with the United States.

A decade later, there is a huge gap between the promises and the reality of NAFTA. In the early nineties, NAFTA promoters asserted that the agreement would usher Mexico into the First World, leaving behind decades of intransigent poverty and underdevelopment.

NAFTA was negotiated over a decade ago. Since then, many countries in Latin America have seen the growth of civil society movements in opposition to the NAFTA trade model. The governments of several nations, notably Brazil, Venezuela, Argentina, and Uruguay, have criticized the model and urged modifications while emphasizing alternative forms of regional integration like Mercosur. The Free Trade Agreement of the Americas (FTAA) is at an impasse.

In this new context, has the United States changed its negotiating style or stance?

The answer, with few exceptions, is no. Instead of heeding this wave of opposition, the United States has dug into its trenches, and in economic policy those trenches are the bilateral trade agreements. From the FTAs, the U.S. government hopes to gain the strength to launch renewed trade offenses in broader multilateral organizations like the WTO and any eventual FTAA. Each NAFTA-style FTA signed not only locks the partner country into a series of pro-corporate measures but also sets a precedent for later negotiations.

This summer the U.S. Congress ratified the Central American Free Trade Agreement. The time it took to negotiate and ratify this agreement was much longer than what the Bush administration had anticipated. Some of the problems are illustrative of whats in store for future negotiations.

Popular protest broke out in most of the nations involved, led by farmers and labor organizations. The political costs for the governments involved are high. Just as the Bush administration was forced to delay ratification in the U.S. Congress due to lack of votes, Central American governments fear ratification will meet with major opposition in their legislatures and in the streets. In Guatemala, the CAFTA debate took a life when a demonstrator against ratification was killed by police. Nicaragua, the Dominican Republic, and Costa Rica still have not ratified, and the Costa Rican president is said to be waiting out his term to pass the hot potato on to his successor. Demonstrations against the incorporation of the telecommunications sector in that normally docile country nearly caused Costa Rica to pull out of the agreement.

In the Andean countries, the situation is even worse. Bolivia is out of the picture because a showdown over the Andean Free Trade Agreement (AFTA) could easily cause the fall of yet another government, caught between the dictums of the economic model and the anger of a people fed up with empty promises. Venezuela under the U.S. nemesis, Hugo Chavez, has denounced all prospects of an FTA with the United States. Both Ecuador and Peru face possible referendums on the issue in their countries and may be barred from participating anyway by the United States, whichҗacting openly as a corporate advocate rather than a governmenthas premised their participation on resolution of several cases of investor claims by major U.S. transnationals.

In both CAFTA and AFTA, rather than take a conciliatory stance faced with the probable negative and destabilizing impacts of the agreements, U.S. negotiators have played hardball. First, they threatened to withdraw or not renew the current trade preferences these countries enjoyחunder the Andean pact for Trade Promotion and Drug Eradication in the Andean case and the Caribbean Basin Initiative and others in Central America. Since many industries had already oriented production toward markets assured under these measures, the threat had real weight. Even government officials have complained that in effect the FTA process means that these nations are forced to concede in non-trade areas such as intellectual property and investor protection only to assure the market access they already have.

Negotiating teams in several countries have complained that the United States gives little and asks a lot. Rice has been particularly sticky. The Central American agreement allows ten years for tariff free entry but farmers argue that time is not the problem U.S. subsidies make it impossible to compete, ever. Andean countries are being pressured to increase their quotas for U.S. rice although a study by the Latin American Economic commission recommends the total exclusion of rice from the agreement be considered due to the pivotal role of rice as a source of food and employment.

Laura Carlsen directs the Americas Program of the INTERNATIONAL RELATIONS CENTER.


Image by Matt Wuerker

Posted by Elvis on 10/09/05 •
Section Dying America
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