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A backroom deal on trade ?

Socialist Worker | June 22, 2007

A backroom deal on trade ?

ADAM TURL explains the behind-the-scenes battles in Washington over trade.

THE CRISIS facing the U.S. empire in the Middle East is also playing out in American efforts to maintain economic dominance in Asia and Latin America.

Four bilateral free trade agreements (FTAs)—with Colombia, Peru, Panama and South Korea—are on the agenda this month for congressional approval, along with a June 30 deadline to reauthorize “trade promotion authority” (TPA) for George Bush. TPA, also known as “fast track” authority, allows the president to negotiate trade deals that Congress must either accept or reject, without amendment.

Also in the balance is the struggling Doha round of multilateral negotiations for the World Trade Organization (WTO).

While the current round of trade deals haven’t been met with the same kind of outcry and opposition as the 1994 ratification of the North American Free Trade Agreement (NAFTA) or the 1999 meeting of the WTO in Seattle, the business press has nevertheless been fretting that the new Congress might nix the deals.

During last year’s midterm elections, dozens of Democrats—especially in working-class districts hit by deindustrialization—talked about the need for “transparency” in trade negotiations.

They were responding to growing pressure from below. A 2006 poll from the Pew Research Center showed 44 percent of Americans thought FTAs lowered wages. The “offshoring” of jobs ranked among the top concerns of voters.

Even the International Monetary Fund (IMF) admits that globalization has lowered labor’s share of national income in developed economies.

NAFTA demonstrated this clearly, with a marked impact on labor in the U.S. and an even worse one in Mexico.

After accounting for inflation, average household income among Mexican workers declined from $8,622 in 1994 to $7,346 in 2004. Meanwhile, thousands of unionized manufacturing jobs moved from the U.S. to Mexico, and studies show the majority of laid-off workers have yet to find employment at similar wages and benefits.

WHEN THE Central American Free Trade Agreement (CAFTA) came up for a vote in 2005, the Republican-controlled Congress barely passed it—the margin was just two votes in the House.

So it was no surprise when House Ways and Means Chairperson Charles Rangel (D-N.Y.) issued a “New Trade Policy for America” in March—a document quickly endorsed by the Democratic caucus, now in control of the House—calling for all future agreements to enforce International Labor Organizations (ILO) conventions, including the right to organize unions and prohibitions on child labor and discrimination.

However, the Panama and Peru FTAs look likely to pass without the ILO provisions—following a May 11 announcement of a deal between Rangel, House Speaker Nancy Pelosi and the Bush administration. What happened ?

The deal between Rangel and Bush was conducted largely in secret—so secret, in fact, that six Democratic representatives penned an open letter in protest.

Democratic strategist David Sirota, writing on, declared that “a handful of senior congressional Democrats and the White House—cheered on by K Street lobbyists—joined forces today to announce a ‘deal’ on a package of trade agreements that could impact millions of American workers and potentially calls into question the entire election mandate of 2006.”

The deal reportedly reprises the toothless labor provisions of NAFTA—which has resulted in zero sanctions for labor rights violations over the past 13 years. Thomas Donahue, president of the U.S. Chamber of Commerce, said he was assured that the “labor provisions cannot be read to require compliance with [ILO] conventions.”

Congressional Republicans say they that this new “bipartisan approach to trade” will extend to the South Korea and Colombia deals.

Of course, if the revamped FTAs contained language enforcing ILO conventions, they wouldn’t have been approved by the Bush administration. For one thing, this would require a strengthening of U.S. labor laws—which are less developed than the ILO conventions.

Secondly, including the conventions would contradict the central thrust of the agreements—to push down wages for U.S. labor and open the way for what amounts to an economic raid in poorer countries to benefit U.S. firms.

A look at the Peru agreement confirms these priorities. According to Oxfam America, the FTA would delay the introduction of generic medicines—benefiting U.S. pharmaceutical companies—and raise drug prices by as much as 55 to 100 percent after five years.

The deal would expose Peru’s agricultural sector—which nearly one-third of the population depends on—to subsidized imports. This could spur a rural crisis, driving more farmers into coca production, and fueling migration to the cities and abroad for work.

Foreign firms in Peru would be able to challenge local environmental regulations. Reportedly, regulations on mining, timber and petroleum investment would also be rolled back, raising profits, lowering wages and undermining working conditions.

NEVERTHELESS, CORPORATE celebrations of a new “bipartisan approach to trade” may be premature. While the deals are a boon to U.S. business, trade with Peru is relatively small—amounting to only $8.8 billion a year ; the same is true of trade with Panama.

In many ways, these FTAs are the “low-hanging fruit,” easily reached. They are certainly part of countering the growing influence of MERCOSUR, the Latin American common market led by Brazil and Argentina. But the deals with Colombia and South Korea are far more important, both economically and strategically. The Korea FTA would be the largest—in value terms—since NAFTA.

However, the U.S. government’s ability to negotiate favorable deals has been eroded by the Middle East crisis—and with China beginning to bypass the IMF as a lender to developing nations. Furthermore, Congress has told the White House that the Colombia and South Korea deals must be renegotiated before they will consider voting on them.

Deputy Secretary of State John Negroponte warned that if Congress rejected the FTAs in Latin America, it would be “a serious blow to Washington’s interests” and a “victory for those people who have a different point of view regarding development in the region.”

Negroponte specifically invoked the specter of Venezuelan President Hugo Chávez and warned that he was not only talking about economics, but “strategic consequences.” What he meant is the U.S. further losing its grip on Latin America—a region Washington considers its “backyard.”

The focus on bilateral agreements is a reflection, in part, of setbacks for the U.S. in the Doha round of WTO negotiations—and the failure of the Free Trade Area of the Americas (FTAA), which was intended to extend NAFTA throughout the hemisphere. The FTAA hit the skids in 2003 when Brazil, Argentina and Venezuela opted to slip the U.S. leash in favor of what Brazilian President Luiz Inácio “Lula” da Silva calls “sovereign insertion” into the world market.

Bogged down in Iraq, the U.S. has been unable to “deal” with its waning influence in the region in the usual manner—through military coups, covert interventions and the like.

The South Korea deal is similarly seen as a bulwark against China—“one of the steps necessary,” as Charlene Barshefsky, Bill Clinton’s former trade representative, described it in veiled terms, “to respond to the transformed landscape in the region.” It is arguably the most important of the deals on the table now, reflecting U.S. aspirations to reprise NAFTA in Asia. But it also reveals the weaknesses in its bargaining power.

The deal has provoked opposition in the U.S. from the auto industry, which fears too many concessions to Korean auto companies, and from some parts of U.S. agribusiness. Indeed, one sign of U.S. weakness in the current climate is that Korean rice is exempted from the agreement—unlike NAFTA, which opened up Mexican corn to subsidized U.S. exports.

Nevertheless, the presidents of the National Association of Manufacturers and UPS hailed the deal, which would remove many remaining trade protections in the South Korean economy, especially in agriculture, services, banking and finance.

South Korea has an unusually large agricultural workforce for an industrialized economy. Even with rice taken out of the agreement, hundreds of thousands of farmers could face ruin if forced to compete with U.S. exports, which benefit from a complex system of subsidies and supports.

Further, the Korean services, banking and financial sectors are, unlike Korean manufacturing, relatively weak, meaning that thousands of workers in those industries could lose their jobs as a result of the FTA.

The Korean Confederation of Trade Unions (KCTU) argues that the FTA will “benefit a handful of conglomerates only, while pushing workers and the grassroots into the abyss of poverty and agony.” While the deal may be less one-sided than the agreements set up in Latin America, it’s still designed to benefit U.S. and Korean companies—at the expense of U.S. and Korean workers, and Korean farmers.

The Colombian FTA may be the hardest sell of all. Two thousand Colombian trade unionists have been murdered since 1991, and more than 400 have been killed since President Álvaro Uribe took office. As the watchdog group Public Citizen puts it, Colombia is a “country where the murder of union members is their comparative advantage.”

Seemingly oblivious to the murder of Colombian workers, Bush scolded Congress : “It is very important for this nation to stand with democracies that protect human rights and dignity.” But the U.S. is complicit in Colombia’s wholesale killings of unionists. The country is a pillar of U.S. imperialism in South America, receiving billions of dollars in military aid since 2000.

THE DETERIORATION of the Washington trade consensus, the reverberations of the crisis of the Iraq war, and grassroots opposition to U.S. versions of “free trade” at home and abroad make the outcome of these agreements difficult to predict.

Most important of all, the proposals have provoked some examples of organized resistance, sometimes in the face of severe repression.

The KCTU is demanding a public referendum on the South Korea deal, and the Democratic Labor Party has defied police bans on protests. In early April, Heo Seowook, a 54-year-old taxi driver, set himself on fire, and later died, to protest the agreement. In Panama, labor organizations and farmers have organized demonstrations.

At the same time, the response from the AFL-CIO reflects the political weaknesses of the U.S. labor movement.

The union federation has rightly condemned the impact of these deals on workers abroad as well as at home. But the federation persists in its appeals to patriotism, including the idea that free trade “poses a serious and growing threat to our national security” and even our “capacity to supply our military troops with ammunition.”

This nationalism dovetails with the AFL-CIO’s emphasis on “better policy” on trade issues—for example, calls for a greater role for Congress in trade negotiations. But the congressional leadership has already showed—most recently, in the Rangel-Bush deal—that it can’t be trusted to protect workers here or anywhere else.

Even if the Colombia and South Korea deals go down to defeat, there will be more agreements coming down the pike. To defeat neoliberal “free trade,” labor and the left need to translate the growing mass opinion against these deals into grassroots struggle—and to build solidarity with those struggling against the U.S. empire abroad, whether in its military or economic forms.

 source: Socialist Worker