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May 24, 2002
Not So Fast
Sidetracking Bush's free trade push.
The fate in Congress of presidential trade promotion authority—formerly known as “fast track”—is instructive. In December, the House approved the bill by only one vote. Opponents have twice blocked renewal since the authority—rules that prohibit congressional revision of international commercial agreements negotiated by the president—expired in 1994, but Republican discipline and the usual deal-making eked out a victory.
Senators typically have been more supportive of “free trade” policies. But when the Senate took up the issue in May, there was unusually vigorous debate on a wide range of issues, including assistance to trade-displaced workers, protection of domestic laws, labor rights, environmental protection and the powers of Congress to regulate trade. The crucial vote came on a bipartisan amendment by Sens. Mark Dayton (D-Minnesota) and Larry Craig (R-Idaho) that would allow Congress to raise objections about provisions in any commercial agreement that threatened U.S. trade laws.
Last fall 72 Senators instructed U.S. Trade Representative Robert Zoellick not to make U.S. trade laws negotiable in any new World Trade Organization talks. Yet at the Doha WTO meetings, Zoellick did precisely what they told him not to do. “Every time Zoellick argued against the Dayton-Craig amendment, he got more votes for it,” says AFL-CIO trade analyst Thea Lee. “He argued he had to have the freedom to weaken trade laws, because if he doesn’t he can’t clinch a deal, but that will be so unpopular that he has to have fast track to get it passed.”
On the key procedural motion, the Senate voted 61 to 38 in favor of the Dayton-Craig amendment, with 16 Republicans joining in support. The administration went berserk, threatening a presidential veto. Cabinet members launched a blitz against other amendments, several of which might have passed without such intimidation by the White House and Senate leadership. Nevertheless, the Senate bill—contrary to White House wishes—expands trade adjustment assistance for displaced workers (though not workers indirectly impacted, like truck drivers), including limited wage insurance for some older workers and tax credits to help defer the costs of health insurance.
However, despite a solid majority in favor of guaranteeing health insurance for retired steelworkers from bankrupt employers, supporters could not end a filibuster by Sen. Phil Gramm (R-Texas). A few minor progressive amendments did succeed, such as Sen. Paul Wellstone’s (D-Minnesota) request for a study of the effect of globalization on workers. But the Senate refused to require enforcement of core International Labor Organization standards (like the prohibition of child labor) in all bilateral trade deals. It also failed to revise language—worse than previous fast track bills—actually prohibiting trade agreements from enforcing each country’s own laws on workers rights or environmental protection. The Senate also rejected Sen. John Kerry’s (D-Massachusetts) initiative to limit the ability of foreign corporations to sue—as they can under NAFTA’s notorious investor rights chapter—to overturn U.S. laws, a measure with widespread support from state and local elected officials.
Although conservative Democrats provided the margin to defeat most amendments, many traditionally ardent free-traders, like Connecticut Democrats Joseph Lieberman and Christopher Dodd, argued for stronger protection of workers rights. Similarly in the House, many free-trade Democrats, like Robert Matsui (D-California), have become critics of fast track. “Members of Congress on one issue or another have become personally aware that today’s international commercial agreements aren’t about tariffs and quotas but about domestic, value-oriented decisions about policy,” including environmental and consumer protections, says Lori Wallach, director of Public Citizen’s Global Trade Watch.
Now fast track goes to a tricky conference committee. Republicans will try to strip the Dayton-Craig amendment and probably reduce trade assistance. But such action could make it harder to get the conference bill approved in the House, where the balance of power is shaky. At least two right-wing Republicans have recently said they would not vote again for fast track, and several solid Democratic opponents were absent in December. Other members of Congress may be upset by promised deals that the administration hasn’t delivered. The Senate debate helped highlight public discontent with globalization, and if political pressure builds as midterm elections draw near, fast track may yet go down to defeat.
ven if Bush finally gets his trade promotion authority, he may have little chance to use it, since the prospects for a new WTO agreement or a Free Trade Area for the Americas (FTAA) look dim. Trade tensions are rising between the United States and Europe, as well as with other industrial countries, in part over Bush’s decision to impose temporary tariffs on steel. Within the Americas, the collapse of Argentina looms ominously; Mexico has gotten little out of President Vicente Fox’s bonding with Bush; Venezuela’s Hugo Chavez is smarting over administration enthusiasm for the attempted coup against him; and Brazil—where the Workers Party’s Luiz Inacio Lula da Silva leads in the presidential race—is upset with what it sees as U.S. protectionism in steel and agriculture.
Developing countries also are growing resentful toward rich nations, especially the United States. They have failed to reap the benefits of trade liberalization and have paid a high price for submitting to the “Washington consensus.” The Bush administration’s unilateralism and arrogance further undermine the potential for global economic agreement.
At the same time, criticism about the impact of globalization is steadily mounting within the United States. The continued loss of manufacturing jobs—1.2 million in the past year—is more politically charged now that unemployment is growing. Partly spurred by revelations about Enron and the recent moves by companies like Stanley Works to avoid paying taxes by using off-shore financial havens, Democrats—and a few Republicans—are pressing for new legislation on long-neglected corporate abuses.
And contrary to free-marketeer promises, agricultural exports have proven no salvation for farmers. Congress recently passed a farm bill still skewed to big agribusiness interests that may exceed WTO limits on subsidies, even though total annual payments will remain stable. When even the United States breaks with free trade dogma, argues Neil Ritchie of the Institute for Agriculture and Trade Policy, it simply confirms that agriculture never did fit in the one-size-fits-all model of trade liberalization.
From a global perspective, the United States has lost credibility as a proponent of free trade. “If the United States tries to get on a high horse and says, ‘You’ve got to reduce subsidies,’ [the new farm bill] makes it that much harder,” argues Dean Baker of the Center for Economic and Policy Research. Bush’s steel tariff especially irked the global business elite because “it was a victory for labor,” Baker suggests. “I think there’s a real fear on the part of the free trade segment of the business elite that things are slipping away.”
Yet the United States is responding to real problems that partly result from being everybody’s favorite marketplace. Baker argues—as the Financial Times also did recently—that rising trade deficits are creating a growing net indebtedness that is unsustainable and will inevitably result in a decline in the value of the dollar, which could lead to a global crisis.
he profound problems of most developing countries are not likely to be solved simply by exporting more to the United States. Oxfam, the global anti-poverty group, recently stirred controversy by arguing that rich country trade barriers to agriculture and textile exports were one of the major causes of world poverty. But Baker cites a recent World Bank analysis that eliminating all barriers to textile and agricultural exports would only raise the gross domestic product of developing nations by 1 percent by 2015—another $5 to $10 per person annually in many countries. Also, export agriculture often wreaks environmental devastation and turns small producers into landless rural workers. Export agriculture strategies often create gluts and price collapses, like currently with coffee, leading to deeper rural impoverishment.
In the meantime, “structural adjustment” policies imposed on poor developing countries by the International Monetary Fund have worsened conditions, according to a new review by the Structural Adjustment Participatory Review International Network (SAPRIN), a joint project of citizen groups and the World Bank (see “Deaf Ears,” page 5). The report concludes that, taken together, trade and financial liberalization, privatization and labor “flexibility” reforms “have contributed to the further impoverishment and marginalization of local populations, while increasing economic inequality.”
A new World Bank report also concludes that its own initiative to help heavily indebted poor countries is failing: Very few countries at or near the completion of the program are likely to reduce their debts to “sustainable” levels. No wonder that the World Development Movement reports that last year IMF policis fomented 77 episodes of social unrest in 23 countries. Now a broad coalition is campaigning to prevent using renewed U.S. funding for the World Bank’s International Development Association for loans that harm the environment, undermine labor rights or recklessly privatize services.
The rising tide of discontent focuses as much on multinational corporations as on governments and international organizations, with protesters from both rich and poor countries often converging. Anti-sweatshop campaigns continue to score victories on many fronts. In the courts, a suit against big clothing companies for violations in the U.S. territory of Saipan is progressing; and a 1998 civil lawsuit charging Nike with willfully misleading the public about how its products are made recently received the green light from the California Supreme Court. This spring, shareholder activists demanded that Exxon-Mobil respect human rights and stop fighting efforts to reduce global warming. In May, union pensioners won a remarkable 31 percent of shareholder votes for their resolution to require Unocal, the largest U.S. investor in Burma, to abide by the ILO’s fundamental rights at work.
Despite the growing conflict among rich countries, well-justified dissatisfaction in poor countries, and demands for a different model of globalization, corporate globalizers are pressing forward. Recently leaked documents revealed a new European initiative to open up government services, such as water, transport, health care and communication to corporate competition. A bonanza for multinational corporations (like Enron, previously a key promoter), this privatization of public services threatens citizens in both rich and poor countries. Even as the failure of corporate globalization becomes more apparent and harder to manage, the drive to expand its scope continues.
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