Page 3 of
3 Clock running
out on free trade By Laura
Carlsen
legislature to determine
tariffs. Costa Rica still has not ratified. There,
massive public opposition centers on protecting
the structure of government services and
regulation that gave that country a giant leg-up
over its Central American neighbors and led to a
more uniformly high standard of living.
False dichotomy of free trade vs no
trade Proponents argue that rejection of
FTAs is tantamount to a return
to
protectionism and isolationism. But US
international trade would not come grinding to a
halt if Congress stopped passing unfair free trade
agreements. In many cases, tariffs are relatively
low before the FTAs and disputes hinge more on
non-tariff barriers that are not necessarily
resolved in the context of the agreement. Indeed,
many of the most controversial provisions of the
FTAs, including the imposition of supra-national
investment guarantees and intellectual property
exclusivity, have little to do with trade.
Moreover, existing trade agreements,
including the General System of Preferences (GSP),
the Andean Pact Trade and Drug Enforcement
Agreement (APTDEA), and the Caribbean Basin
Initiative, carry less baggage than the FTAs and
have already built strong trading relations
between nations. Ninety-five percent of Panamanian
products are exported duty-free to the United
States, and South Korea and the United States
reached over $70 billion a year in bilateral trade
last year. In Peru, the government promoted the
FTA as a way of ensuring that the privileges under
APTDEA would be made permanent.
However,
there is broad support for continuing Andean
preferences in the United States, and in any case
only 10% of Peru's exports are sold under APTDEA -
less than a third of its exports to United States.
Thirty percent of Peruvian exports to the United
States are raw materials that do not face tariff
barriers under the GSP or "most favored nation"
clause.
The United States does not have
bilateral trade agreements with most of its major
trading partners.
Although the Democrats'
proposal falls short of calling for a moratorium
on free trade agreements, it recognizes that other
types of trade agreements are more closely linked
to US diplomacy and security goals. The proposal
calls for "immediate extension of the Andean
program; and update and upgrade other
trade-expanding programs and initiatives with
developing countries including for Haiti and the
African Growth and Opportunity Act".
In
developing countries, the argument that a US FTA
is indispensable to insertion in the international
market is equally false. First, economic
integration will continue to occur - the question
is how to define the terms.
Accepting
World Trade Organization-plus measures in a FTA
merely reduces the policy space of a given
government to define the terms of economic
integration. Second, FTAs are no guarantee of
permanent market access. They permit US
protectionist measures in strategic and powerful
sectors, and outlaw the same type of measures in
partner countries. Moreover, non-trade barriers
are often a bigger problem than tariff barriers.
Interestingly, in the March poll cited
above. the same respondents who were
overwhelmingly against free trade agreements also
rejected protectionism and isolationism. When
given a choice between two paths - restricting
foreign imports and the number of legal
immigrants, or expanding opportunities in the
global marketplace by reducing trade barriers and
attracting skilled immigrants - the majority of
the same anti-FTA sample responded favorably to
the latter.
New principles for a
responsible trade policy It is not easy to
craft fair trade policies that can take the nation
into the 21st century on an equitable and
competitive basis. However, consensus is growing
around some basic principles.
One is to
develop enforceable labor rights and environmental
standards. The way to do this is not to create
more supra-national and quasi-legal courts as part
of individual trade agreements. Rather, nations
should adhere to clear and binding multilateral
standards that define basic rights and corporate
responsibilities. FTAs do the opposite of this, by
locking in privileges and specifically prohibiting
responsibilities defined in performance
requirements.
Mechanisms should be
developed that place the onus for enforcement on
the entity directly responsible - the employer.
Agreements like the NAFTA side agreement to punish
the host government for lack of enforcement while
turning a blind eye to US companies that are in
violation of national laws. No one would deny the
responsibility of developing country governments
to enforce their laws within their territory, but
they often find themselves trapped in the
contradictions of US trade policy.
For one
thing, they have been pushed to adopt an economic
model based on export production and forced to
compete for foreign capital. A cheap and docile
labor force is a prime area of competition, thus
creating a disincentive to raise labor standards.
For another, they have had to accept austerity
programs that reduce government funds and
consequently financing for enforcement activities.
Finally, in many countries - Mexico being a prime
example - transnational corporations and the US
government have pushed to "flexibilize" labor
regulations with measures such as open shops,
lower severance pay and benefits, temporary work,
and low wages, further contributing to the
downward spiral in workers' rights globally.
Another is that trade rules should be
oriented toward equitable and sustainable trade
relations. This means avoiding double standards
that erode US credibility in the trade sphere and
working on predictable and transparent trade
rules. It also means recognizing asymmetries and
allowing for compensating mechanisms so that
developing countries can develop. Trade policy can
no longer be divorced from the long-term interest
of a stable and prosperous international
community.
Finally, non-renewal of
fast-track authority is a first step to assuring a
fuller role for Congress in trade negotiation, as
demanded in the Democrats' proposal. It also calls
a halt to moving blindly forward on a course that
is proving disastrous and has still unknown and
unstudied effects on our children's lives.
The US Congress, executive branch, and
civil society must now work to map a careful and
long-term trade policy as part of a cohesive
economic and foreign policy. This is not a radical
proposal. It's a prudent one. Economist Thomas
Palley writes: "In macroeconomics, there is a
famous theorem that states, 'if you don't know, go
slow'. This insight has relevance to trade
liberalization, where there is much uncertainty
and dispute about impacts. Globalization poses the
additional problem of lock-in; there is a danger
of implanting policies that are hard to reverse."
It's time to let the clock run out on the
failed free trade model. The hour has come for
Congress and the US public to assume
responsibility for recrafting a trade policy that
works in the interests of the majority and of fair
and peaceful international relations.
FPIF columnist Laura Carlsen is
director of the IRC Americas Program. The Americas
Program is online at
http://americas.irc-online.org/.
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