Eyes on Trade

Two Revelations Reveal the Fatal Flaws in WTO Style Globalization

Two developments this week provided further illustrationthat the current NAFTA-WTO model of trade and globalization is fundamentallyflawed.

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The Zombie Lie of Women Opting Out of Workforce Takes Another Hit

Editor's note: Also see Heather Boushey's "Mommies Opting Out of Work: A Myth That Won't Die."


Judith Warner of the New York Times blogs a little bit more about the horrific double standard in the way we approach gender and work issues, and the JEC's new report:

This week, Congress issued a report, [that] states categorically that mothers are not leaving the workforce to stay home with their kids. They're being forced out...
Men, of course, were hit hard by the recession and weak recovery, too; in fact, as Louis Uchitelle of the Times reported earlier this week, the workforce participation rates of men aged 25 through 54 have dropped from 96 percent in 1953 to 86.4 percent today.
But when men in their prime working years drop out of the workforce we don't say they've gone home to be with their kids.
We say they're unemployed.

Americans Want NAFTA Renegotiated


A new Rasmussen Reports telephone poll indicates that over half - 56 percent - of Americans think NAFTA should be renegotiated. The juicy bits include:

A new Rasmussen Reports national telephone survey taken Monday night finds that 56% of voters support renegotiation while 39% say U.S. free trade agreements in general have directly impacted their families. Of that latter group, 73% say the impact has been a bad one, as opposed to 14% who say it was beneficial.

Only 16% of respondents favor NAFTA - a pact which came into being in 1994 and lowers nearly all trade barriers between the U.S., Canada and Mexico -- as is, with 28% undecided... Perhaps most importantly, 71% say negotiation of trade agreements is important to them in terms of how they will vote. Only 20% say it is not important.

(We've been talking about that last point for a while now...)



This comes a few weeks after a Pew Research Center poll showing that 48 percent of Americans, including 42 percent of Republicans and 52 percent of Independents, believe "free trade agreements—like NAFTA, and the policies of the World Trade Organization" have been "a bad thing" for the United States, while only 35 percent said they have been a good thing. This is a dramatic reversal from a 2004 poll in which Americans believed that these trade agreements have been a good thing, by a 47-34 margin.



The same Pew poll also shows that 61 percent of Americans believe free trade costs U.S. jobs, and 56 percent believe it lowers wages. Only 9 percent believe free trade creates U.S. jobs, and only 8 percent believe it raises wages -- results which are consistent across party affiliation lines.



And, just for fun, if you care to take at face value the ABC News/Facebook poll (to be clear... I wouldn't), 79 percent of Americans think the U.S. should renegotiate NAFTA or withdraw from it entirely.



A few more polling tidbits after the jump ...

How To Break a Strike


Advocates of NAFTA argued that they pact would help keep consumer prices low and move the economy towards a more efficient allocation of resources. Just one serious drawback: such permanent tariff reductions remove political uncertainty from firms' cost-benefit calculation. Put differently, the price attached to risk was reduced. And manipulating risk levels is one of the few weapons that the working class has to gain concessions from the rich: think strikes, for instance.      



When firms can be certain that they will never have to pay tariffs on the reimportation of their products produced offshore, strikes matter a wee bit less, as this story over the weekend from the NYT summed up:

The auto industry’s longest strike in more than 40 years, a walkout at a parts supplier that disrupted production at 32 General Motors plants, will end within days if the picketing workers ratify a tentative agreement reached late Friday with their employer, American Axle and Manufacturing....

People involved in the negotiations have said they expect the agreement to call for closing two or three plants, offering buyouts worth as much
as $140,000, and drastically reducing the wages and benefits of workers who remain with the company...


American Axle has said it needs to cut wages nearly in half, from about $28 an hour to as little as $14, to remain competitive with rivals that have squeezed similar concessions from the U.A.W. During the strike, the company threatened to permanently close the plants where workers were picketing and shift work to Mexico instead.

Mexico Got the Shafta from NAFTA

Gabriel Palma is one of the best progressive economists in the world. Originally hailing from Chile, he decamped to Cambridge, currently serving as one of the few Keynesians that the neoliberals that took over his department haven't kicked out. I was in his class for about a week, before I realized that in order to take graduate econometrics, you must know something about math and statistics. At that point, after spending my undergraduate years fighting the man rather than taking the tougher classes, I decided to further postpone the learning. As I take night classes these days, I am kicking myself for not having bitten the bullet while it would have been easier.

Oh well. That doesn't stop me (or you) from getting your learn on with Gabriel's work on NAFTA and Mexico. The paper is a few years old, but it remains one of the better expositions of what went down before and since NAFTA went into effect. Among his findings:

  • Just nine countries account for 90 percent of manufactured exports from developing countries. Mexico is the only one of these to thoroughly go through the neoliberal ringer, courtesy of NAFTA and NAFTA-like policy changes.


  • Oil used to dominate Mexico's exports, but now manufacturing (increasingly high technology) constitutes the vast majority.


  • Like here at home, Mexican wages are scarcely above their 1980s' levels -- whether you're looking at the maquila or non-maquila sectors. In the maquilas, you didn't have to pay anyone much of anything, since there was a bottomless pool of rural Mexicans separately getting displaced by Mexico's agriculture rules.


  • Unlike here, where bubbles and debt made up for the loss of demand brought on by the trade deficit, Mexico used export growth to make up for the loss of demand brought on by wage stagnation.


  • The traditional non-export manufacturing sectors have not seen hardly any increase in investment, meaning that the maquilas (which attracted tons of FDI) did not feed back into other sectors of the economy.


  • It turned out to be a weak substitute for real growth, however, since value added in the maquilas and auto sectors remains about where it was before NAFTA, despite the massive increase in both maquila exports and imports.


  • From just 2001-2002, 545 maquilas left Mexico for China, shedding hundreds of thousands of Mexican jobs. So much for that experiment. But as my colleague Carlos Salas shows in an upcoming paper, the few workers that got to keep their jobs have seen their wages bid up somewhat. And with absolutely none of this background, we can now see the Bush administration taking credit for the momentary respite from hell. Oh joy! A rounded development policy proposal is just around the corner, I. Am. Sure.


Now, as Rev. Jeremiah Wright might say, the chickens are coming home to roost. As CEPR documents in a recent paper, Mexico stands to lose an amount equal to 3 percent of their GDP due to the over-reliance on the U.S. export market (bloated to massive deficits), which will now come crashing down thanks to our recession.

Sustainable growth, anyone?

The Colombia trap

There have been a lot of surprising developments in recent days on the Colombia FTA, most recently with Dem leadership seeming to be suggesting that there could be a vote on the Colombia FTA if there is more trade adjustment assistance. (As we've argued before, it's hard to get all worked up for TAA, because it is highly inadequate to the scope of the problem, but that's for another time.) It's unclear whether this means leadership will allow a vote and support the deal, or allow a vote but whip against it. It's also unclear whether if Bush goes around leadership (as he's threatened to do) they would cancel Fast Track's application to the deal.

Without commenting directly on these latest developments, here are the things I've been thinking over the last few weeks on this matter. American politics are classist enough that one can't assume that mere moral outrage will carry the day on labor's agenda. It would simply never happen in this day and age that civil rights or abortion rights would be negotiated away in exchange for legislative favors. There's simply not a strategic argument that could be made that would erase the moral outrage that our society rightfully feels whenever racist or sexist undertones surface in public. (Think Geraldine Ferraro.)

There's simply no equivalent to these kind of widespread norms when it comes to class politics. It is profoundly insulting to working people that a trade deal with Colombia -- where workers are systematically targeted for assassination -- is even being considered. To not oppose this deal is simply to be a classist. Unfortunately, no politician in America today loses an election or is asked for an apology because they make classist remarks or advocate classist positions.

In 2008, backwards-thinking individuals don't justify opposition to civil rights legislation on the basis that people shouldn't have protected civil rights. But anti-labor legislation is openly supported, and labor has to come up with supplementary arguments as to why it should not be passed. This was why we argued so strongly last year that Bush's Peru NAFTA expansion had to be opposed on the basis that it was bad policy, and would be for ANY country. To not have made this argument last year equals unilateral disarmament. Trying to rally opposition to the Colombia FTA now means that you're assuming that our elected officials would not be so classist as to allow it to come up for a vote. This is a HUUUGE gamble, as the heart attacks some of us have experienced over the last few weeks show.

There is another way that an argument could be made against the Colombia FTA, but I don't think that it's really breaking through in the media coverage. That's through the application of readiness criteria. Under a new president, one hopes that trade deals wouldn't even be considered if a country had major social problems (say Colombia, Burma, Sudan, etc.). Much more like the European Union, accession to a common market wouldn't even be contemplated unless the country were broadly similar to the U.S.

But there's two challenges to this. First, it's simply not yet a part of political culture in the U.S. to think broadly about the level of social development of a trading partner country when contemplating market access. This must change. Secondly, such readiness criteria should also play a role when extending measures short of an FTA, such as trade preference programs. Colombia FTA critics are finding it difficult to justify FTA opposition solely on class- or readiness-type arguments if they didn't oppose preference benefits for Colombia as well. Admittedly, in the short term, having preferences for Colombia takes away the argument that one can make in certain quarters about ensuring market access "for a key U.S. ally." This notion of who is our ally in the region needs to be disputed, but, much like the class politics issues, they are more of a medium- to long-term political culture shift that is needed, and it ain't gonna happen overnight.

All that said, at this point, I would still be pretty surprised if the Colombia FTA came up for a vote this year. But the ground is shifting rapidly, and we like you are trying to stay on top of it.

Corporate Lobbyists Have Turned Human Rights into a Tradeable Commodity

It's our unfortunate duty here at EOT to have to read some truly mind-numbing trade law analyses of domestic regulation. For instance, have you ever really thought about whether electricity is a good or a service? Yesterday, I had to read through a 1998 WTO document that goes through this metaphysical question in excruciating detail. Short answer: if your electricity comes from coal, well then the coal itself is a good. But once it becomes electricity, it's probably a service, because you can't plop a piece of electricity down on your dinner plate.

Since the Bush I and Clinton I administrations committed many energy-related services to the restrictive WTO service sector agreements, there's a good chance that many of Clinton, McCain and Obama's proposals on energy could run afoul of WTO rules. So if the political reasons to talk fair trade weren't compelling enough, there's plenty of good policy reasons as well.

You may ask yourself, how did we get to the point where lawyers sat around thinking of basic human rights to turn into "tradeable commodities/services"? To paraphrase Larry the Cable Guy, this 1992 intellectual history article by William Drake and Kalypso Nicolaidis shows how corporate lobbyists "got-r-done":

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Your Civil Rights Are a Trade Barrier

As we've written about for a long time, "trade" rules are increasingly limiting how our own taxpayer dollars can be spent, namely by banning or rolling back Buy America, green procurement, and human rights conditionality in competing for state, local and federal government contracts - the use of which is one of the very few ways that our elected officials can directly create jobs, and shape the morality of the marketplace.

In a rare sign of morality (or at least political savvy) from the corporate class that drafts these agreements, they've generally excluded minority preferences and set-asides from coverage from trade pact rules.

But this may be ending. According to Luke Peterson's Investment Treaty News, the best source of information on investor-state proceedings anywhere, a group of European mining companies is suing South Africa under a bilateral investment treaty between their respective countries. Their gripe? Having to hire black South Africans.

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