Free Trade hits black workers hardest

Thanks largely to free trade agreements, urban black workers are suffering from especially high joblessness, William Lucy, former secretary-treasurer of a large AFL-CIO union, writes in the Cleveland Plain Dealer.

Unemployment rates reach almost Great Recession heights in cities with a large population of blacks, Lucy points out: 18% in Cleveland, 25% in Detroit, 22% in Milwaukee.

“There are some politicians who would have us believe that the proposed free trade agreements with South Korea, Columbia and Panama will heal the jobs crisis and restore the manufacturing jobs lost. Either those politicians have historical amnesia, or they have not been to Cleveland to see what we've seen,” he writes, adding:

“Since the North American Free Trade Act was signed in 1994, more than 682,900 jobs in America have been displaced to Mexico. The bulk were in manufacturing, the very jobs that helped to create a black middle class. The South Korean FTA is estimated to cost the United States another 159,000 jobs. During a time when so many are struggling to find jobs or straining to hold onto the jobs that they have, how could anyone think that more free trade agreements are what our communities need?

“Maybe they can't see the effects of an auto factory or textile factory shutting down. Maybe they can't fathom the devastation that happens when a company relocates an entire electronics assembly line to another country. Maybe they don't understand that for all the hundreds of thousands of jobs lost, those are communities devastated, workers who can't provide for their families, an entire segment of the population struggling to maintain the economic gains they've made.“

Lucy is founding president of the Coalition of Black Trade Unionists and former secretary-treasurer of the American Federation of State, County, and Municipal Employees. His article appeared in the August 13 issue of the Plain Dealer.

Read more!

Shelve worker rights because of crisis? No!

“Right now everyone wants to maintain jobs, even if they are sweatshop jobs (China). I think it is exactly why many union people will tell you it is not the time to push on labor standards...The economic logic is against [your] perspective.”

That message was in an email criticizing something I wrote. The email reflects a tempting notion that may be spreading: forget the pro-worker agenda for the sake of the anti-recession agenda. But the temptation is based on a fallacy: that the two agendas are necessarily in conflict.

I started to write a strong rebuttal, but soon realized that there was no need to do so. Why should I, when much wiser heads have already rejected that position? They did so in a letter timed for President Barrack Obama’s official meeting on February 19 with Prime Minister Stephen Harper in Canada.

The letter, dated February 18 and addressed to the top leaders of the two countries, was signed by AFL-CIO President John Sweeney and President Kenneth Georgetti of the Canadian Congress of Labor (CLC), who together represent 12,200,000 union members.

Their five-page letter detailed the ways in which Canada and the United States need to work together on the economic crisis and on advancing worker rights. They discussed those two major areas under two headings: “1. Coordinated Response to Current Economic Crisis” and “2. NAFTA Renegotiation.”

The renegotiation of the North American Free Trade Agreement (NAFTA) sparked by far the most interest. Media accounts suggested that Obama’s concerns center on moving the “side” (separate) agreements on labor and the environment into the main body of NAFTA. Whatever the administration’s closely held position may be, the AFL-CIO and CLC position is not limited to what the existing labor and environment agreements cover.

“Substantive amendments” are required in otherimportant areas, Sweeney and Georgetti state. For example, NAFTA’s investment section is flawed by, among other things providing investments “unwarranted and excessive protections.” Other “central concerns with NAFTA” cover its provisions on energy, trade in services, and agriculture.

All in all, “a very ambitious list,” as the two labor leaders conceded. But they certainly don’t believe that the economic crisis requires sacrificing the rights of workers, whether here at home or abroad.

UPDATE: Since writing the above, I learned that the office of the U.S. Trade Representative (USTR)has just released a long report on the President's trade policy, which I'll comment on as soon as I have a chance to read it and think about it. Meantime, check it out yourself at www.ustr.gov, and do by all means send me YOUR comments.


Print Page Read more!

Canadians urge NAFTA renegotiation

In an open letter to Canadian Prime Minister Stephen Harper, major Canadian organizations urged him to commit to a renegotiation of the North American Free Trade Agreement (NAFTA). The letter was released just prior to U.S. President Barrack Obama’s February 19 visit to Ottawa.

“Canadaian public opinion is solidly behind the need to renegotiate NAFTA,” the letter pointed out, citing a September poll in which 61 percent of respondents favored that position.

The letter was signed by 26 Canadian organizations, including Oxfam Canada, Sierra Club of Canada, the Council of Canadians, Common Frontiers, Canadian Federation of Students, the Canadian Auto Workers, and a variety of other unions.

In releasing the letter, Rick Arnold of Common Frontiers said: “We were all promised a golden future under NAFTA, but the reality for the three signatory countries is that the gap between rich and poor has grown exponentially, and government’s ability to set public policy has been curtailed in favor of giving carte blanc to foreign investors.”

Print Page Read more!

Pro-Obama think tank on trade reform

The Obama administration is getting some strong advice from the Center for American Progress, a think tank headed by transition co-chair John D. Podesta. Among other things, the advice deals with creating “a new and different trade policy –- one that takes a strategic approach to making globalization more inclusive and sustainable.”

How to implement that approach is the subject of a Center report by Ira Shapiro, a former general counsel in the Office of the U.S. Trade Representative (USTR), and Richard Samans, a senior fellow at the Center for American Progress.

Their newsiest recommendation:
-- Resist the temptation to lead a revival of the collapsed “Doha Round” of the World Trade Organization (WTO)
-- Do remain a “committed leader” of the multilateral trading system, while also making “new trade arrangements” within the WTO and outside of it.

Their most intriguing recommendation concerns “the special case of Asia” and how the United States could regain “its economic position” there. The report suggests that the Obama administration “reach out to the more advanced countries in Asia as potential partners in a vanguard, global club of advanced economies that agree to pursue deeper economic integration through both free trade and basic consistency of structural, regulatory, and exchange rate policies and institutions.”

“Basic consistency” would include comparable labor, environmental, consumer, and investor protections, the report emphasizes. It envisions that the pioneering members of this arrangement would be the United States, Australia, Singapore, South Korea, and Japan, and that it might serve some nations’ self-interest to have “a counterweight to China’s increasing economic and political clout.”

Whether that particular idea flies or not, the report makes a reasonable case for a “more flexible approach” that regards fundamental policy consistencies as “a sounder organizing principle for [free trade agreements] than geographical proximity or bilateral ties.” The approach thus departs from a founding principle of the current trade regime: that all countries, whether democratic or dictatorial, are treated the same and get the same trade rights and privileges.

Here is what the report says about several of the current trade issues facing the new administration:

NAFTA: Because of global changes in the 15 years since the North American Free Trade Agreement went into effect, “it is perfectly appropriate” for Canada, Mexico, and the United States not only to evaluate the agreement but to explore other topics of mutual interest (e.g., better regulatory coordination on food safety).

Colombia FTA: Before this can be ratified, Colombia will have make “sufficient progress” in ending violence and in prosecuting those engaging in violence.

South Korea FTA: South Korea must address impediments to U.S. beef and auto exports

Presidential trade promotion authority: Without it (including some version of “fast track”), other nations won’t take U.S. negotiators seriously, but this executive power needs to be balanced by a strengthened role for Congress, even to the point of it helping choose countries for trade agreements.

The report, part of a book titled “Change for America: a Progressive Blueprint for the 44th president,” is aimed at the Office of United States Trade Representative (USTR) and what it should do about “responding to the changing global challenge.”

For the new President, the “blueprint” in the 17-page trade section is obviously subject to change because of competing priorities, not only within the ten-chapter book, but also because of the financial debacle that happened after the book was drafted.

Print Page Read more!

Worker rights as an economic asset

Protecting worker rights as part of trade policy can be good for the economy. So says report just released by a Washington think tank, the Center for American Progress.

“The promotion of labor standards, alongside environmental protections, should be an integral part of the future U.S. trade agenda,” says the report titled “Labor Rights Can Be Good Trade Policy.”

The authors, Christian E. Weller and Stephen Zucconi, warn that, to be effective, the worker rights provisions of trade agreements must be enforced with “positive incentives for moving toward better labor standards, and negative incentives, including sanctions, when benchmarks are not met.”

Nearly a third of the 34-page report consists of data buttressing their points, including the fact that “stronger labor rights are correlated with smaller trade balances,” for instance, and that U.S. trade is more balanced with countries that have better worker rights.

Yet improving standards won’t, by itself, produce impressive results. That’s a crucial point emphasized in the Center report. Adopting global labor standards, Weller and Zuicconi insist, is a “key”(but not the only) element in a “broader” progressive international policy agenda to grow the global middle class.

In other words, improving labor standards in the North American Free Trade Agreement, as Senator Obama advocates, is a necessary but not sufficient reform. The Center study does not draw that specific conclusion, but I think it follows logically from a realistic assessment of the negative impact that NAFTA.as a whole has on the situation of workers in Canada, Mexico, and the United States

Print Page Read more!

Hooked on Free Trade Religion

Then there’s the print media’s addiction to the present system of “free trade.” The worst offender of all, in my view, is the New York Times. Liberalization of trade is a sacred component of its liberal faith, promulgated throughout the paper, not only on the editorial pages but in the business section and in the weekly Magazine. Dissenters seldom get any space, not even in the news pages.

Also, facts embarrassing to the policy line get buried or ignored. In a national poll conducted in mid-June, 56 percent of voters surveyed said that NAFTA needs to be renegotiated. Even 49 percent of Republicans agree, according to a June 18 release by an independent polling organization, Rasmussen Reports. The story appeared on Fox News, but not in the New York Times.

On June 8 the New York Times Magazine ran its latest defense of free trade, “This Global Show Must Go On” by Tyler Cowen, professor of economics at George Mason University. Among other things, Cowen criticizes a proposed “’timeout’ from globalization” when the actual proposal is for a timeout in trade negotiations (there already is a de facto timeout, and world trade is actually accelerating, as Cowen acknowledges).

Another economist, Dani Rodrik, has written an economic response to Cowen in an article, “Globalization anxiety as mass hysteria?” on his Weblog. Here’s his first sentence:

“Those who are puzzled by globalization anxiety and attribute it to collective irrationality (see Tyler Cowen’s piece in the NYT) overlook a fundamental aspect of markets – their ‘embeddedness’.”

Read the full text here. Enjoy.

Print Page Read more!

Multinationals, Human Rights, and UN – III

(Reporting on the Ruggie Report – III)

Can anything concrete come out of the report that Professor John Ruggie prepared for the June session of the UN Human Rights Council? After all, the report offers just a “framework” for business and human rights, not a program of action.

Yet the report is far from a compilation of abstractions. I find that it contains a bundle of specific policy ideas that, if taken seriously by the Council and even only a few major UN members, will improve the protection of individuals, organizations, and weak governments against what Ruggie calls “corporate-related human rights harm.”

Take Ruggie’s incisive criticism of the present foreign investment system. He describes how trade and investment laws have expanded the legal rights of foreign investors without matching responsibilities, and thereby undermined the State’s duty to protect human rights, “skewing the balance between the two.”

This imbalance creates human rights predicaments for both “host States” and “home States.” A major example cited by Ruggie: “host States can find it difficult to strengthen domestic social and environmental standards, including those related to human rights, without fear of foreign investor challenges, which can take place under binding international arbitration” – that is, under a procedure that often favors the investor, a flaw not mentioned by Ruggie.

His report provides enough information on this imbalance to strengthen already existing campaigns to correct it. And the various issues that Ruggie highlights should be instructive to Congress next year when it formulates U.S. trade and investment policy to replace “trade promotion”legislation and other policies conducive to moving jobs offshore. Ruggie’s insights will also be useful in the almost certain renegotiation next year of the 15-year-old North American Free Trade Agreement (NAFTA), which set the pattern for the imbalances written into subsequent U.S. bilateral trade agreements.

Another concrete matter covered in Ruggie’s “framework” concerns the Paris-based Organization for Economic Cooperation and Development (OECD), of which the United States and 39 other industrialized states are members. The OECD Guidelines for Multinational Enterprises are “currently the most widely applicable set of government-endorsed standards related to corporate responsibility and human rights,” as Ruggie points out.

In analyzing the Guidelines, he explains why and how they should be revised to make their human rights provisions more specific, and how their administration needs improvement. The case he makes is sure to assist trade union leaders and others who have long pressed for similar reforms.

So the report does indeed have much potential value on the practical level. Moving from the potential to the actual, of course, will depend on a variety of “actors,” or “stakeholders,” including the institution that commissioned the report, the Human Rights Council.

Ruggie concludes his report with this sentence: “The Human Rights Council can make a singular contribution to closing the governance gaps in business and human rights by supporting the framework, inviting its further elaboration, and fostering its uptake by all relevant social actors.”

Note the term that appears in that sentence and elsewhere in the report – governance gaps. The gaps exist “between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences….How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge.”

He restates, and reemphasizes, that challenge in his concluding paragraphs: “As has happened throughout history, rapid market expansion has also created governance gaps in numerous policy domains: gaps between the scope of economic activities and actors, and the capacity of political institutions to manage their adverse consequences. The area of business and human rights is one such domain.”

The greatest value of Ruggie’s 28-page report, in my view, is that he contributes much toward an evolving paradigm of business and human rights under globalization. Policymakers need such a conceptual framework to make sustainable progress toward integrating business and human rights in principle and in practice.


Print Page Read more!

The Dishonesty of Economists about Trade

Trade policy is likely to grow into a larger issue in the course of the Presidential campaign. A good thing, I used to think. But is it?

A lot depends on how economists succeed in framing the issues as advisors to the candidates and as commentators in the media. Sadly, most economists cannot be trusted to portray the issues honestly.

That’s my view. Dean Baker, an economist who is co-director at the Center for Economic and Policy Research in Washington, D.C., has a similar view. He holds that “economists have been extraordinarily dishonest in their interventions in public debates over trade policy.”

He develops his case at length in an article, “Trade and Inequality: The role of economists,” in the March 15 issue of the Real World Economics Review. Leading his indictment is this charge: economists “have acted to conceal the fact that a substantial group of workers, quite likely the majority of the workforce, can expect to be losers from the recent path of trade liberalization.”

Baker’s analysis of economic theory applied to current trade patterns leads to this conclusion: “The winners are likely to be owners of capital and highly educated workers, with the rest of the populations ending up as losers.” This outcome isn’t accidental, he explains; “it is literally the mechanism through which the economy experiences gains from trade.”

Baker blasts the major media outlets for the “enormous respect” they show for the trade policy ideas of mainstream economists and for the ridicule poured on those who disagree.

As it happens, the March 16 New York Times has an example of that. It features a discourse “Beyond the Noise on Free Trade” by N. Gregory Mankiw, professor of economics at Harvard and onetime advisor to President Bush and to Mitt Romney in his Presidential campaign.

In his first paragraph, Mankiw writes: “No issue divides economists and mere Muggles more than the debate over globalization and international trade. Where the high priests of the dismal science see opportunity through the magic of the market’s invisible hand, Joe Sixpack sees a threat to his livelihood.”

Unfortunately in his view, the Muggles and Joe Sixpack don’t benefit from economic courses such as his at Harvard, and doesn’t understand that “trade between two countries creates winners and losers, but it leaves both nations with greater overall prosperity.” As a result, the general public is “less likely to take its cue from Adam Smith than from Lou Dobbs.”


For Mankiw, Senators Clinton and Obama have erred in making Nafta the “latest whipping boy of the ant-globalization crowd.” What consoles him is that their “populist rhetoric” will disappear after the election, and like President Bill Clinton, will rely on the advice of economic moderates like Robert E. Rubin, former Treasury Secretary.

Harvard economist Dani Rodrik on March 16 posted a short item on his weblog titled “Why doesn’t the public buy the economists’ advocacy of free trade?” The posting in full:

“Greg Mankiw bemoans the huge gap between the economics profession and the common people on free trade. Unlike him, I tend to think the fault with economists, who have traditionally proselytized free trade rather than communicated what economics really teaches on trade. Dean Baker offers a sensible guide.”

Rodrik’s words, really teaches, link to an earlier (September 22, 2007) posting praising an analytical paper by Robert Driskill, professor of economics at Vanderbilt, who Rodrik says “knows the theory of comparative advantage as well as anyone else.” Here is a quote from that Driskill paper:

“Unfortunately, most economic writing on the welfare implications of trade is not a balanced weighing of the evidence, or a critical evaluation of the pros and cons of arguments, but rather more akin to a zealous prosecutor’s advocacy of a point of view. As such, this writing is designed to persuade rather than to give the reader the information needed to form an educated point of view.”

To a Driskill passage on how poorly supported positions on trade can confuse people “into false positions about what economics really says about the effects of international trade,” Rodrik added the comment: “A pervasive such false belief, for example, is that trade necessarily benefits more people than it hurts.”

That such a false belief is regularly promulgated by the New York Times is bad enough. Far more troubling is that many economists are teaching this falsehood (and others) about trade in the nation’s colleges and universities.



Print Page Read more!

The 'Opting Out' NAFTA Distraction

Now that the Democratic debate over NAFTA has burst into an international incident, it is instructive to read how relentlessly NBC Moderator Tim Russert pressed Hillary Clinton and Barrack Obama to take a position on “opting out” of NAFTA.

Neither Clinton nor Obama brought up the “opting out” idea. It was Russert who introduced it by quoting this statement that he said Al Gore made to Ross Perot in their 1993 debate: “If you don’t like NAFTA and what’s done, we can get out of it in six months.” Then, given that both candidates had sharply criticized NAFTA in the Ohio campaign, Russert asked: “Will the [next] U.S. President say we are out of NAFTA in six months?”

Senator Clinton quickly responded: “I have said that I will renegotiate NAFTA, so obviously, you’d have to say to Canada and Mexico that that’s what we’re going to do. But you know, in fairness – “

Russert pressed on, in different words: “You will get out? You will notify Mexico and Canada, NAFTA is gone in six months?”

Clinton: “No, I will say we will opt out of NAFTA unless we renegotiate it, and we renegotiate on terms that are favorable to all of America.” She later repeated the same point while renewing her criticism of the absence of labor and environment in NAFTA’s core agreement.

Russert wouldn’t let go. “But let me button this up. Absent the change you’re suggesting, you are willing to opt out of NAFTA in six months?”

Clinton: "I'm confident that as president, when I say we will opt out unless we renegotiate, we will renegotiate."

Then Russert turned to Obama, and after mentioning an AP story about Obama’s supposed ambivalence toward NAFTA, asked: “Simple question: Will you, as president, say to Canada and Mexico, ‘This has not worked for us; we are out?’”

Obama: “I will make sure that we renegotiate, in the same way that Senator Clinton talked about. And I think actually, Senator Clinton’s answer on this one is right. I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced. And that is not what has been happening so far.”

So Tim Russert had his point buttoned up to his satisfaction. But were Obama and Clinton really serious?

Gripped with the same question, diplomats at the Canadian consulate in Chicago thought they would get a candid answer about Obama from someone right there at the University of Chicago: Austan D. Goolsbee, professor of economics and also an advisor to the Obama campaign.

Goolsbee obligingly accepted the invitation to brief the consulate on Obama’s views. Like good diplomats, the Canadian officers took notes, wrote a report, and sent the report to Ottawa. Somehow, it leaked, and its message hit the fan: it soft-pedaled Obama’s tough talk on the campaign trail, specifically claiming that his language was “more reflective of political maneuvering than policy.”

At first, Obama denied that the meeting had taken place (Goolsbee did not report it to the campaign, in the naive belief that he was acting only in his role as a professor). But after the Canadian memo made headlines in Canada and the United States, an Obama spokesperson insisted that Obama’s public position on NAFTA is also his private position. Hillary Clinton insisted he was hypocritical and untrustworthy. And by Wednesday this week Canada’s Prime Minister, Stephen Harper himself, spoke up publicly, saying that the consulate report was “blatantly unfair” to Obama and his campaign.

That doesn’t end the debate over NAFTA, and shouldn’t. Both Clinton and Obama need intensive briefings to be able to explain their fair trade positions more convincingly.

Especially unimpressive, in my view, was how they both buckled under Tim Russert’s pressure, and embraced the tactic of Presidential wielding the “opting out” threat to quickstart negotiations. That’s a dumb way for a government to deal with neighboring governments, so dumb that it doesn’t happen in real life, much as it may be favored by pundits and reporters keen about “gotcha” questions based on fanciful scenarios.

Final point. Obviously, Clinton and Obama are far from isolationists, opposed to trade. They know that the economic and other interests of the three nations are such that, with or without a renegotiated NAFTA, the United States, Canada, and Mexico absolutely need some kind of a formal trade agreement among them and that the dispute is only about its contents. This fact is so obvious, I guess, that nobody at the Cleveland debate thought to mention it.

Print Page Read more!

Review NAFTA? Do We Hafta?

The three NAFTA partners, the United States, Canada, and Mexico, have now lived under the North American Free Trade Agreement for 15 years. It would seem to be a good time to review our experience under it, and possibly make some changes.

What is so shocking about that? The Wall Street Journal’s editorial board makes it seem as though the North American sky is falling

What is frightening to some is that more than NAFTA is at stake. A review of NAFTA would almost certainly open up a review of the entire U.S. trade policy, and that would upset vested interests that need upsetting.

NAFTA is the U.S. government-devised model for dozens of trade and investment agreements in the past 15 years and also for agreements the Bush administration is still pursuing. That model, vigorously defended by the trade elite who wrote it, has many flaws. The most fundamental among them can be boiled down to this indictment: it creates and enforces a large set of cross-border rights and privileges for multinational corporations and investors without any corresponding duties.

You will seldom hear a criticism of NAFTA put that way. Instead, critics usually fault it for a lack of enforceable labor and environmental standards. The solution offered is to tack on those standards. But that won’t suffice, because NAFTA as a whole is unbalanced, so much so that it should be called the North American property rights and investment rights agreement.

Calling it a free trade agreement is a misnomer, because it actually restricts free trade in crucial areas. It favors intellectual property owners over intellectual property users, pharmaceutical companies over pharmaceutical users, Wall Street over Main Street, foreign investors over everyone else. Its tilt, spread ovcr most of the continent, skews income and increases the power of the superpowerful.

In a 1993 syndicated column, Henry Kissinger, a vigorous advocate of NAFTA, hailed it as “not a conventional trade agreement, but the architecture of a new international system…a first step toward the New World Order.” Though no longer expressed in such lofty terms, that vision seems to survive among NAFTA defenders who deem it sacrosanct and so beyond review.

For a dose of reality, read a book written by a noted economist who was a party to NAFTA’s adoption 15 years ago: “Fair Trade for All,” by Joseph E. Stiglitz. It makes a strong case for why all current trade and development policy, including NAFTA, urgently needs a review.


Print Page Read more!