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Free Trade Agreements Have Exacerbated a Humanitarian Crisis in Central America

By Manuel Perez-Rocha | IPS | June 29, 2016

U.S. trade negotiators continue to claim that free trade agreements help to support security, but in reality, they exacerbate the root causes of instability in the Mesoamerican region, IPS’s Manuel Perez-Rocha said in a speech at the AFL-CIO conference on U.S. trade policy.

“Real security encompasses economic, human, financial, and political security,” he said.

Today the Northern triangle of Latin America is one of the most dangerous places in the world. In Mexico alone, there are more than 27,000 people reported missing on top of the 100,000 killed in the so-called war on drugs, Perez-Rocha said.

He explained that the origins of this crisis are rooted in structural adjustment policies that the IMF and the World Bank imposed on Central America to pave the way for free trade agreements like the North American Free Trade Agreement (NAFTA), the Central America Free Trade Agreement (CAFTA) and now the Trans-Pacific Partnership (TPP).

“Instead of bringing prosperity, [NAFTA] took away domestic protections from Mexico’s food production, leading to greater food insecurity and the widespread loss of our agricultural livelihoods,” he said.

Perez-Rocha said the abandonment of national production of food to favor imports, brought on by NAFTA, has meant the fall of production, employment, and income and the increase of inequality, poverty, and migration. He said this abandonment of the countryside by the government propelled the vacuum that has become occupied by organized crime.

“NAFTA is responsible,” he said. “for the increase of violence and public insecurity in the countryside and in all of Mexico.”

Ten years later, CAFTA was imposed in Central America, ushering in what Perez-Rocha called “the deterioration of economic conditions for working people and major new threats to the environment.”

Perez-Rocha offered one of the most egregious examples in the case of the Pacific Rim mining company which is demanding millions of dollars from El Salvador for protecting its environment.

“This is a deep humanitarian crisis that should be recognized as such,” he said. He quoted U.S. Vice President Biden as saying ‘confronting these challenges requires nothing less than systematic change, which we in the United States have a direct interest in helping to bring about.’

However, the proposal in the Alliance for Prosperity Plan does not address the roots of the crisis, Perez-Rocha said.

“The goal of the alliance, as we see it,” Perez-Rocha said, “is to attract foreign direct investment for the exploitation of natural resources.”

The alliance and agreements like the TPP, on top of the destruction already brought on by NAFTA and CAFTA, will only mean an acceleration of the race to the bottom for the region’s working families, further dislocation and displacement, and regional insecurity, he said.

Read Manuel Perez-Rocha’s full essay on page 43 [PDF).

July 5, 2016 Posted by | Economics, Environmentalism | , , , , | Leave a comment

Bill Clinton’s War on the Poor (AKA The Hillary Plan)

By Joshua Frank | CounterPunch | February 19, 2016

So, how did America’s poor fare under Bill Clinton’s White House reign? Better than George W. Bush — at least that seems to be the common belief among Democratic voters today, especially those lining up behind Madam Hillary. However, the economy under Clinton in the 1990s may not have been as robust and healthy as many would like to believe.

As economist Robert Pollin of the University of Massachusetts at Amherst explains in Contours of Descent: US Economic Fractures and the Landscape of Global Austerity, Clintonomics was not all it was cracked up to be. “The distribution of wealth in the US became more skewed than it had at any time in the previous forty years,” he argues. “No question, an increasing number of US jobs began to be outsourced at an unprecedented rate as well.”

“Unlike Clinton, Bush is unabashed in his efforts to mobilize the power of government to serve the wealthy,” he continues. “But we should be careful not to make too much of such differences in the public stances of these two figures, as against the outcomes that prevail during their terms of office … the ratio of wages for the average worker to the pay of the average CEO rising astronomically from 113-to-1 in 1991 under Bush-1 to 449-to-1 when Clinton left office in 2001.”

Pollin points out that while Clinton’s tax policy reversed some of the regressive taxation that occurred under Ronald Reagan, it certainly did not reverse the brunt of it. And, as Pollin contends, “The fact is that, insofar as the end of the Cold War yielded any peace dividend under Clinton, it took the form of an overall decrease in the size of the federal government rather than an increase in federal support for the programs supposedly cherished by Clinton, such as better education, improved training, or poverty alleviation.”

Was Clintontime even a boom-era after all? Pollin doesn’t think so. “Under the full eight years of Clinton’s presidency, even with the bubble ratcheting up both business investment and consumption by the rich average real wages remained at a level 10 percent below that of the Nixon-Ford peak period, even though productivity in the economy was 50 percent higher under Clinton than under Nixon and Ford. The poverty rate through Clinton’s term was only slightly better than the dismal performance attained during the Reagan-Bush years.”

Bargaining power for low-wage workers during the 1990s decreased tremendously as well. Wall Street scion Alan Greenspan in fact did not want the unemployment rate to drop below 6 percent because he feared that inflation would skyrocket. Greenspan also did not want workers to increase their bargaining power, which could possibly benefit their organizing strength in the work place. The majority of workers during Clintontime were not happy with their occupations. As Pollin writes, “Wage gains for average workers during the Clinton boom remained historically weak, especially in relationship to the ascent of productivity. These facts provide the basis for the poll findings reported in Business Week at the end of 1999 that substantial majorities of US citizens expressed acute dissatisfaction with various features of their economic situation.”

Pollin also shows that the Earned Income Tax Credit (EITC), the most significant economic initiative under Clinton, more than doubled from $9.3 billion to $26.8 billion during Clinton’s two terms. But food stamps “dropped by $8.5 billion reflecting a large increase in the percentage of households who are not receiving food assistance even though their income level is low enough for them to qualify. Under the Clinton Administration, the decline in the number of people receiving food stamps — 9.8 million — was 17% greater than the decline in the number of people officially defined as impoverished and was accompanied by a dramatic increase in the pressure on private soup kitchens and food pantries.

“And while the EITC does correct some of the failings of the old welfare system, it has created new, and equally serious, problems. Moving poor and unskilled women from welfare onto the labor market exerts a downward pressure on wages, and the national minimum wage itself is too low to allow even a full-time worker to keep just herself and only one child above the official poverty line.”

Poverty did decline under Clinton by almost 4 percentage points. Yet, as Pollin explains, in the prosperity of the 1990s, this small drop back to 1974 levels is reprehensible: “Per capita GDP in 2000 was 70% higher than it was in 1974, productivity was 61% higher, and the stock market was up 603%.”

Clinton’s presidency did see a stop in wage decline from 1993 to 1996, however. And in the next three years wages rose sharply. But “the real wage gains were also, in turn, largely a result of the stock market bubble. The Clinton economy of the late 1990s, whose successes were so heavily dependent on the stock market, offers little guidance as to what such an alternative path to sustained improvements in real wages might be.

“Moreover, conditions under Clinton worsened among those officially counted as poor. This is documented through data on the so called ‘poverty gap,’ which measures the amount of money needed to bring all poor people exactly up to the official poverty line. The poverty gap rose from $1,538 to $1,620 from 1993-99 (measured in 2001 dollars).”

Pollin continues, “Because workers had experienced the ‘heightened sense of job insecurity’ under most of Clinton’s tenure, when wages did finally start to rise significantly in 1997, this was from an extremely low base. Moreover, the injection of increased spending under Clinton that produced low unemployment came from the stock market bubble, which, as has now become transparently clear, was unsustainable. In the 1960s, the catalyst driving the economy to full employment was government spending on the Vietnam war — that is, a source of economic stimulus that was also unsustainable and even more undesirable than the 1990s market bubble.

“The central challenge for an employment-targeted policy in the US today would therefore be to identify alternative sources of job expansion that do not require waging war or destabilizing the financial system. The Bush-2 plan for huge military spending increases obviously does not qualify any more than the Vietnam War as a desirable source of job expansion.”

In other words, even though jobs were plentiful in the 1990s, poverty was widespread and, in fact, increasing. All this before the effects of NAFTA and welfare reform reared their ugly heads. But this was all by design. Clinton, et al., knew exactly what it was they were doing. No question Hillary’s neoliberal agenda will follow suit.

February 21, 2016 Posted by | Economics, Militarism, Timeless or most popular | , | Leave a comment

Failing to Deliver: Manufacturing Wages Aren’t What They Used to Be

By Deirdre Fulton | Common Dreams | November 21, 2014

Though nine out of ten Americans perceive blue-collar jobs as “good jobs” and policymakers tout the benefits of expanding the country’s manufacturing base, the truth is that factory wages now rank in the bottom half of those for all jobs in the U.S., according to a new study from the National Employment Law Project (NELP).

The report, Manufacturing Low Pay: Declining Wages in the Jobs That Built America’s Middle Class (pdf), reveals that while the manufacturing sector has experienced a rebound in recent years, in fact “the quality of too many of the returning jobs is low and fails to live up to workers’ and the overall public’s expectations.”

“Manufacturing jobs are… highly sought after by our federal and state policymakers,” write co-authors Catherine Ruckelshaus and Sarah Leberstein, “lauded as ‘advanced industries’ that generate investments, create a high number of direct and indirect jobs, enhance worker skills, and generate additional economic activity in related industries.”

But “while the manufacturing sector has been resurging in the last few years, growing by 4.3 percent between 2010 and 2012, the jobs that are returning are not the ones that were lost: wages are lower, the jobs are increasingly temporary, and the promised benefits have yet to be realized,” they write.

Specifically, the study finds that:

  • More than 600,000 manufacturing workers make just $9.60 per hour or less and more than 1.5 million manufacturing workers—one out of every four—make $11.91 or less;
  • Real wages for manufacturing workers declined by 4.4 percent from 2003 to 2013—almost three times faster than for workers as a whole.
  • In the largest segment of the manufacturing base—automotive—wages have declined even faster. Real wages for auto parts workers, who now account for three of every four autoworker jobs, fell by nearly 14 percent from 2003 to 2013—three times faster than for manufacturing as a whole, and nine times faster than the decline for all occupations.
  • In particular, new jobs in the auto industry pay less than the jobs that were lost. New hires in auto earn less than $10 an hour.
  • Heavy reliance on temporary workers hides even bigger declines in manufacturing wages. About 14 percent of auto parts workers are employed by staffing agencies today. Wages for these workers are lower than for direct-hire parts workers and are not included in the official industry-specific wage data cited above.

“What will these jobs look like in 10 years if these trends continue?” the report asks. “If the wage trends continue, manufacturing jobs will not deliver on the promise of creating livable jobs with positive economic revivals in communities and families.”

Writing at the Campaign for America’s Future blog, Dave Johnson blames globalization and so-called free-trade pacts for exacerbating—if not directly causing—the issues raised in NELP’s report.

“American factory jobs used to provide reasonable pay and benefits—largely because of unions and democracy. So how do you make manufacturing jobs more ‘efficient?’ You can move the factory to a country that doesn’t allow unions. Our country used to recognize this game and ‘protected’ the good wages and benefits that democracy provided people with tariffs that raised to price of goods made in places that allowed exploitation of working people. Solution: ‘free trade’ that pits our democracy against thugocracies with few or no protections for people or the environment.

Free trade’ worked—to force unemployment up and wages down. We lost more than 6 million manufacturing jobs and 60,000-plus factories between 2000 (the year before China entered the World Trade Organization) and 2010.

With approval of the corporate-friendly Trans-Pacific Partnership on the horizon, NELP’s findings are a wake-up call, writes Scott Martelle for the LA Times.

“We as a nation need to press the federal government to rethink trade policies, especially as it pushes for ever more deals to make it easier to ship goods and jobs around the world,” he says. “The looming Trans-Pacific Partnership (look at it as NAFTA for the Pacific Rim) might be good for global manufacturers and American consumers, but those consumers are also American workers. Driving down retail prices while also driving down family incomes is the wrong spiral for community stability and a steady or improving standard of living.

Martelle continues: “A century ago, Henry Ford figured out that if he wanted a mass market capable of buying his cars—cheaper to make with his moving assembly line—then he needed to pay higher wages. He understood the connection between wages paid and products bought. These days, the focus seems to be more on wages squeezed. And that’s no way to preserve, or strengthen, a middle class capable of driving a vibrant consumer economy.”

November 21, 2014 Posted by | Economics | , | Leave a comment

New frontiers for oil palm

Communities lose out to oil palm plantations

GRAIN |  September 22, 2014

Palm oil is not something you would associate with a Mexican kitchen. But go to any supermarket in the country, and you will find countless products containing it. The country’s food system has changed immensely since the North American Free Trade Agreement (NAFTA) came into effect in 1994 and multinational companies moved in to take control of the country’s food supply. The alarming rate of obesity, now higher than that of the US, is one manifestation of Mexico’s changing food landscape, and tied to this is the escalating consumption of palm oil.

Palm oil consumption has increased by over four times since NAFTA was signed, and it now accounts for one quarter of the vegetable oil consumed by the average Mexican, up from 10% in 1996. Other countries in Latin America undergoing similar changes to their food systems have also increased their consumption of palm oil. Venezuelans have doubled their intake, and Brazilians are consuming 5 times what they did in 1996.

This growing consumption is matched by growing production, not in Mexico, but in those countries where oil palm can be most cheaply produced. A third of Latin America’s palm oil exports now go to Mexico.

Colombia, with about 450,000 ha under production, is the biggest palm oil producer in the Americas. Since the late 1990s, Colombia’s palm oil production has taken off for several overlapping reasons, including government incentives and a national biodiesel mandate. Oil palm has also been promoted as a substitute crop for coca as part of the US-backed “Plan Colombia” – a programme aimed at ending the country’s long-standing armed conflict and curbing cocaine production. Paradoxically, palm oil is also proving a useful way for drug cartels, paramilitaries and landlords to launder money and maintain control of the countryside.

The most notorious land grabs for palm oil in Colombia have occurred in the north west Chocó province, where businessmen and paramilitaries have colluded to force Afro-Colombian communities to cede their territories for palm oil plantations and contract farming. After dozens of Afro-Colombian leaders were killed resisting such land grabs, Colombia’s Prosecutor General’s Office brought forward charges against 19 palm oil businessmen for crimes of conspiracy, forced displacement, and the invasion of ecologically important land. Three of these businessmen have so far been convicted.

Disease outbreaks have limited palm oil’s expansion in Chocó Province and most of the expansion has instead happened on the pasture lands of the central and eastern parts of the country, where the oil palm industry claims there is little deforestation and displacement of peasants. But studies show that these pasture lands are in fact typically common areas vital to peasants for the production of their food crops and the grazing of their livestock. The “pasture lands” are often the only lands that peasants have access to, and palm oil companies routinely use force and coercion, including paramilitaries, to take control of these lands from them or to force them into oppressive contract production arrangements. Across Colombia, the expansion of palm oil and the presence of paramilitaries are tightly correlated.

Ecuador, Latin America’s second largest palm oil producer, has also seen a recent expansion in oil palm production. While much of its palm oil is produced on farms of less than 50 ha, new expansion is driven by private companies who have been moving into the territories of Afro-Ecuadorians and other indigenous peoples in the Northern part of the country, leading to severe deforestation and displacement and meeting with stiff local resistance.

Land conflicts over palm oil are also erupting in Central America. In Honduras, peasants in the Aguan Valley have been killed, jailed and terrorized for trying to defend their lands and small palm oil farms from powerful national businessmen who have been grabbing their lands to expand their palm oil plantations with the backing of foreign capital. Ironically, these peasant families first moved into the forests of the Aguan in the 1970s as part of a government land reform programme, and were encouraged to grow palm oil and establish their own cooperatives. The neoliberal policies of the 1990s and a coup d’état in 2009, opened the door for powerful local businessmen like Miguel Facussé, to destroy the peasant cooperatives, violently grab lands for plantations, and reorient the supply chain towards exports for biofuels and multinational food companies. Likewise in Guatemala, where production of palm oil has quadrupled over the past decade, the palm oil sector is now entirely controlled by just eight wealthy families who have been aggressively seizing lands from indigenous communities, such as the Q’eqchi,

Some industry insiders predict that an expansion of oil palm production in Brazil will soon dwarf all other production in the region. Brazil is a net importer, and production has so far been confined to a small area of Pará, in the North. But, unlike in other regional palm oil producing countries where production is dominated by national companies and wealthy landowning families, transnational corporations have recently made significant investments in Brazilian palm oil production, such as the mining company Vale, energy companies Petrobras and Galp, and ADM, one of the world’s largest grain traders and a major shareholder in the world’s largest palm oil processor Wilmar.

Going further

Tanya M. Kerssen, “Grabbing Power: The New Struggles for Land, Food and Democracy in Northern Honduras,” FoodFirst, 1 February 2013

Human Rights Everywhere, “The flow of palm oil Colombia- Belgium/Europe: A study from a human rights perspective,” 2006

More frontiers

October 5, 2014 Posted by | Economics, Environmentalism, Ethnic Cleansing, Racism, Zionism | , , , , , , , , , | Leave a comment

NAFTA at 20: State of the North American Worker

Twenty years since its passage, NAFTA has displaced workers on both sides of the U.S.-Mexico border, depressed wages, weakened unions, and set the terms of the neoliberal global economy.

By Jeff Faux | Foreign Policy in Focus | December 13, 2013

Foreign Policy In Focus is partnering with Mexico’s La Jornada del campo magazine, where an earlier version of this commentary appeared, to publish a series of pieces examining the impacts of the North American Free Trade Agreement (NAFTA) 20 years since its implementation. This is the first in the series.

The North American Free Trade Agreement, or NAFTA, was the door through which American workers were shoved into the neoliberal global labor market.

By establishing the principle that U.S. corporations could relocate production elsewhere and sell their products back into the United States, NAFTA undercut the bargaining power of American workers, which had driven the expansion of the middle class since the end of World War II. The result has been 20 years of stagnant wages and the upward redistribution of income, wealth, and political power.

A Template for Neoliberal Globalization

NAFTA impacted U.S. workers in four principal ways.

First, it caused the loss of some 700,000 jobs as companies moved their production to Mexico, where labor was cheaper. Most of these losses came in California, Texas, Michigan, and other states where manufacturing is concentrated (and where many immigrants from Mexico go). To be sure, there were some job gains along the border in the service and retail sectors resulting from increased trucking activity. But these gains are small in relation to the losses, and have generally come in lower paying occupations. The vast majority of workers who lost jobs from NAFTA, therefore, suffered a permanent loss of income.

Second, NAFTA strengthened the ability of U.S. employers to force workers to accept lower wages and benefits. As soon as NAFTA became law, corporate managers began telling their workers that their companies intended to move to Mexico unless the workers lowered the cost of their labor. In the midst of collective bargaining negotiations with unions, some companies even started loading machinery into trucks that they said were bound for Mexico. The same threats were used to fight union organizing efforts. The message was: “If you vote to form a union, we will move south of the border.” With NAFTA, corporations also could more easily blackmail local governments into giving them tax breaks and other subsidies, which of course ultimately meant higher taxes on employees and other taxpayers.

Third, NAFTA drove several million Mexican workers and their families out of the agriculture and small business sectors, which could not compete with the flood of products—often subsidized—from U.S. producers. This dislocation was a major cause of the dramatic increase of undocumented workers in the United States, putting further downward pressure on North American wages, particularly in already lower-paying labor markets.

Fourth, and ultimately most importantly, NAFTA created a template for the rules of the emerging global economy, in which the benefits would flow to capital and the costs to labor. Among other things, NAFTA granted corporations extraordinary protections against national labor laws that might threaten profits, set up special courts—chosen from rosters of pro-business experts—to judge corporate suits against governments, and at the same time effectively denied legal status to workers and unions to defend themselves in these new cross-border jurisdictions.

The U.S. governing class—in alliance with the financial elites of its trading partners—applied the NAFTA principles to the World Trade Organization, to the policies of the World Bank and IMF, and to the deal under which employers of China’s huge supply of low-wage workers were allowed access to U.S. markets in exchange for allowing American multinational corporations to invest there. The NAFTA doctrine of socialism for capital and free markets for labor also drove U.S. policy in the Mexican peso crisis of 1994-95, the Asian financial crash of 1997, and the global financial meltdown of 2008. In each case, the U.S. government organized the rescue of banks and corporate investors while letting the workers fend for themselves.

A Watershed in U.S. Politics

In U.S. politics, the passage of NAFTA under President Bill Clinton signaled that the elites of the Democratic Party—the “progressive” major party—had accepted the reactionary economic ideology of Ronald Reagan.

A “North American Accord” was first proposed by the Republican Reagan in 1979, a year before he was elected president. A decade later, his Republican successor, George H.W. Bush, negotiated the final agreement with Mexico and Canada.

At the time, the Democrats who controlled Congress would not approve the agreement. And when Democrat Bill Clinton was elected in 1992, it was widely assumed that the political pendulum would swing back from the right, and that therefore NAFTA would never pass. But Clinton surrounded himself with economic advisers from Wall Street and in his first year pushed the approval of NAFTA through the Congress.

Despite the rhetoric, the central goal of NAFTA was not “expanding trade.” After all, the United States, Mexico, and Canada had been trading goods and services with each other for three centuries. NAFTA’s central purpose was to free American corporations from U.S. laws protecting workers and the environment. Moreover, it paved the way for the rest of the neoliberal agenda in the United States: the privatization of public services, the deregulation of finance, and the destruction of the independent trade union movement.

The inevitable result was to undercut the living standards of workers all across North America: Wages and benefits have fallen behind worker productivity in all three countries. Moreover, despite declining wages in the United States, the gap between the typical American and typical Mexican worker in manufacturing remains the same. Even after adjusting for differences in living costs, Mexican workers continue to make about 30 percent of the wages that workers make in the United States. Thus, NAFTA is both symbol and substance of the global “race to the bottom.”

Creating a New Template

Here in North America there are two alternative political strategies for change.

One is repeal: NAFTA gives each nation the right to opt out of the agreement. The problem is that by now the three countries’ economies and populations have become so integrated that dis-integration could cause widespread dislocation, unemployment, and a substantial drop in living standards.

The other option is to build a cross-border political movement to rewrite NAFTA in a way that gives ordinary citizens rights and labor protections at least equal to the current privileges of corporate investors. For example, all three NAFTA nations should adopt similar high standards for the protection of free trade unions, collective bargaining, and health and safety—and their citizens should have the right to sue other countries for violations.

This would obviously not be easy. But a foundation has already been laid by the growing collaboration among immigrant, trade unionist, human rights, and other activist organizations in all three counties.

If such a movement could succeed in drawing up a new continent-wide social contract, North American economic integration—instead of being a blueprint for worker exploitation—might just become a model for bringing social justice to the global economy.

Jeff Faux is the founder, and now Distinguished Fellow, of the Economic Policy Institute in Washington DC. His latest book is The Servant Economy.

December 14, 2013 Posted by | Civil Liberties, Economics, Environmentalism, Solidarity and Activism, Timeless or most popular | , , , , , , , | Leave a comment

Trans-Pacific Partnership: Free Trade vs. Democracy

By Cliff DuRand  | Americas Program | April 12, 2013

As closed-door negotiations concluded in Singapore on the Trans-Pacific Partnership, opposition begins to build in many countries. At the urging of the United States, Canada and Mexico have joined the nine countries in the talks and now Japan has announced it too wants to be part of this new free trade pact of Pacific rim countries, described by its critics as “NAFTA on steroids”.

Going into its 17th round of negotiations, the Obama administration aims to wrap up an agreement by October, hoping to push ratification through the Senate on a fast- track basis. Called Trade Promotion Authority, fast track would mean an up or down vote without amendments or even hearings on the agreement presented to it. It is a profoundly anti-democratic procedure because it shuts down debate.

But from start to end, TPP has been thoroughly anti-democratic. On the first day of the Singapore talks a broad range of civil society organizations issued an open letter to Congress calling for greater transparency in the proceedings. The agreement is being hammered out in secret discussions among trade ministers. Even Senators have been denied a look at its draft provisions.

However, some 600 transnational corporations are in the inner circle. They are writing the rules for trade in their own interests without any democratic input from the people whose lives will be profoundly affected. If adopted, TPP will deny citizens their democratic rights to shape public policies on a host of domestic issues, conceding those decisions to the large corporations.

Some sections have been leaked. They reveal “an agreement that actually formalizes the priority of corporate power over government,” according to Lori Wallach of Public Citizen’s Global Trade Watch. Only 5 of the 29 chapters have to do with trade. Wallach says the rest of the draft “include[s] new rights for the big pharmaceutical companies to expand, to raise medical prices, expand monopoly patents, limits on Internet freedom, penalties for inadvertent noncommercial copying, sending something to a friend. There are the same rules that promote off-shoring of jobs that were in NAFTA that are more robust that literally give privileges and protections if you leave. There is a ban on ‘buy American’ and ‘buy local’ or ‘green’ or sweat-free procurement. There are limits on domestic financial stability regulations. There are limits on imported food safety standards and product standards. There are limits on how we can regulate energy towards a more green future – all of these things are what they call ‘Behind the Borders’ agenda. And the operating clause of TPP is: ‘Each country shall ensure the conformity of its domestic laws, regulations and administrative procedures with these agreements.’”

Global Class War

Free trade is about more than trade. It is about favoring corporations over the democratic rights of citizens and the sovereignty of nations. As the former Director-General of the WTO, Renato Ruggiero, said in 1995, “We are no longer writing the rules of interaction among separate national economies. We are writing the constitution of a single global economy.”# What is being created is a global governance order in which corporations are the citizens, not flesh and blood humans like you and me. With free trade, corporations are making an end run around democracy.

TPP is the latest offensive in a global class war. For nearly 40 years now, since the mid 1970s, corporations have been rolling back the popular gains of the New Deal era and the 1960s. Democracy has been the target of a class war to restore the class power of capital. And there has been weak resistance, at best, by the popular classes. But the stakes have become increasingly clear to more and more. Indeed, on the issue of free trade, there is now a broad public sentiment against this aspect of the corporate offensive.

The US has become the world advocate of “free trade,” promoting it through trade agreements like NAFTA and other bi-lateral agreements as well as through global governance institutions it has sponsored such as IMF, World Bank and WTO. The US has promoted free trade for much the same reason Great Britain promoted it in the 19th century, viz. the economically strongest country in the world benefits from free trade. It is the weaker countries that seek tariff protection for their infant industries, protection from competition with cheaper and higher quality imports. That protection is what enabled the US to industrialize in the last half of the 19th century. But then when the US became economically strong enough to compete regionally and eventually globally, it became an advocate of free trade and demanded that others abandon protectionism.

The justification for free trade rests on the theory of comparative advantage. This is the view that if countries trade free of government impediments, the market will tend to direct each to export that which they can produce most efficiently and import what can be produced more efficiently and thus more cheaply elsewhere. The invisible hand of the market will guide each to specialize in producing what they have a comparative advantage in. Thus a rational production and trading system will emerge that maximizes efficiency.

Free trade agreements like NAFTA were sold to the US public by appealing to consumer’s interest in having access to cheaper goods imported from Mexico. What was deliberately soft-pedaled was their interest as workers in having jobs. Organized labor opposed NAFTA, fearing it would pit US workers in competition with low wage Mexican workers. Independent presidential candidate Ross Perot warned of “a giant sucking sound” as jobs would be off-shored to Mexico.

But the Clinton administration said US exports to Mexico would create new jobs. And so, ignoring opposition from its traditional base in the unions, new Democrat Clinton pushed ratification of NAFTA through the Senate as his first priority. Perot proved to be correct as US companies shifted production to low wage Mexico – until even lower wage Chinese workers were brought into play when China joined WTO. But Clinton was also right as cheaper consumer goods from abroad filled the shelves of Wal-Mart with bargains welcomed by US workers who found their wages reduced. Free trade proved to be a mixed blessing.

Capital Becomes Global

One important point about free trade that is often overlooked is that it is not only about the free, frictionless movement of goods and services across borders, unrestricted by tariffs, quotas and regulations. It assures the free movement of capital, as corporations are freed to invest abroad. The mobility of investment capital is of utmost importance, with profound economic consequences and consequences for democracy.

Unable to find sufficiently profitable venues for investment in the overdeveloped US economy, large corporations have increasingly moved abroad. They sought not just new outlets to sell their commodities, but low wage workforces that would decrease their production costs and thus boost their profits. Frequently that would involve locating different stages of the productive process in different countries so as to take optimal advantage of local conditions. The assembly lines of US industry were disaggregated and disbursed across the globe.

Global assembly lines emerged. These global production chains have become a signature feature of contemporary capitalism. Components may be manufactured in Singapore, transported to China for subassembly and then shipped to Mexico for final assembly before sale in the United States. Although global assembly lines are geographically dispersed, they overcome the limitations of the fixed assembly lines of the Fordist era in that they no longer have to rely on a fixed labor force that can organize itself to effectively claim a share of the surplus they create.

Instead, the global assembly line gives capital the flexibility to seek out the lowest wage workforce and friendliest business environment available anywhere in the world. This has been made possible by the development of a global computerized network of instant communications via satellite. That and the computerization of banking have made money transfers and the movement of capital both easy and instantaneous. The communications network also allows the decentralization of technological development and design. Technicians can work at points distant from the processes of production to which they address themselves. And the entire process can be coordinated by management located anywhere on the globe. The limitations of space and time have been overcome by digital communications and cheap energy for transporting goods to their ultimate consumers.

For such globalized production to be possible, capital must be able to flow freely across national borders and products have to be able to move with minimum friction across those borders, unhampered by tariffs or quotas or non-uniform standards. In other words, there must be free trade for transnational capital to optimize accumulation.#

But transnational corporations also need legal protection of their investments. They need protection from expropriation of their assets, laws and governments that can ensure their property is secure. A crucial part of free trade agreements is protection of what are called investor rights. This involves more than just protection from expropriation, as happens with revolutions. It also involves protection from governmental actions that might reduce the value of their property or potential profits by environmental and health regulations, labor laws or other such measures even though they might be for the public good. What in US law is called “regulatory takings” are seen as tantamount to expropriation.

When such governmental actions do occur, free trade treaties give the foreign corporation the recourse to sue. The suit is not adjudicated in a national court, but by a transnational body of experts operating in secret. States are expected to enforce its decisions on their own nation’s taxpayers and consumers. This favors investor rights (i.e. the interests of transnational corporations) over the democratic rights of a nation.

Super NAFTA

As corporations have globalized, morphing into transnational corporations, they have promoted free trade agreements to get national governments to assist them. But when “investor rights” trump the democratic rights of citizens, the transnational corporations become the real citizens of the emerging global order. TPP is a further step in this direction, making an end run around a number of important issues –banking regulation, extension of patent protection, food inspection, environmental protection, food sovereignty, internet freedom, health care, job creation policies, and more, denying voters the opportunity to decide such matters when they impinge on corporate profit making.

Here are a few of the issues around which opposition to TPP is beginning to emerge.

* Doctors Without Borders (Medecins Sans Frontieres, MSF) is concerned that TPP would “enhance patent and data protections for pharmaceutical companies, dismantle public health safeguards enshrined in international law and obstruct price-lowering generic competition for medicines.” The intellectual property provisions would give pharmaceutical companies prolonged monopoly protection for medicines and delay access to cheaper generic versions. This would have disastrous consequences in poorer countries.

* Internet freedom is also in danger. The Council of Canadians and OpenMedia have warned that the TPP would “criminalize some everyday uses of the Internet,” including music downloads, making no distinction between commercial and non-commercial copyright infringement. The TPP imposes a “three strikes” system for copyright infringement, where three violations would result in the termination of a household’s Internet access.

* Japanese farmers are concerned that TPP will force removal of protections from Japan’s agriculture needed to maintain food sovereignty for the country. They are protesting Japan’s decision to enter into TPP negotiations at all.

* Guaranteed compensation for loss of “expected future profits” from health, labor or environmental regulations.

* Corporate performance requirements are banned.

* Capital mobility is to be guaranteed, preventing capital controls in event of a financial crisis. TPP will require countries to let capital flow in and out without restriction, not allow the banning or regulation of risky investments like derivatives and credit-default swaps and will prevent the formation of much-needed public banks

Democratic sovereignty

Most fundamentally what is at stake with TPP and existing free trade treaties is the sovereignty of nations and the ability of their peoples to make democratic decisions. This is a concern on both the Left and the Right, suggesting the possibility of a broad coalition opposing TPP, bridging our otherwise polarized politics.

A major NBC News-Wall Street Journal poll from September of 2010 revealed that “the impact of trade and outsourcing is one of the only issues on which Americans of different classes, occupations and political persuasions agree,” with 86% saying that outsourcing jobs by U.S. companies to poor countries was “a top cause of our economic woes,” with 69% thinking that “free trade agreements between the United States and other countries cost the U.S. jobs.” Only 17% of Americans in 2010 felt that “free trade agreements” benefit the U.S., compared to 28% in 2007.

Arthur Stamoulis, executive director of Citizen Trade Campaign  said: “If they were to negotiate an agreement that put human rights ahead of corporate profit, creating more just and sustainable social policy, the TPP could be a tool for incredible good. But if you look at who has a seat at the table, with the public shut out and more than 600 corporate lobbyists included, there is nothing to indicate that’s the deal we’re going to get.”

The developing opposition to the corporate coup that the TPP represents has the potential to win. It’s about time for the people to win one victory in the corporate class war. Our first chance in this campaign will be over granting fast track Trade Promotion Authority. And that battle will be followed by the fight over Senate approval of TPP itself. This is one that we can win. The stakes are high. The alternatives are democracy or plutocracy.

******

Cliff DuRand is a Research Associate at the Center for Global Justice and a contributor to the CIP Americas Program http://www.cipamericas.org. He is co-author and co-editor of Recreating Democracy in a Globalized State (Clarity Press, 2012). Contact him at global.justice.cliff@gmail.com

For More Information:

Public Citizen’s Global Trade Watch  http://www.citizen.org/trade

on TPP http://www.citizen.org/TPP

Citizens Trade Campaign www.citizenstrade.org

A coalition of labor, environmental, religious, family farm, and consumer organizations united in the pursuit of socially and environmentally just trade policies.

It’s Our Economy www.itsoureconomy.us

It’s Our Economy seeks to educate, organize and mobilize Americans to shift the power from concentrated capital to the people.  http://itsoureconomy.us/occupy-the-tpp-stop-the-global-corporate-coup/

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April 13, 2013 Posted by | Civil Liberties, Economics, Full Spectrum Dominance | , , , , , , | Leave a comment

NAFTA at 20: The New Spin

By Manuel Perez-Rocha and Javier Rojo | Foreign Policy in Focus | March 14, 2013

Only a few years ago, analysts were warning that Mexico was at risk of becoming a “failed state.” These days, the Mexican government appears to be doing a much better PR job.

Despite the devastating and ongoing drug war, the story now goes that Mexico is poised to become a “middle-class” society. As establishment apostle Thomas Friedman put it in the New York Times, Mexico is now one of “the more dominant economic powers in the 21st century.”

But this spin is based on superficial assumptions. The small signs of economic recovery in Mexico are grounded largely on the return of maquiladora factories from China, where wages have been increasing as Mexican wages have stagnated. Under-cutting China on labor costs is hardly something to celebrate. This trend is nothing but the return of the same “free-trade” model that has failed the Mexican people for 20 years.

The North American Free Trade Agreement (NAFTA), which was ratified in 1993 and went into effect in 1994, was touted as the cure for Mexico’s economic “backwardness.” Promoters argued that the trilateral trade agreement would dig Mexico out of its economic rut and modernize it along the lines of its mighty neighbor, the United States.

The story went like this:

NAFTA was going to bring new U.S. technology and capital to complement Mexico’s surplus labor. This in turn would lead Mexico to industrialize and increase productivity, thereby making the country more competitive abroad. The spike in productivity and competitiveness would automatically cause wages in Mexico to increase. The higher wages would expand economic opportunities in Mexico, slowing migration to the United States.

In the words of the former President Bill Clinton, NAFTA was going to “promote more growth, more equality and better preservation of the environment and a greater possibility of world peace.” Mexico’s president at the time, Carlos Salinas de Gortari, echoed Clinton’s sentiments during a commencement address at MIT: “NAFTA is a job-creating agreement,” he said. “It is an environment improvement agreement.” More importantly, Salinas boasted, “it is a wage-increasing agreement.”

As the 20th anniversary of NAFTA approaches, however, the verdict is indisputable: NAFTA failed to spur meaningful and inclusive economic growth in Mexico, pull Mexicans out of unemployment and underemployment, or reduce poverty. By all accounts, it has done just the opposite.

The Verdict Is In

Official statistics show that from 2006 to 2010, more than 12 million people joined the ranks of the impoverished in Mexico, causing the poverty level to jump to 51.3 percent of the population. According to the United Nations, in the past decade Mexico saw the slowest reduction in poverty in all of Latin America.

Rampant poverty in Mexico is a product of IMF and World Bank-led neoliberal policies—such as anti-inflationary policies that have kept wages stagnant—of which “free-trade” pacts like NAFTA are part and parcel. Another factor is the systematic failure to create good jobs in the formal sectors of the economy. During Felipe Calderon’s presidency, the share of the Mexican labor force relying on informal work—such as selling chewing gum and other low-cost products on the street—grew to nearly 50 percent.

Even the wages in the manufacturing sector, which NAFTA cheerleaders argued would benefit the most from trade liberalization, have remained extremely low. According to the Bureau of Labor Statistics, Mexican manufacturing workers made an average hourly wage of only $4.53 in 2011, compared to $26.87 for their U.S. counterparts. Between 1997 and 2011, the U.S.-Mexico manufacturing wage gap narrowed only slightly, with Mexican wages rising from 13 to 17 percent of the level earned by American workers. In Brazil, by contrast, manufacturing wages are almost double Mexico’s, and in Argentina almost triple.

Mexico’s stagnant wages are celebrated by free traders as an opportunity for U.S. businesses interested in outsourcing. According to one report by the McKinsey management consulting firm, “for a company motivated primarily by cost, Mexico holds the most attractive position among the Latin American countries we studied. … Mexico’s advantages start with low labor costs.”

But even as the damning evidence against NAFTA continues to roll in, entrenched advocates of the trade agreement have been busy crafting new arguments. In his recent book, Mexico: A Middle Class Society, NAFTA negotiator Luis De la Calle and his co-author argue that the trade agreement has given rise to a growing Mexican middle class by providing consumers with higher quality, U.S- made goods. The authors proclaim that “NAFTA has dramatically reduced the costs of goods for Mexican families at the same time that the quality and variety of goods and services in the country grew.”

Most of the economic indicators included in the book conveniently fail to account for the 2008-2009 financial crisis, which hit Mexico worse than almost any other Latin American country. The result has been skyrocketing inequality. As the Guardian reported last December, “ever more Mexican families have acquired the trappings of middle-class life such as cars, fridges, and washing machines, but about half of the population still lives in poverty.”

The indicators of consumption that suggest the rise of Mexico’s middle class also exclude the dramatic increase in food prices in recent years, which has condemned millions of Mexicans to hunger. Twenty-eight million Mexicans are facing “food poverty,” meaning they lack access to sufficient nutritious food. According to official statistics, more than 50,000 people died of malnutrition between 2006 and 2011. That’s almost as many as have died in Mexico’s drug war, which dramatically escalated under Calderon and has continued under President Enrique Peña Nieto.

The food crisis has coincided with the “Walmartization” of the country. In 1994 there were only 14 Walmart retail stores in all of Mexico. Now there are more than 1,724 retail and wholesale stores. This is almost half the number of U.S. Walmarts, and far more than any other country outside the United States. The proliferation of Walmart and other U.S. big-box stores in Mexico since NAFTA came into effect has ushered in a new era of consumerism—in part through an aggressive expansion built on political bribes and the destruction of ancient Aztec ruins.

The arguments developed prior to the signing of NAFTA focused primarily on the claim that the trade agreement would make Mexico a nation of producers and exporters. These initial promises failed to deliver. Throughout the NAFTA years, the bulk of Mexico’s manufacturing “exports” have come from transnational car and technology companies. Not surprisingly, Mexico’s intra-industry trade with the United Sates is the highest of any Latin American country. Yet the percentage of Mexican companies that are actually exporters is vanishingly small, and imports of food into Mexico have surged.

Same Snake Oil, Different Pitch

Because their initial promises utterly failed to deliver, the NAFTA pushers are now hyping “consumer benefits” to justify new trade agreements, including the Trans-Pacific Partnership. One of the most extreme examples of this spin is an article in The Washington Post that celebrates a “growing middle class” in Mexico that is “buying more U.S. goods than ever, while turning Mexico into a more democratic, dynamic and prosperous American ally.” Devoid of all logic, it goes on to say that “Mexico’s growth as a manufacturing hub is boosted by low wages.” How can low wages make people more prosperous?

The Post also boasts that in “Mexico’s Costco stores, staples such as tortilla chips and chipotle salsa are trucked in from factories in California and Texas that produce for both sides of the border.” Is this something to celebrate? The influx of traditional Mexican food staples, starting with maize, and goods from the United States has displaced and dislocated millions of Mexican small-scale farmers, producers, and small businesses. And not only that, Mexicans’ increasing consumption of processed foods and beverages from the United States has made the country the second-most obese in the world.

In essence, NAFTA advocates have been reduced to saying: “so maybe NAFTA didn’t help Mexico reduce poverty or increase wages. But hey! At least it gave it Walmart, Costcos, and sweat shops.”

The bankruptcy of NAFTA’s promises is only compounded by the poverty of this consolation.

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March 17, 2013 Posted by | Deception, Economics, Mainstream Media, Warmongering, Timeless or most popular | , , , , , , , | Leave a comment

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