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A few well-written words can convey a wealth of information, particularly when there is no lag time between when they are written and when they are read. The IPS blog gives you an opportunity to hear directly from IPS scholars and staff on ideas large and small and for us to hear back from you.

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Entries tagged "Free Trade"

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We Need to Rethink, Not Rearm NAFTA

February 4, 2011 ·

U.S. President Barack Obama and Canadian Prime Minister Stephen Harper will meet in Washington today amid calls in the United States for tougher security on the northern border. Suggestions in the Senate Homeland Security Committee that the 49th parallel is an unruly ‘no man’s land’ threatening the American people, and that Canadians should need visas to enter the United States  prompted the meeting.

Experts expect the two leaders to announce today a “new” border partnership to ease the flow of goods and people across the border by harmonizing security, immigration and refugee, surveillance and possibly defense policy across the continent. There's nothing new about this plan. It's the regurgitation of the defunct Bush-led Security and Prosperity Partnership (SPP)without the Mexican “amigo,” previously  played by Mexican President Vicente Fox. As the Canadian business lobby suggested to Obama, it only “takes two to tango.”

Ten years ago, business lobbies of the three countries claimed the only way to keep goods, services, and investment flowing across borders in the post-9/11 security climate was through “deep integration,” or the arming of NAFTA. Corporate North America entered into a pact with governments to endorse transnational military exercises and surveillance systems, no-fly lists, and other ineffective but intrusive security measures.  In return , promises were made for open borders, a common and laxer regulatory environment, and a dominant role for big business in the creation of a North American economic policy that went beyond the already exhausted NAFTA.

The plan took many forms, from the 2001 and 2002 Smart Border Declarations with Canada and Mexico, a 2005 trilateral report from the Council on Foreign Relations on “Building a North American Community,” and the now reviled SPP, which emerged in Waco, Texas that same year. By 2006, a hand-picked group of 30 CEOs was driving integration as the North American Competitiveness Council -- the only non-governmental advisory group for the process.

The plan was corporatist, its successes modest, and its failures abundant. No one can legitimately claim it has made North America safer. Since President Felipe Calderon took office in 2006, the Washington-led war on drugs has left more than 34,000 dead in Mexico. Not only does the United States. arm the Mexican military with taxpayers’ money, but criminals enjoy a continuous supply of high caliber guns given the laxity of U.S. laws and the large supply close to the border. In addition, NAFTA’s prohibition on capital controls allows dirty money to flow both ways without effective restrictions.

In Canada, the thought of harmonized security and border policy will bring to mind the experience of Maher Arar.  A Canadian citizen, Mr. Arar was deported from New York to Syria based on RCMP intelligence shared without filters with the Department of Homeland Security. He was imprisoned and tortured for a year before being let go without charge. Canadian airlines continue to use U.S. no-fly lists to block innocent Canadians from boarding planes that travel through U.S. airspace en route to non-U.S. destinations.

The SPP goal of enhanced competitiveness and “prosperity” has also failed to materialize. Cheap U.S. corn exports into Mexico are blamed in numerous studies for the loss of millions of farm jobs. Manufacturing jobs have been leaving Mexico for Asia, where salaries are much lower, for several years. Mexico’s exports are from transnational industries, mainly the automobile sector, but not of the weakened national industry.

Canada has also lost manufacturing jobs as its economy becomes increasingly linked to raw resource exports. What manufacturing or other high-value industry still exists is increasingly U.S.- or foreign-owned. Even in the resource sector, extraction and export is carried out by private firms based on the profit motive only. Almost all of the heavy crude from Alberta’s tar sands goes to the U.S. for refining. Part of the SPP vision has been to consider energy, raw materials, and even water as part of a “North American” pool at the disposal of the free market, not something that must be preserved and protected for future generations.

Like many Canadians and Mexicans, we were relieved when President Barack Obama campaigned on a promise to renegotiate NAFTA to make it work for working families. “Starting my first year in office, I will convene annual meetings with Mr. Calderón and the prime minister of Canada. Unlike similar summits under President Bush, these will be conducted with a level of transparency that represents the close ties among our three countries," he said. "We will seek the active and open involvement of citizens, labor, the private sector and non-governmental organizations in setting the agenda and making progress”.

We still believe openness and involvement is what it’s needed. But we worry that Obama and Harper will use today's meeting to endorse a myopic economic and security vision for North America that takes us further away from a just and sustainable future. At the very least, the public should be informed promptly and in detail of the decisions taken, and to have a say in whether or not a “security perimeter” is in anyone’s interests.

Manuel Pérez-Rocha is an associate fellow at the Institute for Policy Studies in Washington D.C. Stuart Trew is a trade campaigner with the Council of Canadians in Toronto.

The Age of Vulnerability

January 10, 2011 ·

Philippine Laborers

Laborers going home from a Philippine
plantation where pineapple is grown
for export.

Photo by John Cavanagh

If you are wondering what the Wall Street crash did for U.S. credibility abroad, listen to this. In the middle of the pain and suffering of the global economic and food crises of 2009, a group of South Asian economists and policy makers met in India and mocked the United States: “You guys messed up, and you’re taking the world economy down with you. Thank God we were smart enough to ignore your advice, so our financial sector was never deregulated, and we still grow most of our own food. We keep government grain stocks to cushion price spikes, and we’re even better than China because we rely more on internal demand than exports so we’re not taking as much of a hit,” as one participant summed up the sentiment of the meeting.

Is anyone in the United States (and other, poorer nations of the world) listening? We certainly are intrigued. So, after 30 years of working on and off in the Philippines, we return to gauge the debate, among members of the nations' new government and among ordinary Filipinos. How is the government and how are Filipinos, we asked, responding to what we call the “triple crises of vulnerability”: the global economic crisis, the food crisis, and the spreading environmental crises of water, forests, fisheries, and climate?

Some broader context is helpful here: For these past 30 years, the United States (along with the World Bank, International Monetary Fund, and World Trade Organization) has preached the merits of “free trade”—gearing economic activity to global corporations and markets in order to take advantage of the so-called “efficiencies” of trade and investment with other countries. From the United States to the Philippines to Mexico, governments set incentives and rules so that firms shifted from local to global markets and, in the case of the Philippines, roughly 11 million people ended up working overseas.

Over these decades in most countries, banking was deregulated so that new high-risk financial instruments reaped big gains for investors, but small businesses that once formed the backbone of most economies had trouble getting loans. Firms produced goods in global factories that exploited natural resources and workers from poorer countries like the Philippines where governments offered lax labor and environmental standards. Over this period in the Philippines, the big foreign-exchange earners became overseas workers, call centers for Western firms, electronic exports, and tourism.

In this era of what financier George Soros calls “market fundamentalism,” the rich soared to unimaginable heights (the number of billionaires in the world jumped from 111 in 1987 to 1,011 in 2010) while workers, the environment, and fairness suffered. We now know that this strategy made poorer countries extremely vulnerable to external shocks from the economies of other nations, over which they have no control.

Robin Broad and John Cavanagh

The authors debate their latest book
at World Bank Headquarters.

Photo by World Bank Staff

Indeed, economic crisis struck in late 2008, emanating from the Wall Street casino as a giant bubble in U.S. housing prices burst. Then banks and other financial markets crashed. The crisis quickly spread to Europe and to those poorer countries most tied into Western markets. Turkey and Mexico, for example, found export markets and remittances from overseas workers drying up. Many countries in Asia fared somewhat better, since they traded more with China and India—which partially insulated their economies from such shocks. About half of the Philippines’ global trade and other economic ties, for instance, are still with the United States and Europe; it thus remains vulnerable to a global economic crisis that has defied conventional predictions of recovery.

For most countries, economic crisis has been accompanied by a food crisis, as prices of rice, wheat, corn and other basics soared in 2008, fueled by both unusual weather and opportunistic speculators. This led to widespread protests and unrest in countries like the Philippines, which still imports up to 10 percent of its rice, the country's most important source of calories (it is the most import-dependent of the rice-consuming nations).

Meanwhile, the spread of global assembly lines and trade, heavily dependent on fossil fuels, deepened the climate crisis. The Philippines sits on key lists of the 10 countries most vulnerable to climate change, as the majority of rice and other foodstuff are grown on land that is barely above sea level.

In the middle of such global suffering and continuing vulnerability, what better time to rethink the overall economic and agricultural path? We asked this of a group of Philippine Congress members, led by Rep. Erin Tanada and Rep. Walden Bello. Coming from various political parties, most harbored hopes that global markets would simply pick up again and the Philippines could continue to live off the largess of other countries. But every Congressperson with whom we met in these hallowed halls has been spooked by the food crisis, and we found a refreshing openness to new ideas.

The good news, as we told these members of Congress, is that alternative economic models more rooted in small businesses and small farms are spreading around the world. In the United States, the local farm movement has expanded rapidly; for the first time in decades, the number of U.S. farmers has stopped shrinking. From local farmers markets to the spread of worker-owned cooperatives, creative people are building communities based on rooted economic activity, less inequality, more ecological health, and involving people more directly in the decisions that affect their lives.

We found this also in the Philippine countryside, where we spent time with dozens of farmers. We discovered a growing number who had shifted from so-called “high-yielding” varieties of rice heavily dependent on imported and toxic chemical fertilizers and pesticides to local seeds grown organically and kept healthy by a variety of homemade “concoctions” to control pests and weeds (more on this in our next blog).

Back to the India conference of 2009. The participant ended his report: The global economic crisis “is a blow, but we’ll still grow at 6 percent and we’ll catch you [in the U.S.] even sooner in the global economy than we would have otherwise. Hope you learn something from this.”


John Cavanagh and Robin Broad wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Robin is a Professor of International Development atAmerican University in Washington, D.C. and has worked as an international economist in the U.S. Treasury Department and the U.S. Congress. John is on leave from directing the Institute for Policy Studies, and is co-chair (with David Korten) of the New Economy Working Group. They are co-authors of three books on the global economy, and are currently traveling the country and the world to write a book entitled Local Dreams: Finding Rootedness in the Age of Vulnerability.

Deal on U.S.-Korea Trade Would Expand Excessive Investor Protections

December 10, 2010 ·

Approval of a White House deal on a trade agreement with Korea appears increasingly uncertain, as several labor unions and key Democrats have announced their opposition.  The deal, announced December 3, includes revisions to the pact negotiated by the Bush administration in the areas of market access for automobiles and beef.  These changes resulted in a split in the U.S. labor movement, with the United Auto Workers and the United Food and Commercial Workers coming out in favor of the deal but the AFL-CIO, Steelworkers, Communications Workers, and the Machinists opposed.

One of the most disappointing aspects of the “deal” is the failure to address widespread concerns over excessive investor protections.  Current U.S. trade and investment agreements allow private foreign investors to bypass domestic courts and sue governments in international tribunals over actions, including public interest regulations, that reduce the value of their investment.

On the campaign trail, President Barack Obama made several promises to revise these rules.  For example, he stated “With regards to provisions in several FTAs that give foreign investors the right to sue governments directly in foreign tribunals, I will ensure that foreign investor rights are strictly limited and will fully exempt any law or regulation written to protect public safety or promote the public interest.  And I will never agree to granting foreign investors any rights in the U.S. greater than those of Americans.”

As Rep. George Miller (D-CA), chair of the House Education and Labor Committee, points out, however, such changes were not made in the Korea deal.  According to Miller, “The rights granted foreign investors are far too broad and allow foreign corporations to skirt the rule of American law, such as for health and environmental protections, and American courts by using private arbitration panels to demand compensation from US taxpayers for upholding our own labor standards and other essential regulations.”

The Communications Workers of America also drew attention to the problems with the deal’s investment rules:  “This agreement gives investment and legal protections to large multi-national corporations which shift jobs offshore in search of the lowest labor and environmental costs and highest profits.  With no counter balance, multi-national corporations whipsaw workers and nations to prevent and eliminate bargaining rights.”

Several major U.S. environmental groups have also emphasized the problems with investor protections.  According to Friends of the Earth, “The Korea trade pact replicates some of the worst aspects of NAFTA (North American Free Trade Agreement), providing foreign investors the right to challenge U.S. public health and environmental regulations that could put a dent in their current or expected profits. Like NAFTA, the agreement would also allow South Korean companies to challenge U.S. environmental laws in secret, unaccountable trade tribunals that completely bypass the U.S. judicial system.”

One little-known aspect of the investment chapters of U.S. trade agreements is that they ban the use of capital controls, a tool that has been used effectively by many countries to prevent or mitigate financial crisis.  New Zealand academic Jan Kelsey has pointed out that recently adopted capital controls by the government of Korea would likely be in violation of the trade pact’s investment rules. According to Kelsey, “a number of measures adopted by South Korea in its national interest appear to conflict with the agreements it has signed with the US and the EU and also reveals inconsistencies in Korea’s obligations under the two agreements and with other international instruments that allow them more flexibility.”

As Boston University professor Kevin Gallagher stated in his article Obama must ditch Bush – era trade deals, “South Korea will join the growing group of nations that have recently resorted to currency controls in the wake of the global financial crisis. As a rash of new research has shown, such controls are legitimate tools to prevent and mitigate financial crises. Yet if the pending South Korea-US free trade agreement had been ratified by now, South Korea’s actions would be deemed illegal.”

Despite strong opposition from civil society groups in the United States and South Korea, the White House is expected to seek Congressional approval of the U.S.-Korea trade deal in early 2011.

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