Atelier n°. 1, article 14




Sid Schniad :
© Presentation at the Workshop on Free Trade: Quebec and Beyond
The 2001 Labor Notes Conference
Detroit, Michigan, April 21, 2001
 
 

                                                    It's Not About Trade...
 
 

WHY ALL THE FUSS ABOUT FREE TRADE?
 

Free trade is all over the news these days. Everywhere you turn, there's
another story about NAFTA or the WTO. Now the FTAA is meeting in Quebec
City. Why is all this attention being focused on free trade? How has this
subject become so controversial?

The reason for the controversy is that the agreements which are being
negotiated in secret and rammed down our throats go far beyond the subject
of trade. Some of the issues they address have nothing at all to do with
trade. To understand what free trade is about, it has to be seen in the
context of the policy framework that governments have been putting in place
for the past twenty-five years: curbing wages, rolling back social programs,
privatizing government holdings and services, and deregulating corporate
activity. This policy framework is known as neoliberalism.

Neoliberalism had its origins in the early 1970s. By that time, the
expansionary Keynesian economic policies that were put in place after World
War II had produced an economic expansion which had lasted decades. While
most people saw this as desirable, corporations did not: against the
background of the full employment which characterized the lengthy economic
expansion, labour militancy reached levels that had not been seen since the
1930s. This, together with the relatively generous levels of social spending
that characterized Keynesian policy, combined to generate rising real wages,
falling profits, and a level of inflation that threatened financial returns.
From the perspective of the corporate sector, all this constituted a major
crisis.

In 1975, the Trilateral Commission addressed this issue in a book called The
Crisis of Democracy. Writing against the background of the prevailing
decline in corporate profitability, its authors bemoaned the effects of
increased government spending in the areas of education, welfare, social
security, health and hospital care.

Expressing a view widely shared by the rich and powerful, The Crisis of
Democracy traced the crisis of profitability to "an excess of democracy."
The neoliberal policies that the Trilateral Commission and other, similar
groups have promoted ever since, through organizations like the World Bank
and the International Monetary Fund, are designed to restore corporate
profitability and to ensure that it is not jeopardized in the future, first
by restructuring the role of government and then by restricting our ability
to use the political process to promote progressive economic and social
policy.
 
 

INTERNATIONAL TRADE AGREEMENTS RESHAPE THE WORLD

This is where free trade comes in. In addition to their efforts in
organizations like the IMF and the World Bank, the proponents of
neoliberalism have extended the reach of their program to the realm of trade
by promoting unprecedented changes to the role played by trade agreements.

The General Agreement on Tariffs and Trade (GATT), the international trade
organization established in 1948, was given a mandate to reduce tariffs on a
specified set of internationally traded goods. In the following twenty
years, GATT achieved this goal; by the beginning of the Tokyo round of trade
negotiations in the 1970s, tariffs on internationally traded goods had been
largely eliminated. But by that time, the largest and most powerful
countries in the world were planning to reshape the trade negotiation
process so that it could play a major role in promoting neoliberalism.

The Uruguay Round of GATT negotiations, which began in the mid-1980s,
addressed an unprecedented range of complex issues. In those negotiations
American, European and Japanese representatives worked to change the GATT
framework to include measures designed to deregulate international
investment by limiting governments' ability to impose performance
requirements on corporate activity. At times the talks verged on failure
because Third World delegates did not share their First World counterparts'
enthusiasm about deregulating corporate behaviour.

Proponents of trade-related neoliberalism - particularly those in the United
States - worried that the opportunity to institutionalize neoliberalism at
the international level would be lost once the Uruguay round ended. It was
in this context that the U.S. government began promoting the bilateral
Canada-U.S. Free Trade Agreement (FTA) and the trilateral North American
Free Trade Agreement (NAFTA).

These two agreements were designed to do an end run around the opponents of
neoliberal free trade. The FTA and NAFTA gave the U.S. government forums
where it could apply pressure to Canada and Mexico, its most significant
trading partners - without incurring resistance from countries which were
concerned about Washington's agenda. The goal of American negotiators was to
create precedents in these two agreements which could be included in
subsequent multi-party trade agreements.

Neoliberal efforts to transform the GATT came to fruition in 1995, when the
World Trade Organization (WTO) was created. This marked the most significant
institutional change in the realm of international trade since the GATT was
created in 1948. But where GATT's modest mandate had been to remove tariffs
on internationally traded goods, the WTO's radically expanded purview
focused on the deregulation and privatization of services, protection for
intellectual property rights, and attacks on national laws and regulations
deemed to impede corporations' pursuit of profit. By altering the trade
negotiation process in this manner, politicians attuned to corporate
priorities have created a trade mechanism designed to limit governments'
ability to regulate or otherwise constrain corporate behaviour.

When they realized what powerful tools such agreements could be in enhancing
their power, corporations began promoting a number of them. Over the past 15
years, I personally have participated in struggles against the U.S.-Canada
Free Trade Agreement, the North American Free Trade Agreement, the
Multilateral Agreement on Investment (MAI), the World Trade Organization
(WTO) and now the Free Trade Area of the Americas (FTAA).

All of these agreements are variations on a common theme. They are an
integral part of corporate-driven "globalization." Although they are
referred to as trade deals, these agreements are only peripherally about
removing barriers to trade. Their real purpose is to institutionalize a
neoliberal political and economic agenda that enhances corporate rights at
the expense of the rest of society.

Certain aspects of these deals include provisions which have nothing at all
to do with facilitating trade. By protecting intellectual property rights,
for example, they restrict trade for the benefit of transnational drug and
computer software companies by extending long-term patent coverage to a
range of goods and services.

Case in point: the situation in Brazil. In 1998, the government began making
generic copies of brand-name drugs. By defying the pharmaceutical companies
and threatening to break patents, Brazil has made antiretroviral drugs
available to everyone who needs them. The fact that it does not pay
prevailing market prices for drugs has enabled the government to establish a
highly successful program which treats every Brazilian who has AIDS.

Now, however, the U.S. government is threatening trade sanctions against
Brazil for violating the intellectual property rights of drug companies
which are guaranteed under the WTO. If the U.S. is successful, Brazil's
ground-breaking anti-AIDS program will come to an end.
 

Canada provides a clear illustration of the effects of neoliberal policies.
For the last twenty years, Canada's Conservative and Liberal governments
have pursued a neoliberal agenda by:
 

            · deregulating airlines, trucking, financial services and
                telecommunications;

            · reducing spending for social programmes, health care and post secondary
                education;

            · undermining the Unemployment Insurance system;

            · weakening Old Age Pensions and child benefit programmes; and

            · reducing the federal minimum wage

            · privatizing public sector services and reducing public sector jobs.
 

This neoliberal domestic program has been complemented by terms and
conditions included in free trade agreements.

Case in point: government-run auto insurance in Ontario. When Canada's New
Democratic Party formed the government in Ontario in 1990, it promised to
establish a government-run automobile insurance system. This was a major
plank in their election platform and was very popular among the citizens of
Ontario because the private insurance industry had been gouging customers
for years. In addition, Ontario voters knew that government-run auto
insurance companies in British Columbia and Manitoba had been providing
residents with efficient, reasonably priced car insurance for years.

Although the people of Ontario clearly wanted government-run auto insurance,
private insurance companies headquartered in the U.S. were determined to
prevent any further government incursion into their business. These
companies invoked Article 1605 of the Canada-US Free Trade Agreement, which
requires "fair market compensation" for companies subjected to government
measures that are "tantamount to expropriation."

These insurance companies prepared more than $2 billion in damage claims
against the government of Ontario. They also sought and received the backing
of American Trade Representative Carla Hills, who interceded on their behalf
with the right wing federal government that was in office in Canada at the
time.

Faced with this powerful opposition, Ontario's NDP government shelved the
idea of government-run auto insurance that the voters of Ontario had voted
for.

Clearly, NAFTA restricts governments' ability to regulate corporate
behaviour and enables companies to sue governments if their profitability
has been negatively effected by government decisions.

Case in point: Metalclad. Last summer, a NAFTA tribunal, working behind
closed doors, ordered Mexico to pay nearly $17 million in compensatory
damages to the Metalclad Corporation of Newport Beach, California, for
failing to protect the company's rights as a foreign investor.

Basing it decision on investor-protection measures in Chapter 11 of NAFTA,
the tribunal found that the government's actions amounted to an
expropriation because they prevented Metalclad from making use of a
multimillion-dollar hazardous waste treatment and disposal site that it had
built several years before in the Mexican state of San Luis Potosi.

Case in point: Methanex. The Methanex Corporation, based in Vancouver,
British Columbia, filed a $970 million claim against the U.S. government
over the State of California's order to phase out the use of methyl tertiary
butyl ether, a gasoline additive. Methanex is the world's largest methanol
producer. The company claims that the California government violated a key
provision of NAFTA when it banned the use of the additive, known as MTBE,
because of concerns about its effect on the environment. Made from methanol,
MTBE has been used since the 1970s to reduce exhaust emissions. The
California government banned the additive because it had appeared in 10,000
ground water wells in the state and was suspected of causing health
problems.

Methanex launched a complaint under Chapter 11 of NAFTA, which protects
foreign corporations from illegal expropriation of their property or
investments because of state actions.

Every free trade agreement is a variation on this theme, constrainigovernments' ability to regulate corporate behaviour. This is what these trade deals are really about: they are vehicles for pursuing corporate
priorities via international trade agreements. The rhetoric of "freedom" and
"trade" is tended to frame the terms of the discussion in a positive light.

But the real agenda is based on:
 

            · de-regulating corporate behaviour;

            · enshrining corporate powers in international trade agreements;

            · preventing governments from pursuing social goals that clash with
                corporate priorities; and

            · threatening trade sanctions against governments that don't go along with
                the corporate-driven programme.
 
 

WHAT FREE TRADE IS ALL ABOUT

After more than a decade of living with government of, by and for the
corporations, Canadians have made it clear that they want to see a change of
direction in government policy. They would like to see government to play a
more active role in meeting human needs. But the corporate interests driving
free trade have done their homework. They have used free trade to ensure
that even if people want governments to pursue social and economic policies
that benefit people instead of corporations, these governments will be
constrained from doing so by terms and conditions contained in the
Canada-U.S. FTA, NAFTA, GATT, WTO, GATS and FTAA.

This is the purpose of free trade: to ensure that any government which is
tempted to pursue policies that conflict with corporate priorities is
intimidated from doing so by the threat of facing international trade
sanctions. Michael Walker, the Chief Economist at the right wing Fraser
Institute in British Columbia, is an avid supporter of free trade. He put
the matter in a nutshell when he explained that "A trade deal simply limits
the extent to which [a] signatory government may respond to pressure from
their citizens."

Walker's accurate comment is in flat contradiction to the people who are
pretending that the purpose of the FTAA is to spread democracy throughout
the Western Hemisphere.
 
 

CONCLUSION

Some people active in the debate about free trade believe we should respond
to neoliberal free trade agreements by fighting for labour, environmental
and social clauses. Theirs is the wrong approach to take if we want to
undermine neoliberalism.

First of all, labour and environmental side agreements already exist in
NAFTA. They have done nothing to lessen the negative effects of free trade
on workers or the environment in Canada, the U.S. or Mexico.

Second, opponents of neoliberalism have mounted massive protests at free
trade summits as well as IMF and World Bank meetings in recent years. These
protests have shaken the confidence of business leaders and their political
allies. The fact that the labour movement has been an integral part of these
demonstrations, working with environmentalists and a broad cross section of
popular organizations is clearly of concern to the promoters of free trade.
They realize they must play the politics of divide and rule if they are to
succeed. This is the basis for the accomodating statements they have been
making recently about including labour and environmental side agreements.

But settling for side agreements as an answer to our concerns delivers the
wrong message to the architects of free trade. To do so is to declare that
it's okay to privatize government services, to deregulate the private
sector, and to constrain governments' ability to pursue progressive social
policies as long as you give us window-dressing side agreements that pretend
to address our concerns. When labour leaders participate in the free trade
negotiations in pursuit of such side agreements, it causes confusion and
creates division, both within the labour movement and between labour and its
allies.

Professor Michel Chossodovsky has analyzed the reason that corporations have
been inviting certain leaders to participate in the official WTO and FTAA
meetings. In his view, "The ploy is to selectively handpick civil society
leaders 'whom we can trust' and integrate them into a 'dialogue', cut them
off from their rank and file, make them feel that they are 'global citizens'
acting on behalf of their fellow workers but make them act in a way which
serves the interests of the corporate establishment."  Participating in this
corporate ploy is no way to resist neoliberalism.

In the March issue of Labor Notes Canadian activist Naomi Klein argued that
the "AFL-CIO dropped the ball on globalization movement." She noted that
coming out of Seattle, there was talk of building the coalition between
labour and the rest of the popular movement to oppose neoliberalism. But
after Seattle, the AFL-CIO went its own way. When demonstrations were
organized to protest the IMF and World Bank meetings in Washington, D.C.,
the AFL-CIO wasn't there. Instead of working with the rest of the growing
coalition against neoliberalism, official labour focused its efforts on
campaigning against China's admission to the WTO. Instead of opposing two of
the key institutional promoters of neoliberalism around the world, they
organized a separate rally and lobbying effort against China.

Organized labour has a crucial decision to make. Although the popular battle
against neoliberalism is gaining momentum, the coalition opposing it will be
seriously weakened if member organizations go their own way when they find
it convenient. The bottom line it that the entire neoliberal agenda,
including free trade, is rotten to the core. It's essential for us to work
together to defeat it in its entirety.
 

 Appendix

DEREGULATED E-COMMERCE

Neoliberal free trade reaches into some surprising places. Take the subject
of electronic commerce, which is a hot topic in the news these days. While
we are inundated with stories about the wonderful things e-commerce has to
offer, few people have heard about the corporate-driven push to deregulate
e-commerce at the WTO/GATS negotiating table or why this is significant. The
reason for this push to include e-commerce in the GATS - and the fact that
few have heard anything about it - is simple: deregulated e-commerce has the
potential to dramatically increase corporate power at the expense of the
rest of society.

In its submission to the WTO Work Programme on Electronic Commerce, the U.S.
government argued that companies should be allowed to use electronic
commerce to expand the range of the services that are traded across borders.
In its submission, the American negotiators posed a revealing question:
"Will this phenomenon [i.e. services traded across borders] replace the
currently held preference for establishing a commercial presence in a
foreign market?"  In other words, they are seeking the right for American
companies to engage in a range of activities, including cross-border
"monitoring, metering, and diagnostics," and to have this right enshrined in
the WTO/GATS agreement. If they are successful, any foreign governments
attempting to limit companies' ability to operate this way could find
themselves on the receiving end of trade sanctions.

American corporations are not alone in promoting the deregulation of
e-commerce. According to the European Services Forum,

The ability to provide services across borders is a necessary prerequisite
for the robust development and growth of electronic commerce. If service
provision across borders is not permitted, the ability to deliver those
services electronically will be constrained and fragmented in national
markets.

Corporations have had the technical capacity to carry out their activities
electronically, across borders, for some time. In the mid-1990s, for
example, the telephone company in British Columbia announced that it
intended to move network monitoring and diagnostic work south of the border
to centres owned by its American parent, GTE. Fortunately, a clause in the
contract between the company and the Telecommunications Workers Union which
deals with Contracting Out and Technological Change says that the company
cannot contract out work that is regularly performed by the classifications
listed in the agreement. Movement of monitoring and diagnostic work to GTE's
centres south of the border would have violated that provision in the
contract.

The company's plans were further impeded when the TWU enlisted the aid of
the provincial government in Victoria, which pressured the company to leave
the work in British Columbia. Together, these factors convinced BC Tel to
abandon the idea of moving the monitoring and diagnostic tasks needed to run
its network to the U.S. But if deregulation of electronic commerce is
written into the GATS agreement, there is a real danger that companies would
be able to challenge contract provisions or government actions which limited
their ability to engage in such cross-border activity - and to have such
challenges backed by the threat of trade sanctions!

Corporations are already using modern telecommunications capacity to provide
services across borders. In 1996, for example, the Labor Report on the
Americas described a situation in which a U.S.-based company contracted with
the U.S. Postal Service to use state-of-the-art technology to do the mail
sorting that American postal workers had traditionally done - from a
maquiladora located in northern Mexico! If the promoters of deregulated
e-commerce are successful, governments would not be able to restrict
companies from operating in this manner.

If e-commerce is deregulated under the GATS, corporations would be able to
shift any activity that is carried out on-line to locales where wages are
low or where tax and environmental laws are more to their liking - and to
know that governments were powerless to do anything about it. This would
threaten a wide range of jobs, enabling companies utilizing existing
communications technology to move work in the telephone, electricity,
insurance, airline, banking, postal and other industries to sweatshops in
far flung areas of the world.

Technological developments in the field of communications already make such
activity feasible. What is ominous is that negotiations at the WTO may give
companies the right to use technologies in this manner - and to have this
right enforced by the threat of trade sanctions if governments attempt to
stand in their way.

___________________________
ADDENDUM :

                Labor Report on the Americas                    September-October 1996

                 U.S. MAIL SORTING HANDLED IN REYNOSA MAQUILADORA

Local 4325 of the American Postal Workers Union, located in McAllen,
Texas, has discovered that companies doing bulk mailings have set up
operations in Mexican maquiladoras to handle mail sorting work. According to
Cindy Martinez, president of Local 4325, one of the companies -- San
Diego-based Envisions -- recently opened a plant in Reynosa, Mexico, just
across the U.S.-Mexican border from McAllen. The plant currently employs 180
workers, but the company plans to employ as many as 1,000 people by year's
end.

Envisions is a "pre-sort" house that prepares bulk mailings for
business customers. These customers receive a discount from the U.S. Postal
Service for having their mailings pre-sorted and pre-coded. Envisions takes
in bulk business mail from companies located in Chicago and Indianapolis.
The mail is then processed through remote encoding technology, owned by the
U.S. Postal Service and licensed to private companies, which sends the image
of individual pieces of mail to computer screens located in the Reynosa
maquiladora. The bar code is automatically printed on the piece of mail in
Chicago or Indianapolis. Workers in the Mexican plant are paid $4 per day to
type the appropriate bar code on each piece that appears on their computer
screen.

Tom Fahey, APWU Communications Director, says the union fought hard
to have remote encoding of mail that enters the USPS done by union workers
making a decent wage. But USPS is undermining the job security of 30,000
mail sorters who work in the States by licensing out the remote encoding
technology.

The costs of developing the technology were paid by the American
public through the cost of their postage.