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.