Vol. XII, Bulletin No. 2                                                            February 2, 2007

Should Congress Renew Bush Role as The Decider on Trade?

NO To Staying the Course on Trade

Even folks at the office of the U.S. Trade Representative recognize that staying the course on trade will no longer work.  "We'll need to make some substantive adjustments" to the labor chapters of proposed free trade agreements with Colombia, Panama, and Peru, a deputy U.S. trade representative, John Veroneau,  told a press conference on January 17. "I'm confident that we'll be able to do so," he added, "assuming that folks [in Congress] are interested in finding a new template that promotes trade."

What kind of adjustments?  That would be depend, he said, on a "dialogue" with members of Congress about a "new template."  In other words, private negotiations, not open hearings. But the issues involved are so vital that they must not be cloaked in secrecy.

The priority for the Bush administration is to extend the controversial Trade Promotion Authority" (TPA) law, which the administration pushed through the House early one July morning in 2002 by a 215 to 212 vote, after much secret wheeling and dealing.  Now the administration offers "adjustments" on labor in hopes of quickly persuading Congress to renew TPA immediately for another few years, without serious public debate in Congress and in Presidential campaigns.

Future of Globalization, For Good or Evil, Is at Stake

Congress should not be trapped into a rush-rush deal built on secret negotiations.  Here is why a public debate is necessary.
  1. The word "trade" in TPA -- and in trade agreements -- covers a variety of vital non-trade issues. The most notorious example of promoting not free trade, but the very opposite, is the global monopoly granted to pharmaceutical company patents, depriving many poor countries of inexpensive access to needed generic medicines, while enriching the already fabulously wealthy companies like Pfizer. (If you think this criticism is radical,  read how scathingly a free-trade economist like Jagdish Bhagwati has attacked the U.S. government for pushing trade agreements favoring the pharmaceutical industry.)  The 304-page TPA -- the current "template," which expires on June 30 this year -- sets the agenda for U.S. trade negotiators on a wide variety of subjects that need to be examined.
  2.  But what matters most about TPA is this:  it puts the President in the primary role of being the decider on trade agreements, and reduces Congress to a secondary role, even although article 1 of the Constitution assigns the power to regulate foreign trade to Congress.  TPA gives the President the primary role by trimming the procedures and powers that Congress normally has in passing legislation.  It restricts Congressional consideration of a trade agreement to 30 days, bypassing normal committee hearings on bills, and prohibits the possibility of Congressional amendments. Congress can say only yes or no.  That's why TPA used be called "fast track," before it got a more fetching label.
  3. There is a case for Congress to cede some trade powers to a President, though not to the present sweeping extent. In any case, is it wise to renew the present TPA for this president for the rest of his term in office?  I think not.
  4. There is no reason to rush to judgment on a new TPA.  Even without its immediate renewal, trade will continue.  In fact, the expiration of fast track, I mean TPA, is a blessing because it enables us to have a discussion of issues that will determine, for good or ill, the future direction of globalization.
  5. The present TPA already has some good things to say about labor and environmental issues that the President should include in trade agreements. Improving these and other matters would be nice, but how will they be implemented?  That depends on the kind of President we will elect. Don't forget that not just this administration, but both Democratic and Republic administrations before it, downgraded labor and environmental requirements in favor of the priorities sought by Wall Street and multinational corporations. (Again, for anyone shocked by that statement, reading Jagdish Bhagwati's work would be instructive.)  In the case of Senators who are Presidential candidates, it is worth checking how they voted on the Free Trade Agreements signed by President Bush.
  6. The bottom line, I think, is that there must be full and open debates, by Congress and by Presidential candidates, on trade policy (in the broad sense). That is essential for the common good. Still, we should realize that even the best possible TPA, followed by the best possible trade agreements, will not suffice to bring about the better world we seek. Much else also needs to be done. 
To a large extent, U.S. trade agreements consist in our government telling foreign governments what we expect them to do. But that's not the only way to go. Shouldn't we also be more responsible ourselves as individuals, families, voters, consumers, clergy, politicians, and corporate executives in ending social irresponsible behavior abroad?

A Senate Bill Against Sweatshop Imports

A bill introduced in the U.S. Senate last month would outlaw imports of clothing and other goods made under sweatshop conditions. With the short title of "Decent Working Conditions and Fair Competition Act," the bill would not only impose a fine on retailers who violate the law but also enable competitors selling non-sweatshop goods to sue to recover damages from violators.

The bill's chief sponsor, Senator Byron Dorgan, Democrat of North Dakota, identified imports from China's sweatshops as the major target, but said that the law would apply to all imports made under "slave-like conditions."  A lead co-sponsor, Senator Sherrod Brown, an Ohio Democrat, said the bill was part of a larger struggle to change U.S. trade policy.

The American Manufacturing Trade Action Coalition
said it supports the bill because of the "substantial subsidy" given to producers in foreign countries that do not adequately enforce their own labor laws.

Advancing Homeland Social Responsibility

Speaking at a conference on human rights, accountability, and business held in Johannesburg in mid-January, a South African leader, Kader Asmal, charged that multinational corporations are violating human rights throughout the continent of Africa.  He advocated action by South Africa itself to make sure that its own multinationals respect human rights.

Asmal, a member of South Africa's Parliament, told the conference, which was sponsored by the Pretoria-based Foundation of Human Rights, that Africa must adopt a strict code of conduct covering the activities of South African companies operating in the rest of Africa. "I am concerned that South African companies do not observe proper labor laws of the countries they operate in," he said. According to an account by the Inter Press Services News Agency, he explained one of his motives: "We don't want these companies to damage South Africa's reputation.".

What a novel idea: that the home country of multinationals should make sure that they do not violate human rights in their foreign operations.  Well, not so novel after all.  During the Clinton administration the U.S. government sought to promulgate fair labor rules for U.S. multinationals but backed off under pressure from -- guess who? -- multinationals.

Still,  it is worth trying again.  Corporate social responsibility is now all the rage in some corporate circles.  At least the idea is. Congress has persuasive powers to turn the idea into a reality.  And U.S. human rights organizations can learn how to achieve that goal from counterparts in the United Kingdom (see article below).
*   *   *
UK Strengthens Corporate Governance

Thanks to a national campaign by nongovernmental organizations, the United Kingdom now has a revised "Companies Act" that its advocates call a significant first step toward making UK corporations socially responsible in their operations both inside and outside the Great Britain and Northern Ireland.

After the legislation was adopted in November, the Corporate Responsibility Coalition (CORE) pointed to two new responsibilities required of the 1,300 largest companies listed on the UK stock market:
CORE and its campaign partner, the Truth Justice Movement, insist that  Companies Act 2006 needs further improvement.  "Our campaigning to ensure that British businesses are responsible and accountable, no matter where in the world they trade, will continue," said Glen Tarman, coordinator of the Trade Justice Movement.

Although the requirements of the new legislation are still limited, the laws of no other country in the world place even this minimal kind of responsibility on the directors of its corporations. The other nations submit themselves to Milton Friedman's dictum that corporate leaders have no social responsibilities "other than to make as much money for their stockholders as possible."  The United Kingdom is in the process of liberating itself from that immoral ideology.

Meanwhile, organized business in Europe has launched what it calls the European Alliance for Corporate Social Responsibility, with the strong backing of the European Commission, the executive arm of the European Union.  The Alliance "should lead to new partnerships and new opportunities for all stakeholders in their efforts to promote CSR," the EC commission said in an enthusiastic press release in March last year..

CORE opposes this initiative because of its non-binding nature -- a voluntary approach "insufficient to protect people and planet."  The European Trade Union Confederation (ETUC), which groups 81 union organizations with 60,000,000 members in 36 countries, also criticizes the Alliance because it is "a voluntary system and, as such, lacks objective, consistent, and transparent criteria for workers, consumers, and other stakeholders to measure company performance."

Catching Up With Globalization

"We are 20 years behind," a union staffer told me six years ago when I was doing research for an article on how unions were coping with globalization. The article was published in the July-August 2001 issue of the Foreign Service Journal under the title of "Can Labor Catch Up With Globalization?"

The movement's single most important stride forward since then occurred late last year in Vienna, Austria.  There a fractured world movement united to form the International Trade Union Confederation (ITUC), which has 304 national trade union affiliates in 153 countries and territories. Representing some 168,000,000 unionists in all, the ITUC now has a stronger voice in speaking for the interests of all the world's working men and women and their families.

Pursuing that mission in Washington in December, a large delegation of international trade union officials met with top executives of the World Bank and the International Monetary Fund, including Bank President Paul Wolfowitz and IMF Managing Director Rodrigo de Rato. The ITUC delegation included union representatives from 35 countries from all regions of the world.

Their most important achievement was an agreement whereby infrastructure projects funded by the Bank will have to respect the core labor standards of the UN International Labor Organization. Henceforth $8,000,000,000 worth of projects funded each year will come under the new worker rights requirement, which covers the right to organize and engage in collective bargaining, freedom from workplace discrimination, and elimination of child labor and forced labor. The same standard has been applied to the Bank's private-lending arm, the International Finance Corporation, since May.

ITUC General Secretary Gus Ryder, who headed the delegation, said that the World Bank decision "reinforces the importance of fundamental worker rights in the global economy."

Among the many other issues discussed during three days of meetings were these:
According to the ITUC press release, Wolfowitz promised to look into both issues, and "agreed that any suggestion that China need not respect workers' basic human rights was unacceptable."

A Bill of Rights for the Global Economy

In the final paragraph of my article, "The WTO in Crisis," published last month in America magazine, I quoted something that the first director general of the World Trade Organization, Renato Ruggiero, said ten years ago. "We are no longer writing the rules of interaction among separate national economies," he declared.  "We are writing the constitution of a single global economy."

I then characterized that statement as "grandiose." It seemed to me as too ambitious a vision of what the WTO was trying to accomplish. Still, upon further reflection, I think that Ruggiero may have been on to something.  He may have been pointing to a little understood truth about the modern global economy:  that it is a new reality, a reality whose rules were evolving into a kind of global constitution.

He called it a "new phenomenon," according to the press release issued October 8, 1996, but he explained the term only by saying that WTO has many more developing countries as members and as representatives on its Geneva staff.   But could today's global economy be a "new phenomenon" in a much more profound sense?

U.S. trade statistics provide a clue. About 40 percent of the goods that cross U.S. borders are shipments between units of the same multinational corporation.  In 2005 the total value of such trade -- commonly called intrafirm trade -- came to $1,059,000,000,000, according to the U.S. Census Bureau.

Conducted on a global scale, intrafirm trade is not just old-fashioned trade writ large, since it departs radically from traditional market transactions between two unrelated parties, or so-called arms-length trade.  Instead, intrafirm trade "amounts to a substitution of these market-based transactions by internal, nonmarket transactions within the multinational firm," Wolfgang Reinicke writes in his book "Global Public Policy" (Brookings).

Reinicke, economist, political scientist, and keen explorer of today's economic universe, sees globalization as a new reality -- "not a mere quantitative intensification of an ongoing trend dating back to the 1960s [but] a fundamental qualitative transformation of the international system."   Globalization, he points out, "is for the most part a corporate-level phenomenon":

"It entails the application of new forms of industrial organization such as flexible manufacturing, coupled with the cross-border movement of increasingly intangible capital (including finance, technology, information, and the ownership or control of assets).  This spatial reorganization of corporate activity leads to the emergence of a single, integrated economic geography defined by the reach of corporate industrial networks and their financial relationships.

"These networks and relationships cut across multiple political geographies, challenging the operational dimension of internal sovereignty, as governments no longer have a monopoly of the legitimate power over the territory within which these private sector actors organize themselves."

So, as Renato Ruggiero suggested, the world's trade ministers may have indeed been writing a de facto constitution for globalization. If that is so (I am persuaded that it is), then it follows that the world's policymakers need to get busy and write a bill of rights that embraces more than just multinational corporations.

Economic Models Made To Order

"So is globalization to blame for the rich world's recent anxieties or not?" asks an Economic Focus column in the January 20 issue of the Economist.  Its answer:

"Unfortunately, the new theories of offshoring can deliver opposite verdicts depending on precisely how they are set up.  As James Markusen, [professor of economics] of the University of Colorado, mischievously puts it, 'I am confident that I can concoct a model to generate any result desired by a reader with a deep pocketbook.'  If only every worker were as versatile."

Remember that the next time you read a pundit (or economist) hyping a trade agreement by citing how many billions of wealth it will create.

Human Rights for Workers: Bulletin No. XII-2     February 2, 2007
Robert A. Senser, editor
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