Election Blog Series - Trade: What You Didn’t Hear on the Campaign Trail

By Witness for Peace Nicaragua Team

According to U.S. embassy's interpretation of macroeconomic figures, Nicaragua is one of the countries that has benefited most from free trade agreements (FTAs.) Foreign direct investment (FDI) in Nicaragua grew by 91% in 2011 and the GDP real growth rate has increased from -1.5 in 2009 to 4.7 in 2011. Nicaragua seems to be thriving. Taking a nuanced look at these numbers, however, the effects of the Central America Free Trade Agreement (CAFTA) on the Nicaraguan economy are not so clear-cut. Although exports have increased in various sectors, the cited 70% growth in exports between 2005 and 2010, for example, may be more related the increase of the price of gold on the world market than the influence of CAFTA. When talking to those employed by the new jobs CAFTA created, though they appreciate the employment, many cite low pay, long hours, and unhealthy conditions as negatively affecting their lives and their communities. The average wage in a maquila or Free Trade Zone is only between 37 and 52% of a Nicaraguan living wage, and even according to the Director of Hygiene and Safety at the Nicaraguan Ministry of Labor, the greatest problem is lack of education for workers regarding health, hygiene, and the use of protective equipment.

Not only have these agreements hurt workers abroad but they have also failed to meet the promises made to U.S. American workers that they would increase U.S. exports and create jobs domestically.

Rhetoric

President Obama has, at times, opposed the template for Free Trade Agreements utilized since the creation of the North American Free Trade Agreement (NAFTA) in 1994. During the 2008 campaign, Obama shared his beliefs that global trade is only unsustainable when it favors corporations and the wealthy, and that trade agreements must put in place safety nets for the workers who suffer under globalization’s race to the bottom.  He voted against CAFTA and has insisted that he would only support trade agreements with strong labor, safety, and environmental standards.  In practice, however,  Obama’s policies have not only  sustained traditional, Bush-era trade agreements, but have expanded them.

In his 2011 State of the Union Address, President Obama released his plan to double U.S. exports by 2014, “because the more we export, the more jobs we create here at home.” The cornerstone of this plan was the ratification of FTAs with Korea, Colombia and Panama that were signed during Bush presidency. The South Korea agreement, he said, would create 70,000 jobs, and the deals would “keep faith with American workers and promote American jobs. “

Reality

Department of Commerce trade data, however, report exports to these countries decreasing during the past year. Though imports from Korea and Colombia have skyrocketed, the US.-Korea trade deficit has soared by 34%, costing between 15,000-17,000 U.S. jobs. Obama’s trade agreements have not lived up to his declaration that “trade is going to be reciprocal…it's not just going to be a one-way street.”An increase in imports from countries like Korea, Colombia and Panama, however, is not a good indicator of well-dispersed growth within these countries.

The Colombia FTA turns a blind eye towards egregious labor rights violations in that country, where more union leaders were assassinated in 2010 than in the rest of the world combined. The deal puts patents on traditional medicinal knowledge and natural resources; and it pushes Colombia to lower the minimum wage and remove or reduce guarantees for overtime pay, collective bargaining and worker’s compensation. Witness for Peace Colombia has closely followed the story of injured former GM workers who are pleading with the U.S. to enforce the safety and labor standards put in place by the 2011 Labor Action Plan between the Colombian and U.S. governments. Not only has the Obama administration ratified free trade agreements inked by Bush, but it is also working on a new kind of mega-free trade agreement that will expand the current free trade model and create what could be the biggest free trade deal in history.

Expansion

The Obama Administration is currently negotiating this massive international trade pact called the Trans-Pacific Partnership (TPP), behind closed doors with at least 11 other countries. The text of the agreement has not been released, but it is clear that it will be closely modeled on past FTAs. Despite the secrecy behind the negotiation of the TPP, various chapters have been leaked and show extreme financial industry deregulation, patent expansion laws, and support for huge pharmaceutical companies.  These chapters do not address consumer safety, environmental issues, or the concerns of organized labor.

Countries besides the U.S. mentioned in the foreign policy debate

Future

During this election season, where job creation has been the focal point of the debate, both candidates have continued to tout free trade. Although Obama avoided any explicit mention of Latin America during the debates, he did brag about the FTAs passed during this term, stating that they "are helping us to double our exports and sell more American products around the world."

Romney supported these new free trade agreements and named expanding free trade agreements the second pillar of his economic plan. He scolded Obama for not moving on these trade deals faster, and cited the huge “opportunity” Latin America could be as a trading partner for the U.S.

The few details Governor Romney has provided as to how investment in Latin America would rejuvenate the U.S. economy indicate a very flawed model. The U.S. already has trade deals with most Latin American countries, excluding only a few countries with strong economies like Venezuela and Brazil.  As Romney has expressed no interest in working with recently re-elected Venezuelan President Hugo Chavez, Brazil is basically the only country he must have in mind to support this essential pillar of his plan. Brazil, however, has expressed no interest in allowing the kind of deregulation stipulated by U.S. trade agreements. Observing Mexico who under NAFTA has grown just over 1 percent per annum in per capita terms, Brazil has been exceedingly better off, growing steadily throughout the past decade and relying heavily on China for trade. China, unlike the United States, does not require deregulation as a prerequisite for making trade deals.  Unless the future president changes the current model for trade agreements with Latin American countries, we will not succeed in forging healthy trade relationships.

Opposition

Though the two major party candidates in this year’s election have failed to break from the free trade mold, the often-ignored third party candidates have made bold statements on free trade. During the third party debate on foreign relations, Green Party candidate Jill Stein said, “We need to get to free trade which is fair, not just free for corporations, and expensive and devastating for people and the environment and workers. We need truly fair trade agreements.” Justice Party candidate Rocky Anderson talked about the horrible conditions found in some Free Trade Zones: “this is the kind of inhumane treatment of foreign workers that our federal government, through these trade agreements, are [sic] helping to foster. It has got to come to an end.” Both of these third party candidates argue that we must reform existing agreements and find a better and more just trade template.

Many of our representatives in both the House and Senate have also come to oppose free trade agreements. Two-thirds of Democrats in the House opposed the Korea FTA, and 82% opposed the Colombia FTA. The opposition to the Colombia FTA constituted the largest percentage of Democrats to ever vote against a Democratic president on trade. The Trans-Pacific Partnership is therefore being written behind closed doors, and is on the Fast Track past Congress, so as to not face opposition there.

U.S. trade policies can be written with high labor, human rights, and environmental standards, but only if we hold the government accountable for doing so. The Trade Reform, Accountability, Development and Employment (TRADE) Act was introduced in 2010, and pledged to do just that. The bill was introduced with 106 initial co-sponsors, but was held up in committee.

Polls show that the majority of Democratic, Republican, and independent voters oppose NAFTA-style trade agreements. We must expose new trade agreements like the TPP to the public, encouraging civil society to pressure the government to reform old trade policies, stop the creation of new mega-agreements, and support bills like the TRADE Act.