free trade agreements

Marina Gusmao, Forms.
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By GILBERTO LOPES*

The Biden government operates in a scenario very different from the one that, about 30 years ago, seemed to promise free trade

Regardless of other factors, globalization has two main drivers: trade and foreign investment. Promoted by Free Trade Agreements, the idea was sold as a win-win model. As President George Bush Senior used to say, NAFTA, the North American Free Trade Agreement, meant more exports, and more exports meant more jobs. Everyone won. It sounded too simple.

But a quarter of a century later, it is clear that this optimism was unfounded, as explained by Gordon H. Hanson, professor of urban policy at the Harvard Kennedy School, specialist in international trade. “Can trade work for workers?” asks Hanson in an article published in the latest issue of the magazine Foreign Affairs. And he explains how the mechanism actually works, and its consequences for workers: “Many American workers suffered as high-paying manufacturing jobs disappeared as companies moved abroad. Those who kept their jobs saw their wages stagnate”.

One might think that while NAFTA did not favor American workers, it was to the advantage of Mexicans, where some of those good jobs had been transferred. But 23 years after the agreement took effect, an assessment published in the journal El País, in August 2017, indicated that between 1994 and 2016 the Gross Domestic Product (GDP) per capita in Mexico had gone from around five thousand dollars to just over 6.600 (in constant 2008 prices). It may seem like a lot, “but an average growth rate slightly above 1% a year is quite disappointing for an emerging country that expanded at a rate of 3,4% a year between 1960 and 1980”, says the note. If the FTA had at least managed to maintain the previous growth rate, “Mexico would be a high-income country today, significantly above Portugal or Greece”.

The then Mexican Secretary of Commerce, Jaime Serra Puche, claimed that the treaty would gradually end the wage gap between Mexico, the United States and Canada. But wages in Mexico during this period only increased by 4% in real terms, as a result of wage containment policies applied to attract foreign investment, especially from the US manufacturing industry, thanks to significantly lower labor costs. Among other results of this policy, in 2016 ECLAC estimated the poverty rate in Mexico to be slightly above 40%, while the richest 1% of the population held “more than a third of the national wealth”.

irresponsible promises

The skepticism about globalization that now dominates US politics, as Hanson argues in his article, stems from the failed promises of the 90s about free trade. NAFTA had been a bipartisan effort (negotiations began in the first Bush Republican administration and were completed in the first term of the Democrat Clinton administration) and when it went into effect in 1994 under President Carlos Salinas de Gortari, the promise was that the country would become the next South Korea.

Clinton not only praised the future economic benefits that the treaty would bring, but also allowed himself to predict "more equality, better preservation of the environment, and more possibilities for peace in the world". “Big but irresponsible promises,” says Hanson. In the end, "NAFTA did what economic models predicted: achieving modest net profits, primarily by giving US companies access to low-cost manufactured components, improving their ability to compete in global markets." With the expectations raised in those years by the promises of free trade exhausted and bankrupt, the scenario changed quickly after China's incorporation into the World Trade Organization (WTO) in 2001, the financial crisis of 2008 and the consequences caused by the current Covid-19 pandemic. XNUMX, still difficult to pinpoint.

In the United States, the initiatives proposed by President Joe Biden in his presentation to Congress last week offer a different emphasis, highlighting huge investments in public works and measures to alleviate the situation of American families, affected by decades of these policies. Two trillion dollars had already been approved for recovery from the Covid-19 crisis, and Biden is now proposing an additional two trillion dollars dedicated to rebuilding the country's infrastructure over the next ten years. A program that, for some, represents a redefinition of the role of the State in the economy and the end of neoliberal ideas on the subject. “And one cannot even think that the stimulus is over, considering that, according to David M. Cutler and Lawrence H. Summers, the total cost of the pandemic in the United States would be around 16 trillion dollars,” said Spanish economist Juan Torres Lopez. In any case, there will be resistance in Congress, and not just from Republicans.

Devastation

Hanson describes the effects that the process of moving jobs abroad had on a vast industrial swath in southern Virginia, North Carolina, Georgia, Alabama and Mississippi, where a labor-intensive manufacturing industry was devastated by Chinese competition. and by shifting production to countries with cheaper labor. The effects in Mexico are also well known, such as the growth of social tensions, organized crime and violence. The devastation wrought by these policies in Latin America has in any case extended to other Latin American countries.

In Colombia, for example, “free trade has brought more violence,” says journalist Genevieve Glatsky in an article published last month in the magazine Foreign Policy. Glatsky tells the story of the port of Buenaventura, in the Colombian Pacific. Jhon Jairo Castro Balanta was a port union leader. In 2011, when a trade promotion agreement between the two countries was being negotiated in Washington, he presided over the union of dock workers and was called to testify before the US Congress about the working conditions that prevailed there. Today, threatened with death, he has been in New York since last November, awaiting approval of his asylum application. Glatsky claims that it was from then on that he conducted the interview by telephone.

In Buenaventura, a town in Valle del Cauca with just under 500 inhabitants, through which more than half of Colombia's foreign trade passes, unemployment and armed gang violence predominate, she said. As armed conflict spread across the country, the population seeking refuge in the port grew, “many living in abject poverty,” says Glatsky.

Since the port was privatized in 1993, wages had been frozen, while "exploitation, outsourcing, discrimination, humiliation, and all these abuses" increased, denounced Castro. Local inhabitants were hired for minor tasks, sometimes working 24 or 36 hours straight, without social benefits, threatened with death if they dared to organize themselves in unions, conditions that delayed the negotiation of the agreement with the United States.

To facilitate its signature, Presidents Barack Obama and José Manuel Santos signed an action plan for labor rights, supported by the association of Colombian and US companies, which stated that the agreement would strengthen Colombia's democratic institutions, threatened by violent actors. – guerrillas, paramilitaries and drug traffickers – and would mean “more legitimate jobs and opportunities”. A decade later, none of these promises have been fulfilled, assures Glatsky. Mafia violence, unemployment and drug trafficking grew. 172 trade unionists have been murdered since the agreement entered into force.

In 2017, thousands of people took to the streets of the city in large protests, which were renewed in December and January, with the blocking of access to the port, complaining about living conditions and the lack of basic services. Protests that spread across the country last April 28, after it became known about a tax reform promoted by the government of Ivan Duque, which aims to raise 6,3 billion dollars. And 73% of that total will be charged to people and the rest to companies, according to Colombian finance minister Alberto Carrasquila.

Violence has increased in the port as armed gangs fight for control of the land where the expansion of its facilities is planned, essential to meet the demand generated by the free trade agreements that Colombia signed with 17 countries, including the United States. . “The protests and the recent wave of violence are perhaps what led the US Department of Labor to announce (just one week before the end of the Trump administration) a $5 million cooperation agreement to improve the working conditions of Afro-Brazilians. -Colombians in the port of Buenaventura and in other ports in the country”, observes Glatisky.

Politics as a scam

Promises regarding the benefits of Free Trade Agreements also animated the debate in Central America, where an agreement between the five countries in the region and the United States, joined by the Dominican Republic, entered into force in 2006. A Costa Rica was the last country to implement the agreement. After fierce popular resistance, the decision to join was taken in a plebiscite held on October 7, 2007, in which the government managed to impose its criteria by 51,2% in favor of “Yes” and 48,1% in favor of “ No”, after an unscrupulous campaign.

To overcome resistance to the treaty in Costa Rica, the government had to use all kinds of weapons, including threats made in companies against their workers, threatening them to lose their jobs if the “No” won. President Oscar Arias promised, in the press, that “those who come by bicycle today, with the TLC, will come on BMW motorcycles, and those who come in a Hyundai, will come in a Mercedes Benz”. “This is what development is all about,” he said. Arias claimed that the FTA would double the employment rate, generating 300 to 500 jobs from 2007 to 2010, but none of this happened when the treaty entered into force.

As early as 2007, a report by groups tracking the treaty's performance noted that, contrary to promises made before the vote in Costa Rica, the treaty was not bringing prosperity to the signatory countries or their populations. Levels of job creation were disappointing and migration remained the main escape valve for poverty. A process that ended up becoming, in the end, an unavoidable tide, which turned the pressure on the southern border of the United States into a headache for Washington.

Six years later, in 2013, the unemployment rate in the country, according to the Continuous Employment Survey of the National Institute of Statistics and Censuses (INEC), was 10,4%, a number that studies by the National University (UNA) raised to 18%. Slightly lower than the 18,5% registered today, but higher than the 11,9% registered before the pandemic. Just two months before the plebiscite, faced with the real possibility of defeat, the government implemented one of the most shameful campaigns in the country's political history. In a document sent by Kevin Casas, then Vice President of the Republic, to Arias and her sister, the Minister of the Presidency, several steps were suggested to reverse this trend.

The document proposed, among other things, “stimulating fear”, which it defined as being of four types: the loss of jobs, the attack on democratic institutions, foreign interference and the effect of the triumph of “No” on the government. And that's what they did in the two months before the plebiscite. Soon released by Weekly University, the document became known in the political history of the country as the “Memorandum of fear” and the vice president had to resign from his position to start a distinguished career in international organizations. The result is that the plebiscite allowed privatization and the concession of public works to advance, without reducing poverty, while the concentration of wealth and social polarization grew.

In the face of the Covid-19 crisis, the importance of the public social security network became evident, while the government promotes the approval, in the Legislative Assembly, of an agreement with the IMF to face the growing fiscal deficit, whose character does not cease to resemble to the Colombian: increase in taxes for the population in general and refusal to apply it to companies, especially those installed in free zones.

Jobs that won't come back

President Biden said in his April 28 speech to Congress that his administration's investment program would create "millions of high-paying jobs for Americans." Biden repeated the word jobs (jobs) 43 times in his speech.

But Hanson had warned, in the article quoted above, that the jobs lost in the regions most affected by competition from free trade or automation "would not come back." “Biden and his team must carefully consider what free trade can do to help workers affected by globalization,” he added. Pretending otherwise "will only lead to more disenchantment and could fuel protests against free trade and globalization."

Biden, however, also faces the challenge of redefining his policy towards his Central American neighbors, who continue to put pressure on his southern border. In 2015, at the Summit of the Americas in Panama, Obama reviewed the progress of a plan called the “Alliance for Prosperity” for the Northern Central American Triangle, made up of Guatemala, Honduras and El Salvador, which Biden had overseen. It was an attempt to revive these economies with a package of 750 million dollars in 2016, which was intended to increase to a billion dollars in 2017, to curb immigration to the United States. Without any success, as we know today.

In 2019, Trump withheld a large part of that aid that Biden, in the middle of the campaign, last October, promised to increase to four billion dollars. Injecting billions of dollars to reactivate the public sector, rebuilding infrastructure, facilitating resources for research in cutting-edge technological areas, rebuilding alliances to face China, finding solutions to migratory pressure on the southern border are some of the priorities of the Biden government in a very different from the one that, some 30 years ago, seemed to promise free trade.

*Gilberto Lopes is a journalist, PhD in Society and Cultural Studies from the Universidad de Costa Rica (UCR). author of Political crisis of the modern world (Uruk).

Translation: Fernando Lima das Neves.

 

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