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AFL-CIO on the Free Trade Area of the Americas
Thea M. Lee,
Assistant Director for International Economics, AFL-CIO
December 12, 2002, posted January 23, 2003
Expanded trade and investment can provide opportunities for growth
and development in Latin America, but this expansion must be accompanied
by rules to help ensure that growth will be stable and sustainable,
that the benefits of growth will be shared, and that it will contribute
to, rather than detract from, social cohesion and human development.
Over the last 20 years Latin America has embraced many of the market
liberalization policies embodied in trade agreements like NAFTA, but
these policies have failed to produce the shared, sustainable, and democratic
growth the region requires. Inequality has stayed the same or increased
in every Latin American country in the 1990s. These increases in inequality
prevented the region from reducing poverty as much as its growth would
have permitted, and some countries - El Salvador, Mexico, Nicaragua,
Peru and Venezuela - have actually seen their rate of poverty increase
during the 1990s. Unemployment and informal employment are still unacceptably
high, and financial crises have thrown people out of work, families
into poverty, and entire economies into deep recession. Finally, egregious
violations of workers' rights - abuse of child labor, gender discrimination,
repression of independent union organizing, and murders of trade union
leaders - continue to mark much of the region. If the FTAA is going
to stimulate development in our hemisphere, it must contain policies
specifically designed to address these challenges. Simply repeating
the policies of past agreements like NAFTA is a recipe for failure.
Since 1995, the AFL-CIO has been meeting regularly with trade unions
from around the hemisphere to share information and find common ground
on the FTAA. Since 1997, we also have participated in a much broader
network of citizens' groups from the hemisphere called the Hemispheric
Social Alliance. In addition to trade unions, the Alliance includes
women's groups, farmers, peasants, environmentalists, human rights activists
and many other organizations that do not want to see NAFTA expanded
wholesale throughout the Americas. The Alliance has developed proposals
for alternatives to the FTAA that provide guarantees for workers' rights
and the environment, preserve the ability of governments to regulate
in the public interest, and promote broad-based economic development.
These proposals, along with others from civil society, have been presented
to the FTAA negotiators throughout the FTAA process. The AFL-CIO has
submitted comments to the FTAA Committee of Government Representatives
on the Participation of Civil Society and made our proposals known to
our own FTAA negotiators. Unfortunately, these recommendations are completely
absent from the current draft text of the FTAA. Despite this frustrating
record, we welcome this additional opportunity to offer recommendations
on the FTAA and hope that the Trade Policy Staff Committee will seriously
consider these comments presented on behalf of the 13 million working
women and men of the AFL-CIO.
Workers' Rights: The FTAA's rules governing international trade and
investment will affect the living standards and communities of working
people all over the hemisphere. As the San Jose Ministerial Declaration
states, "the negotiation of the FTAA shall take into account the
broad social and economic agenda contained in the Miami Declaration
of Principles and Plan of Action with a view to contributing to raising
living standards, to improving the working condition of all people in
the Americas and better protecting the environment" (emphasis added).
This goal should be at the center of the FTAA negotiations.
Unfortunately, we see few signs that the FTAA process has fulfilled
this mandate. There is no chapter on labor issues in the draft FTAA
text. No negotiating group, no study group, not even an official discussion
on labor issues has occurred within the FTAA negotiating process. Only
one provision relating to labor has even been proposed in the FTAA,
and even this provision would be non-binding. Unless the FTAA includes
enforceable protections for core workers' rights, we are likely to see
the same kinds of job loss, wage depression, and rights violations under
the FTAA that have characterized NAFTA.
NAFTA has not raised living standards or improved working conditions
in the U.S., Mexico and Canada as its promoters promised. Trade between
the NAFTA countries grew dramatically in the past eight years, but this
growth has been very unbalanced. U.S. workers lost hundreds of thousands
of good jobs under NAFTA, as our companies relocated to Mexico to take
advantage of lower wages, weaker worker and environmental protections
and improved access to the U.S. market. NAFTA rules allow companies
to pit worker against worker and drive down wages and working conditions,
and companies increasingly use the threat of leaving to break union
organizing drives and get concessions at the bargaining table. Though
Mexico now exports much more to the United States, Mexican workers have
not gotten their fair share of the benefits; their wages actually have
dropped about 10 percent in inflation-adjusted pesos since NAFTA was
implemented in 1994. Canadian workers also have seen their wages fall
below U.S. levels.
The NAFTA labor side agreement has not protected workers' rights. In
Canada, Mexico and the United States, fundamental workers' rights continue
to be abused with impunity. The North American Agreement on Labor Cooperation
(NAALC) has very limited enforcement powers, especially when contrasted
to the commercial provisions of NAFTA. Although NAALC cases have led
to many hearings and reports on labor issues, virtually no concrete
changes have been made to countries' laws or practices to improve workers'
rights. Even in a case where the National Administrative Office responsible
for enforcing the NAALC found that Mexico persistently failed to enforce
its own laws in the key area of freedom of association, the only remedy
was a ministerial consultation, not any form of sanctions on the government
or company responsible for the violations.
In order to truly promote growing employment and better working conditions,
the FTAA must include enforceable worker rights standards in its core.
The internationally recognized core labor rights include the freedom
of association, right to organize and bargain collectively, a minimum
age for the employment of children, and prohibitions on forced labor
and employment discrimination. Commitment to observing these core labor
rights, in addition to adequate enforcement of each country's own labor
laws, should be a condition of entry into the FTAA, and appropriate
enforcement mechanisms must be established to ensure that countries
continue to adhere to core labor standards and effectively enforce their
own labor laws. Non-compliance must be remedied, as would be the case
for violation of any other portion of the agreement.
The inclusion of enforceable workers' rights provisions is necessary
to make the FTAA a successful model for economic integration, but it
is not sufficient. Commercial provisions must also be reformed to promote
equitable economic development. NAFTA-style provisions that protect
corporate rights at the expense of public health and safety, the environment,
and essential human services must not be included in the FTAA. Some
of these provisions are outlined below.
Investment: NAFTA gives corporations the right to challenge our laws
in secret tribunals and to demand compensation from governments. Companies
have used NAFTA to challenge laws protecting the environment, public
health and consumers, arguing that these laws hurt their profits. For
example, when a Mexican state did not allow the Metalclad Corp. to build
on a local ecological preserve, Metalclad used NAFTA to successfully
demand more than $16 million in compensation from the Mexican government.
In another case, a company called Methanex is demanding almost one billion
dollars from the United States because California passed a law banning
a harmful fuel additive that Methanex produces. The draft FTAA contains
language identical to NAFTA's investment provisions, and would extend
these rights to even more investors throughout the hemisphere.
FTAA investment rules should not grant investors any rights greater
than those rights that investors already enjoy under U.S. law. The FTAA
should contain a broad carve-out allowing governments to regulate corporate
behavior to protect the economic, social, and health and safety interests
of their citizens. The FTAA should rely on government-to-government
rather than investor-to-state dispute resolution, and all dispute resolution
mechanisms should be fully transparent and accessible to interested
members of the public.
Services: NAFTA restricts the ability of governments to regulate services
- even public services. Increased pressure to deregulate and privatize
services could raise the cost and reduce the quality of such basic services
as health care and education. A NAFTA dispute panel decided the United
States will have to let Mexican truck companies provide their services
throughout this country, even though we do not have enough inspectors
to ensure these trucks meet our safety and labor standards. The U.S.
company UPS is arguing that Canada's public postal service violates
NAFTA, because governmental support for the postal service is an unfair
subsidy. The FTAA should contain a broad, explicit carve-out for all
public services. Services rules should be negotiated sector by sector,
and should preserve the ability of governments to regulate services
in the public interest. The FTAA should not include commitments on temporary
work visas until these visa programs are revised to protect the rights
of all workers.
Procurement: NAFTA does not allow governments to include social, environmental
or workers' rights criteria in their purchasing decisions. When President
Clinton ordered the federal government to stop using taxpayer dollars
to buy goods made with the worst forms of child labor in 1999, he had
to exclude Mexico and Canada from the order because these kinds of protections
are not allowed under NAFTA rules. If these rules are extended to state
and local governments, as is now being proposed in the FTAA negotiations,
responsible contracting requirements, project labor agreements and living
wage laws could all be challenged. FTAA government procurement rules
should allow federal, state and local preferences for domestic purchases
to continue and should give governments scope to serve important public
policy aims such as environmental protection, economic development and
social justice, and respect for human rights and worker rights through
their purchasing decisions.
Development: NAFTA has not created a healthy economy in Mexico. Because
of its large external debts and inability to control financial speculation,
the Mexican government had to devalue its currency in 1995 when panicky
investors pulled billions of their dollars out of the country. This
created a severe economic crisis, and Mexico still has not recovered
despite growing trade and investment under NAFTA. Wages are lower than
they were before NAFTA came into effect, and poverty levels actually
are higher. Regional and economic inequality persist, and many workers
from rural areas have migrated to work in the maquiladora zones or in
the United States, where their rights are not protected fully. Pollution
levels also are up in Mexico and the border region poses a severe environmental
challenge. If the FTAA does not do more to help countries pursue sustainable
and equitable development, instability and inequality in the region
will continue to increase.
The FTAA should allow countries to regulate the flow of speculative
capital in order to protect their economies from the kind of excessive
volatility that has led to financial crises in Mexico and Argentina
and now threatens Brazil. In addition, the agreement must address the
possibility of massive currency devaluations and the impact these devaluations
have on fair competition in the hemisphere. The FTAA should include
debt relief measures that will allow developing countries to adequately
fund education, health care, and infrastructure needs, thereby contributing
to closing the gap between rich and poor nations, reducing inequality
within nations, and diminishing the financial instability caused by
mounting debt burdens. The FTAA also must include equitable and transparent
market access rules that allow for effective protection against import
surges or other trade law violations, and must include enforceable protections
for the environment.
Democracy: The FTAA negotiators made a significant step forward before
the 2000 Summit of the Americas in Quebec by releasing the first draft
text of the FTAA. We commend the U.S.'s leadership in pushing for this
release, and look forward to the release of another updated draft at
the trade ministers' meeting this October in Quito, Ecuador. Unfortunately,
much more could be done to make FTAA negotiations more open and transparent.
Citizens in every country have a right to know not only what the draft
FTAA proposals are, but which ones their government is supporting and
opposing. Once the agreement is concluded, dispute resolution measures
should also be open to the pubic. A transparent, inclusive, and democratic
process, both for the negotiation of the FTAA and for its eventual implementation,
is essential to ensure the legitimacy of the FTAA process.
The FTAA must not simply replicate the failed trade policies of the
past. If the negotiations continue along their current path, they will
yield an agreement that undermines workers' rights and the environment,
exacerbates inequality in the hemisphere, and constrains the ability
of governments to regulate in the interest of public health and the
environment. Such an agreement will face fierce public opposition in
many countries.
A different kind of hemispheric integration agreement - one that upholds
workers' rights, protects the environment, and stimulates real development
- is needed. The labor movement and other members of civil society have
presented reasonable and coherent proposals for what such an agreement
should look like. In our view, the success or failure of the FTAA will
hinge on our government's willingness to adopt these proposals and carry
them forward in the FTAA process.
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