Time for a Change on Trade

May 28, 2009

During the 2008 presidential campaign, NETWORK was elated at President Obama’s statements calling for a comprehensive review of U.S. trade policy, including the renegotiation of the North American Free Trade Agreement (NAFTA). NETWORK works for fair and just trade policies that promote good jobs, support livelihoods and poverty reduction in the U.S. and globally—and give the people most affected by trade agreements a hand in shaping them. Our existing trade model fails to meet these standards.

In this time of economic hardship and anxiety, we urge President Obama and Congress to seize the election mandate for change and start work on a thorough review and revision of U.S. trade policies. We need policies that genuinely benefit vulnerable populations in both the U.S. and abroad.

We are deeply concerned that the administration and some members of Congress are moving forward with a free trade agreement (FTA) with Panama. The Panama FTA is based on the deeply flawed trade model copied from NAFTA and the Central American Free Trade Agreement (CAFTA). This approach to trade is destroying livelihoods in many developing countries, undermining small-holder agriculture, restricting access to essential medicines, and devastating many communities in the United States.

On May 11 and 12, NETWORK participated in visits to the offices of nine new and senior representatives on Capitol Hill to urge a review of U.S. trade policies. Dr. Raúl Moreno, a Salvadoran economist and expert on trade and globalization issues, joined members of the Interfaith Working Group on Trade and Investment and the Alliance for Responsible Trade for these visits.

Dr. Moreno provided a powerful firsthand critique of how CAFTA undermined environmental protections, labor standards and people’s livelihoods in El Salvador during the first three years of its implementation. His remarks underscore the need for Congress to shape a new model for trade that is fair and just before considering any pending or new trade agreements. These are some examples of the key problems with our existing free trade model highlighted by Dr. Moreno:

It is a myth that the free trade model supports better livelihoods and local industrial development for poor countries like El Salvador.

• Since CAFTA went into effect, exports of some low value-added goods such as ethanol and sweatshop textiles have increased, but El Salvador’s overall trade deficit with the U.S. is larger than ever. In the face of unequal competition, many domestic industries are going bankrupt.
• El Salvador is losing its food sovereignty. CAFTA removed restrictions on trade in agriculture, displacing small farmers in El Salvador unable to compete against heavily subsidized U.S. exports of crops. As a result, El Salvador now imports 90% of its rice.
• The collapse of agricultural livelihoods has caused increased unemployment in El Salvador’s cities and increased migration to the U.S.

Free trade agreements fail to adequately protect workers’ rights and promote stable jobs with decent wages.

• In El Salvador, the labor clauses in CAFTA were more regressive than domestic laws already in effect. Even “improved” labor clauses incorporated into the Peru and Panama FTAs in 2007 lack mechanisms for effective enforcement.
• CAFTA has contributed to growing income inequality in El Salvador.
• Without enough jobs to replace the agricultural livelihoods destroyed through CAFTA, over 60% of workers in El Salvador now depend on the informal sector for income.

Free trade agreements unfairly privilege the interests of multinational corporations and foreign investors over the rights of citizens and democratic governments to protect public services, the environment, and public health and safety.

• CAFTA has enabled the U.S.-based Pacific Rim mining company to challenge the Salvadoran government’s decision—on public health and environmental grounds—to block a proposed cyanide gold mining operation at the mouth of the country’s most important river.
• The undemocratic “investor-state” dispute settlement mechanisms included in all FTAs from NAFTA on (including the Panama FTA) give investors like Pacific Rim broad authority to sue governments for enforcing environmental or other regulations that threaten the company’s future expected profits.

The intellectual property (IP) regulations in free trade agreements hinder people’s access to essential medicines while facilitating the piracy of indigenous knowledge.

• The IP chapter of CAFTA prevents the production and commercialization of generic medicines, undermining a 2001 agreement in the World Trade Organization affirming that every country has a “right to promote public health and, in particular, to promote access to medicines for all.”
• At the same time, IP provisions in CAFTA allow U.S. pharmaceutical corporations to patent for commercial production plants and other life forms used for many years by indigenous peoples.