Saturday, December 17, 2005

WTO agreements reached on agricultural products.

According to news reports, a tentative agreement to get rid of export subsidies on agricultural products has been reached at the WTO talks in Hong Kong. According to reports, the United States will end export subsidies on cotton, allowing African nations to compete in cotton sales, while the European Union is likely to phase out agricultural export subsidies between 2010 and 2013. Details remain to be negotiated.

Export subsidies are payments that governments pay to farmers to lower the price which they will charge for a product. And not surprisingly, many farmers both in the U.S. and the EU are likely to be very angry about this agreement. I once saw a bumper sticker that read, 'Crime doesn't pay. And neither does farming.' For American farmers to expect to compete in the global marketplace against farmers from countries where people typically get by on a few hundred dollars per year is ridiculous.

At the same time, people who suggest that we should throw away all the free trade agreements that have been signed, are proposing an unrealistic solution. This kind of neo-isolationism is doomed to failure. The world is today an interconnected economy, and the fact is that as time only moves forward, it will become more so, rather than less so in the future. The problem is that under the present framework, only large multinational corporations, which can now move jobs to the countries where they have the least regulation and can pay the lowest wages, or in the case of agricultural products, they can buy from the most exploited of farmers, benefit. Perhaps throw in some corrupt local or national officials in these countries who will gladly enrich themselves in exchange for making sure that even what laws there are, are not enforced.

What is missing in the WTO talks, and what would make a difference, would be to condition these kinds of agreements on environmental, labor and anti-corruption standards similar to those which exist in developed countries.

In the case of pollution, not only is it true that pollution doesn't stop at the border (the recent benzene spill in China which is now wiping out the Amur river fishing industry in Russia is instructive), but pollution caused by lax standards, industrial accidents or inefficient equipment ultimately hurts all of us. The Kyoto accords were a start towards developing a world standard on pollution, but only a start. Although it was a mistake for the U.S. to skip out on the treaty, the Bush administration's point that countries like China and India were not covered is a valid one. Future agreements must cover all countries, and trade agreements must be conditioned on an agreement to adopt and enforce twenty-first century pollution standards.

Labor standards are also important. Free trade can certainly help poor countries develop. It is, for example, certainly true that African countries will benefit a great deal from the end of U.S. export subsidies. However, without proper labor standards, what we will see is literally a return to the bad old days of sweatshops (as we already do see) in many countries. Unfortunately, many large companies have so conditioned consumers in the U.S. (though with much less success in Europe) to not care if the items they are buying are made in a sweatshop, that it is no longer feasible to look to the conscience of individual consumers to solve the problems. A good example is Nike. Some years ago, it was brought up that a pair of tennis shoes that they sold for $150-200 was made for less than $4.00 total, and the majority of that cost was foam and other materials. The share paid to the workers (in a sweatshop in Vietnam) was less than a dollar per pair. And that is among the high end of sweatshops. In places like Haiti and Indonesia, there are sweatshops in which workers earn eleven cents an hour to make clothes sold with designer labels in American stores. It is no secret that Wal-Mart sells a lot of clothes made in sweatshops, but they have done a good enough job of advertising that they bring in consumers. Leaving aside the issue of how people shopping in places like this forces American textile mills to shut down and declare bankruptcy or move overseas themselves in order to compete, in this case, untrammeled free trade has not improved wages globally (if anything, it is lowering them-- some factories that moved to Mexico or other Latin American countries a few years ago are now closing them and moving to even lower wage countries in Asia and Africa). And workplace safety and child labor laws? Dream on. I have read in what I consider reputable sources examples of children as young as six forced to weave all day at a loom, sometimes suffering life-altering injuries or death, and denied the opportunity to go to school, all for literally pennies per day. And of course, products produced by unskilled laborers who are paid dirt low wages are likely to prove of commensurately low quality. For these reasons, when we sign free trade agreements we must insist on labor laws that at least show substantial and continuing improvement towards matching our own.

Lastly, these agreements have to deal with corruption. If a government is corrupt at any level, then any of the preceding agreements are worthless. Laws which are not enforced are, if anything, worse than no law at all, because even the threat of passing more stringent laws can simply be considered as the need to bribe some official to make sure it is not passed, or if passed is ignored. In third world countries, corruption is a long standing problem. Part of it is because of the low standard of living for everyone, as well as the fact that many of these countries have very low taxes (another feature that draws multinationals)-- local officials get paid such a small salary that an amount of money, say $500, that would not buy much influence in the United States, is easily enough to bribe a local official. National officials are more expensive, but the same principle applies. To deal with this, we have to take a two pronged approach. The first part of the approach is that we must establish certain corruption standards that we tie to agreements: an independent judiciary, a professional police force and investigations office that is paid well enough that they don't have to depend on bribery, and evidence of an ongoing effort to root out and punish (as in prison) corrupt officials. This may still not be enough, however. For one thing, the idea of public service as a path towards personal enrichment is a long standing tradition in some countries. So, I would suggest that if evidence is uncovered of any multinational corporation engaging in bribery of local officials in other countries to skirt these laws, then perhaps there should be a mechanism in place whereby the U.S., Europe and other industrialized nations can sanction whoever offered the bribe by not allowing them to operate (as in sell their products) in these nations for a period of time. Hence I would suggest the following: The second part of the approach is to develop a mechanism to sanction businesspersons and their employers if they get caught paying bribes by not allowing them to operate in industrialized countries. Of course, if any U.S. laws were broken in the process, we can also use the U.S. courts to punish the perpetrators.

The WTO in concept is a good thing. But as long as it is exclusively focused on the macro-economics of trade from a corporate and governmental standpoint and not on the social effects and micro-economic standpoint of trade from the individual viewpoint, I think we should be very careful about signing onto any more trade agreements.


dorsano said...

You've got my vote - though like many centrist positions it's hard for me to find hope for this one - unless someone finds a way to articulate it in a soundbite - "fair trade" doesn't seem to work.

Both throwing away all the free trade agreements and continuing the race to the bottom are unsustainable courses in a democracy.

Both political parties are feeling the heat on trade and there was significant resistance even in the GOP on CAFTA - 11 GOP Senators voted against it and some that voted for did so only after much pressure from the White House. 10 Democrats voted for plus Jeffords.

If ever there was a bipartisan issue, this is one - both parties have constituencies which are directly affect today by trade policy.

Still - I expect things to get progressively worse until they get so bad that the populist position of abandoning the agreements wins out.

Anonymous said...

Eli, your post brings me much more clairty on these issues.

Dors, I agree; it's going to get worse before it gets better.