Labor fears the worst in new Chile, Singapore trade deals

By Don McIntosh, Associate Editor

U.S. negotiators have completed new NAFTA-like trade agreements with Chile and Singapore, both of which Congress is likely to vote on in the next few months.

In the face of widespread public concern about previous agreements, the Bush Administration has adopted some of the rhetoric of its labor and environmental critics, but almost none of the substance. In its press release announcing the Singapore agreement, the Office of the U.S. Trade Representative (USTR) said the agreement provides for “groundbreaking cooperation in promoting labor rights and the environment.” Similar claims were made for the Chile deal.

Labor leaders familiar with the agreements say nothing could be further from the truth.

“We hate the agreements,” said Thea Lee, chief international economist at AFL-CIO headquarters in Washington, D.C. “We think they’re rotten policy.”

“It’s a warmed-over retread of NAFTA (North American Free Trade Agreement). What’s so innovative about that?”

Under the Trade Act of 1974, the U.S. government is supposed to consult on trade policy with committees representing different economic sectors. One of those is composed of representatives from organized labor — currently 58 officials from unions in every major industry. Given a look at the Singapore and Chile agreements, the Labor Advisory Committee’s report was unequivocal: “The free trade agreements negotiated with Chile and Singapore are tilted towards benefiting those few large companies that hope to ship work out of the United States, exploit guest workers in the United States, and constrain the ability of governments to regulate their behavior.”

The committee said the agreements repeat the mistakes of NAFTA and will lead to deteriorating trade balances, lost jobs, and trampled rights. NAFTA critics say the 1992 treaty joining Mexico with the United States and Canada hastened the flight of family-wage U.S. industrial jobs to Mexican maquiladoras, and established unacceptable new rights for corporate investors to sue governments if environmental or other public interest laws hurt their profits.

Singapore and Chile are small and relatively prosperous, so the new trade agreements wouldn’t have quite the same impact as the one with Mexico. What concerns critics more is that the terms of the two agreements are likely to serve as a template for other treaties. The U.S. is currently negotiating bilateral trade agreements with Morocco and Australia, and multi-lateral agreements with five Central American countries, the Southern African Customs Union, and the entire Western Hemisphere in an agreement called the Free Trade Area of the Americas. And the USTR says the Singapore agreement will serve as a foundation for other possible free trade agreements in Southeast Asia.

If they pass Congress, the Chile and Singapore agreements would set a precedent that future trade agreements can:

• Replicate NAFTA’s “Chapter 11,” which allows investors to sue governments directly if regulations threaten their profits;

• Set up new visa categories to allow more foreign workers into the United States; and

• Ignore any concern about protecting workers rights.

Lee, the AFL-CIO economist, says the new agreements actually backtrack from the minimal progress on workers’ rights that was achieved in a 2001 trade agreement with Jordan. That agreement contained three labor provisions: The countries have to enforce their own labor laws, can’t weaken them in order to attract investment, and have to adhere to the minimum standards that the International Labor Organization puts forth. And the treaty provided a dispute mechanism to deal with violations, with penalties possible.

The Chile and Singapore agreements contain a promise to live up to international labor standards, but have no mechanism to enforce that, rendering it meaningless. The only binding commitment is for countries to enforce their own labor laws —however good or bad they may be. To enforce this commitment, the treaties set up a dispute resolution process — separate from the one for commercial disputes — and specify penalties that actually reward countries for failing to enforce their laws. [Countries would pay a fine for failing to enforce their labor laws — to themselves!]

“Under these agreements, a country could ban unions, set the minimum age for employment at 10 years old, and reinstate slave labor,” Lee testified to a U.S. House subcommittee on trade at a June 10 hearing —because the treaties only require that they enforce their own laws. Lee told Congress that the workers’ rights provisions, problematic in the context of Chile and Singapore, will be disastrous if applied to future free trade agreements with countries and regions where labor laws are much weaker to begin with.

The Chile and Singapore trade agreements also include provisions for the “temporary” entry of foreign workers into the United States.

Lee said Congress didn’t anticipate that the Bush Administration would try to rewrite immigration law when it went out to negotiate trade treaties, but that’s what it has done. The accords create a special visa category for “professionals” who could work in the United States for one year, renewable indefinitely.

“Professionals” is defined to include any job that requires a bachelor’s degree — even if there’s no domestic labor shortage in that category — and it also includes physical therapists, agricultural managers, and several other occupations that don’t require a bachelor’s. These visas were first proposed without any numerical limits, but congressional committees overseeing immigration policy got wind of this, and now the trade agreements limit the special visas to 1,400 Chileans and 5,400 Singaporeans.

While the two treaties are basically similar, each treaty has unique aspects as well.

Chile, population 15.6 million, is an exporter of copper, fish, fruits and paper. Thus the Chilean agreement is more of a threat to U.S. agricultural producers than to manufacturing. The agreement would also allow U.S. companies to provide financial services in Chile’s privatized social security system.

Singapore’s role in the world economy is mainly as a transhipment point for goods from other Asian countries. An island nation off the southern tip of Malaysia and just north of Indonesia, it is already the world’s second-busiest transhipment hub. With a population of just 4.6 million, it has become the U.S. 12th-largest trading partner.

Singapore already had no tariffs on U.S. goods, so that’s not what the treaty’s about. Instead, as the U.S. ambassador to Singapore revealed in a January magazine article, the most significant part of the agreement is a provision titled the “Integrated Sourcing Initiative.” Under this clause, goods made outside Singapore would be treated as of Singaporean origin. The point, the ambassador explained, is to allow American companies, particularly electronics manufacturers, to take advantage of low-wage production on two neighboring Indonesian islands and export the products to the U.S. duty-free.

But an AFL-CIO analysis of the treaty found the list of products allowed in under this provision is set to expand indefinitely, and that the treaty language is vague enough to let any third country get its goods into the U.S. so long as it is shipped through Singapore.

“If most of the American people knew about this, they would be up in arms,” said Gretchen Gordon, director of Citizens’ Trade Campaign, a coalition of labor, farmers, environmentalists, consumer advocates and church groups founded during the fight against NAFTA.

Gordon said starting with NAFTA, trade agreements were no longer just talking about tariffs and exchanges of goods, but were expanding into food safety rules, workers’ rights, zoning laws and public health standards. Now they’ve expanded to include trade in services, copyright and patent enforcement, and immigration.

“We’re getting rid of tariffs,” Gordon said, “and we’re making it easy for companies to hop around the globe, but we’re not including any enforceable labor standards to make sure if they are going to hop around, they’re not hopping around just to seek out the cheapest labor they can get and the weakest environmental standards.”

Both the Singapore and Chile treaties will worsen the U.S. trade deficit, Lee said. In fact, the U.S. trade deficit has increased in every case where the U.S. has entered into a “free trade” agreement with another country. Since China was granted “Permanent Normal Trade Relations” in 2000, the U.S. trade deficit with that country has swelled 25 percent, to $103 billion last year. The combined trade deficit with Canada and Mexico is almost 10 times what it was before NAFTA went into effect. Even tiny Jordan, with which the U.S. had a trade surplus when its agreement went into effect in 2001, now is a country with which the U.S. has a trade deficit.

“U.S. trade deficit” is another way of saying “lost U.S. jobs,” since every million dollars of consumer spending going to buy imports is a million dollars not going to employ American workers to produce the same thing. Last year’s U.S. trade deficit was the biggest ever — $435.2 billion.

The experience of unions members with past trade agreements has led them to question the extravagant claims often made by free-trade boosters, Lee told the House Ways and Means Committee. “These agreements are inevitably touted as market-opening agreements that will significantly expand U.S. export opportunities (and therefore create export-related U.S. jobs),” Lee said, but “the impact has more often been to facilitate the shift of U.S. investment offshore. Much of this investment has gone into production for export back to the United States, boosting U.S. imports and displacing rather than creating U.S. jobs.”

The AFL-CIO has an alternate vision: that trade agreements ought to have enforceable protections for core workers’ rights — the right to unionize, and prohibition of child labor, forced labor and employment discrimination. And they should preserve the governments’ ability to regulate in the public interest and use government purchasing decisions to promote economic development and other legitimate social goals.

Under the “fast track” rules passed last year, after the president introduces a trade agreement to Congress, the House and Senate have 45 to 60 days to vote it up or down, and can not amend it. In that fast-track law, Congress directed the USTR to ensure that workers’ rights would be protected in any new trade agreements. Technically, in order to qualify for the fast track treatment, any trade agreement would have to satisfy that goal.

The Oregon AFL-CIO Ad Hoc Committee on Trade has been meeting for months to plan opposition to the new trade agreements, and members plan to lobby local members of Congress.

Representative Earl Blumenauer, who voted against the fast-track bill after years of pressure from unionists and others, said in a June congressional committee hearing that he favors the Chile agreement. A Blumenauer staff person said he even plans to encourage others in Congress to vote for the Chile free trade agreement, but that he is leaning against the Singapore agreement because of the Integrated Sourcing Initiative clause.

A spokesperson for Representative David Wu said he wouldn’t have an opinion on the agreements until after they are formally introduced in Congress.

Opponents of the treaties are organizing a July 19 “town hall” at the First Unitarian Church, 1011 SW 12th Ave. The event begins at 1 p.m. State Representative and union activist Diane Rosenbaum will moderate, and Portland State University professor Barbara Dudley and Oregon AFL-CIO research director Lynn-Marie Crider will give short presentations, along with environmentalists and others, followed by public discussion.

The Chile and Singapore agreements, 1,400 pages long, are available on-line at . The Labor Advisory Committee’s 20-page response is available at

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