Several diaries have been written about the Peru Free Trade Agreement in recent weeks here at Daily Kos. As far as I can tell we started out with this diary, and this, and then moved to this one, and then today we had this one. The problem is that none of these diaries presents an accurate description of the Peru FTA and some of them misrepresent the agreement and what it accomplishes. In the interest of accuracy, I thought I'd attempt to address the Peru FTA and some of the inaccuracies that have cropped up throughout the discussion.
First things first let's get some background information. What exactly is the Peru Free Trade Agreement and how did it come about?
On May 23, 2002, the Senate voted to pass H.R. 3009. This bill extended the Andean Trade Preference Act. If you're wondering how current Democratic Presidential candidates voted on that, Biden and Edwards voted yes, Clinton and Dodd voted no. This Act opened up trade negotiations between the U.S. and Bolivia, Colombia, Ecuador and Peru. Due to slow progress the countries decided to engage in bi-lateral talks with the U.S., each seeking its own separate trade agreement. So far Columbia and Peru have finalized agreements. In order for these agreements to come into effect, the U.S. Congress will need to ratify them.
Several criticisms have been made of the Peru FTA, some valid and some not. I'd like to make an attempt to sift through some of those now.
Claim #1: "Not a single American labor union has endorsed the Peru trade pact..."
While no American Labor unions have endorsed the Peru FTA, the AFL-CIO has specifically declined to oppose it. This article summarizes the differences among Labor groups.
Update: I didn't have this link before, but this is important information to add:
The AFL-CIO is neither supporting nor opposing the treaty, though some of its affiliate unions have taken stands. The American Federation of Television and Radio Artists (AFTRA), American Federation of Musicians (AFM), and the Screen Actors’ Guild (SAG) are supporting the agreement because it would require Peru to better enforce copyright protections that benefit union actors and musicians.
The Change to Win coalition, which includes the Service Employees International Union, the International Brotherhood of Teamsters and the United Brotherhood of Carpenters and Joiners of America announced its opposition to the Peru FTA in letters sent Tuesday to every member of Congress and the Senate.
While the announcement was unsurprising, it does formalize a split in organized labor over the Peru deal. The AFL-CIO is not supporting that deal, but nor is it vocally opposing it. The Peru FTA is supported by House Democratic leaders such as Ways and Means Committee Chairman Charles Rangel (N.Y.) and Rep. Sandy Levin (Mich.), a leading Democrat on trade.
This is an important distinction and a Representative from the AFL-CIO says:
Unions making up the AFL-CIO have taken different stances on the Peru FTA. "If we have unions split on a deal, we won’t be as active on that issue," AFL-CIO Policy Director Thea Lee said.
In other words, Unions are split on the Peru FTA. A few Unions have endorsed the agreement, and some Unions are clearly against, but it's clear that not every Union is actively opposed or actively supportive of this deal. Why might a Union decide to not actively oppose, but not support? Well, a Union's purpose is to protect the rights of the workers they represent. If an FTA doesn't negatively or positively impact a Union's workers, then the Union doesn't necessarily have to take a position on it.
Claim #2: "This agreement will extend NAFTA into Peru."
This claim is a bit odd, quite frankly.
First, what is NAFTA?
The North American Free Trade Agreement (NAFTA) eliminated the majority of tariffs between products traded among the United States, Canada and Mexico, and gradually phases out other tariffs over a 15-year period. Restrictions were to be removed from many categories, including motor vehicles, computers, textiles, and agriculture. The treaty also protects intellectual property rights (patents, copyrights, and trademarks), and outlines the removal of investment restrictions among the three countries. The agreement is trilateral in nature (that is, the terms apply equally to all countries) in all areas except agriculture, in which stipulations, tariff reduction phase-out periods and protection of selected industries, were negotiated on a bilateral basis. Provisions regarding worker and environmental protection were added later as a result of supplemental agreements signed in 1993.
In other words, NAFTA has nothing to do with the Peru FTA.
Now, the Peru FTA may include one or two provisions that are similar in nature to the ones that exist under NAFTA, as both of them are free trade agreements and it seems many FTAs share similarities here and there, but to claim that it is the same as NAFTA is just dishonest.
Peru is not in North America (Peru isn't in Central America either, so it isn't an extension of CAFTA either), and NAFTA didn't contain provisions for labor or the environment, and thanks to some further negotiation, the Peru FTA does.
In fact, initially there was opposition from several environmental groups as well as labor groups, but once the changes were made to this final bill and there were protections for labor and the environment included, the environmental groups decided not to oppose.
After congressional Democrats negotiated changes to the agreement with President Bush in May 2007, the Center for International Environmental Law, Defenders of Wildlife, Earthjustice, Environmental Investigation Agency, Friends of the Earth, Natural Resources Defense Council, and Sierra Club noted that the environmental provisions of the agreement marked a significant step forward. The FTA now includes provisions that could help stop the flow of illegally logged timber from Peru. In addition, there are requirements for countries to fulfill their obligations under a selected set of Multilateral Environmental Agreements. The groups warned, however, against using the Peru FTA as a template for future trade deals since several problematic provisions, especially in the investment chapter, have not been improved. Link.
In this document, Change to Win argues that the Peru FTA has similar provisions to NAFTA and CAFTA and that those provisions will hurt American workers. One of the provisions they object to stipulates a ban on Buy America and anti-offshoring policies.
In this global economy, what does "Buy America" mean? The UAW website asks readers to support Toyota workers. So, in other words, some of the Union members work to build Toyota vehicles and Toyota is a foreign corporation, last I checked. When we talk about protecting American jobs these days, it isn't black and white. There are a lot of foreign companies that have operations in America and provide Americans with jobs. In fact, according to the Dept. of Commerce (I know, I know, evil link...but the numbers are accurate here and I only care about the numbers), foreign companies appear to be helping out some of our Unions and some of our non-union workers:
Foreign companies in the U.S. employed more than 5 million U.S. workers in 2005, providing 4.5% of all private sector employment in the United States.
· Manufacturing jobs accounted for 33% of the jobs created by foreign companies in the U.S. (2004 data). The manufacturing sector accounts for just 12% of overall U.S. private sector employment. Thus, FDI is disproportionately bolstering this important sector.
· An additional 4.6 million U.S. jobs indirectly depend on foreign investment in the U.S. (2005 data). Foreign companies in the U.S. buy 80% of their inputs from U.S. companies. This additional business indirectly supports almost as many U.S. jobs as FDI creates directly.
· Compensation at foreign companies in the U.S. is on average 30% higher than the U.S. national average. Foreign-owned firms paid U.S. workers an average of $63,428 in 2004.
The idea that foreign companies and investors are inherently evil isn't helpful. I say this as a person who is inherently distrustful of corporations and of investors. Millions of American jobs depend on foreign investors and many of those are Union jobs that aren't going away any time soon. Will we be able to protect every single job that is in place at this moment if the Peru FTA isn't passed? The answer is obvious - no.
Claim #3: The Peru FTA is not Fair Trade.
What is "Fair Trade"?
The most widely recognized definition of fair trade was created by FINE, an informal Association of the four main fair trade networks (Fairtrade Labelling Organizations International, International Fair Trade Association, Network of European Worldshops and European Fair Trade Association):[5]
Fair trade is a trading partnership, based on dialogue, transparency and respect, which seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers - especially in the South. Fair trade organizations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade.
I have always said the the perfect "Free Trade" agreement is in fact a "Fair Trade" agreement. I don't think I've ever actually seen a perfect agreement and I doubt I ever will, but we can work to make them better and better and the Peru FTA is so far one of the best FTAs I have seen.
I think part of the problem here is that many of us are operating under different definitions of "Fair Trade". The Wiki page gives details on key aspects of "Fair Trade" and I think that some of us are talking about one or more of these, and ignoring others, and yet calling it "Fair Trade".
Here is the list (for details click on the Wiki link above):
Creating opportunities for economically disadvantaged producers
Transparency and accountability
Capacity Building
Payment of a fair price
Gender Equality
Working Conditions
Environmental Protections
By this definition, I'm not sure there is a Trade Agreement in existence that can be called "Fair Trade". However, there are certainly considerations of some of these things in the Peru FTA. This is a step forward. This may even be multiple steps forward considering that the bill includes Environmental and Labor Protections.
This info comes from a response to Sirota's post on this over at Working Assets:
The Peru agreement - unlike NAFTA and CAFTA, -- includes the five basic internationally recognized labor standards set forth in the International Labor Organization's 1998 Declaration on Fundamental Principles and Rights at Work.
These rights - along with each country's obligation to enforce its labor laws - are to be fully enforceable under the dispute settlement provisions of the Peru Trade Agreements, just as all other provisions.
Thea Mei Lee, the AFL-CIO economist testifying before Congress said that the Peru trade agreement was "an enormous improvement" over past Bush agreements with Chile, Singapore, Morocco and others. She said that AFL-CIO unions were on both sides on the Peru agreement, and it was putting its priorities into opposing two other pending free trade agreements, with Colombia and South Korea.
In case you don't believe the AFL-CIO quote, you can find it here:
On March 6, the AFL-CIO Executive Council adopted a statement that calls on Congress to institute new reforms on trade that stop our jobs from being exported and put our workers and the companies they work for on a level playing field. The council’s statement outlines the principles that should be embodied in all U.S. trade policies:
Enforceable International Labor Organization (ILO) core labor standards in every trade agreement, so no government or corporation can gain a comparative advantage by violating workers’ human rights.
Reform of the environment, investment, government procurement, intellectual property rights and services provisions in trade agreements.
U.S. negotiators must not put our trade laws on the chopping block, nor should they make irreversible commitments with respect to immigration policy.
More transparency and much broader public participation is needed in the negotiation of trade rules, at both the national and international levels. Business is not the only constituency affected by trade, and it should not be the only nongovernment group at the table when these deals are cut.
Claim #4: The Peru FTA will harm workers in both countries.
Workers in both countries are already suffering. The purpose of the trade agreement in the first place is to improve the economies of both countries. I think Paul Krugman hits on this better than I ever could here:
So what’s the answer? I don’t think there is one, as long as the discussion is restricted to trade policy: all-out protectionism isn’t acceptable, and labor standards in trade agreements will help only a little.
By all means, let’s have strong labor standards in our pending trade agreements, and let’s approach proposals for new agreements with an appropriate degree of skepticism. But if Democrats really want to help American workers, they’ll have to do it with a pro-labor policy that relies on better tools than trade policy. Universal health care, paid for by taxing the economy’s winners, would be a good place to start.
I'm quoting from his conclusion but I think the entire piece is relevant to our discussion so I'd encourage you to read it. Krugman admits what many don't want to, that there is no simple answer to these problems - or that the answer doesn't reside in trade agreements at all. In fact, the answer resides in other policies. He notes that Bush opposed Labor stipulations "not because it wanted to keep imports cheap, but because it was afraid that America would end up being forced to improve its own labor policies."
The very fact that the agreement will include Labor provisions is a victory for the Democrats who helped negotiate it.
Both Ways and Means Chairman Rangel and Mr. Levin described the meeting in a positive light. Mr. Levin told reporters the discussion had confirmed his belief that more members will support the Peru FTA when they better understand the details - including the worker rights and environmental protection standards "Democrats have long been fighting for."
In this comment earlier today, Geekesque notes that Peruvian products are already entering the United States:
Peruvian products already enter the United States virtually tariff-free under the Andean Trade Preference Act, which gives four South American countries open access to U.S. markets, in return for their cooperation in combatting drug trafficking. The new agreement will drop Peruvian tariffs on U.S. goods and services, and add numerous investor rights and intellectual property protections along the lines of NAFTA. Link.
In other words, if we were going to see job losses due to trade with Peru, then we would have likely already seen them because ATPDEA has been in effect for years.
98% of Peruvian exports to the United States already enter the U.S. duty free under the Andean Trade Preferences and Drug Eradication Act (ATPDEA).
The Peru Trade Agreement has Additional Benefits
98% of Peruvian exports to the United States already enter the U.S. duty free under the Andean Trade Preferences and Drug Eradication Act (ATPDEA). The Peru Agreement will help American firms by immediately providing duty-free treatment to 80% of non-agricultural U.S. exports and about two-thirds of agricultural exports to Peru.
One Democrat who has taken a lot of criticism for his support of the agreement is Barack Obama.
Obama has this to say about the Peru FTA:
"The Peruvian agreement contains the very labor agreements that labor and our allies have been asking for," he said. "What I'm saying, is that the same provisions that we fought for - and that the AFL-CIO and other labor organizations had been asking for and that weren't contained in NAFTA - they are in this agreement."
...
"We're not going to draw a moat around the United States' economy. If we do that, then China is still trading, India is still going to be trading," said Obama, who voted against the recent Central American Free Trade Agreement and opposes the pending trade deal with South Korea.
"I think that NAFTA and CAFTA did not reflect the interests of American workers but reflected the interests of the stock owners on Wall Street, because they did not contain the sorts of labor provisions and environmental provisions that should have been embedded and should have been enforceable in those agreements," he said.
In other words, Obama has carefully weighed this decision and while he opposes trade agreements that don't include Labor and Environmental provisions, he is willing to support this particular agreement because it does include those provisions.
Obama doesn't stop there though. He, like Krugman, sees that when Trade Agreements can't meet all of our needs, there are answers to be found in other places. This week Obama outlined his policies for rural America. You can read all the various details of the plan here, but I want to outline some important aspects of it below:
Obama traveled to an eastern Iowa farm to outline his plan, parts of which have been offered before. His proposal included:
_ A $250,000 limit on subsidy payments to farmers as well as strict environmental rules and enforcement for large livestock operations. He would also put strict limits on the size of operations eligible for assistance in cleaning pollution, "so the largest polluters have to pay for their own environmental cleanup."
_ Creation of new cost-sharing programs to help farmers get certification as organic farmers, and revamping crop insurance programs to avoid penalizing organic producers.
_ A goal of a 50 percent increase in the economy's energy efficiency by 2030.
_ A change to allow small businesses to pool together to offer health insurance for workers, with subsidies for those who can't afford it. Also, overhaul the Medicare and Medicaid reimbursement system that can penalize rural areas.
_ Loan forgiveness for doctors and nurses who practice in rural areas. Also, revamp community college programs to "reflect the increasingly dynamic and technical skills required for rural America to respond to a globalizing workforce."
_ Establish new incentives to promote sustainable farming and creation of new wetlands.
_ A repeat of his call to eliminate income taxes for seniors making less than $50,000 a year. Also, let Medicare bargain for the lowest prescription drug costs.
"In moving forward we must always stress sustainability and conservation principles that are best understood by Americans who live and work off the land," said Obama.
Each and every one of these stipulations will end up helping American workers and farmers - some of these very workers and farmers will be trading good with Peru, but even if they aren't, they will all have healthcare, more affordable access to education, they will be helping us toward energy independence, and they will be using farming practices that are better for the environment.
The Peru FTA isn't perfect, but it's a move in the right direction. If we can pass it and build on it as we negotiate other trade agreements in the future, and improve our own standards for the environment and American workers, then we'll all be better off.