Tag Archives: Free Trade Agreements

Trade Promotion Authority and Labor Rights

(I have been working on these small articles for a class I have been taking in the law school. Since the topics were so interesting, I thought it would be good to publish some of them on the blog. I have of course taken the Professor’s permission for this. I would love some input and information on these issues, from those of you more in the know. To Indian readers, the perspective here is very American, which is unusual in my posts. But I hope you enjoy reading it anyway.)

Free trade agreements (FTAs) or Regional Trade Agreements have become increasingly popular since the 1990s. [1] These are agreements where the parties (which can be states or customs unions) agree to greater integration through lower tariffs and liberalized trade regimes between each other.

These agreements, in some cases, can cause job losses in industrialized countries, like the United States of America. This is because jobs could move from the more industrialized nations, where wage rates are higher, to less industrialized nations with lower wage rates (and a weaker framework of labor rights). An example of this is the North American Free Trade Agreement (NAFTA). On its website the AFL-CIO claims that nearly 700,000 American jobs have been lost since the NAFTA took effect in 1994. [2] This website also states that 20 years after NAFTA was passed, all fifty American states have had jobs lost or displaced to Mexico. [3]

Now it must be remembered that there is an economic logic to these free trade agreements, and they have played a role in maximizing consumer choice. In the developing countries they have created jobs, albeit with scanty worker protections. However, in the USA these F.T.As have come under attack from labor groups, due to the job displacements which have had a significant social impact. An illustration of the grave impact of job-losses/ displacement can be seen in the rust belt of the USA, with high rates of poverty and crime. Particularly moving is the story of Gary, Indiana, which turned from a steel-city to a crime hub (at the risk of oversimplifying things.) [4]

The Trade Promotion Authority (or Fast Track) as it is known, has been in the public eye of late. President Obama is seeking the Fast Track authority in order to negotiate the Trans-Pacific Partnership (T.P.P).  Fast Track is meant to facilitate negotiating trade deals. It works by providing for a framework of close collaboration between the members of the Congress and the President of the United States. This means that members of the Congress (through the Congressional Oversight Group) get a seat at the table during trade negotiations. In exchange for this, the Congress has to vote for trade-agreement implementing legislation without amendments (i.e. it is a Yes-No vote), and within a specific time frame. [5]

The advantage of Fast Track is that it strengthens the USA’s hand during trade negotiations.[6]  Other countries have a greater faith in the USA negotiators because they know that the USA speaks with one voice at the negotiating table. [7] The fast track authority also assures the trading partners of the USA that the completed trade agreements will be decided quickly and without any amendments. [8] But this efficiency comes at a cost.

The Public Citizen’s Global Trade watch has described the Fast Track Authority as an ‘undemocratic path to unfair trade’. [9] This is because Fast Track limits the kind of debate that would otherwise take place in Congress, and restricts special interests groups (like labor unions) from opposing trade agreements that could cause job losses. This is what, according to AFL-CIO and Public Citizen’s Trade Watch happened with NAFTA.  This is exacerbated by the fact that Trade agreements today are far wider than the simple tariff arrangements of the past. Which brings us to Obama and the TPP.

Leo Gerard, the President of the United Steelworkers, has spoken out against Obama’s request for Fast Track, noting the 400 million tons of over-capacity in steel manufacturing in China, which will continue to eat into the US markets. In fairness, China is not a part of the TPP yet (though it has been showing a lot of interest in it of late).  It is also important to note that U.S. wage rates have not increased in ‘real terms’ since 1973, since Fast Track was passed.[10] The ‘right to work’ is enshrined under Article 23 of the Universal Declaration of Human Rights (which has attained the status of customary international law),  and Article 6 of the International Covenant on Economic Social and Cultural Rights (which the USA has not ratified). The ILO Convention 122 on Employment policy (to which the USA is not a party) also lays down that , ‘each Member shall declare and pursue, as major goal, an active policy designed to promote full, productive and freely chosen employment.’[11] However, it is difficult to make out a case for a hard international law obligation on part of the USA to avoid large-scale job losses. But the USA is a member of the ILO and is bound by the principles in the Declaration of Philadelphia, which includes the goal of ‘full employment and raising the standards of living’.[12] Further, the large scale job losses do severely diminish the capabilities of communities and people affected by them.

In conclusion, it seems that the chances of the T.P.P going through without the Fast Track authority are slim. Further, there is a large body of economic literature that swears by the economic logic of comparative advantage. Taken at face value this would make the signing of the T.P.P is pivotal for US interests. Further it may not be entirely fair to describe the Fast Track process as undemocratic, given that the President of the USA (who signs off on these deals, is democratically elected).  However, social impact of the job displacement is real, and the fears of trade unions and labor groups cannot be wished away. Before canvassing for Fast Track authority, the President should provide a clear and coherent vision of how he plans to tackle the issue of job losses.  It is possible that through vocational training and rehabilitation (programs dealing with which which already exist to a certain extent), the impact of job losses can be minimized, but such policies must be developed by taking the views of all stakeholders into account. Holding back the trade agenda, however, seems difficult.

[1] http://www.wto.org/english/tratop_e/region_e/region_e.htm

[2] http://www.aflcio.org/Issues/Trade/NAFTA

[3] Ibid

[4] http://prospect.org/article/where-work-disappears-and-dreams-die

[5] Report to the Congress on the Extension of the Trade Promotion Authority, United States Trade Representative, https://ustr.gov/archive/assets/Document_Library/Reports_Publications/2005/2005_TPA_Report/asset_upload_file834_7514.pdf

[6] Ibid

[7] Ibid

[8] Ibid

[9] http://www.citizen.org/fast-track

[10] http://www.citizen.org/Page.aspx?pid=2124

[11] http://www.ble.dole.gov.ph/issuances/ILO_122.pdf

[12] http://www.un-documents.net/dec-phil.htm