Reblogged from Public Citizen’s Blog and well worth reading.

Cross-posted at Eyes on Trade

By Todd Tucker

Today is Blog Action Day on Poverty, and it seems like a good opportunity to remember the impact that our failed trade policies have had on the world’s poor.

  • The worldwide gulf between rich and poor has widened under current trade policies
  • Long-standing economic theory predicts that trade increases inequality in developed countries, but not in developing countries. However, during the era when the corporate globalization policies were implemented worldwide, income inequality between developed and developing nations, and between rich and poor within developing nations has increased. Research by 2007 Nobel Laureate Eric Maskin recently confirmed this trend. In 1960, the 20 richest nations earned per capita incomes 16 times greater than non-oil-producing, less-developed nations. And by 1999, this gap had more than doubled. The richest 1 percent of the world’s population is 2,000 times richer than the poorest 50 percent.  
  • One United Nations study concluded that, “in almost all developing countries that have undertaken rapid trade liberalization, wage inequality has increased, most often in the context of declining industrial employment of unskilled workers and large absolute falls in their real wages, on the order of 20-30 percent in Latin American countries.” World Bank projections show that the WTO Doha Round could make matter even worse, with only a few large developing countries likely to gain, while many countries and regions would be likely to suffer net losses.
  • Progress on growth and social development in poor countries slowed during the corporate globalization era. Increasing economic growth rates mean a faster expanding economic pie. With more pie to go around, the middle class and poor have an opportunity to gain without having to “take” from the rich – often a violent and disruptive process. But the growth rates of developing nations slowed dramatically in the current globalization period. For low- and middle-income nations, per capita growth between 1980 and 2000 fell to half that experienced between 1960 and 1980. The slowdown in Latin America was particularly extreme. There, income per person grew by 75 percent in the 1960-80 period, before the International Monetary Fund (IMF) and World Bank began imposing a package of deregulation, investment, and trade policies similar to that found in NAFTA and the WTO. Since adopting these policies, per capita income growth in Latin America plunged to 6 percent in the 1980-2000 period.
  • Even when taking into account the longer 1980-2005 period, there is no single 25-year window in the modern history of the continent that was worse in terms of rate of income gains. In other world regions, growth also slowed dramatically. In Sub-Saharan Africa, income per person actually shrank 15 percent, due to implementation of the neoliberal policy package as well as a variety of other contributing factors. Improvement measured by human indicators – in particular, life expectancy, child mortality and schooling outcomes – also slowed for nearly all countries in the current period as compared with 1960-80. Pro-FTA analysts consider these outcomes to have been a significant factor in the numerous Latin American elections where critics of current globalization policies prevailed (see here and here).
  • Poverty, hunger and displacement on the rise during the neoliberal period. The share of people living on less than $2 a day rose in Latin America & the Caribbean, the Middle East & North Africa, Sub-Saharan Africa and Eastern Europe over the 1993-2001 period, while the share living on less than $1 a day (the World Bank’s definition of extreme poverty) grew in Sub-Saharan Africa and the Middle East & North Africa.
  • According to the Food & Agriculture Organization, in 1996 “world leaders committed themselves to what was considered an ambitious but attainable intermediate target: to halve by 2015 the number of undernourished people in the world from the 1990 level. Ten years later, we are confronted with the sad reality that virtually no progress has been made towards that objective. Compared with 1990-92, the number of undernourished people in the developing countries has declined by a meager 3 million – a number within the bounds of statistical error.”
  • As nations have begun adopting NAFTA-WTO style policies, the displaced rural poor have had little choice but to emigrate to wealthy countries or join swelling urban workforces. As a recent exposé in the pro-NAFTA New Republic put it, “as cheap American foodstuffs flooded Mexico’s markets and as U.S. agribusiness moved in, 1.1 million small farmers – and 1.4 million other Mexicans dependent upon the farm sector – were driven out of work between 1993 and 2005. Wages dropped so precipitously that today the income of a farm laborer is one-third that of what it was before NAFTA. As jobs disappeared and wages sank, many of these rural Mexicans emigrated, swelling the ranks of the 12 million illegal immigrants living incognito and competing for low-wage jobs in the United States.” Indeed, a review of Mexican income growth rates, inequality, and manufacturing value-added shows that Mexico fared better before neoliberalism’s introduction relative to outcomes post-neoliberalism and post-NAFTA (see here and here).
  • Developing countries that did not adopt the neoliberal policy package fared better. In sharp contrast, nations that chose their own economic mechanisms and policies through which to integrate into the world economy had more economic success. For instance, China, India, Malaysia, Vietnam, and Chile (and Argentina since 2002) have had some of the highest growth rates in the developing world over the past two decades – despite largely ignoring the directives of the WTO, IMF and World Bank. It remains to be seen what will occur if these countries implement the corporate globalization policy package. It is often claimed that the successful growth record of countries like Chile was based on the pursuit of NAFTA-WTO-like policies. But nothing could be farther from the truth: Chile’s sustained rapid economic growth was based on the liberal use of export promotion policies and subsidies that are now considered WTO-illegal.
  • . In the early 1990s, proponents of the WTO and NAFTA touted these pacts as keys to poverty reduction in developing nations and a more equitable global economic system. That same argument is being raised again today to promote the Doha Round WTO expansion.

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    The 2/15/ 2008 headline for the guest editorial in the Morrison County Record read Every Child Deserves a Chance to Succeed in a Global Economy.  What it was really saying is every American child deserves a chance to succeed in a global economy. Dedicated funding for education is a no-brainer and raising the academic standards to that of other countries should go without saying. There are a few issues and assumptions within the article that warrant careful scrutiny.

    The article says “all citizens will need to have a higher level of knowledge and skill to earn a living wage.” While stated as a fact, I think the fundamental question should be, why?

    To answer that you have to go back to the signing of trade agreements like NAFTA and the extension of permanent normal trading status to China along with its inclusion to the World Trade Organization (WTO), all signed during the Clinton administration. After the signing of the initial agreements the U.S. enacted so many subsequent trade agreements that the flurry of acronyms looks like a game of Boggle.

    In the early 1990’s consumer groups and environmentalist warned of the potential adverse effects these trade agreements could have on American jobs as well as the American standard of living. In short; if the trade agreements were enacted without setting standards for the environment, working conditions in foreign countries and human rights, Americans stood to loose more than jobs and more than entire industries;  over time the American standard of living would have to equalize with that of the other participating countries.

    Consumers groups weren’t preaching isolationism, they were merely pointing out that the trade agreements should estabished a baseline standard for business conduct in order to be included as a trading partner. Free trade would mean fair trade and it would act in best interest of all people as well as the environment thereby establishing a system that discourages the sweatshop culture and egregious polluting rather than one that fosters its growth and development in foreign countries.

    The reality is that the standards we allow for our trade participants will ultimately determine how good or how poor our own standards will be. If the baseline standards allow for sweatshops or even worse employs children then America will forfeit those business sectors to other countries thereby creating a need for Americans to have a higher degree of skill and a higher level of education in order to earn a living wage, as Heinzman suggests.  

    The question we should be asking right here and right now while we still have a choice is this;  is this what we want?

     American school children should have an education that matches the best education systems in the world, this does not mean that America would be prudent to continue to forfeit its low skill business sectors to foreign countries who pollute the planet and violate fundamental human rights. Even if we were to succeed in ensuring every American child a world class education someone will have to serve up fast food and work at Wal-Mart, how much poorer are we willing to allow our poor to become?

    Another less evident change ushered in by the succession of trade agreements is this; for the first time in history American businesses forged a unprescidented alliances with the American government so the U.S could compete in global  markets, a de facto, pseudo partnership that has allowed U.S. products like pharmaceuticals to be rushed market at breakneck speeds. 

    The question we forgot to ask is where does that leave American consumer protections within US government agencies like the Food and Drug Administration (FDA), United States Department of Agriculture (USDA) and the Federal Trade Commission (FTC)?

    Today the consequences are too obvious to be ignored but perhaps we have been slow to identify one significant root to the problem. In quick succession Americans watched in horror as tainted dog food, tainted tooth paste and lead paint arrived in US markets. Gaping infraction discovered despite the fact that only a minuscule percentage of the goods imported to the US are ever inspected.

    While this article only serves to touch upon a few issues,  review the list of promises made by NAFTA’s corporate proponents prompting its Congressional approval in 1993:

    200,000 new NAFTA jobs in the first 2 years, higher wages, increasing middle class consumer demand in Mexico, an increasing U.S. trade surplus with Mexico, greater economic and social stability in Mexico, improved environmental and health conditions in the U.S.-Mexico border region, thorough border inspection, as trade volumes increased, inhibiting shipments of unsafe food or contraband such as illegal drugs, and better relations with Mexico on issues from immigration to promotion of democratic elections. 

    While the articles title was Every Child Deserves a Chance to Succeed in a Global Economy what Heinzman is really saying is American children deserve a chance to succeed in a global economy. 

    I must agree with his original wording “every child.” Americans should demand a complete review of all trade agreements  and ask if they’ve lived up to any of their promises. Are these agreements good for Americans of just good for filthy rich shareholder? While insider trading is illegal for you, me and obviously Martha Stewart, it isn’t for those we elect to the U.S. House and Senate, they profit from these agreements and their subsequent investments.

    America should  set standard education, but we should also set the standards for human rights and environmental stewardship. If we don’t we will be forced to continue gutting standards Americans once enjoyed, in order to compete.

     ***In the model discussed by Heinzaman article,  there must be a large consumer base requiring good paying jobs in order for globalization to work.  Which nations have that base will be the next question.

    There has been much  debate and discussion over Walmart, even amidst our own little blog. In considering the scales of justice and debate, one factors seems overlooked more often than any other and that is role played by the trade agreements like NAFTA and the extension of permanent normal trading status to China along with its inclusion in the WTO, all signed during the Clinton Administration. Since then the US has enacted so many trade agreements that the acronyms begin to look more like a game of Boggle. While many of Walmart’s practices such as sweatshops and pressuring business partners to outsource, makes them easy targets for criticism some statement has to be made about the the role trade agreements have played in the over all dynamics. In general; if it wasn’t flawed by design Walmart would not be allowed to encorporate such exploitative and despicable practices.  Free trade, could have meant fair trade.

    In the early 1990’s consumer groups and environmentalist warned of the potential adverse effects these trade agreements could have on the American jobs as well as the American standard of living. In short; if the trade agreements were enacted without setting standards for the environment, working conditions in foreign countries and human rights, Americans stood to loose more than jobs. Over time the American standard of living would have to equalize with that of the other participating countries.

    Consumers groups weren’t preaching isolationism, they were merely pointing out that the trade agreements should estabished a baseline standard for business conduct in order to be included as a participant. Free trade would mean fair trade and it would have been in best interest of people… and the environment.  Thus, establishing a system that discourages the sweatshop culture rather than one that fosters its growth and development. The reality of this situation is this,  the standards we allow to be set for our trade participants-will ultimately determine how good or how poor our own standards will be.

    Another less evident change ushered in by the succession of trade agreements is this; for the first time in history American businesses forged a unprescidented alliances with the American government. A pseudo partnering that would enable America to market its goods to world.  The question no one really seemed to consider was how this alliance would effect consumer protections within US government agencies like the Food and Drug Administration (FDA), United States Department of Agriculture (USDA) and the Federal Trade Commission (FTC).

    Today, the consequences seem to obvious to overlook. In quick succession we saw tainted dog food, tainted tooth paste and lead paint on imported children’s toys. Keep in mind that some of these infraction were discovered despite the fact that only a minuscule percentage of the goods imported to the US are ever inspected.

    While this article only serves to touch upon a few issues, take the time to review the list of promises made by NAFTA’s corporate proponents prompting its Congressional approval in 1993 and opening the door to the implementation of a gamut of others. 

    200,000 new NAFTA jobs in the first 2 years, higher wages, increasing middle class consumer demand in Mexico, an increasing U.S. trade surplus with Mexico, greater economic and social stability in Mexico, improved environmental and health conditions in the U.S.-Mexico border region, thorough border inspection, as trade volumes increased, inhibiting shipments of unsafe food or contraband such as illegal drugs, and better relations with Mexico on issues from immigration to promotion of democratic elections.

    While assembling information to include in this blog ran across Hillary’s trade position as told to a Bloomberg reporter:

    “We just can’t keep doing what we did in the twentieth century,” she said stating that the US may need “a little time-out” before the enactment of any further trade deals.  She has even reportedly, questioned the wisdom of NAFTA–while stopping short of blaming Bill.  Hmmm…like minds in unexpected places.

    On a brighter note,  President Bush’s grant of Fast Track authority– expired June 30, 2007…that’s a load off.

    Financial Times: Clinton vows to revisit trade deals

    Click here: to watch interview with Walmart factory worker in China

    Click here: to read more about Walmart outsourcing to China

    Eyes on Trade Blog

    Dems Cut Trade Deal with Bush; Poised to Throw American Workers Under Bus

    Parading as a Chinese Fighting Fish,

    容忍 鱒(魚), 鮭魚