Obama and NAFTA

Will he or won't he?

In the shadow of the economic crisis, a war of words rages
over whether President-elect Barack Obama will hold to his campaign
promise of opening up the North American Free Trade Agreement for

The debate isn't likely to stay in the shadows for long. Campaign attacks on NAFTA
and candidate promises to renegotiate proved that demands for revision
of the free-trade model have reached critical mass in U.S. politics. A post-election report from Public Citizen's
Global Trade Watch heralded a net gain of 28 fair-trade members in the
House and seven senators. Most of these politicians, it notes, didn't
just happen to be critical of the free-trade model. They actively ran
on a fair-trade platform and won partly on that stance.

The economic crisis only strengthens those demands. If international
trade and investment policy is the pillar of the current economic
model, its revision must be a foundation of global restructuring plans.

Why renegotiate NAFTA?

The mainstream press is wrong when it says the United States can't
"unilaterally" call for renegotiation. Not only is renegotiation
permitted legally - in fact, any country can unilaterally withdraw with six months notice - but there have been many calls for renegotiation in Canada and Mexico.

Canadians have built a strong grassroots movement to protect natural
resources from predatory NAFTA clauses. Broad-based citizen groups like
the Council of Canadians
oppose NAFTA because of the energy proportionality clause that requires
Canada to export oil to the United States even in times of scarcity,
the investor-state clauses that give investors the right to sue
governments contained in Chapter 11, and the clause that permits
bulk-water exports. Polls in the general population show that 61% favor renegotiation.

In Mexico, 100,000 people marched
in the streets on two separate occasions under the banner of
renegotiation to revise NAFTA's agricultural provisions. They demanded
protection of basic food production by removing corn and beans from the
agreement. In 2003, former President Vicente Fox requested opening up
the agreement only to be rebuffed by the U.S. government.

For the United States, the main issue is jobs. Senator Sherrod Brown, an Ohio Democrat, cites a loss of 200,000 manufacturing jobs due to NAFTA for his state alone. The nation has lost 3.1 million manufacturing jobs since 1994,
and its trade deficit with Mexico and Canada has risen to $138.5
billion in 2007 from $9.1 billion in 1993. The opposition to NAFTA
within the United States goes well beyond organized labor. While job
loss and insecurity under globalization were major
constituency-builders in blue-collar states during the elections, polls
taken before the election revealed that a national majority opposes free trade and particularly NAFTA, and that opinion increased during the campaign. A June 2008 Rasmussen nationwide poll
showed 56% in favor of renegotiating NAFTA. Many people feel that NAFTA
has given companies incentives to move production to where labor is
cheaper, exporting jobs and eroding working conditions.

In general, U.S. opposition to the trade agreement is split between
fair-trade groups that focus on jobs and the environment and a nationalist rightwing
that believes NAFTA and its offspring, the Security and Prosperity
Partnership, threaten U.S. sovereignty. Neither of these currents could
properly be called "protectionist," and both call for more transparency
in the process.

Among the differing priorities, citizen demands concur that the
current agreement favors transnational companies and is unfair to
citizens in all three nations.

Broadly shared priorities for renegotiation are:

  • Eliminate Chapter 11.
    Corporations shouldn't have the right to sue governments and supersede
    national laws. Trade tribunals lack adequate transparency and
    accountability, and consistently reflect a strong, pro-corporate bias.
  • End
    the energy proportionality clause between the United States and Canada,
    and exclude bulk water as a commodity. Canadian national and provincial
    governments should be able to fulfill their responsibilities in
    long-term energy planning without restrictions under NAFTA.
  • Get
    NAFTA out of food and agriculture. Countries should be able to develop
    national agendas to assure food quality, farm livelihoods, and consumer
    safety and then adapt the trade agreement to those objectives rather
    than the reverse. NAFTA favors corporate farms and bans certain policy
    tools to support small farmers and consumers, including special
    products protections. Renegotiating the agreement's agricultural
    provisions shouldn't involve surgical incisions of specific clauses,
    but a deep reform and reorientation toward food sovereignty.
  • End the Security and Prosperity Partnership.
    This 2005 NAFTA extension into further trade and investment
    liberalization and national security has no public mandate in any of
    the three countries. Further negotiations on expanding integration
    should be reviewed and, where approved, be channeled into open,
    representative talks. The U.S. military aid package it spawned, the
    Merida Initiative, should be converted into a development aid package
    for the 2010 appropriations.

Citizen movements also call for national governments to have more
development and social policy tools, many of which are prohibited under
the competition and privatization terms of NAFTA. Some of these groups
together produced a document of 10 areas
that should be reviewed: energy, agriculture, role of the state,
financial services, foreign investment, employment, migrants,
environment, intellectual property, and dispute settlement.

Will He or Won't He?

Obama's campaign promise was explicit: "NAFTA's shortcomings were evident
when signed and we must now amend the agreement to fix them." The
president-elect called for enforceable labor and environmental
standards in the text, an end to the ability of corporations to sue
governments, and emphasizing the needs of "Main Street" over "Wall

But now some Obama-watchers claim he's waffling on his trade commitments.
Although these contentions in the pro-free-trade press are mostly
wishful thinking, experts and activists are following the appointments
closely. So far it has been a mixed message. The initial nomination of
Bill Richardson, point-person for the passage of NAFTA under the
Clinton administration, didn't sit well with fair-trade groups and
elicited a sigh of relief
among free-trade promoters, who instantly chalked up the
president-elect's anti-NAFTA statements to electoral propaganda.
Obama's economic advisors, led by Larry Summers, and appointee for
Treasury, Timothy Geithner, at face value would also indicate a
commitment to the status quo on trade. And when Ron Kirk, a former
mayor of Dallas who proclaimed his city the "capital of NAFTA,"
accepted the nomination for U.S. Trade Representative, it reversed
satisfaction among fair-traders at the initial nomination of Xavier
Becerra, who turned down the job.

Pending the new Commerce designate, that leaves Hilda Solis, Obama's
nominee for Secretary of Labor, as the only real bright spot for
fair-traders. A NAFTA critic, she would wield real clout since jobs
will be the pivotal issue for the United States in renegotiation. As a
Latina, she also has an acute understanding of the need to make NAFTA
fair for all partners.

Pessimistically, it's possible to imagine that the Obama presidency could end up merely adopting the Democratic platform on trade,
which would stick side agreements in the text, add International Labor
Organization core labor standards, and create an expanded U.S. jobs
displacement program. Obama voted for the U.S.-Peru Free Trade
Agreement, which was modified along these lines. But the economic
crisis has changed everything. Even as the Bush administration
frantically - and incredibly - insists that free trade isn't the
problem but the solution, most other countries are taking a second look
at the model. As the crisis sets in, Europe wants more regulation and
developing countries want more policy space. And Americans want more
protection from the disaster that's currently befalling them.

With every appointment, Obama has insisted he'll be the one calling
the shots. For the next few weeks, then, all we really have to go on
for predicting trade policy is Washington's current favorite game - the
psychic exploration of Obama's inner mind. A more productive activity
for fair-traders is to pull out all the stops in the tri-national
campaigns to renegotiate NAFTA and impose a moratorium on new free trade agreements. This is an historic opportunity to change course in crisis.

Citizens Organize for Renegotiation

Citizen organizations and legislators
have called for renegotiation of NAFTA in the United States, Canada,
and Mexico. The collapse of the financial sector spells the need for a
reconversion strategy for the "real economy;" that is, U.S. productive
capacity in the United States. This strategy will require a careful and
critical look at NAFTA, our blind reliance on market forces, and the
promotion of outsourcing as a competition strategy.

The industrial policy that Obama outlined clashes ideologically and
legally with NAFTA and other free trade agreements. It hasn't been lost
on the rest of the world that the U.S. government is adopting measures
such as massive subsidies and bailouts that it has sought to deny
developing countries under free-trade rules. Robert Kuttner at The American Prospectrefers
to this as "the sin of committing industrial policy" and warns that
it's only a matter of time before a trade partner registers a suit
against Obama's anti-crisis measures. This would be an excellent
opportunity to expose the hypocrisy of our trade policies and chart a
new course.

The new fair-trade members of Congress and others outside the
leadership clique will provide new allies and be far more willing to
move beyond the stodgy party leadership's position on trade. Some
already have. The TRADE Act, introduced into Congress in April 2008, calls for a NAFTA review and lays out fair-trade principles.

Meanwhile, poor countries need maximum room for maneuver to help
those who are already living on the edge. Mexico is no exception.
Although the current government isn't likely to willingly change
neoliberal policies and accept NAFTA renegotiation, the citizenry
opposes NAFTA two to one. Echoing the phrase that did in John McCain's
candidacy, President Felipe Calderon continues to argue that the
Mexican economy will be fine even as reports of job loss, wage
declines, inflation, and capital flight pour in. In Mexico, as in the
United States, only energetic measures can address the deepening crisis
and growing social unrest.

Renegotiation can and should be good for citizens in all three
countries. With such a high degree of integration, our futures are
intertwined.A recent study
calculated that when Mexican wages drop 10% relative to U.S. wages,
attempts to cross the border illegally rise 6%. Real wages in Mexico
fell 24% from
December 2006 to August 2008 and are plummeting now with the crisis;
renegotiation should include a view toward job generation and retention
in Mexico, and a compensation fund similar to the European Union's
transition funds for less-developed countries. The current security aid
in the ill-conceived Merida Initiative should be converted to this end.

Review and Redo

The first step for renegotiation must be a broad, in-depth review of
NAFTA, or rather three reviews, one per country. Review bodies must be
independent, representing different orientations and expertise. These
should carefully define the criteria of evaluation, including social,
economic, political, and cultural indicators. The U.S. TRADE Act, which
also calls for a review, lists some criteria for evaluation, but we
need precision. Also necessary are public consultations and other
mechanisms for incorporating civil society input into the process.

The review would achieve several important goals. First, it would
open up a debate that in the United States had been practically dormant
between NAFTA's passage and the recent presidential campaign. It also
would provide valuable information on impacts. The apples-and-oranges
debate on trade policy - one side argues that NAFTA increased
international trade and the other argues that international trade isn't
all it's cracked up to be - is sterile and abstract. We should be able
to move beyond this debate with additional data and analysis.

To convince public opinion of the case for renegotiation, at this
critical moment in a process of economic integration gone awry, will
require thinking about international trade and investment in the
context of new economic arrangements. To do this we need to build both
arguments and alliances. Renegotiation demands must be woven into
comprehensive proposals for reform that have a coherent logic and go
beyond NAFTA articles. Related issues include enforcing antitrust
legislation, ending commodity speculation, adopting supply management
mechanisms, creating grain reserves, supporting domestic food
production, and building local marketing systems.

Renegotiating NAFTA should no longer be a question of "will he or
won't he." To confront the crisis and establish mutual well-being in
the region, the debate must move quickly now to "how and when."

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