Trading With the Enemy

Trading With the Enemy

Multinationals, their intellectual coverings shredded, are love-bombing labor while hunting for new fig leaves.


A new season of trade politics is under way among Washington insiders, with an astonishing twist: America’s major multinational corporations are love-bombing labor and environmentalists. Leading business interests, it turns out, are not opposed to incorporating labor and environmental rights into new trade agreements after all. “These are important issues that cannot be ignored,” the Business Roundtable announced, in a report speaking for about 200 of the best and biggest corporate logos, from General Motors to General Electric. The Emergency Committee for American Trade and the National Association of Manufacturers have been shopping a list of various labor-enviro measures they might support in upcoming trade negotiations. The Economic Strategy Institute, a think tank financed by steel, aviation, semiconductors, autos and other manufacturers, went much further. ESI published a scholarly study that argues labor-rights enforcement will actually generate greater economic efficiency in the global system and healthier development for poor countries.

This abrupt friendliness toward reform from its most stalwart industrial opponents represents meaningful progress for the popular forces that made their anticorporate coalition visible in Seattle. Alas, it is not the millennial consensus the corporates wish to depict. “The only whiff of sincerity,” said Daniel Seligman of the Sierra Club, “is they sincerely want fast track legislation with minimum cost to their bottom lines.” Lori Wallach, director of Global Trade Watch, described the business offensive as “a splash of green and blue paint” intended to get out of the political stalemate threatening further trade liberalization. “They’ve hit the political reality,” she said. “It’s slaying them.”

The business motives clearly involve tactical politics, not some sort of ideological conversion, but we may at least pause to savor the new music. A year ago, all right-thinking experts discounted and ridiculed the new social movement as self-indulgent and destructive. “Luddite whackos,” in the Wall Street Journal‘s memorable phrase. Economists and free-trade cheerleaders in the media condescendingly lectured the activists on how impossible it would be to incorporate “social” values into international agreements without wrecking the global economy. Besides, they scolded, don’t you know such measures do the gravest harm to the struggling poor of the world? Now that global corporations are shifting to a more sympathetic line, one awaits a similar revisionism among their media camp followers. Or will the pundit class turn its fire on Boeing, Microsoft and others for caving to the Seattle rabble? More likely, the opinion-makers will blame the bleeding-heart agitators for again mucking up progress.

The important point is that, tactical insincerity aside, many US multinationals are implicitly retreating from an untenable intellectual position, as some business reps privately confirm. A central question raised by labor and others is, How can the trading system invoke penalties like tariffs to protect intellectual property rights or capital investors but insist this device would be illegitimate for labor rights and other human concerns? “There’s no answer to that on intellectual grounds,” one business-friendly thinker confided. “Businesspeople realize the debate has shifted, but they’re trying to figure out how they can still preserve their position.”

The intellectual concession is expressed most directly in the ESI’s report Labor Standards in the Global Trading System, by Peter Morici, a neoclassical economist from the University of Maryland and former economics director at the US International Trade Commission. Arguing that poor labor conditions hamper long-term growth even though they may appear to have short-term advantages, Morici wrote that exploited labor in developing economies, including child labor and discrimination against women, “may be expected to reduce wages for less skilled workers in [their] domestic markets, increase exports and place downward pressure on the wages for competing workers in foreign economies.” When freedom of association, the right to organize and other labor rights aren’t protected, the annual savings in labor costs average more than $6,000 per worker, Morici estimated. These practices may attract low-end investments to a country’s export zones but won’t have much positive effect on economywide development, he wrote. “Lax enforcement of workers’ rights encourages prolonged reliance on less-skilled, labor-intensive activities and does little to encourage economy-wide capital formation, the development of more advanced industries and long-term growth,” Morici reported.

This analysis is a pretty good fit with what AFL-CIO president John Sweeney has been saying when he promotes “fairness” and new rules for the global system, though Morici is deriving his conclusions from standard economic theory as well as the accumulated evidence. The ability of some countries to gain advantage against foreign competitors by exploiting their workforces ultimately distorts the allocation of investment capital for everyone in the system and thus is inefficient, he explained. Thus, he said, the economic logic for enforcing labor rights through trade rules is identical to the World Trade Organization’s justification for invoking penalties against, say, a government subsidizing its auto industry to gain illegitimate advantage over others. In both cases the consequences distort trade, for the same theoretical reasons.

“An international regime that permitted importing countries to embargo or impose tariffs on goods made with exploited labor would increase wages, speed development and increase growth in countries where labor is exploited,” Morici concluded, “if these measures caused governments or producers to take corrective actions.” If the offending nation refuses to take action on labor rights, that could make conditions worse for the exploited workers, he acknowledged, but the country would also lose markets for its exports. Thus, the downward wage pressures on competing workers in foreign countries would be reduced and the system as a whole would benefit by encouraging rising wages and maturing levels of development everywhere. This objective, of course, is precisely what motivates organized labor to seek enforceable labor standards worldwide–a position the press describes as “protectionist” when promoted by workers, but a “breakthrough agreement” for free trade when it is achieved by the corporations.

Most of the multinationals, one hastens to add, are not so enlightened as the ESI study and certainly not ready to consider enforceable sanctions. With the usual measure of cynicism, the corporations are angling for the right set of rhetorical concessions that will allow nervous politicians to vote for another open-ended round of trade negotiations while claiming they stood up for the virtues of labor and enviro rights. The vigorous new popular movement has at least made it more difficult to talk nice while caving in. Indeed, the vigilance of an energized grassroots can cut through the cynical ploys by educating people on the real content of what’s occurring. In this case, the business orchestration seems to have been tripped up by its own allies. When business lobbyists took their list of innocuous proposals around Capitol Hill, they encountered intense objections from key Republicans, who evidently fear that even sounding friendly to labor rights and other human concerns is a slippery slope for business. If you say you support environmental rights in global trade, next thing you know, people might expect you to do something real. The business groups backed off.

“At least some parts of the business interests,” Lori Wallach of Global Trade Watch explained, “have concluded that to get out of the rut, the standstill on further liberalization, they will need a fig leaf on labor and the environment. But there’s still enough resistance among other business guys who say, hey, we don’t even need a fig leaf.” In any case, she added, the proffered list of possible compromises is ludicrous, since it mostly involves unenforceable provisions from old trade measures, like the NAFTA side agreements, that utterly failed to bring about any real progress, and so are unthreatening to business as usual.

US multinationals have two large targets of opportunity on this year’s agenda: the so-called Free Trade Area of the Americas (FTAA), which would essentially expand NAFTA to cover the entire hemisphere; and the long-sought startup of a new negotiating round to expand the WTO agreement (an objective stymied at Seattle). In late April, Bush travels to Quebec to meet with other heads of state and presumably launch the FTAA negotiations (his second trip abroad, though still not overseas). The WTO’s November meeting in Qatar is intended to launch its new round, though nations do not yet agree on the terms. Movement activists intend to stage their own, more colorful reunions in Quebec and Qatar.

Both corporate trade objectives face dicey prospects at best, given the divisions in Congress and opinion polls demonstrating the public’s strong skepticism–the majority’s fear that trade expansion deepens the inequalities between rich and poor and that the agreements have neglected concern for US workers, global labor standards and the environment. The first legislative hurdle for the Bush Administration is securing the fast track authority from Congress that would enable the United States to negotiate with a blank check–whatever agreement the Administration produces would come back to Congress for a simple up-or-down vote, no amendments or deletions allowed. Back in 1998 the labor, enviro and human rights coalition defeated Bill Clinton in the House on fast track, and it can prevail again this year if House Democrats maintain unified resistance. It’s another big test for the Democratic Party but also for the new President, because both trade issues would consume a lot of his political capital.

The insider action now under way amounts to essential foreplay–turtles and Teamsters versus the Business Roundtable. Both sides are attempting to lock in the swing votes in Congress and thereby persuade the White House either to plunge ahead confidently with fast track or to back off and postpone, rather than damage the domestic issues that are higher priorities. Bush could theoretically skip the fast track authority and proceed to negotiate without it, hoping to build sector-by-sector support for the final terms. That approach would be a blow to corporate manhood likely to enrage business and finance constituencies. Either way, these trade issues pose real risks for Bush. The negotiations with Latin America will be especially tricky for him since the US side seeks concessions for the financial sector and other business interests, and to get them, it may have to toss American agriculture over the side. Developing countries are demanding greater US market access for their agricultural production, from grain and beef to citrus fruits and flowers.

If Bush goes ahead with fast track this year, it should provide a prime political test for the Seattle movement and a splendid mobilizing opportunity, since at this point neither side can count on the votes to prevail. In the House, there are always at least forty or more Republicans voting against trade measures, so Bush needs to round up a lot of Dems (the Senate is more disposed to support trade measures, though with the 50-50 tie the Democrats could certainly block fast track if they have the will to do so). Wallach and other head-counters for the green-blue coalition think their side may be marginally stronger this year, partly because Democrats won’t have a Democratic White House squeezing them for pro-trade votes, but no one really knows.

Fig leaves do matter. Congressional members use them as convenient justification, even if they know the content is meaningless. Last year twenty-eight House Democrats who had opposed fast track voted with the corporate globalists for China’s admission to the WTO. Their fig leaf was an amendment creating a special commission to monitor China’s behavior on human rights and presumably to criticize its abuses. Yet after the China vote, the money for the commission was never appropriated. The much-touted commission still doesn’t exist. This year, the business guys will have to come up with new and better fig leaves.

The Seattle movement, in other words, is gaining traction inside Washington politics, but does it have the power to go on the offensive and actually legislate its own agenda? Not yet and obviously not easily with a Republican President. But initial moves are under way to develop that capacity. A broad coalition is supporting a newly drafted “right to know” legislative proposal that would require US multinationals to collect and disclose vital data on environmental damage and workplace conditions in their overseas production–including the subcontractors and suppliers where the most abusive practices typically occur. The information would flow not just to Americans but to the workers and communities in foreign countries where the damage is done. Citizens and civic organizations would be empowered to sue violators and collect damages [see Greider, “Global Agenda,” January 31, 2000].

The proposal is deliberately modest, a first step that sets no standards or trade penalties but is designed to demonstrate that Congress can (and regularly does) legislate terms for the behavior of US multinationals elsewhere in the world. Most of the reporting requirements are parallel to what US companies already must do at home–the toxic-release reports to communities required by the EPA, the workplace injuries and deaths reported to OSHA, the status of workers’ rights and core labor standards in their factories. On human rights, corporations would be required to report their security arrangements with state police and the military, as well as the complaints of abuse from local communities. Collectively, the information would provide a new window on the nature of globalization and also greater capacity for international activists to confront the conditions, company by company.

Some 180 civil organizations have endorsed the proposal and are shopping for co-sponsors in Congress. Support includes the AFL-CIO, the Natural Resources Defense Council, Amnesty International, Oxfam America, Global Exchange, the International Labor Rights Fund, the Lawyers Committee for Human Rights and many other leading advocates of reform. David Waskow, the international policy analyst at Friends of the Earth, said, “People are very excited about having some kind of proactive opportunity. People are still ready to fight it out on the trade stuff, but they also want something where they can say yes.”

Getting to yes–the constructive and thorough reformation of the global system–is a long way off, of course. But it does help to know there’s forward movement.

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