Fallout from the "Christmas Trade Offensive"

 
December was an uncharacteristically bold month for US trade initiatives. The Clinton administration initiated a free trade agreement with Singapore and Chile using the newly signed FTA with Jordan as a template, and the USTR announced new criteria for environmental reviews of commercial treaties. Criticism and skepticism came from some unexpected circles, however. The AFL-CIO, a friend of the Clinton White House, had some stern comments about the Singapore FTA, which are likely to be extended to the Chile FTA. The union does not consider the terms of the Jordanian agreement to be adequate for other countries that are more heavily involved in trade and investment with the US. The Sierra Club also objected to Chile's record on environmental protection. The Chilean government, expecting labor and environmental groups to take a tough stance, refused to consider these issues in the negotiations, and many voices in the US Congress and business community agreed. The battle lines on trade seem to be drawn even before the inauguration of President Bush.

The AFL-CIO presented a lengthy comment to the USTR on the Singapore FTA. This document is interesting for its sweeping coverage of trade issues in general, not only with regard to Singapore, but also Jordan, Chile and future trade agreements. It is a reminder that labor doesn't focus on the single issue of the social clause when it views trade; wider concerns relate to the desire for a level playing field for all workers affected by world trade and investment. Writing for the US labor movement, AFL-CIO trade expert Thea Lee expressed some specific concerns regarding the discussion of a labor rights clause. She pointed out that the US has much closer trade relations with Singapore than it does with Jordan, so "the potential economic consequences of the agreement are much greater for both countries." She noted that Singapore's labor laws and practices do not always conform to the ILO's internationally recognized workers' rights standards or the United States' own trade laws, especially in the areas of freedom of association, right to bargain collectively and child labor. Because Singapore serves as a hub for significant third-country shipments, Lee added, the agreement will have to include customs and rules of origin measures to guard against illegal transshipments. In addition, she pointed out that the FTA with Singapore is likely to include investment measures (unlike the Jordan FTA), which will have to be scrutinized to ensure that they strengthen and protect workers' rights and do not unduly restrict the ability of the governments to regulate in the public interest. Finally, she called attention to shortcomings of the e-commerce provisions of the agreement.

Dispute settlement and national sovereignty will undoubtedly be lynchpin issues in the Singapore agreement. The AFL-CIO insists that "dispute settlement and enforcement mechanisms for labor and environmental provisions should be the same as those mechanisms in the agreement for commercial provisions. The labor and environmental provisions must be in the core of the agreement, not in a side agreement. To the extent that the agreement outlines precise procedures to strengthen enforcement in other areas such as intellectual property rights protection, it ought to do the same for the enforcement of labor and environmental measures." The question of sanctions has drawn much resistance from developing counties, as well as from Republicans in Congress. Opponents of labor rights clauses see the provisions as a crude attempt to protect US jobs. For this reason, Singapore has reportedly received a great deal of criticism from its East Asian neighbors for having agreed to discuss labor and environmental questions as part of the FTA negotiations at all. US business interests, led by the president of the US Chamber of Commerce, have been particularly vocal opponents to the inclusion of labor and environmental issues in FTA proposals.

Lee's comments went further, offering a vision of labor's positions on the FTAA as well as NAFTA. "NAFTA's investment chapter is seriously flawed, and multinational corporations have exploited these flaws to challenge legitimate government regulations designed to protect the environment, shield consumers from fraud, and safeguard public health," she argued. The AFL-CIO objects to the inclusion of investment measures modeled on NAFTA Chapter 11, which, Lee claimed, "ostensibly" protects foreign investors from discriminatory treatment, but "has been used - or used as a threat - on numerous occasions when environmental or cultural policies differ among the three member countries."

Lee pointed to such cases as that of the Metalclad Corporation, recently awarded $17 million by the International Center for the Settlement of Investment Disputes (ICSID), which ruled that the Mexican government "expropriated" the company's investment in a hazardous waste facility by declaring the proposed waste site a protected ecological reserve. A Canadian multinational has used NAFTA to challenge the damages awarded against it by a US jury for fraud, and another Canadian company is now challenging attempts by the state of California to regulate the fuel additive MBTE.

Interestingly, labor's position mirrors that of the Canadian government, which recently released its FTAA negotiating positions. Fran Huegel, the US negotiator on investment in the FTAA, claimed at a recent briefing that there was consensus among governments on the inclusion of an investor-state clause, except for a country "in an electoral period" (Canada, at the time).

The USTR's "Christmas Trade Offensive" was bound to create polemic. Perhaps the Clinton administration didn't expect so much criticism from some of its domestic allies. Still, the effect has been to draw a line in the sand for the Bush administration. Even if seen as a last-minute effort by the Clinton administration to appease its labor and environmental supporters, the trade initiatives will have lasting effects. Like the Jordan FTA, the Singapore and Chile agreements were greeted with enthusiasm by the governments involved. They seemed unconcerned at dealing with an outgoing government; both countries seemed to see the initiatives as a way to get their foot in the door at the beginning of the new US legislative process.

The spate of new agreements appears to support the idea that the emphasis of the next administration will be on bilateral trade relations. Whatever becomes of the Jordan, Chile and Singapore initiatives under Bush and the 107th Congress, they have provided the impetus for the many sides of the trade question to state their positions on the issues.