“Free Traders” On the Run

Kevin Danaher and Jason Mark are the co-authors of Insurrection: Citizen Challenges to Corporate Power [Routledge, 2003]. They work for the human rights group Global Exchange.

After years of growing citizen opposition to corporate globalization, the free traders are on the run.

In September of 2003, a World Trade Organization (WTO) summit in Cancún, Mexico came to a screeching halt after the world’s poor countries defied the industrial powers and said they would not agree to new concessions unless the wealthy nations committed to opening their own markets. Two months later, government ministers meeting in Miami to create a Free Trade Area of the Americas (FTAA) barely reached consensus for moving ahead with talks. The current plan for the FTAA is so far removed from what the corporations backing the deal originally wanted that the result marks a clear victory for fair trade forces.

With the WTO in disarray and the FTAA on the defensive, fair trade groups are poised to deal a lethal blow to the “free trade” agenda.

The WTO deadlock in Cancún was the second of the institution’s five meetings to end in failure. “The fiasco in Cancún,” government negotiators called it. For the world’s majority, “fantastic” would be more like it.

New bonds of unity among WTO critics and between civil society groups and poor nations led to the collapse. Nongovernmental organizations (NGOs) and demonstrators established an impressive degree of cooperation as past divisions between protesters and policy wonks melted away: Constant communication between the marchers in the streets and the agitators in the negotiating suites gave WTO opponents a strength greater than the sum of their parts.

At the same time, the NGOs and the negotiators from developing nations also reached a new level of collaboration. Vastly outnumbered by officials from wealthy countries (the United States had some 300 staff members in Cancún, while countries like El Salvador had less than a dozen) the poorer nations were greatly assisted by NGOs monitoring the talks. The sharing of information between NGOs and negotiators from countries in Latin America, Asia, Africa and the Caribbean helped right the imbalance of power between poor nations and rich ones.

But most important to the WTO meltdown was the new unity among developing countries. Going into the talks, a collection of southern countries—the so-called “Group of 21,” which included Brazil, China, India, Argentina, Indonesia and Mexico—said they would not agree to a further expansion of investors’ powers unless they were given new access to the North’s agricultural markets. In a customary display of arrogance, the industrial powers ignored the South’s demands. The poorer countries refused to back down and resisted attempts at divide-and-conquer. With the Group of 21—representing some 63 percent of the world’s farmers and 51 percent of the earth’s population—holding strong, the meetings ended.

This muscular resistance is largely due to the failures of the “free trade” model. Most countries’ economies and human development indicators have gone backward since the WTO took effect in 1995. This dismal record has led, in turn, to increased resistance to corporate globalization from grassroots movements. Poor countries could have acceded to the wealthy nations’ demands, but only at the risk of inflaming their own citizens.

The rebellions against privatization, neoliberalism and corporate power are perhaps strongest in Latin America. Argentine President Nestor Kirchner rode into office on a wave of anti-IMF sentiment. Similar feelings are roiling Brazil, where Ignácio (Lula) da Silva heads the first Workers Party government in the country’s history. In Venezuela, Hugo Chávez has become a hero among the country’s poor majority as he resists transnational corporations. And in Bolivia, a recent peasant revolt grounded in opposition to neoliberal policies recently unseated the probusiness president. Thirteen members of the Group of 21 that brought down the WTO talks are Latin American nations.

The plight of Mexico’s maquiladora industry and its poor farmers shows why opposition to the “free trade” agenda is on the rise.

Mexico was once a “free trade” poster child, its lines of maquilas “proof” that low wages and loose regulations could attract investment. But cheap as Mexico’s labor is, it is not as cheap as that in Asia or Eastern Europe. In the last two years, Mexico’s maquiladora sector has lost at least 280,000 jobs with the closing of 400 plants. Many of the jobs have been transferred to China.

The ultimate affront: Statuettes of the beloved Mexican icon, the Virgin of Guadálupe, now carry the “Made in China” label.

Labor rights and development organizations have long criticized the assembly plants along the United States-Mexico border as a dead-end model of development. The foreign-owned maquilas rarely transfer technology to Mexican industry, instead relying on workers to assemble already-manufactured parts. Wages hardly ever rise above subsistence levels, while union organizing drives are invariably crushed. For Mexico’s maquila workers, the departure of the assembly plants adds injury to years of insult.

A typical Mexican worker in an assembly plant makes a fraction of the average U.S. wage—between $2 and $2.50 an hour. A similar worker in China earns no more than 80 cents per hour. For a multinational corporation with no allegiance to any community, the comparison is no contest: lower wages usually win out. No wonder that Philips Electronics, Microsoft, and Canon have moved factories from Mexico to East Asia.

The flood of jobs from Mexico shows that the sweatshop model of development is not only inequitable, but also unsustainable. If a better deal comes along, corporations will jump for it, leaving workers in the lurch. In a global economy driven by the whims of investors on Wall Street, short-term profits are always going to trump the long-term investment that leads to genuine prosperity. Under the “free trade” system, communities shouldn’t expect to be regarded as anything more than disposable resources. The race-to-the bottom is real.

At the same time, Mexican farmers are in dire straits, due in large part to NAFTA. Since 1994, U.S. corn exports to Mexico have increased eighteen-fold as U.S. producers dump massive quantities of cheap corn on the market. The drop in corn prices caused by this dumping has crippled the 15 million Mexicans who rely on corn farming. Another 10 million farmers have been similarly devastated by the collapse in prices for coffee and sugar.

U.S. taxpayers are directly funding the crisis in the Mexican countryside. U.S. agribusiness giants like Archer Daniels Midland and Cargill are able to dump corn on the Mexican market because of the massive subsidies they receive from the U.S. government. Such subsidies enable U.S. farmers to produce corn and wheat well below production costs—an advantage not enjoyed by Mexican farmers. While Mexico gives about $720 per year to each farmer, the United States spends $20,800 per farmer. Last year the U.S. Congress approved a $70 billion increase in farm subsidies over the next 10 years.

So U.S. farmers are doing well, right? If only. The new farm supports will go overwhelmingly to the largest, corporate-owned operations. By encouraging over-production, the subsidies end up dropping farm prices on both sides of the border, to the dismay of family farmers everywhere. While agribusiness giants Conagra and ADM have seen profit increases of 200 and 300 percent, respectively, since NAFTA went into effect, small farmers in the United States have been pushed into bankruptcy. Thirty-three thousand U.S. farmers went out of business since NAFTA—three times the pre-NAFTA rate.

To add insult to injury, ordinary consumers have not received any savings from the decrease in wholesale prices. Between 1993 and 2000, prices for food eaten at home in the United States increased 20 percent. Tortilla prices in Mexico City have also risen.

Now the situation threatens to become worse. On January 1, 2003, NAFTA’s latest stage eliminated Mexican tariffs on wheat, rice, potatoes, pork, apples and barley. Pitting hi-tech U.S. agribusiness corporations against small-scale Mexican farmers is no contest. Thanks to NAFTA, Mexico will soon be converted from a self-sufficient country to a country that cannot feed itself.

“Free trade” opposition is also on the rise in the world’s wealthiest nation. Grassroots resistance in the United States, combined with the rebelliousness throughout the rest of the hemisphere, is largely responsible for crippling the FTAA talks. With Brazil, Argentina and Venezuela opposing any FTAA that would give investors new powers, expand intellectual property rights rules, or reduce government powers over public purchasing, the negotiators in Miami were only able to agree to a “FTAA-Lite.” Government officials said it was a kind of “buffet-style” agreement that allows countries to pick and choose what policies they will adopt. If so, it’s buffet without any real meat: The corporate lobbyists left Miami hungry.

The question facing fair trade forces is whether the failure in Cancún and the deadlock in Miami are due to poor strategic judgment or smart political calculus. That is, did the rich nations merely underestimate the courage of poor countries? Or did they deliberately push too hard, knowing that a collapse in negotiations would free them from having to make concessions that would anger their own farmers and workers?

If it’s the first, then the “free trade” agenda will have a second life: Negotiators won’t make the same mistake twice. But if it’s the second, then the “free trade” plan is very likely stalled for good. As long as citizens’ movements can keep the pressure on their governments and demand that the public interest not be sacrificed for corporate interests, the free traders won’t have the political strength to achieve their dangerous goals.