The reason for the controversy is that the "trade" agreements which are being negotiated in secret and rammed down our throats go far beyond the subject of trade. Some of the issues they address have nothing at all to do with trade. To understand what free trade is about, it has to be placed in the context of the policy framework that governments have been putting in place for the past twenty-five years: curbing wages, rolling back social programs, privatizing government holdings and services, and deregulating corporate activity. This policy framework is known as neoliberalism.

Neoliberalism had its origins in the early 1970s. At that time, the expansionary economic policies that were put in place after World War II had produced a prolonged economic expansion. While most people saw this situation as desirable, corporations did not: the unprecedented levels of labour militancy that accompanied the expansion, together with relatively generous levels of social spending, combined to generate rising real wages, falling profits, and a level of inflation which threatened financial returns. From the perspective of the corporate sector, all this constituted a major crisis.

In 1975, the Trilateral Commission published a book called The Crisis of Democracy. Writing against the background of the decline in corporate profitability described above, its authors bemoaned the effects of increased government spending in the areas of education, welfare, social security, health and hospital care.

Expressing a view widely shared by the rich and powerful, The Crisis of Democracy traced the crisis of profitability to "an excess of democracy." The neoliberal policies that the Trilateral Commission and other, similar groups have promoted ever since, through organizations like the World Bank and the International Monetary Fund, are designed to restore corporate profitability and to ensure that it is not jeopardized in the future, first by restructuring the role of government and then by restricting our ability to use the political process to promote progressive economic and social policy.

This is where free trade comes in. In addition to their efforts in organizations like the IMF and the World Bank, the proponents of neoliberalism have extended the reach of their program to the realm of trade by promoting unprecedented changes to the role played by trade agreements.

The General Agreement on Tariffs and Trade (GATT), the international trade organization established in 1948, was given a mandate to reduce tariffs on a specified set of internationally traded goods. In the following twenty years, GATT achieved this goal; by the beginning of the Tokyo round of trade negotiations in the 1970s, tariffs on internationally traded goods had been largely eliminated. But by that time, the largest and most powerful countries in the world were planning to reshape the trade negotiation process so that it could play a major role in promoting neoliberalism.

The Uruguay Round of GATT negotiations, which began in the mid-1980s, addressed an unprecedented range of complex issues. In those negotiations American, European and Japanese representatives worked to change the GATT framework to include measures designed to deregulate international investment by limiting governments’ ability to impose performance requirements on corporate activity. At times the talks verged on failure because Third World delegates did not share their First World counterparts’ enthusiasm about deregulating corporate behaviour.

Proponents of trade-related neoliberalism — particularly those in the United States — worried that the opportunity to institutionalize neoliberalism at the international level would be lost once the Uruguay round ended. It was in this context that the U.S. government began promoting the bilateral Canada-U.S. Free Trade Agreement (FTA) and the trilateral North American Free Trade Agreement (NAFTA).

These two agreements were designed to do an end run around the opponents of neoliberal free trade. The FTA and NAFTA gave the U.S. government forums where it could apply pressure to Canada and Mexico, its most significant trading partners — without incurring resistance from countries which were concerned about Washington’s agenda. The goal of American negotiators was to create precedents in these two agreements which could be included in subsequent multi-party trade agreements.

Neoliberal efforts to transform the GATT came to fruition in 1995, when the World Trade Organization (WTO) was created. This marked the most significant institutional change in the realm of international trade since the GATT was created in 1948. But where GATT’s modest mandate had been to remove tariffs on internationally traded goods, the WTO’s radically expanded purview focused on the deregulation and privatization of services, protection for intellectual property rights, and attacks on national laws and regulations deemed to impede corporations’ pursuit of profit. By altering the trade negotiation process in this manner, politicians attuned to corporate priorities have created a trade mechanism designed to limit governments’ ability to regulate or otherwise constrain corporate behaviour.

When they realized what powerful tools such agreements could be in enhancing their power, corporations began promoting a number of them. Over the past 15 years, I personally have participated in struggles against the U.S.-Canada Free Trade Agreement, the North American Free Trade Agreement, the Multilateral Agreement on Investment (MAI), the World Trade Organization (WTO) and now the Free Trade Area of the Americas (FTAA).

All of these agreements are variations on a common theme. They are an integral part of corporate-driven "globalization." Although they are referred to as trade deals, these agreements are only peripherally about removing barriers to trade. Their real purpose is to institutionalize a neoliberal political and economic agenda that enhances corporate rights at the expense of the rest of society.

Certain aspects of these deals include provisions which have nothing at all to do with facilitating trade. By protecting intellectual property rights, for example, they restrict trade for the benefit of transnational drug and computer software companies by extending long-term patent coverage to a range of goods and services.

Case in point: the situation in Brazil. In 1998, the government began making generic copies of brand-name drugs. By defying the pharmaceutical companies and threatening to break patents, Brazil has made antiretroviral drugs available to everyone who needs them. The fact that it does not pay prevailing market prices for drugs has enabled the government to establish a highly successful program which treats every Brazilian who has AIDS.

Now, however, the U.S. government is threatening trade sanctions against Brazil for violating the intellectual property rights of drug companies which are guaranteed under the WTO. If the U.S. is successful, Brazil’s ground-breaking anti-AIDS program will come to an end.

Canada provides a clear illustration of the effects of neoliberal policies. For the last twenty years, Canada’s Conservative and Liberal governments have pursued a neoliberal agenda by:

• deregulating airlines, trucking, financial services and telecommunications;
• reducing spending for social programmes, health care and post secondary education;
• undermining the Unemployment Insurance system;
• weakening Old Age Pensions and child benefit programmes; and
• reducing the federal minimum wage
• privatizing public sector services and reducing public sector jobs.

This neoliberal domestic program has been complemented by terms and conditions included in free trade agreements.

Case in point: government-run auto insurance in Ontario. When Canada’s New Democratic Party formed the government in Ontario in 1990, it promised to establish a government-run automobile insurance system. This was a major plank in their election platform and was very popular among the citizens of Ontario because the private insurance industry had been gouging customers for years. In addition, Ontario voters knew that government-run auto insurance companies in British Columbia and Manitoba had been providing residents with efficient, reasonably priced car insurance for years.

Although the people of Ontario clearly wanted government-run auto insurance, private insurance companies headquartered in the U.S. were determined to prevent any further government incursion into their business. These companies invoked Article 1605 of the Canada-US Free Trade Agreement, which requires "fair market compensation" for companies subjected to government measures that are "tantamount to expropriation."

These insurance companies prepared more than $2 billion in damage claims against the government of Ontario. They also sought and received the backing of American Trade Representative Carla Hills, who interceded on their behalf with the right wing federal government that was in office in Canada at the time.

Faced with this powerful opposition, Ontario's NDP government shelved the idea of government-run auto insurance that the voters of Ontario had voted for.

Clearly, NAFTA restricts governments’ ability to regulate corporate behaviour and enables companies to sue governments if their profitability has been negatively effected by government decisions.

Case in point: Metalclad. Last summer, a NAFTA tribunal, working behind closed doors, ordered Mexico to pay nearly $17 million in compensatory damages to the Metalclad Corporation of Newport Beach, California, for failing to protect the company's rights as a foreign investor.

Basing it decision on investor-protection measures in Chapter 11 of NAFTA, the tribunal found that the government's actions amounted to an expropriation because they prevented Metalclad from making use of a multimillion-dollar hazardous waste treatment and disposal site that it had built several years before in the Mexican state of San Luis Potosi.

Methanex launched a complaint under Chapter 11 of NAFTA, which protects foreign corporations from illegal expropriation of their property or investments because of state actions.

Every free trade agreement is a variation on this theme, constraining governments’ ability to regulate corporate behaviour. This is what these trade deals are really about: they are vehicles for pursuing corporate priorities via international trade agreements. The rhetoric of "freedom" and "trade" is tended to frame the terms of the discussion in a positive light. But the real agenda is based on:

• de-regulating corporate behaviour;
• enshrining corporate powers in international trade agreements;
• preventing governments from pursuing social goals that clash with corporate priorities; and
• threatening trade sanctions against governments that don’t go along with the corporate-driven programme.

In its submission to the WTO Work Programme on Electronic Commerce, the U.S. government argued that companies should be allowed to use electronic commerce to expand the range of the services that are traded across borders. In its submission, the American negotiators posed a revealing question: "Will this phenomenon [i.e. services traded across borders] replace the currently held preference for establishing a commercial presence in a foreign market?" In other words, they are seeking the right for American companies to engage in a range of activities, including cross-border "monitoring, metering, and diagnostics," and to have this right enshrined in the WTO/GATS agreement. If they are successful, any foreign governments attempting to limit companies’ ability to operate this way could find themselves on the receiving end of trade sanctions.

American corporations are not alone in promoting the deregulation of e-commerce. According to the European Services Forum,

Corporations have had the technical capacity to carry out their activities electronically, across borders, for some time. In the mid-1990s, for example, the telephone company in British Columbia announced that it intended to move network monitoring and diagnostic work south of the border to centres owned by its American parent, GTE. Fortunately, a clause in the contract between the company and the Telecommunications Workers Union which deals with Contracting Out and Technological Change says that the company cannot contract out work that is regularly performed by the classifications listed in the agreement. Movement of monitoring and diagnostic work to GTE’s centres south of the border would have violated that provision in the contract.

The company’s plans were further impeded when the TWU enlisted the aid of the provincial government in Victoria, which pressured the company to leave the work in British Columbia. Together, these factors convinced BC Tel to abandon the idea of moving the monitoring and diagnostic tasks needed to run its network to the U.S. But if deregulation of electronic commerce is written into the GATS agreement, there is a real danger that companies would be able to challenge contract provisions or government actions which limited their ability to engage in such cross-border activity – and to have such challenges backed by the threat of trade sanctions!

Corporations are already using modern telecommunications capacity to provide services across borders. In 1996, for example, the Labor Report on the Americas described a situation in which a U.S.-based company contracted with the U.S. Postal Service to use state-of-the-art technology to do the mail sorting that American postal workers had traditionally done – from a maquiladora located in northern Mexico! If the promoters of deregulated e-commerce are successful, governments would not be able to restrict companies from operating in this manner.

If e-commerce is deregulated under the GATS, corporations would be able to shift any activity that is carried out on-line to locales where wages are low or where tax and environmental laws are more to their liking – and to know that governments were powerless to do anything about it. This would threaten a wide range of jobs, enabling companies utilizing existing communications technology to move work in the telephone, electricity, insurance, airline, banking, postal and other industries to sweatshops in far flung areas of the world.

Technological developments in the field of communications already make such activity feasible. What is ominous is that negotiations at the WTO may give companies the right to use technologies in this manner – and to have this right enforced by the threat of trade sanctions if governments attempt to stand in their way.

After more than a decade of living with government of, by and for the corporations, Canadians have made it clear that they want to see a change of direction in government policy. They would like to see government to play a more active role in meeting human needs. But the corporate interests driving free trade have done their homework. They have used free trade to ensure that even if people want governments to pursue social and economic policies that benefit people instead of corporations, these governments will be constrained from doing so by terms and conditions contained in the Canada-U.S. FTA, NAFTA, GATT, WTO, GATS and FTAA.

This is the purpose of free trade: to ensure that any government which is tempted to pursue policies that conflict with corporate priorities is intimidated from doing so by the threat of facing international trade sanctions. Michael Walker, the Chief Economist at the right wing Fraser Institute in British Columbia, is an avid supporter of free trade. He put the matter in a nutshell when he explained that "A trade deal simply limits the extent to which the U.S. or other signatory government may respond to pressure from their citizens."

Some people active in the debate about free trade believe we should respond to neoliberal free trade agreements by fighting for labour, environmental and social clauses. I believe that this approach is fundamentally mistaken.

First of all, the labour and environmental side agreements that already exist in NAFTA have done nothing to lessen the negative effects of free trade on workers or the environment in Canada, the U.S. or Mexico.

Second, the massive protests that opponents of neoliberalism have mounted at free trade summits as well as IMF and World Bank meetings in recent years have shaken the confidence of business leaders and their political allies. The fact that the labour movement has been an integral part of these demonstrations, working with environmentalists and a broad cross section of popular organizations is clearly of concern to the promoters of free trade. They realize they must play the politics of divide and rule if they are to succeed. This is the basis for the accomodating statements they have been making recently about including labour and environmental side agreements.

But accepting side agreements as an answer to our concerns delivers the wrong message to the architects of free trade. To settle for side agreements is to declare that it’s okay to privatize government services, to deregulate the private sector, and to constrain governments’ ability to pursue progressive social policies as long as you give us window-dressing side agreements that pretend to address our concerns. When labour leaders participate in the free trade negotiations to promote such side agreements, it can only cause confusion and create division, both in the labour movement and between labour and its allies.

Professor Michel Chossodovsky has analyzed the corporate motivation for inviting certain leaders to participate in the official WTO and FTAA meetings. In his view, "The ploy is to selectively handpick civil society leaders ‘whom we can trust’ and integrate them into a ‘dialogue’, cut them off from their rank and file, make them feel that they are ‘global citizens’ acting on behalf of their fellow workers but make them act in a way which serves the interests of the corporate establishment." Participating in this corporate ploy is no way to resist neoliberalism.

In the March issue of Labor Notes Canadian activist Naomi Klein argued that the "AFL-CIO dropped the ball on globalization movement." She noted that coming out of Seattle, there was lots of talk about building the coalition between labour and the rest of the popular movement to oppose neoliberalism. But after Seattle, the AFL-CIO went its own way. A year ago, when demonstrations were organized to protest the IMF and World Bank meetings in Washington, D.C., the AFL-CIO wasn’t there. Instead of working with the rest of the growing coalition against neoliberalism, official labour focused its efforts on campaigning against China’s admission to the WTO. Instead of working to oppose two of the key institutions promoting neoliberalism around the world, they organized a separate rally and lobbying effort against China.

Organized labour has a crucial decision to make. Although the popular battle against neoliberalism is gaining momentum, the coalition opposing it will be seriously weakened if member organizations go their own way when they find it convenient. The bottom line it that the entire neoliberal agenda, including free trade, is rotten to the core. It’s essential for us to work together to defeat it in its entirety.

Labor Report on the Americas September-October 1996

U.S. MAIL SORTING HANDLED IN REYNOSA MAQUILADORA

Local 4325 of the American Postal Workers Union, located in McAllen, Texas, has discovered that companies doing bulk mailings have set up operations in Mexican maquiladoras to handle mail sorting work. According to Cindy Martinez, president of Local 4325, one of the companies -- San Diego-based Envisions -- recently opened a plant in Reynosa, Mexico, just across the U.S.-Mexican border from McAllen. The plant currently employs 180 workers, but the company plans to employ as many as 1,000 people by year's end.

Envisions is a "pre-sort" house that prepares bulk mailings for business customers. These customers receive a discount from the U.S. Postal Service for having their mailings pre-sorted and pre-coded. Envisions takes in bulk business mail from companies located in Chicago and Indianapolis. The mail is then processed through remote encoding technology, owned by the U.S. Postal Service and licensed to private companies, which sends the image of individual pieces of mail to computer screens located in the Reynosa maquiladora. The bar code is automatically printed on the piece of mail in Chicago or Indianapolis. Workers in the Mexican plant are paid $4 per day to type the appropriate bar code on each piece that appears on their computer screen.

Tom Fahey, APWU Communications Director, says the union fought hard to have remote encoding of mail that enters the USPS done by union workers making a decent wage. But USPS is undermining the job security of 30,000 mail sorters who work in the States by licensing out the remote encoding technology.

The costs of developing the technology were paid by the American public through the cost of their postage.