Fast Track to Trade Failure? The Political, Economic and Environmental Consequences of Executive Trade Negotiations

Below you will find the first in an ongoing series of articles on the effects of Free Trade Agreements (FTAs) throughout the Western Hemisphere. In the next several weeks, COHA will issue in-depth reports on migration in and immigration from Mexico as a result of trade pacts, the devastating economic impact of FTAs on Canada and the inability of recent Mexican presidents to create jobs for their constituencies. Please refer to our website for further installments in this series or subscribe to our mailing list by sending an email to coha@coha.org.

In recent days, the Bush administration has begun an initiative to push several free trade agreements through their final stages before the president’s Trade Promotional Authority (also known as Fast Track) expires on June 30, 2007. As the deadline looms, trade agreements with Peru and South Korea are scheduled to be signed. Yesterday, June 28, workers at South Korea’s top automaker, Hyundai, initiated a partial strike in protest of the Fast Track formed trade agreement, crippling production for several hours. In Washington D.C., several days ago, Susan Schwab, the U.S. Trade Representative, asked members of Congress to approve an extension of Fast Track in order to salvage the dying Doha round at the World Trade Organization (WTO) negotiations. The goal of the WTO talks is to eliminate various trade barriers between developed and developing nations throughout the world in a macro-expansion of free trade. Many experts believe, based on the history of free trade agreements such as the North American Free Trade Agreement (NAFTA), that both bilateral pacts between individual countries (such as the one between the U.S. and South Korea) and collective WTO-sponsored agreements could actually have devastating negative effects on the economies of the nations involved.

What is Fast Track Trade Authority?
Fast Track is a process in which the president of the United States and the staff in the executive Office of the U.S. Trade Representative (USTR) are exclusively mandated to recommend with which countries the U.S. will enter into special trade relations and what will be the exact terms of such arrangements. The USTR is an office within the executive branch headed by the United States Trade Representative, who has been given “cabinet level” status.

The USTR attends Cabinet meetings and advises the president on trade-related policies, but the position does not require confirmation by the Senate. In the end, the only two people permitted to negotiate trade deals under Fast Track legislation are the president and an official from the executive branch appointed without any congressional assent.

After the president and the USTR have formulated their trade proposals and proceed to initial them, Congress is only allowed to declare either for or against their terms in an up and down vote—rather than the usual process of amendment prior to the final vote. Moreover, the legislature is restricted in its debate of the pact’s provisos. After the deal is signed, Congress has only 90 days to vote on the proposition under discussion and the House and Senate are limited to 20 hours of discussion and debate of the topic, but Congress is never given the opportunity to revise the proposal.

Fast Track was first established in 1974 during President Richard Nixon’s time in office. The authority was reinstated in 1979 and continued until 1994. Fast Track ended shortly after the passage of the NAFTA, one of the most controversial examples of the Trade Promotional Authority’s use. During most of the Clinton presidency, Fast Track was not in place, but by 2002, under the Bush administration, the authority was reestablished amidst considerable debate and bipartisan deal-making, as evidenced by the House of Representatives’ authorization of Fast Track by only three votes at 3:30am on July 27, 2002.

Fast Track Deforms Democracy
Under the U.S. Constitution, the legislative branch is given the authority to negotiate all trade deals. According to Article Two, Section Eight, “the Congress shall have power to lay and collect taxes, duties, imposts and excises” and “to regulate commerce with foreign nations, and among the several states.” It was obviously the intention of the Founders that the legislative branch control all trade-related negotiations. Since practically every trade treaty negotiated by the president and the USTR concerns matters of taxation, Fast Track trade authority would seem to nullify Congress’ constitutional power to regulate revenue and tariffs and to create and monitor trade pacts between the U.S. and other nations. In effect, Fast Track critics say that pro-free trade senators and representatives have abandoned their constituents, who trusted them to monitor and act upon these issues. Many believe that it is negligent of Congress to pawn their jobs off to the president and his trade representatives, over whose appointments Congress is not involved. Fast Track prevents the legislature from action on issues of trade, essentially leaving the citizens of the United States without an unfettered voice in all trade matters in which Trade Promotional Authority is utilized. Under the existing system, those who craft the pacts are in no way accountable to citizens who may be most impacted by the trade agreements—this country’s blue collar workers.

While average U.S. citizens do not have a voice in the outcome of trade agreements, large corporations exercise their influence almost unchecked and unwitnessed. The Bush administration has appointed a number of CEOs (whose companies made large campaign contributions to the Republican Party) to a government advisory committee for trade negotiations.

Additionally, agreements formed through Fast Track are binding, long-term pacts. If a newly-elected president believes that the agreements are not in the best interest of the American people, he or she will lack the authority to revoke the pacts without serious and damaging economic repercussions. Even if the American people use their presidential votes to voice their disapproval of existing trade agreements created by the Fast Track system, their dissent will never be clearly registered, because future administrations’ hands are tied by long-term deals negotiated without direct public consent.

Fast Track and Free Trade Failures
As previously mentioned, perhaps the most contested free trade initiative that has resulted from Fast Track has been NAFTA, which was initiated in 1994. According to the Economic Policy Institute (EPI), over a million job opportunities were lost in the U.S. due to NAFTA. Moreover, the U.S. trade deficit has increased at a dramatic rate as the nation continues to import a much greater volume of products than it exports. Trade deficits are a sign of external economic dependence and may show a lack of internal fiscal discipline and growth. After NAFTA was enacted, U.S. exports did increase significantly, but the rate of import increases eventually outpaced exports. In fact, since 1994, the year that NAFTA came into effect, the U.S.’s trade deficit has actually increased by $107.3 billion.

Outside of the U.S., NAFTA’s impact has been every bit as significant. After the ratification of the pact, the Mexican market gradually filled with subsidized corn from the United States, pushing small local producers out of the market because the prices of such subsidized U.S. produce fell below the production costs of Mexican farmers. As a result, upwards of one million small-scale corn producers in Mexico have lost their jobs. An EPI report on the impact of NAFTA found that the percentage of the Mexican population involved in agricultural activities has fallen from 26.8 percent in 1991 to 16.4 percent in 2004. In Canada, 47 percent of the manufacturing plants that existed in 1988 were closed by 1997.

Experts critical of NAFTA are wont to say that President Bush and the USTR did not learn from the failures of NAFTA, as they desire to continue to use Fast Track to push through trade legislation that many analysts insist eventually harms American workers and their counterparts abroad.

The Central American Free Trade Agreement (CAFTA-DR) became law with President Bush’s signature in August 2005. Since then, it has been ratified by the Dominican Republic, El Salvador, Guatemala, Nicaragua and Honduras. Although the full impact of CAFTA will not be known for several years, leery evaluators predict that the results will be virtually identical to those of NAFTA, as CAFTA’s wording is nearly indistinguishable from that of its sister document. Just as with Mexican farmers and NAFTA, Central American corn producers cannot compete with the low prices of the mass-produced and heavily subsidized corn coming from American agro-corporations, such as Cargill. Already, impoverished farmers in countries like Nicaragua are being forced to abandon their traditional crops, such as corn, for new, less reliable and non-nutritional produce with very high price volatility, like sesame. When international prices drop, these small-scale farmers will once again find themselves unable to compete. To make matters worse, sesame, unlike corn, has no intrinsic sustaining nutritional value, leaving producers with neither adequate funds nor sustentative produce with which to provide for their families.

Fast Track Weakens Environmental Standards
In what many see as an affront to both the workings of democratic institutions and the environment, NAFTA and CAFTA both include chapters that allow corporations to sue governments for existing, as well as projected damages, when businesses are unable to turn a profit because of local legislation. There have been two instances of this application under NAFTA. In December 1995, the local government in San Luis Potosí, Mexico denied Metalclad, a large U.S. corporation, the necessary permits to operate a hazardous waste transfer station within an ecological sanctuary neighboring the community’s fresh water supply. Under a previous owner, the transfer station contaminated the site with 20,000 tons of toxic waste. In January 1997, over one year after originally being denied the permit, Metalclad sued the Mexican government for damages as a result of being denied the permits to process poisonous waste which, arguably, would have devastated both the health of the community and the environment. In August 2000, a NAFTA tribunal awarded Metalcald over $16.6 million in damages, to be paid by the government of Mexico. The NAFTA tribunal consists of arbiters whose identities are kept hidden from the public. Not only is there no democratic nomination or confirmation process to ensure that the judges will have the best interests of the citizenry in mind, but after their covert appointment, they are able to rule in total anonymity.

Re-approval of Fast Track?
As President Bush campaigns for the renewal of Fast Track, supporters and detractors of the authority come from both sides of the aisle. Senators John McCain (R-AZ), Barack Obama (D-IL), and John Edwards (D-NC) all support Fast Track legislation. In May 2007, a deal was struck between House Speaker Nancy Pelosi and the Bush administration to place labor and environmental provisions into the primary wording of free trade agreements with the same fervor as was the case with commercial provisions that provide protection to private-sector firms. Nevertheless, its opponents maintain that this is not an acceptable solution to the problems associated with Fast Track. Even with these new arrangements, Americans will not be able to adequately have their voices heard in the negotiation process, the well-being of the environment will obviously take a back seat to corporate earnings and jobs will continue to be sacrificed throughout the Western Hemisphere to buttress annual corporate stockholder reports.

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