WTO-Cancun 9/03

WELCOME TO THE GLOBAL PLANTATION GOVERNMENT ANNOUNCES THE OUTSOURCING OF PROFESSIONAL JOBS

By Joan Veon

Do you remember the picture that was painted in the Chevy and Ford television commercials in the 60s and 70s? They portrayed happy American families climbing the middle class economic ladder of success and prosperity. In sunny Cancun, those dreams are about to be turned into nightmares as trade representatives from 147 countries meet to broaden the rules of free trade.

The Bush Administration has opened the World Trade Organization meeting by calling for a radical departure from the Doha Round by eliminating ALL trade barriers and export subsidies on both sides of the table instead of a few at a time. Even though the living standard of the average American is falling, both Republicans and Democrats have maintained that free trade will bring prosperity to all those around the globe. What they haven’t told us is the whole story.

Throughout the 90’s, while U.S. corporations transferred jobs to China to take advantage of its slave labor force, you paid no attention while the blue-collar workers were being laid off since it wasn’t you. Well buddy, it’s your turn. Here in majestic Cancun where powerful gyrating waves beat upon white sand beaches and where the water is so blue that you forget you are still on planet Earth, many highly paid professional jobs are now up for grabs to the lowest bidder.

In response to a question I asked about how many professional jobs would be lost or what kind of wage adjustment would American workers incur as a result of lowering barriers on trade in services, members of the U.S. negotiating team said that they were not able to provide any kind of projections, but they did maintain that if they are successful in all three areas, the standard of living in many developing countries will rise because they will be participating in a global outsourcing of goods and services.

What this means is that your job just might be one of those outsourced. Countries waiting in line to take your high tech, accounting, telemarketing, medical x-rays, engineering, architectural, or financial analyst job are lining up in India, South Africa, Australia, Malaysia, Singapore and China. According to The Financial Times, “a fundamental restructuring of rich-world economies” is in the process of being birthed. In the 1980s it was manufacturing, then in the 1990s it was outsourcing of the manufacturing process, now it is the outsourcing of the professional jobs!

What is the cry of Wall Street? PROFITS—PROFITS—PROFITS!!! We will now experience a major shift in our standard of living on all economic levels which will help us to finally see what is at stake when profits are maximized: MY JOB, YOUR JOB!

I am told that General Motors is in the process of transferring their engineering design department to India where they will pay an Indian engineer $8,000 a year versus $50,000-80,000 here. Think of the savings. Think of what the analysts will say when they report the increase in profits. GM's stock will rise by 10-30% and investors will cheer—that’s if anybody can afford to invest. After all when you have a standard of living that supports a $250,000+ mortgage, two car payments and kids in college, and then you find that it is your job that has been outsourced, you are not going to be overjoyed. Furthermore you will have to sell all your mutual funds, 401Ks, and IRAs if you don’t have any savings while you get re-training for cleaning the streets. That then will depress the stock and the analysts will moan and groan and the financial geniuses in government will say they need to outsource more jobs.

Because the U.S. is importing $500B more than it is exporting, maybe the government will figure out that there is no such thing as free trade. By that time, no one will be able to afford Wal-Mart. By then we will not have to worry about our trade imbalance because Americans will be paid the same salary as our Chinese slave labor brothers and sisters. In other words, welcome to the global plantation. Now you know the rest of the story.

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CHINESE DRAGONS VIE FOR A SEAT AT THE TRADE TABLE

By Joan Veon

Here in Cancun, it is the lesser-developed countries that are looking for a seat at the table. In particular, the G20 countries headed by China, Brazil, India, Argentina, and South Africa. Furthermore, it should be noted that these five countries plus six others were present at the June Group of Eight meeting in Evian France where they were given a seat at the table. Interestingly enough at a time when U.N. Secretary-General Kofi Annan has called for a restructuring of the Security Council, China is the only Security Council member that is NOT a member of the Group of Eight. They and the other countries present in France will now be invited back to permanently participate. Obviously, this heralds a major global structural change in world affairs which as yet to be recognized. Here in Cancun, the world structure continues to change.

Here, according to U.S. Trade Secretary Robert Zoellick, the U.S. is looking to take two giant steps forward and negotiate aggressively and boldly to eliminate ALL trade barriers and export subsidies on both sides of the table instead of a few. Even though the living standard of the average American is falling, both Republicans and Democrats have maintained that free trade will bring prosperity to all.

The WTO agenda in its entirety is far too complex to understand. Here, the U.S. is focusing on three main areas: agriculture, manufactured goods, and trade in services. Throughout the 90’s, U.S. corporations transferred jobs to China to take advantage of its cheap labor. While this desecrated the blue-collar work force, the professional workforce is now up for grabs to the lowest bidder. Guess who wins every time? China. While the Chinese have historically always been quick and nimble, after being admitted to the WTO last year, they are now becoming its shrewdest player. But consider what is happening to their currency.

Because the Chinese renminbi has been tied to the U.S. dollar for the past ten years (fixed at 8.3), as the dollar has dropped against the euro, it has made Chinese slave labor products even cheaper, thus undercutting the products of Europe and those of other countries. As a result of this “imbalance”, U.S. corporate executives have been hounding the Bush Administration to allow the renminbi to float against the dollar on world exchanges. If the renminbi is allowed to float versus being tied to the dollar, it would rise 10% to 40%, which would increase the price of China’s slave labor products. That would allow our government to continue to devalue the dollar so that our debt to other countries can be effectively reduced by the weakness of the dollar.

So let’s take a look at what this really means. Large U.S. multinational and transnational corporations started to use China’s slave labor to “reduce their expenses.” As a result of transferring their manufacturing to a country with 1.3B people and an hourly wage below our minimum wage, the multinationals and transnational corporations have been able to increase their profits while U.S. wages have dropped and jobs have been eliminated. Instead of American workers receiving a raise, they are no longer able to afford what used to be taken for granted.

The higher profits Wall Street anticipates and heralds are really a result of sacrificing a higher standard of living for one that is reduced so that Americans can compete with slave labor wages. Free trade means a lower standard of living, not a higher one. Ask those in the U.S. who do the work of three people or those who lost their jobs to a Chinese worker. The American way of life was due to PROTECTIONIST MEASURES put in place in 1933 to keep jobs at home. With the passage of the 27,000-page GATT in 1994 by a lame duck Congress, all of that changed.

We now have these same multinational and transnational corporations going to Congress to tell them to put pressure on the Chinese to let their currency float freely so that they can maintain their profit margin. The bottom line is that in a ruthless capitalistic system the Chinese have finally found our “Achilles Heel”. While American CEO’s have been willing to sacrifice American jobs and standard of living to increase their profits, they want both their cake and ice cream by telling the Chinese to float their currency so that they can maintain their competitive edge and profits. So far the Chinese have been polite to Secretary Snow. I hope they continue to be polite. Ruthless capitalists are up against ruthless communists. Somehow I get the feeling that they wear the same size of shoe.

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JV INTERVIEW WITH AMBASSADOR ERNEST PREGG

Veon: Mr. Ambassador, can you give me a heads up as to where this all started?

Pregg: The starting point was immediately after the Second World War in 1947 to be precise when the GATT was adopted by the industrialized countries and some countries and what we were facing were the extremely high tariffs put forth during the great depression of the 30s. Since then there have been eight rounds of negotiations where all the countries get together to mutually reduce trade barriers, mostly by industrialized countries of Europe, North America, Canada, and Japan, and more recently the developing countries which are still behind the curve. This is a long trajectory – over 60 years. A lot has changed in the last 20 years. Since the mid-80s, trade has grown more rapidly because barriers are down partly because new technologies are being applied, transmitted across borders, and rapid growth of trade is almost all in the manufacturing sector which does account for ¾ of global trade, almost all the growth of trade, and has a lot to do with the rapid growth in productivity in the U.S. which is partly because of trade back and forth, but even faster in the newly industrialized countries of East Asia, Latin America, and central Europe and that is what we are confronting here in Cancun with the Doha—can we make another major step to together to reduce barriers and increase further the benefits from trade—you exchange what you do better. There is a challenge in not only getting the barriers down, but another new point in the also 15 years is that countries are even going faster to total free trade on a bi-lateral or regional basis just as the U.S. has done with Canada and Mexico and is now doing with a dozen others.

There is this competition between “do you go to free trade—bilaterally, regionally or step-by-step or do you do it together which has a lot of economic benefits and avoids certain problems.

Veon: When we look at what is happening, during the Uruguay Round some of the tariffs were dropped –can you explain?

Pregg: Well, in the Uruguay that was an important round; one area was tariffs on manufactured trade. They were reduced substantially almost all by the industrialized countries—West Europe, North America, and Japan. The question is, “What happens in this round?” I already mentioned bi-lateral, regional or multilateral competition. What has

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thrown down the gauntlet is the FAR FORWARD THINKING PROPOSAL BY THE U.S., “WHY DON’T WE JUST GO TO MULTI-LATERAL FREE TRADE IN MANUFACTURERS THE WAY WE ARE DOING IT WITH CANADA AND MEXICO. IF OTHERS ARE WILLING TO DO IT, WE WILL DO IT, WE WILL BRING OUR TARIFFS DOWN. I work for Manufactures Alliance—a private sector think tank of the 1,500 biggest manufacturing companies. I think that most U.S. companies would approve of a truly multi-lateral free trade agreement where we would have free access to Asian markets. So the U.S. has put down these very bold proposals—so far there have been very few that have supported the U.S.

Developing countries have been very hesitant – in part because they are not all ready to go to free trade, but also because there is the institutional barrier – the WTO—which has a lot of characteristics of the UN with the “north” versus the “south”. The rich versus the poor and the rich have to do everything and the poor don’t want to take on the difficulties of taking on the reduction of barriers. There is a supreme irony in the regional agreements like the Central American grouping—five countries, two small with Honduras and Nicaragua that have come to us and told us they want to go totally free trade. Whereas, here at the WTO has been, “if you reduce barriers, it is a concession and you should avoid.” So there is this political institutional barrier and is being confronted to some extent here in Cancun of all the leaders of the negotiation saying, “What developing countries do in reducing barriers is important and in their interest. SEVENTY PERCENT of all tariffs developing countries pay on their exports are paid to OTHER DEVELOPING COUNTRIES.

Where this Doha is headed for market access for non-agricultural or MANUFACTURING TRADE—is bogged down over impasse BY HOW MUCH YOU CUT TARIFFS. Korea, China , South Korea, and Taiwan have not realized that the US has a trade deficit of $500B—this blows the mind. I happened to be in government in 1986 with the Uruguay Round and for the first time the U.S. ran a $100M trade deficit and everybody ran for cover. No member of Congress would join the delegation. Now we are at $500B—almost all in manufacturing – about 80% with EAST ASIA and with developing countries and for them to say they should not have to do reciprocity does not stack up.

Veon: You bring out a good point as I raised this issue with the Trade Representative spokesperson yesterday and he negated the $500B trade deficit. My question was, “Do we not need to have trade in manufacturing and goods and services in order to offset our trade deficit” and he told me no.

Pregg: It’s a complicated issue…

Veon: But is it not – when you simplify, is it not necessary for us to offset some of the $500B with other types of exports….

Pregg: Almost everybody believes our $500B trade deficit is NOT sustainable and has to come down a lot. It will come down through a lower dollar—exchange rates and will come down – it gets somewhat complicated—we don’t save enough. WE grow so fast and invest so much, so we don’t save like the Asians and we have to borrow abroad to finance our growth and that pushes the dollar up and gives us a bigger trade deficit. The most immediate one is the over-valued exchange rate for the dollar and the under-valued East Asian currencies where the deficit is. The key term is “currency manipulation” as the East Asians are in clear violation of their IMF commitments.

How does this relate back to “free trade”? It would be over 10-15 years since it does not happen from one day to the next. It could help to bring about a trade deficit in a non-disruptive way. As the higher barriers in Asia come down and ours are already low will give us more export opportunity in these dollars and if we can save more and our dollar adjust it can bring about more through export growth rather than having to put export restrictions on. It would be another reason by export Asian powerhouses with their big trade surpluses and high tariffs—

Veon: Did not American manufacturers create them when they outsourced…

Pregg: To a certain extent there is growth in trade and investment. Another thing is this very rapidly growth in manufacturers trade which is different from agri and petroleum. Since the mid 80’s has been directly linked to FOREIGN DIRECT INVESTMENT with imbedded new technology and building new industry which increases exports and imports. That can be beneficial to both of us---US and East Asia since we both export more. We invest and we get return on the investment through profits. We should all be beneficiaries but if it ends up being a very balanced result which is this $500B deficit is—very unbalanced, it needs to be adjusted and made more balanced, but the way to do it is not—certainly cut off our imports or cut off investment but to talk seriously with East Asians. Finally, our Treasury Secretary is talking to the Chinese….and on the trade front should say, “You can’t hide behind the fact that China says it is a developing countries…you need to be as open as we are – so why not go to multi-lateral free trade.”

Over 60 years, at that time ½ of merchandise trade (things you can hold) and services (telephone services). On merchandise trade in 1960 it was ½ manufacturer and 30% agriculture with the rest petroleum and raw materials.

Today it is 80% manufacturers and less than 10% agriculture, and the rest is petroleum and raw materials. The shift has been toward manufacturers trade because that is where the growth is.

Within manufacturers trade, in the also 15-20 years, you hear about apparels, textiles, and steel. They are politically sensitive and are important for some developing countries. Apparel, textiles together only account for 10% of manufacturer’s trade with the other 90% in the technology intensive sectors. You are trading things that provide an increase in productivity.

The 2/3’s of manufacturers trade is in machinery, information technology products, automotive products and chemicals, including pharmaceuticals, including medicines, so that is where the manufacturer’s trade is.

Veon: Where does FTAA come in?

Pregg: The trading system since the 1900’s, this is a whole different systemic:

Multilateral—Doha and this far in Doha has been the lowest common denominator.

Separate Free trade which can be bilateral with one other country our regional. We are doing Chile, Singapore, Australia—

Then we have the FTAA which is 34 out of 35 in the Western Hemisphere except Cuba—until post-Castro. Where is the FTAA? It got off to a dynamic start, but has gotten bogged down and in Latin American, Brazil is the key country. Mexico is already free trade. So it really is Brazil – are they prepared to conclude the agreement as scheduled in 2005 and it is very doubtful at this point.

Two question marks about Brazil—they will have to restructure as Mexico has done since there is a lot of protectionist power in Brazil and I doubt that they are ready. Lula, is from the left-socialist background—he is getting positive responses from at home and abroad. There is some political baggage with the socialist connections.

For the last 15 years, things have been changing rather rapidly with regard to free trade.

VEON: Help me understand the shifts in jobs.

PREGG: I work for Manufactures…with 4,500 manufacturers. 2.7M jobs lost out of 16 or 17M or 15%. That is as a result of 3 main reasons:

1. This has been going on for 30-40 years which is the productivity growth. You can do

a. The same with less workers

b. Then the 3 year recession – has been in manufacturers—of all the business cycles this has been the hardest hit—it has been almost all manufacturing

c. The trade deficit which has doubled to $500B—almost all in manufacturing and that is a combination of some cyclical factors. In East Asia, they have been keeping their currencies low – they don’t want to take the brunt of the downturn in manufacturers because they export, so they have tried to not have their exports go down by manipulating their currency.

My estimates show that we would have 1M more jobs if it were not for the trade deficit. Lost lots in apparel industry in 10 years. And in last point—dynamic growth, between 3-4million yearly are displaced and lose for one reason or another or 3% of the workforce. Most of them find jobs right away—engineer, nurse, doctor—others take longer and get unemployment or re-training or through a difficult period. Of the 3-4 million, about 1 out of 20 is related to trade. Out of those who lose their jobs, with one out of 20 trade related—we need to do something for them and people have to take their own responsibility. That great sucking sound--

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THE DISCONNECTING OF THE MIND AT CANCUN

By Joan Veon

What do pornography, drugs and alcohol have in common? The more you use them, the more the emotions are disconnected from the reality of life. In the case of pornography, natural body processes are stimulated as a result of looking at a picture of a woman in a suggestive pose or one who is nude, or even a picture of a perverted act. As the natural body responses get used to being stimulated through pictures, over time there is a disconnect between the natural God-given body functions and reality as the disconnect increases through continued use of pornography, drugs, or alcohol. Here in Cancun, the same kind of disconnect of reason from reality is taking place.

As a result, there is very little real truth and very little reality. The World Trade Organization tells us they are working for the benefit of humankind—they want everyone to have a job. But what they are not telling the people of the world is that they no longer have any intention of providing people with a job in which they can realize the dream that middle class Americans have had--to better themselves financially over a period of time by working their way up the ladder of success. Instead, this meeting has become a free for all by major multi-national and transnational corporations to transfer jobs of all levels and pay-scales to third world countries where recipients of this largess can work for slave labor salaries and in slave-labor conditions for the rest of their lives. Is this the new utopian dream of the neo capitalists?

Under the guise of tearing down the trade barriers between the countries of the world which are comprised of tariffs, subsidies, and quotas, the U.S. Administration is leading the charge to get all of the 148 WTO countries to drop all of them immediately. Interestingly enough, these barriers were put in place during the Depression to PROTECT the jobs of American workers. Today, we are told there is no need to protect the American worker or any other worker in any other country.

However, there are those who negate the fact that Americans are losing jobs, specifically to slave-labor Asian countries. In an interview with former Ambassador Ernest Pregg, a retired career foreign service officer, who participated in the Kennedy and Uruguay Round negotiations and as American Ambassador to Haiti, he points out that 15% or 2.7 million jobs have been lost in the U.S. as a result of increased productivity through computer advancement, the economic slow down in manufacturing, and the $500B historical trade deficit. While he makes some good points, he negates the fact that American manufacturers have created the high trade deficit through transferring good paying American jobs to lower wage countries, specifically China.

Then there is the Bush trade negotiating team. When I posed a question to U.S. Trade Representative Peter Allegier about anticipated “adjustments” in wages and standard of living as a result of Trade in Services which opens the doors to export professional level jobs (engineering, accounting, architecture, financial analyst, medical technician, etc.) as proposed in the Doha Ministerial Agenda being discussed here, he took great pains to quote me figures from a recently concluded World Bank study that shows the annual purchasing power for a family of four will rise $1,300 to $2,000 a year, and if all the trade barriers come down, it will increase to $7,500 a year and 144 million people will be lifted out of poverty by 2015. When I pressed for government sponsored studies, I was told they would have to check. Does not a person count the cost to build a house before they build it in order to see if they can afford it? Is our own Administration relying on a global organization that supports and is part of a global governmental structure not recognized by our Constitution to tell them truth?

Interestingly enough, when the Uruguay Round was agreed to in 1986 under Reagan, the door was opened to begin tearing down trade barriers between the countries. At the time, our trade deficit was an unthinkable $100M. The American people were told it would decrease by $60B over ten years. Furthermore the Reagan Administration said American families would earn an additional income in $1,700. While they may have had an increase as a result of corporations keeping jobs at home, today the tables have turned. As our government has continued to pander to big business, the outflow of jobs to China and other low-wage countries will continue.

The bottom line is that these geniuses have not connected the past, present and future loss of jobs to the bankruptcy of the local, state, county, and federal governments in America. All across the country, property taxes and other kinds of service fees are rising as middle class Americans have believed all of the skillful marketing of America’s most trusted corporations by buying what they are told to buy so they could feel better about themselves. Now they have the 5,000 square foot house that they deserve with the huge mortgage, two car payments, and children in private schools. These specimens of capitalism are now going to be told that their white-collar professional job is being transferred to India, Australia, Malaysia, or China where their employer can save 90% of their salary in expenses that will boost corporate profits for Wall Street.

Have the CEO’s of our transnational corporations lost their minds? Is it disconnected from the pornography of profits that is dependent on sales? Who is going to buy their products? Americans will be busy trying to sell their houses in order to get out from under the debts they cannot pay and the property taxes they cannot afford as they begin their quest for survival. If the major multinationals and transnational corporations lower expenses with slave labor, how competitive will the small and medium-size corporations be? Hasn’t anyone in the Bush Administration and those in the U.S. Chamber of Commerce, and other industrial and manufacturing associations figured out that if they kill the goose that laid the golden egg, they will go down with us? A “successful” Doha Round is not something to celebrate.

Lastly, as Americans are pitted one against the other for whatever jobs are left, there will be class warfare. Will all of this happen tomorrow? No, but I challenge you to keep track of the daily articles that discuss job layoffs, corporate restructuring, and downsizing. The old adage “Liars figure and figures lie” has a lot more meaning when you consider the disconnect with reality.

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WTO TRADE TALKS BREAK DOWN

By Joan Veon

Minutes after Deputy U.S. Trade Representative Josette Sherran Shiner in a late afternoon press briefing declared that the US and EU were not using “the Singapore issues” to distract the attention of the Conference away from agricultural subsidy issues, the Doha Round discussions broke down when a number of lesser developed countries walked out of the trade negotiations in Cancun.

On Tuesday, U.S. Trade Representative Robert Zoellick declared that the U.S. wanted to go to zero tariffs between all countries, which would help fuel the engine for worldwide growth. This was reinforced by Ambassador Sherran Shiner before the walk-out, “We believe it is very significant and important for the global economy to get growth going, to [bring] barriers down and to sell their goods and raise their incomes. If we have a shot to bring down subsidies, to erase trade distortions, and to bring down market barriers, now is the moment to seize the moment.”

Those countries trying to arrive at consensus on a very complex agenda total 148 members that include its two newest members, Cambodia and Nepal, who were admitted during the conference. The issues involved in this round included agriculture, manufactured goods, and trade in services as well as a large range of other objectives.

What had caused the greatest concern by developed countries were “the Singapore issues”, which came out of the Singapore meeting in 1996. If countries are going to trade with one another, then new definitions for words needed to be agreed to and new rules needed to be devised and hammered out that all 148 countries would implement. Because there are 148 countries, each with different levels of trade development in different areas of manufacturing, services, and commodities, the complexity is multiplied.

The Singapore issues dealt with investment, transparency in government procurement, competition policies, and trade facilitation. In order to set the framework up, the scope and definition of what each of these meant was needed. For example, there were controversies over how to define “investment” and “investor”, as well as other implications. With regard to “investment”, members needed to determine the form of investments that would contribute to the expansion of trade.

After the breakdown, many of the developed countries gave press briefings in which they determined what went wrong. One member of the Canadian delegation said, “The gap was too wide on the Singapore issues which moved too late in the week. There were three different groups, one on each end and another larger group in the middle. We did not have time to make a compromise for those in the middle.” Others termed the difference as a “clash of cultures”.

EU Trade Commissioner Pascal Lamy lamented the loss for French farmers who he said had lost the right to trade access in the U.S., Malaysia, Brazil, and other countries. He also said that the U.S. had agreed to reform the U.S. Farm Bill to conform to tariffs and subsidies agreed to in Cancun. His response to where they go now was, “We will need a lot of work to put it back together – We will have to put a lot of thought on how we work together.”

While Lamy refused to name the countries that walked out, all week long there had been complaints by the developing countries as to the undemocratic and “blatant manipulation by developed countries in total disregard of the interests and voices of African countries” to get them to agree to the Singapore issues while being unwilling to make commitments on unfair agricultural subsidies.

Since its birth in 1995, the WTO has come under great criticism as an elite club for the whims and desires of huge multinational and transnational corporations. One such critic is Lori Wallach from Public Citizen, “[T]hese new rules are aimed at eliminating the diversity of national policies, priorities, and cultures to create the uniform world market sought by large multinational corporations. A key WTO provision specifically requires each signatory to ensure the conformity of its laws, regulations, and administration procedures to the WTO agreements’ terms. Taken as a whole, the WTO and its agreements are a powerful mechanism for spreading and locking in corporate-led globalization.”

There appears to be consensus that the WTO will have to regroup and re-access their methods and proposed rules. If they are putting together a “rules based” order, then these rules will have to be fair for all and implemented when all countries are ready to drop trading barriers for all their commodities, manufactured goods, trade in services, and agriculture.

Lastly, it is the goal of the Bush Administration to have world trade. U.S. Trade Representative Robert Zoellick has said that if they have to conclude bi-lateral agreements with every single country directly instead of all 148 at one time, they are prepared to do so.

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Joan Veon is a businesswoman and independent international reporter. Please visit her website: www.womensgroup.org. To get a copy of her WTO report, send $10 to The Women’s International Media Group, Inc., P. O. Box 77, Middletown, MD 21769-0077.