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		22 - 28 August 2002 Issue No. 600 International	Current issue Previous issue Site map
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Fast Track blues
The 'most historic' trade legislation ever passed by Congress gives the US president unprecedented trade negotiation powers. It may, however, spell disaster for the Western hemisphere, writes Faiza Rady

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Trading in New York's stock exchange
United States President George W Bush did it, he finally managed to eclipse his nemesis Bill Clinton. Earlier this month, Bush convinced the US Congress to grant him Fast Track authority -- a feat Clinton failed to achieve. The president's success was duly hailed by Senate Finance Committee Chairman Max Baucus, the Democrat who negotiated the deal. Baucus described the package as "the most historic trade legislation ever passed by Congress". Baucus' statement has hit the nail on its head. The Fast Track bill will empower Bush to circumvent legislative hurdles by allowing him to negotiate and sign binding international trade agreements without prior congressional approval.
A manna for the US president, the procedure ensures Bush a free hand to unilaterally negotiate trade agreements. Largely bypassing the legislature, Fast Track massively expands presidential powers by limiting congressional input to a "yes or no" vote on new trade agreements after the fact and disallows any amendments.
At stake is the Free Trade Area of the Americas (FTAA), a gargantuan market of 34 countries that will encompass all those of the Western hemisphere, with the exception of Cuba. With a population of 800 million, and a combined gross domestic product (GDP) of $11 trillion, the FTAA would be the largest free trade zone in the world.
Modelled on the 1994 North American Free Trade Agreement NAFTA, which includes Canada, the US and Mexico, the US version of the FTAA will be exclusively fine-tuned by the Bush team.
Analysts, who essentially view the FTAA as a macho clone of NAFTA, use the latter as a blueprint for things to come.
Sales representatives for NAFTA initially promised all things to all people, critics say. Capitalising on the "big is beautiful" gimmick and "globalisation" and "free trade" mantras, the NAFTA sales-pitch effectively pledged health, wealth and prosperity to investors, financiers and workers alike.
Eight years after the fact, analysts of various shades and colours concur that NAFTA peddlers have made good on at least some of their pledges. In all three countries, statistics show that investors and financiers flourished under the NAFTA regime.
But over and above mundane capitalist gains, neo- liberal pundits triumphantly promote Mexico as a show- case of sorts, a Southern country's free trade success story. According to their version of the story, the neo- liberal formula (liberalisation and privatisation under the auspices of NAFTA) magically turned the Mexican economy around after the disastrous 1994 stock market crash. NAFTA attracted a contingent of foreign investors armed with much-needed capital, and the Mexican economy took off, prospered and everybody lived happily ever after.
Although this neo-liberal narrative may sound convincing in its simplicity, it fails to address the 1994 crash as a major determinant of the sudden injection of foreign capital into Mexico. The crash, which led to a 31 per cent devaluation of the peso, in fact, created the perfect conditions for a deluge of much-coveted foreign direct investment (FDI). With plummeting production and labour costs, Mexico became a haven for investors seeking ever-greener pastures 'down South'. Thus between 1993 and 1999, FDI inflows into Mexico increased by 169 per cent, and the much-touted maquiladora, the export-oriented free trade zone factories, mushroomed along the US-Mexican border.
Nothing then like a resounding stock market crash to get the juices flowing again and pump a massive dose of adrenaline, in the form of FDI inflows, into an ailing economy?
By that logic, an alluring crash in an impoverished Southern country should make everybody happy. In this, 'best-of-all possible-worlds' scenario, Northern investors will make more profits than back home, local investors will expand their operations and skim the cream, and workers will presumably be back in business -- toiling away at some hi-tech assembly line.
Did NAFTA then fulfill its promises of prosperity for all and was the crash, in effect, a blessing in disguise for the economy? Yes and no, the problem being that the sum of the parts don't add up to the whole in this particular equation.
While the market crash lowered production costs for the capitalists, workers did not quite get what the NAFTA sale reps had lauded: more jobs and better working conditions in the maquiladoras. Although the bosses prospered, the national economy did not significantly develop.
In the much-touted maquiladoras, exports grew at an annual rate of 16 per cent between 1995 and 1999 -- an impressive growth, when measured in absolute terms. In the real world, however, maquiladora export growth was offset by an increasing volume of manufacturing imports. Total manufacturing imports from the US and other countries grew at 18.5 per cent over the 1995- 1999 period, leading to a serious foreign trade deficit that may pave the way for another crisis.
If Mexico's export-driven development model looks more alluring in the absolute, in the absence of details like import/export balances, the same can be said about the labour situation. Over the 1995-1999 period, total employment in Mexico grew from 33.9 million to 39.1 million jobs. The figures indicating steady employment growth.
Over the past 10 years, agricultural employment has hovered at around eight million workers. The stability of the numbers suggests that there has been no major migratory trend from rural to urban centres, and that NAFTA has not significantly impacted on rural employment patterns. So far so good.
In the country's urban areas, the scene looks almost as pastoral on paper. Between 1989 and 1999, the figures show very low unemployment levels -- mostly ranging between two and three per cent. The only major exception was in 1995, when unemployment soared to six per cent in the immediate aftermath of the crash.
Yet the figures reflect a flawed image. Mexico's labour statistics define employment in somewhat elastic terms. According to the Mexican Labour Department's definition of the term, a person who has worked for at least one hour in the week preceding the survey should be listed as "employed". The low unemployment figures thus mask severe underemployment or unemployment.
The most dramatic shift in labour conditions was the loss of regular salaried positions in manufacturing and services. Between 1991 and 1998, 13 per cent of salaried jobs were permanently eliminated. Deteriorating labour conditions over that period are reflected by an increase in the proportion of the labour force that is self- employed and/or working in the informal sector; often for low wages, or no wages at all, in family-owned enterprises. Between 1991 and 1998, the proportion of self-employed workers almost doubled, soaring from 17 per cent to 23 per cent; while the share of unpaid workers jumped from 4.6 per cent to 12 per cent.
The loss of salaried jobs means that workers moved to low-skill, low-pay jobs in the informal sector. Between 1991 and 1998, wages decreased by 27 per cent, while hourly income plummeted by 40 per cent. In addition, high inflation levels significantly eroded workers' wages. Over the last decade, the minimum wage in Mexico lost close to 50 per cent of its purchasing power.
In this context, the facade of the Mexican success story shows a number of ugly cracks. Under NAFTA, the situation remains grim for Mexican workers. As for the FTAA, it spells more of the same, albeit on a much larger scale, courtesy of Fast Track.

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