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Lessons from Europe
for trade in the Americas
By
Sarah Anderson
With free trade a hot issue in key swing states, Senator
John Kerry and most of the others who competed for the
Democratic Party’s nomination have promised big changes.
But when asked about specifics, Kerry and other leading
Democrats offer only a narrow proposal to include labor
and
environmental issues in future trade pacts.
A
far broader response is necessary to address the growing
concerns about trade – in this country as well as in
Latin America. Currently, plans to expand the North
American Free Trade Agreement (NAFTA) to the rest of the
hemisphere are stalled in the face of resistance from
the governments of Brazil, Argentina, and other nations.
One
alternative approach that should be considered is that
of the European Union (EU). Similar to the Democratic
candidates' proposals, the EU has required member states
to adopt strong standards as part of their economic
integration process. Through EU-wide regulations on
labor rights, gender equity, racial discrimination,
health and safety, environment and other issues, the EU
has helped promote a high-road path to development. By
contrast, NAFTA lacks strong mechanisms on these issues
and as a result, corporations have had a strong
incentive to export jobs to Mexico, where they can more
easily profit by exploiting workers and the environment.
The
EU recognizes that stronger labor and environmental
regulations, while important, are not enough to level
the economic playing field among its member states. And
lifting up the poorer countries is considered critical
for a stable and healthy European economy. Thus, the EU
has invested more than $300 billion in grants (most of
it since the late-1980s) to poorer countries and poorer
regions within richer countries for infrastructure,
training, and other development projects. The EU has
also provided considerable financial and technical
assistance to help poorer countries comply with EU
regulations.
The
largest recipients have been the so-called “poor four” –
Ireland, Greece, Spain and Portugal. To varying degrees,
all have made progress. Since 1982, Ireland has become
one of the wealthiest European countries, while Spain
and Portugal have increased their GDP per capita levels
from 74 to 82 and 61 to 71 percent, respectively. Greece
did less well in the 1980s, but has caught up by 7
percentage points since an infusion of aid in the 1990s.
By
contrast, NAFTA contained no mechanisms to reduce
inequalities and, despite large increases in exports and
foreign investment, Mexico has fallen further behind in
per capita income as a percentage of the North American
average. This figure was 43 percent in 1982, 33 at the
start of NAFTA, and 31 in 2002.
The
EU has recognized that as long as extreme income gaps
exist, it is unrealistic to expect that labor and
environmental regulations alone will be enough to lift
up standards. Poorer countries will not only lack
resources necessary for infrastructure and human
investment. They will also face serious pressure to
attract foreign investment by offering an exploited
workforce and lax environmental enforcement, undermining
efforts to maintain high standards in the richer
countries. In the Americas, one major factor in the
economic divide is that most poor countries bear a heavy
burden of foreign debt. Thus, in this context, it would
be appropriate to incorporate debt relief in efforts to
address inequality.
One
of the most obvious benefits of the EU’s efforts to
narrow disparities is that it makes possible an “open
border” policy. EU citizens enjoy the right to live and
work in any member state. Although there were strong
fears that richer countries would be flooded with
migrants from Spain and Portugal prior to their entry
into the EU, living standards in those countries rose
considerably during a transition period, partly due to
EU supports, so that out-migration was negligible. At
present, the EU is working to lift up incomes in the far
poorer new member states in Eastern Europe.
NAFTA, by contrast, side-stepped the migration issue,
except for offering limited visas to professionals, and
U.S. taxpayers spend billions of dollars every year to
block Mexican migrants.
The
EU is by no means perfect. EU budget rules have forced
many national governments to make spending cuts that
have hurt the poor, while EU immigration and trade
policies towards non-member states are not much better
than the Bush Administration’s. Nevertheless, the EU
offers some important guiding principles, and given the
growing resistance to current trade policies in the
United States and elsewhere, this is an opportune moment
to learn from them.
For
the Presidential candidates to limit the discussion to
labor and environmental clauses would be a huge missed
opportunity. This is the time for bold proposals that
tackle the economic divide that hurts all of us.
Sarah Anderson is the Director of the Global Economy
Project of the Institute for Policy Studies and the co-author
of a new study on “Lessons of European Integration for
the Americas”
(http://www.ips-dc.org/EULessons) |
