NAFTA 2.0 Would Lock In High Medicine Prices for Big Pharma — While Allowing Outsourcing to Continue Unabated
UTICA, N.Y. — As a corporate-funded “Motorcade for Trade” RV tour prepares to make stops in Utica and Buffalo to hype the proposed North American Free Trade Agreement (NAFTA) revision (also called the US- Mexico-Canada Agreement), the New York Director of Citizens Trade Campaign, George Kimball, issued the following statement:
“There’s a reason why hundreds of corporate lobby groups have come together to push the revised NAFTA deal. As written, NAFTA 2.0 would expand the privileges and profits of Wall Street executives and other corporate CEOs, while failing to take the steps needed to protect the livelihoods of hard-working families in rural New York and beyond.
“The proposed NAFTA deal fails to make the changes needed to protect jobs and raise wages for American workers and family farmers. There’s nothing in the current proposal that would prevent the outsourcing of jobs or that would reverse our high agricultural trade deficit. In fact, a recent International Monetary Fund study concluded NAFTA 2.0 would have a negative effect on both overall U.S. welfare and in agriculture specifically.
“While hundreds of corporate lobbyists had inside access to NAFTA negotiators, the voices of rural America were largely ignored throughout the NAFTA renegotiation process. For instance, American consumers are increasingly interested in knowing where and how their food is produced — and America’s farmers and ranchers want to tell them. But the repeated calls of family farmers and ranchers for a NAFTA deal to restore country-of-origin-labeling for meat products were ignored by trade negotiators.
“One call trade negotiators was sure to answer was that of the pharmaceutical lobby. At a time when many New Yorkers struggle to afford the medicine prescribed to them by their doctors, the new NAFTA text sneaks in language that would lock in lengthy monopoly periods for pharmaceutical companies, blocking competition from lower-cost generic medicines and keeping medicines prices outrageously high.
“Instead of rubber-stamping this business-as-usual trade deal, New York’s Members of Congress should continue insisting on the substantive changes necessary for a NAFTA replacement to truly benefit working families. We’re counting on our elected officials to demand stronger labor and environmental standards with swift and certain enforcement; restoration of our country-of-original-lableing program; and the removal of language that locks in high medicine prices.”
The United States and China continue to circle around a deadline that could mark a turning point in their commercial and diplomatic relations.
On March 1, the Trump administration had planned to levy 25 percent tariffs on more than $200 billion of Chinese exports, unless China agreed to all U.S. demands, including ceasing its retaliatory tariffs against U.S. exports. But on February 24, President Donald Trump tweeted he would indefinitely postpone the date for applying those tariffs, pending the signing of an agreement by President Xi Jinping at President Trump’s country club in Mar-a-Lago, Florida, sometime in the future.
While praising the “progress” claimed to have been made in the negotiations, President Trump rebuked U.S. Trade Representative Robert Lighthizer, in front of reporters and Chinese negotiators, for formulating any eventual agreements as Memoranda of Understanding (MoU), because President Trump doesn’t trust MoUs. Trump insisted that any documents he and President Xi might sign be called a “trade agreement.” The U.S. draft list of demands for the negotiations is prefaced by a claim that whatever is negotiated is not an “international trade agreement,” regardless of the impacts of the MoUs on members of the World Trade Organization.
A May 2018 four-page draft of U.S. demands, first reported in January in the Financial Times, would require China to purchase, in enforceable phases, U.S. goods and services “such that the U.S. trade deficit with China will have decreased compared to 2018 by at least $200 billion by the end of 2020.” The U.S. requires that “China immediately will cease providing [U.S. determined] market-distorting subsidies and other types of government support” for its Made in China 2025 industrial policy. It must strengthen protections of U.S. patented, trademarked and copyrighted products and U.S. investments in China. China must withdraw dispute settlement cases against the United States it has begun in the World Trade Organization and terminate all retaliatory actions, including tariffs against U.S. agricultural exports to China.
The list goes on.
In a January 16 article, IATP cited the FT’s Martin Wolf: “The idea that the U.S. will be judge, jury and executioner, while China will be deprived of the rights to retaliate or seek recourse to the WTO is crazy.” China has not given up its WTO rights but is negotiating to avoid the threatened U.S. tariffs, to buy U.S. goods, and to change Chinese law and enforcement practices to protect U.S. investments and intellectual property.
The Department of Commerce released reports in January 2018 to justify the current tariffs on steel and aluminum imports imposed for national security reasons. It is likely that the U.S. will propose to enforce the bilateral agreement outside of the WTO dispute settlement system by including U.S. unilateral tariffs and anti-subsidy measures as a formal compliance mechanism. If China were to agree to that compliance mechanism, the steel and aluminum studies, which include redacted commercial information submitted by U.S. steel and aluminum producers, might not be subject to review and possible dispute challenge by other WTO members.
On December 17, U.S. Secretary of Agriculture Sonny Perdue announced “the second and final round of trade mitigation payments aimed at assisting farmers suffering from damage due to unjustified trade retaliation by foreign nations.” Also in December, the Congressional Research Service informed its employer that net farm income was estimated to be down 46 percent from its record high in 2013 and that $4.6 billion in trade mitigation payments contributed to the highest level of U.S. government payments to farmers since 2006. In other words, while the clock has stopped ticking—for the moment—on dropping Trump’s tariff bomb, the U.S. taxpayer trade-related safety net for farmers will be reduced. According to Bloomberg, as part of the overall deal, “China is proposing that it could buy an additional $30 billion a year of U.S. agricultural products” above the pre-trade dispute export sales level during the period that the MoU/trade agreement is in force. The purchases would reduce the huge stocks of grains and soybeans held in U.S. elevators and lying on the ground covered by tarps.
Gordon Sondland, the United States ambassador to the European Union, has proposed that the EU make common cause with the U.S. against China. But how? The Office of the U.S. Trade Representative’s “2018 Report to Congress on China’s WTO Compliance” concluded that EU-proposed reforms of the WTO dispute settlement system and of the WTO system for reporting changes to its members’ trade-related laws are wholly inadequate to achieve U.S. aims. The procedural reforms do not force China to change its economic development model to become a “market economy” open to U.S. investment without conditions. (“Market economy” status imposes fewer and less burdensome requirements than those for “non-market” WTO members.)
Ambassador Sondland, formerly a hotel magnate, criticized a speech by Secretary of State Mike Pompeo in December in Brussels as not tough enough on the EU. Secretary Pompeo, according to Politico, “bashed a wide array of international organizations, including the EU, the United Nations, the Organization of American States, the African Union, the World Bank, the International Monetary Fund and the International Criminal Court.” Having disparaged international organizations, very soon thereafter Secretary Pompeo was praising “our true allies,” such as Poland and Hungary, willing to follow U.S. foreign policy and split EU foreign policy cohesion.
Secretary Pompeo, echoing President Trump, insists that national sovereignty claims overrule international governance. Consequently, the U.S. has threatened the EU with sanctions for not complying with U.S. sanctions against trade with Iran. In response to a February 13 speech by Vice President Mike Pence criticizing the trade of Germany, France and the United Kingdom with Iran, an EU official stated, “the EU does not recognize the extra-territorial application of U.S. sanctions.”
The consequences of the trade and foreign policy disputes among the major powers reach beyond their own borders. In February, a report of the United Nations Conference on Trade and Development (UNCTAD) stated, “the trade confrontations between the United States and China have already weighed on currency markets by increasing the volatility and downward pressure for many currencies, especially in the riskier emerging markets. For many developing countries, one important concern is whether trade tensions will affect currency markets in ways that will make their dollar-denominated debt more difficult to service.” The UNCTAD report noted that trade related currency re-pricing was just one of several spillover effects thus far of the retaliatory tariff battles.
Rather than work with or through international organizations, the Trump administration views every trade dispute as a nail to be hit with a tariff or threat of a tariff. President Trump dangles the threat of tariffs on U.S. imports of European and Japanese automobiles, to force open those markets to U.S. agricultural goods.
The European Parliament’s response to these and other U.S. threats may be weakening support for a mandate for the European Commission to negotiate even a phased in and “lite” version of the proposed Transatlantic Trade and Investment Partnership. On January 30, Bernd Lange, chair of the Parliament’s committee on international trade, proposed a non-binding resolution to reject “the opening of negotiations of an agreement with the US on the elimination of tariffs for industrial goods and on [regulatory cooperation] conformity assessment in their current form.” The committee rejected Lange’s proposal and endorsed by a 21 to 17 vote a resolution to open trade negotiations with the U.S. subject to “articulated red lines”, including the exclusion of agriculture—a U.S. priority (subscription required). The full Parliament will vote on the resolution in mid-March. Its narrow margin of victory indicates a large minority of support for not negotiating with the Trump administration under any conditions.
In response to the U.S.’s unilateral application of tariffs and hostility towards international organizations, China’s strategy has been to find allies through international organizations. SUNS reports (subscription required) that China and India have responded to U.S. demands for an end to self-designation of developing countries (subscription required) which allows them to receive, non-binding Special and Differential Treatment in WTO agreements (e.g. longer compliance timelines). The China/India paper contends that international organization definitions of developing countries are based on per capita measures of human welfare and not macro-economic measurements, such as growth in the Gross Domestic Product and trade balances.
Chad Freeman, a China expert formerly in the State Department, described U.S. diplomacy towards China: “Some Americans nostalgic for the simplicities of the Cold War suffer from enemy deprivation syndrome. They are in earnest search of a hostile ideology against which to orient themselves and see China as the answer to their distress.” There is ample evidence that China, under current Communist Party management, is hostile to U.S. national security interests, with increased Chinese (and Iranian) cyber warfare against U.S. corporations as one response to the current trade war. However, there is also ample evidence of a Cold War mentality in the U.S. trade policy and diplomacy that seeks to contain China’s economic development and geo-political influence by making demands that likely would require regime change in China (and Iran, Venezuela, Cuba and Nicaragua) to fulfill.
It does not appear that the Trump administration will abandon its unilateral diplomacy and attacks on international institutions, regardless of the economic harm to farmers and other collateral damage. Waiting out the Trump administration, as the European Union appears to be doing with proposals unacceptable to the Trump administration, may be the best alternative to more trade dispute-related damage.
The court, which has nationwide jurisdiction over civil actions arising out of the customs and international trade laws, said the law the administration used to impose the tariffs had already passed constitutional muster under a 1976 U.S. Supreme Court decision.
A federal court in New York has rejected a constitutional challenge to President Donald Trump’s executive order imposing tariffs on steel and aluminum imports, ruling that the move was premised on a lawful delegation of legislative authority.
The U.S. Court of International Trade, which has nationwide jurisdiction over civil actions arising out of the customs and international trade laws, said Monday that the law the administration used to impose the tariffs had already passed constitutional muster under a 1976 U.S. Supreme Court decision.
A group of steel importers had challenged the March 2018 tariffs, arguing that Section 232 of the Trade Expansion Act of 1962 violated the constitutional doctrine of the separation of powers by delegating congressional powers to the president without an “intelligible principle” for doing so.
The American Institute for International Steel Inc. and two member companies, Sim-Tex and Kurt Orban Partners, said that Section 232 gave the president a “limitless grant” of power to determine when executive actions are necessary for national security purposes, without any significant mechanism for review.
A three-judge panel of the court, however, said that the Supreme Court’s 1976 decision in Federal Energy Administration v. Algonquin SNG had already decided that Section 232 met the “intelligible principle” standard because the scope of the law was limited to issues of national security.
In the court’s ruling, Judge Claire P. Kelly noted that the line between regulation of trade in the name of national security and improper encroachment into the role of Congress “could be elusive in some cases.” However, Kelly said those concerns fell beyond the court’s purview, given the high court’s ruling in Algonquin.
The plaintiffs argued that they should not be bound by the 1976 decision because Algonquinchallenged a specific remedy, and not the constitutionality of the underlying statute itself. The legal landscape for review of presidential actions had also shifted drastically since the previous case had been decided.
In a concurring opinion, Judge Gary S. Katzmann agreed that he and his colleagues were bound by the Supreme Court’s earlier ruling, but said the constitutionality of the statute may need to be revisited.
“I respectfully suggest, however, that the fullness of time can inform understanding that may not have been available more than forty years ago. We deal now with real recent actions, not hypothetical ones,” he wrote.
“If the delegation permitted by section 232, as now revealed, does not constitute excessive delegation in violation of the Constitution, what would?”
The plaintiffs were represented by Alan B. Morrison of George Washington University Law School; Donald Bertrand Cameron and Rudi Will Planert of Morris, Manning & Martin and Gary N. Horlick of the Law Offices of Gary N. Horlick in Washington, D.C.
The administration was represented by Jeanne E. Davidson, director of the U.S. Department of Justice’s Commercial Litigation Branch, and Tara Kathleen Hogan, who serves as assistant director.
After Democrats in the U.S. threatened to hold up a renegotiated Nafta, Mexico’s ruling party beefed up a labor bill to meet requirements laid out in the trade deal and plans to vote it through this month.
The bill now satisfies “diverse obligations” required by the United States-Mexico-Canada Agreement, or USMCA, as the new Nafta deal is known, said Mario Delgado, the majority leader for Mexico’s lower house. The lower house could vote on it in a week’s time, he told reporters Thursday.
Mexico is racing to amend laws to comply with new USMCA rules that explicitly require that workers vote for their unions and labor contracts, both of which rarely happen in Mexico, where employees often lack basic representation. The original draft of the bill by leftist President Andres Manuel Lopez Obrador’s party didn’t go far enough, according to U.S. labor leaders and Democrats in Congress.
“It’s a reform for labor justice and will democratize unions,” Delgado said. “One of its main objectives is to transform the labor justice system.”
AMLO, Pelosi Push
The new draft comes the same day Lopez Obrador demanded the bill comply with the USMCA and get passed quickly, in order to eliminate any “pretext” to reopen trade negotiations. It also follows comments by U.S. House Speaker Nancy Pelosi that there are outstanding USMCA issues including treatment of workers in Mexico. Democrats hold a majority in the House of Representatives and have raised issues with the trade deal the Trump administration clinched last year with Mexico and Canada.
The latest draft of the labor bill, which is expected to be discussed in committee and voted in the full plenum as soon as Thursday, requires secret votes for workers to choose unions and their delegates and to approve their labor contracts, Delgado said. It also creates new labor courts to resolve disputes.
While requiring votes to choose unions and delegates, the original draft didn’t do enough to ensure they’d vote on the contracts themselves, or that they’d even see copies of the contracts, said Ben Davis, director of international affairs at United Steelworkers, an AFL-CIO affiliate. The AFL-CIO is America’s biggest federation of labor unions.
The new labor bill might require a review of that position, a representative of the group said.
“The lengthy text needs full review but a first read indicates key improvements,” Gladys Cisneros, director of AFL CIO’s labor advocacy group in Mexico, the Solidarity Center, said in a statement. “It’s on the right track to correcting egregious violations, but workers will also need to see aggressive, systematic enforcement to guarantee true freedom of association.”
Democrats circulated a letter saying Mexico’s labor bill was deficient in several critical areas, Bloomberg Law reported. The letter was based on the original draft presented in February and was to be sent to U.S. Trade Representative Robert Lighthizer.
It wasn’t immediately clear if Mexico’s new draft would satisfy all of the Democrats’ demands and USMCA requirements as set out in its labor annex. Even if it does, Pelosi may seek changes to the USMCA on trilateral issues to ensure enforcement. “I think we are only chatting unless we are enforcing,” Pelosi said Thursday. “I want to see stronger enforcement language.”
Interview with Celeste Drake of the AFL-CIO. Celeste is the trade and globalization policy specialist at the AFL-CIO, where she advocates for reforms to U.S. trade policy to create shared gains from trade on behalf of working families.
One year ago, we were hopeful that renegotiating NAFTA represented the first real opportunity in 25 years to finally rewrite the labor template currently relied on for trade agreements.
After all, since NAFTA was implemented, hundreds of thousands of U.S. jobs have been outsourced to Mexico by companies taking advantage of workers who do not enjoy the fundamental human rights to form their own free and independent unions, engage in meaningful collective bargaining, be free from discrimination and forced labor, and work in safe and healthy workplaces.
In anticipation of the renegotiations, numerous recommendations for improving and enforcing labor standards were submitted—all of which are instrumental in removing corporate incentives to transfer work to Mexico. Specific recommendations for improving the labor template of current U.S. agreements included these five general suggestions:
Incorporate explicit references to labor standards and interpretation of those standards through various cases and reports reflecting specific rules adopted by the UN’s International Labour Organization (ILO), including those concerning the freedom of association, collective bargaining, discrimination, forced labor, child labor, and workplace safety and health.
Remove the footnote explicitly limiting the terms of the chapter to the ILO Declaration on Fundamental Principles and Rights at Work.
Eliminate the requirement that labor violations under the agreement must be in a manner affecting trade or investment between the parties.
Eliminate the requirement that labor violations must be sustained or recurring.
Verify that labor standards in the agreement are being honored and enforced by the signatories prior to the agreement going into effect.
Unfortunately, none of these essential changes were made to NAFTA 2.0. As noted by the AFL-CIO’s recent Executive Council Statement, “[T]he NAFTA renegotiation requires strong labor rights provisions and strong enforcement provisions that as of today are not yet in the agreement.” Without incorporating the recommendations mentioned above, NAFTA 2.0’s labor standards and enforcement remain weak and Mexico’s workers will still struggle to enjoy fundamental human rights. As a result, wage suppression will continue to provide incentives to for corporations to outsource work to Mexico.
Despite much discussion over modest improvements to the labor chapter, complaints must still overcome obstacles posed by four significant questions regarding NAFTA 2.0’s labor obligations:
Are signatories obligated to honor labor rights or principles?
Under NAFTA 2.0 as currently drafted, any signatory could argue that if it meets the principles of labor rights, as opposed to the rights themselves, it satisfies its obligations under the agreement. This is why recommendations include that the signatories’ obligations must be explicitly linked to specific ILO’s rules along with ILO’s cases and reports, which furnish precise interpretations of these rights.
Not only was this recommendation rejected, but negotiators also retained a footnote first incorporated in the Peru Trade Agreement that makes it even easier for signatories to argue that they are only obligated to meet certain principles, as opposed to the rights themselves. NAFTA 2.0 retains this flaw, making it even more difficult for parties to argue that ILO Conventions and accompanying cases and reports can at least give guidance to interpreting the principle-based obligations.
Instead of referring to the ILO’s core conventions, the Parties chose to include language [in footnote 3 of NAFTA 2.0] that serves to obfuscate, rather than clarify, the rights and principles in the ILO Declaration. We have offered numerous ideas about this matter including simply eliminating the footnote, all of which have been rejected to date.
Few companies would be satisfied with such vague obligations when it comes to matters of special relevance to their interests. This is why they have demanded, and in many instances succeeded in, including specific language in the agreement addressing their concerns. Can you imagine the comments from businesses if NAFTA 2.0 only obligated Mexico to honor the principles of protecting intellectual property rights? Why should labor provisions, which are directly related to Mexico’s suppressed labor rights and resulting low labor costs, be viewed any differently?
NAFTA 2.0’s Article 23.9 reinforces the LAC’s concerns over the lack of commitment to honor specific rights. While it addresses discrimination for a number of things including sexual orientation and gender identity, when it references the signatories obligations, it adopts the wording, “that it considers appropriate” undermining any enforceability. Furthermore, footnote 13 declares that “existing [U.S.] federal agency policies regarding the hiring of federal workers are sufficient to fulfill the obligations of this Article”—raising additional questions over interpretation and enforcement.
Are sectors of workers excluded from NAFTA 2.0’s labor obligations?
Even if a labor violation is deemed to violate the principles referenced in the labor chapter, in order to proceed, the violations must be “in a manner affecting trade or investment between the parties.” This provision makes it clear that large sectors of employment may not be covered by the agreement’s labor obligations. This means that thousands of teachers, government workers, fire fighters, police, medical workers, and others could arguably left out of NAFTA 2.0.
[The provision] therefore risks leaving loopholes for wage suppression, particularly by public sector employers that refuse to accord fundamental labor rights to their employees. Mexico has denied workplace rights and freedoms to its teachers, which not only suppresses the wages, benefits, and conditions of those teachers, but also applies downward pressure on wages, benefits, and conditions of similarly skilled working people in Mexico’s private sector, many of whom produce goods or provide services that compete with goods and services of U.S. workers… The failure of one significant set of workers to be able to enjoy their rights can undermine the proper functioning of a market, suppressing demand, both for the goods produced in that country and for the goods produced by other trading partners.
Would murder of a trade union activist constitute a violation of NAFTA 2.0?
Even if a labor violation meets the burden of showing that there has been a violation and meets the burden of affecting investment or trade, the violation still must meet the sustained or recurring burden.
Single egregious acts can and do crush workers’ desires to exercise their fundamental human rights to form unions and engage in meaningful collective bargaining. The murder of a union activist sends a powerful message to all other workers that they face the same fate, should they wish to form a union. Language in Footnotes 8 and 11 even represents a step backward by emphasizing that “an isolated instance or case” is not covered, removing any possible ambiguity. The new standard sets a very high bar requiring that not only do the actions (or inactions) have to occur “periodically and repeatedly,” but the “occurrences” must be “related or the same in nature.”
What good are labor standards if they are not effectively enforced?
Even if NAFTA 2.0 adopted stronger standards, violations of the labor chapter’s provisions must be effectively enforced. To date, an effective enforcement mechanism in the proposed agreement is lacking. Although several recommendations have been made, none have been adopted.
Without a strong and swift enforcement mechanism, none of the labor obligations—even strengthened labor obligations—in the agreement will be effective. One of the faults of NAFTA is that it does not provide enforcement for obligations like the freedom to form a union. Subsequent labor agreements also fail to provide for effective enforcement. Workers know that without a true commitment to enforcement, through proper funding, accessible and equitable procedures, education on what basic human rights are (like the freedom to form a union and engage in meaningful collective bargaining), as well as other essential items, enforcement will not be effective.
NAFTA 2018’s dispute settlement and enforcement provisions are neither “effective” nor “equitable,”… by failing to include additional provisions to ensure that the labor rules are adequately and promptly monitored, remedied, and sanctioned if not remedied, the dispute settlement provisions will be neither effective nor equitable as regards labor. A quarter century of experience has proved that labor rules must receive special attention to ensure swift and certain enforcement. Workers simply do not have the power and influence that global companies seeking to vindicate their trade rights have.
Without question, NAFTA 2.0’s labor provision contains some improvements. Language regarding the right to strike, recognition of violence against workers and efforts to improve Mexico’s labor laws with respect to protection contracts are welcome. Nonetheless, as stated, NAFTA 2.0 maintains the fundamental flaws carried over from past trade agreements. Until the recommendations mentioned above are adopted, NAFTA 2.0 will continue to fall short in significantly improving labor standards and, wage suppression for Mexico’s workers will continue.
Florida farmers will pay the price for a flawed trade agreement with Mexico, warns one Republican Congressman, as he tries to convince the Trump administration to reopen negotiations before the United States-Mexico-Canada Agreement (USMCA), or “NAFTA 2.0,” is put forward for a vote.
U.S. Rep. Ross Spano of Florida’s 15th Congressional District says the currently negotiated deal doesn’t do enough to stop Mexico from flooding U.S. markets with seasonal fruits and vegetables, which are sold at much cheaper rates than American produce.
Florida farmers, direct seasonal competitors with Mexican farmers, say those “dumping” practices have crippled their business in recent years, from the tomato producers in Immokalee to the strawberry growers in Hillsborough County. Produce subsidized by the Mexican government reportedly include tomatoes, cucumbers, peppers, and strawberries.
“The Mexican government, in my opinion, is violating the existing NAFTA agreement,” Spano said. “It’s impossible for them to produce those berries at the price they’re selling them.”
U.S. Sen. Marco Rubio, along with a bipartisan contingent of dozens of U.S. House members, has been successful in lobbying the Trump administration to pursue a NAFTA investigation into Mexican tomato-dumping. But NAFTA requires the support of a majority of U.S. growers to initiate an investigation, and Spano says California farmers, whose growing seasons tend to run opposite of Florida’s and who also own stakes in Mexican farms, have refused to support Florida farmers on strawberries.
The newly renegotiated USMCA represented the fulfillment of a campaign promise by President Donald Trump. The deal appears friendly to corn, dairy, soybeans, and other powerful U.S. agricultural industries, but it does not address the concerns of the farmers in the Southeast U.S., which Spano says will allow Mexico to continue to dump seasonal crops, undercut competition, and shut down farms in the Southeast U.S.
“It’s very difficult to establish they’re doing it without direct evidence because (the Mexican government) won’t produce it,” Spano said. “In order to allege a violation of NAFTA and prompt an investigation to get the information, we need California growers to cooperate … but they have the summer market cornered, and they can sell in the winter months from their operations in Mexico … their only competition in the winter is Florida.”
Spano said the Trump administration conceded to Mexico on rules for initiating a NAFTA investigation. “We wanted the USMCA to include a provision that would allow us to initiate an investigation without a clear majority,” he said. “Unfortunately, that was the last thing, as I’ve been told, that the administration gave back to Mexico. That was the No. 1 issue for Mexico; they did not want our industries to allege violations more easily.”
Florida farmers find themselves fighting the produce trade war not just with their international seasonal competition; they are fighting a domestic battle as well, with other U.S. agricultural industries and interest groups that receive federal subsidies and favorable treatment from the USMCA.
“The split of interest groups and the level of tension between the Northwest and Southeast are staggering, at a dangerous level,” Zhengfei Guan, Assistant Professor at the Gulf Coast Research and Education Center and University of Florida’s Food and Resource Economics Department, wrote in an email. “The government should take the situation seriously and work out a solution acceptable to all involved, either inside or outside the USMCA trade deal.”
Guan said Mexico had increased its fruit and vegetable exports to the U.S. to a whopping $13 billion in 2017; the U.S. exported just $7 billion to Mexico.
“Florida strawberry growers do not receive subsidy payments and are simply asking for a fair playing field and a reasonable mechanism to defend themselves,” Kenneth Parker, Ex-Dir. of the Florida Growers Association, said in a statement. Earlier this month, Parker and Spano hosted U.S. Chief Agricultural Negotiator, Ambassador Gregg Doud, in Plant City to persuade the administration to restrict Mexico’s dumping of produce into the U.S. The Trump administration — through its Office of the United States Trade Representatives — declined on-the-record comment since the discussions are ongoing.
A fact sheet on the office’s website states, “while agriculture has generally performed well under NAFTA, important improvements in the agreement will enable food and agriculture to trade more fairly, and to expand exports of American agricultural products.”
When the vast expanse of rural Iowa was carved up for settlers in the 19th century, it was often divided into 160-acre lots. Four farms made a square mile, with a crisscross of dead-straight roads marking the boundaries like a sprawling chess board.
Within each square, generations of families tended pigs and cattle, grew oats and raised children, with the sons most likely to take over the farm. That is how Barb Kalbach saw the future when she left her family’s land to marry and begin farming with her new husband, Jim, 47 years ago.
Half a century later, Kalbach surveys the destruction within the section of chessboard she shared with other farms near Dexter in southwestern Iowa. Barb and Jim are the last family still working the land, after their neighbours were picked off by waves of collapsing commodity prices and the rise of factory farming. With that came a vast transfer in wealth as farm profits funnelled into corporations or the diminishing number of families that own an increasing share of the land. Rural communities have been hollowed out.
And while the Kalbachs have hung on to their farm, they long ago abandoned livestock and mixed arable farming for the only thing they can make money at any more – growing corn and soya beans to sell to corporate buyers as feed for animals crammed by the thousands into the huge semi-automated sheds that now dominate farming, and the landscape, in large parts of Iowa.
Kalbach comes from five generations of farmers and suspects she may be the last. As she drives the roads around her farmhouse, she ticks off the disappearances.
“That’s the Shoesmiths’ place,” she said. “Two years ago, it had cattle, pigs and pasture.”
Now the land is rented out and is all given over to corn. A little further along, the Watts family’s farmhouse stands empty, its roof falling in. There are a few relics of the old farm at the place that used to be owned by the Williamses – an abandoned hen house and a bit of machinery – but the land is all corn and soya beans. The Denning house, on Walnut Avenue, was bulldozed after the land was sold and rolled into a bigger operation.
It’s a story replicated across America’s midwest, with the rapid expansion of farming methods at the heart of the row over US attempts to erode Britain’s food standards and lever open access to the UK market as part of a post-Brexit trade deal. Last weekend, the US ambassador to Britain, Woody Johnson, appealed to the UK to embrace US farming, arguing that those who warned against practices such as washing chicken in chlorine had been “deployed” to cast it “in the worst possible light”.
His message was greeted with anger by campaigners. Nick Dearden of Global Justice Now warned: “It is really an animal welfare issue here. If UK farmers want to compete against American imports, they will have to lower their standards or go out of business.” His words would come as no surprise to Rosemary Partridge, who farms in Sac County, western Iowa. She grew up on an Iowa family farm and then moved with her husband in the late 1970s to raise pigs and grow crops.
“In the past 20 years, where I am, independent hog farming just silently disappeared as the corporates came in,” says Partridge. “I live on a hilltop. I can see seven farm families, people my kids went to school with. They’re all gone now. My county has 11 small towns, and it’s almost like I could look back in slow motion and just see the businesses change and disappear. We’ve become poorer. Our communities are basically shattered and in more than just an economic way – in a social way too.”
This collapse has in good part been driven by the rise of concentrated animal feeding operations, or Cafos. In these industrial farming units, pigs, cows and chickens are crammed by the thousand into rows of barns. Many units are semi-automated, with feeding run by computer and the animals watched by video, with periodic visits by workers who drive between several operations.
“That’s how I end up with 40,000 hogs around me,” says Partridge.
Cafos account for only a small proportion of America’s 2 million farms, but they dominate animal production and have an outsize influence on crop growing, particularly in the midwest.
By one calculation, the US has around 250,000 factory farms of one kind or another. They have their roots in the 1930s, with the mechanisation of pig slaughterhouses. By the 1950s, chickens were routinely packed into huge sheds, in appalling conditions.
In the early 1970s, US agriculture secretary Earl Butz pushed the idea of large-scale farming with the mantra “get big or get out”. He wanted to see farmers embrace what he regarded as a more efficient strategy of growing commodity crops, such as corn and soya beans. Some farmers invested heavily in buying land and new machinery to increase production – taking on large amounts of debt to do so.
A decade later, the farm crisis hit as overproduction, the US grain embargo against the Soviet Union and high interest rates dramatically drove up costs and debt for family farms. Land prices collapsed and foreclosures escalated.“Every blow to independent farming made it more of an opportunity for large corporations to come in,” said Partridge.
In 1990, small and medium-sized farms accounted for nearly half of all agricultural production in the US. Now it is less than a quarter.
As the medium-sized family farms retreated, the businesses they helped support disappeared. Local seed and equipment suppliers shut up shop because corporations went straight to wholesalers or manufacturers. Demand for local vets collapsed. As those businesses packed up and left, communities shrank. Shops, restaurants and doctors’ surgeries closed. People found they had to drive for an hour or more for medical treatment. Towns and counties began to share ambulances.
Corporate agriculture evolved to take control of the entire production line from “farm to fork”, from the genetics of breeding to wholesalers in the US or far east. As factory farms spread, their demands dictated the workings of slaughterhouses. Smaller abattoirs, which offered choice and competitive prices to family farmers, disappeared, to be replaced by huge operations that were further away and imposed lower prices on small-scale breeders such as the Kalbachs.
“By the time you paid to transport them the extra distance, and they were paying you less than they paid the corporations because you weren’t bringing the big numbers, there was really no money in it,” says Kalbach.
The buying power of the Cafos also helps drive farmers’ decisions on which crops to grow. With no livestock, the Kalbachs were forced into gowing corn and soya beans to sell to factory farms as animal feed or to corporations for ethanol.
Iowa is not alone. Missouri, to the south, had 23,000 independent pig farmers in 1985. Today it has just over 2,000. The number of independent cattle farms has fallen by 40% over the same period.
Tim Gibbons of Missouri Rural Crisis Center, a support group for family farmers set up during the 1980s farm crisis, says the cycle of economic shocks has blended with government policies to create a “monopolisation of the livestock industry, where a few multinational corporations control a vast majority of the livestock”.
Gibbons explains: “They are vertically integrated, from animal genetics to grocery store. What they charge isn’t based upon what it costs to produce, and it’s not based on supply and demand, because they know what they need to make a profit. What they have done, through government support and taxpayer support, is to intentionally overproduce so that the price stays low, sometimes below the cost of production. That kicks their competition out of the market. Then they become the only player in town.
“Over time, it has extracted wealth and power from communities. We can see how that has impacted rural main streets. You can see the boarded-up storefronts. You can see the lack of economic opportunity.”
Gibbons says that corporations game the system by obtaining low-interest, federally guaranteed loans to build Cafos that then overproduce. But they know the government will buy up the surplus to stabilise prices.
“The system has been set up for the benefit of the factory farm corporations and their shareholders at the expense of family farmers, the real people, our environment, our food system,” he adds.
“The thing that is really pervasive about it is that they control the rules of the game because they control the democratic process. It’s a blueprint. We’re paying for our own demise.
“It would be a different argument if it was just based upon inevitability or based on competition. But it’s not based upon competition: it’s based upon squelching competition.”
There are about 70 million pigs in the US at any time, most of them destined for the dinner plate. But one in 10 are breeding sows, and the majority of those are in Cafos. The biggest pig farmer in the country is Virginia-based Smithfield Foods, which has nearly a million sows in the US (and more in Mexico and eastern Europe). Iowa Select Farms has one of the fastest-growing Cafo operations in the country, with 800 farms spread through half of the counties in Iowa.
Yet few of the economic benefits spill down to the communities around them. Workers are often poorly paid; many are bussed in. That they often include immigrants has sharpened the criticism from men like Nick Schutt, who used to work at Iowa Select, driving pigs in livestock trucks and handling sows. He says he earned $23,000 a year for 12-hour days and no overtime.
“These companies claim they’re creating all these jobs, but who’s coming? Not people with families who create communities.”
Schutt lives in Williams, a small town in central Iowa, which is surrounded by Cafos and currently fighting to keep a big new one out, saying factory farms pollute the environment and depress property values. When the wind blows in the wrong direction, the stench from huge lakes of pig manure wafts across the town.
The high school Nick Schutt attended has closed. His daughter was in the last class to graduate. As Williams declined, the only doctor shut his clinic and left town. Schutt’s mother used to own a restaurant: that closed along with the town’s three grocery stores.
In Blairsburg, seven miles away, pretty much every shop except the post office is gone. The neighbouring hamlet of Wilke now consists of three animal sheds on land where dwellings were bulldozed from existence. Two-thirds of the counties in Iowa, almost all of them rural, have seen their populations decline since 2010, according to the US census.
North of Williams is a Cafo whose name, Quality Egg, has come to represent the worst of factory farming. In 1988, New York temporarily banned the sale of its eggs after salmonella killed 11 people. In 2017, its former owner, Jack DeCoster, went to prison, along with his son Peter, over a 2010 salmonella outbreak that made tens of thousands sick, left some with permanent injuries and prompted the recall of more than half a billion eggs shipped from Iowa factory farms. Quality Egg pleaded guilty to selling eggs with false expiry dates and to bribing an agriculture department inspector to approve the sale.
DeCoster had a long history of paying fines worth millions of dollars for animal cruelty, falsifying records, swindling contractors and polluting – without much impact on the way he did business. He was found to have made immigrant workers, many of them in the US illegally, live and work in squalid and unsafe conditions. The company paid $1.5m to settle allegations that supervisors at Iowa plants raped female workers.
DeCoster is an extreme case, but around Iowa he’s seen as emblematic of how the industry uses its money and influence to impose its will, including changing planning and environmental regulations.
Much of this is the result of agricultural corporations pouring millions into lobbying state governments. But Gibbons says Washington also bears some responsibility. He accuses President Barack Obama’s administration of failing to deliver on promised reforms that would have benefited smaller farmers. It is this, he says, that damaged Obama’s standing among farmers and drove up their support for Donald Trump.
Barb Kalbach is not optimistic about the future. Her son will not be taking over the farm. She hopes the land will stay in the family for at least another generation, but expects it to be rented out and subsumed into some larger operation.
But Kalbach fears something bigger than the loss of her own farm. Farmers are ageing and their children either have little interest in working the land or cannot afford the sophisticated equipment needed to compete with corporations.
“Investors buy the land, and they have tractors and combines that you can run by computer,” she said. “They’ll hire somebody to sit in a little office somewhere and run that stuff off the computer and farm the land that way. Now what you’ve done is you have lost the innate knowledge of how to grow food and raise animals. You’ve lost a whole generation of it, probably two. Now we are going to rely on a few corporations to decide who is going to eat and who isn’t. We’re one generation away from that picture right now.”
In Williams, Schutt says he’s seeing a community of owners becoming workers: “It’s going to be like Russia with serfs. If you want to work on a farm, you’ll have to work for them. We’ll give you a job, but you’re going to be working on our terms. We control everything. Small farms can’t survive.”
Labor group representatives on Tuesday offered lawmakers suggestions for how the U.S.-Mexico-Canada Agreement could be reworked to include sufficient labor enforcement mechanisms, with the AFL-CIO pitching an option that would give citizens standing to sue governments if the deal’s dispute settlement process went awry.
During a House Ways & Means trade subcommittee hearing on labor and trade, Rep. Don Beyer (D-VA) honed in on what he called a dysfunctional state-to-state dispute settlement process, an issue that has been raised by several analysts and lawmakers as the administration seeks to advance USMCA.
As written, USMCA would allow any party to block the formation of a dispute settlement panel, effectively paralyzing the process at the outset.
“So, even if the political will is present for labor enforcement, the mechanism is non-functional as written. How should the state-to-state dispute settlement process be altered … to address the whole panel formation issue?” Beyer asked during the hearing.
Celeste Drake, a trade policy specialist with the AFL-CIO, said “removing that barrier” would be the first step.
“In the new NAFTA, it essentially replicates the mechanism of the original NAFTA,” she testified, “and that is that you can’t get to the step of dispute settlement unless there has been a meeting of the free trade commission, which is all three countries, and any one country can say ‘Nope, I don’t feel like meeting,’ which essentially means there’s not going to be dispute settlement. The U.S. abandoned that model in the CAFTA and subsequent agreements and now it’s back.” CAFTA-DR is the Dominican Republic–Central America Free Trade Agreement, which went into force after NAFTA.
“So, the first step would be removing that barrier and saying ‘Look, if we need to get to dispute settlement, the very country being challenged for violating the trade agreement can’t prevent the dispute settlement panel from forming,’” Drake added.
Beyer then asked if using the laws of the “state that was violating the agreement” could suffice.
“That’s written into the agreement,” Drake said. “So, it’s baked in the cake unless that provision is modified. So, we would fix that but then we would add additional things that reflect the 25 years of experience of lack of political will in actually enforcing the agreements.”
One mechanism the AFL-CIO has proposed to the administration, Drake continued, would “make enforcement an obligation — a mandatory duty — so that if any government refuses to enforce the labor obligations, that citizens could go to a federal court, as they do now for instance under the Environmental Protection Act, and say ‘the federal government is violating its duty by not enforcing these agreements; we want the federal government to act.’
Prompted by a question from trade panel Chairman Earl Blumenauer (D-OR), Drake addressed issues that led to a U.S. loss in a nine-year labor caseinvestigating Guatemalan labor practices, which was filed under the CAFTA-DR trade agreement. The determination was released in June 2017. She said labor language requiring that the U.S. show violations occurred in a “manner affecting trade” and in a “sustained or recurring course of action of inaction” acted as barriers to enforcement. Such language, though clarified by footnotes, remains in USMCA.
“These terms remain in the new NAFTA,” Drake noted. “They are both now modified by footnotes that say ‘for greater certainty here is what we mean.’ The footnote that interprets ‘manner affecting trade’ does really attempt to expand the meaning of manner affecting trade beyond what the Guatemala panel had held. The footnote interpreting ‘sustained or recurring course of action or inaction,’ we believe, actually moves the ball backward and makes that harder to prove.”
In the AFL-CIO’s submissionto the U.S. International Trade Commission last November, the labor group said while USMCA “retains the objectionable limitations that labor violations under the agreement must be in a ‘manner affecting trade or investment’ (which likely excludes much of the public sector) and occur in a ‘sustained or recurring course of action or inaction’ (which excludes egregious but one-time acts such as murder or torture), the footnotes clarifying these standards are welcome improvements.”
Rep. Ron Kind (D-WI) asked whether labor groups would prefer to retain NAFTA, as many have said USMCA’s labor chapter does not pass muster as written.
Citing the testimony of Shane Larson, the director of legislation, politics and international affairs for the Communications Workers of America who told the panel USMCA negotiations should be re-opened, Kind said “we’ve heard from our administration, Mexico, Canada — that ain’t going to happen.”
“Now, assuming Mexico does move forward and changes their domestic labor laws like they promised to do, and if we are faced with a choice, either this or back to the old NAFTA, what’s your opinion?” Kind asked.
“The labor chapter is an improvement on the current NAFTA,” Larson contended. “The problem is the enforcement mechanism. And the enforcement piece is not there. And that’s why we’ve got to get back to the table to get a meaningful enforcement mechanism in place.”
While the administration has said it will not re-open talks on the agreement, Larson continued, “we heard that with Peru, we heard that with Korea, we’ve heard that from past administrations on past trade agreements where once they realized the votes weren’t here on the Hill, they went back and renegotiated.”
Larson also pointed to administrations in Mexico and Canada that are more “open to workers’ rights” than prior governments. “So, we believe that at least on the labor piece you will have a receptive audience to go back to the table to negotiate,” he added.
Rep. Bill Pascrell (D-NJ) pointed to a push from U.S. labor groups during the negotiation of the Trans-Pacific Partnership to ensure the country installed high-caliber labor standards before entering the agreement.
“How should we use trade agreements to set higher labor standards abroad?” Pascrell asked Thea Lee, president of the Economic Policy Institute and a former AFL-CIO official. Lee said pillars established by the International Labor Organization were key to ensuring countries meet the necessary standards, including provisions in USMCA.
“One of the issues that we have is to say countries should basically have laws that meet the international core labor standards prior to entering into force with a trade agreement,” Lee said. “A labor chapter of a trade agreement is not that powerful an instrument. You don’t want to use that to try to change a country’s labor laws, you want that country to demonstrate that they want to be in compliance with the international labor standards and then use labor chapter to enforce that going forward, and I think that’s the ideal balance there.”
Mexico’s Congress is expected to pass, by April 30, legislation implementing labor reforms called for in USMCA, though sources have questioned whether the leading bill under consideration will meet USMCA standards and mollify Democratic lawmakers in the U.S. who have said labor enforcement is crucial.
Holly Hart, legislative director for the United Steelworkers of America, pointed to Trump administration budget in questioning whether the administration planned to address enforcement concerns.
“Enforcement is a critical issue that seems to only be getting paid lip service,” Hart said during her testimony. “What is disturbing to the USW and should be for those committed to strong enforcement are the budget requests of the president, which shortchange the agencies that do this critical work. Congress appropriated $95 million for the International Trade Commission for fiscal 2019, while the Trump administration is only requesting $91 million for fiscal 2020 yet unfair trade continues. While the President’s budget pluses up by $6 million its funding requestfor the Office of the U.S. Trade Representative, it cuts the Trade Enforcement Trust Fund from $15 million to $10 million.”
Hart alleged that the enforcement of USMCA’s labor chapter was a “minimal priority” for the Trump administration because its “new budget plans cuts of more than 80 percent for the very entity that has a significant role in handling labor rights violations, the Department of Labor’s Bureau of International Labor Affairs.”
After meeting one-on-one with U.S. Trade Representative Robert Lighthizer on Tuesday, Congressional Progressive Caucus co-chair Mark Pocan (D-WI) said key changes must be made to the U.S.-Mexico-Canada Agreement itself if the Trump administration wants to gain the support of his contingent, which is one of the largest in Congress.
The trade-skeptical caucus, which has more than 90 members, has made clear it wants to re-open the deal and make some tweaks, Pocan toldInside U.S. Trade, “and we expressed those again to him” this week.
“He’s very open to conversation, he’s a lot more open than the previous trade representative under a Democratic president. So, for many of us it’s unique to have someone who does seem to be listening to us. But we still have concerns about biologics, around labor enforcement written into the agreement and some other provisions,” Pocan said, pointing to a briefing the USTR gave to the Democratic caucus last month.
Asked what solutions were discussed, Pocan said it was more of a theoretical conversation. “Honestly, we just had a good, open discussion about what’s in it, what’s not in it and what we are still expecting and why if he opens it what he thinks could happen. It was a very constructive conversation,” he added.
Lighthizer has told other lawmakers – and said at the deal’s signing in November – that the deal would not be re-opened. House Speaker Nancy Pelosi (D-CA) on Tuesday urged the USTR to reconsider that position and resolve outstanding enforcement issues by going back to the negotiating table.
But Pocan said he told Lighthizer this week that “if he wants Democratic votes he is going to need to” re-open the deal.
“Again everything that happened in caucus [meeting] is the same conversations that I brought up,” Pocan noted. “I think he is getting the message that we are at a similar place and it’s not like heavy lifts.”
Asked whether changes could be made via the deal’s implementing legislation or in other ways, Pocan said fixes must be made to the deal itself – and soon.
“I go by – remember the Popeye ? ‘I’ll pay you Tuesday for a hamburger today?’ We want the hamburger paid for today. So, we want the language fixed today – not in other language because that never has the same kind of enforcement. We’ve had to re-open too many of these agreements after passing them because they weren’t done right the first time,” he contended.
The required changes, he continued, are minor. “This is close enough in my opinion that if they do a few things [within the body of the text], we could have it done right,” he said.
To Lighthizer’s credit, Pocan continued, “he is truly listening, and he has a real conversation and I never really had that with [former U.S. Trade Representative Michael Froman]. So, we are happy to have him doing the outreach he is doing.”
Lighthizer was invited to the caucus’ next meeting, which has yet to be scheduled, Pocan said, adding that the trade representative agreed to attend. “He’s been extremely open.”
Rep. Ron Kind (D-WI) on Tuesday urged Capitol Hill to work with the administration to explore avenues other than a full-blown re-opening of USMCA talks to address Democratic concerns.