Latin America

NAFTA was always something that created tension between the US, Canada and Mexico in areas of debate that were never an issue before the concept of free trade became an ethos of foreign policy. NAFTA, originally built on from the Canadian-American Free Trade Agreement (CAFTA), was a progression of the US-Canada Auto Pact which set to reduce barriers to trade in the auto sector, expanding through CAFTA to include other consumer good and into NAFTA, to integrate Mexico into a North America wide trade agreement. The benefits and costs never were ultimately weighted to one side or the other. Canada would benefit from a secured auto market and less restrictions in selling its good to the US, now numbering around 92% of Canada’s exports abroad. Mexico would benefit from becoming a base for manufacturing goods to sell into the US and Canada and allow for employment in their own country in an attempt to curb poverty and increase much needed investment into the Mexican economy. Both would benefit from having a NAFTA Tribunal which would allow for judgments in a binding forum which would assist the two countries in registering just disputes with its massive neighbour, the United States. In turn, US companies would be able to access those markets and allow for US multinationals to set up investments and cross border trade within their own organizations as well as with other companies. US exports to Canada and Mexico since 1994 has made these two countries two of the top importers of American goods. With a population of 32 million and 100 million respectively, Canada and Mexico rival some of the largest markets in the world for US exports. It is hard to measure the true benefit of NAFTA for each country, but with the stability of the modern Mexican economy, the great effect of US companies on the Canadian and Mexican economies and the ability for the US to have two of the world’s largest economies within its economic and political influence, NAFTA was seen as a success by many policymakers in all three countries.

Recently NAFTA has been attacked by Hillary Clinton and to a lesser extent Barak Obama in their bloody and senseless campaigning towards degrading the Democratic Party. With the support for Hillary Clinton coming from many blue collar workers in Ohio, Pennsylvania and other manufacturing regions in the US; NAFTA, Mexico and immigration has become the keys to winning seats over Mr. Obama and his calls for Change. Damage has not only been inflicted on the Democrats, but on America’s neighbours. Countries like Canada and Mexico who have given a lot of support to the US, despite the poor impression of Mr. Bush in both countries, have been fairly good neighbours with the US in the last few years. Canada alone has born the brunt of much of the conflict in Afghanistan since Al Qaeda resumed its offensive two years ago, with most US forces stuck in Iraq. Mexico has opened its oil and petroleum industry towards the US, bringing closer economic ties despite the move by many American companies to China and away from Mexico. Mexico even has taken great steps to alienate Cuba, once a friend of the island nation, now in a cold peace with the Communist nation. The costs and benefits of NAFTA were summed up recently in the North America Leaders Summit in New Orleans where Mr. Bush, Stephen Harper of Canada and Felipe Calderon of Mexico met to discuss the future of North America.

The first volley of issues came as a response to Clinton’s campaign strategy to re-negotiate or scrap NAFTA. The North American Competitiveness Council, a group of 30 business leaders issued a statement promoting NAFTA and its increase since 1994 to creating trade amounting to over a trillion dollars. They also commented of how recent protectionist dialogue would do little to improve the relationship between the countries. Much of the losses of recent employment has come from American companies moving to China, so beating up on NAFTA and not addressing China trade when assisting blue collar workers in the US may simply hurt the relationship with the few neighbours Mr. Bush hasn’t already alienated in the last 8 years. This attack does nothing more than give a false solution to the US economy except for gaining a few votes for Mrs. Clinton and stirring sentiments against Latino immigrants in the US and trade in general.

Despite many in the US attacking Canada and Mexico for taking American jobs and wanting to integrate into the US, and many in Canada trying to tie Prime Minister Harper into the conservative right in the US to prompt and election, the Canadian Prime Minister has been strong in taking a stance on resolving NAFTA and other issues involving its neighbors. Mr. Harper has done a respectable job in addressing problems in NAFTA such as softwood lumber, defining Canada’s role in Afghanistan as a force to create a sustainable environment for aid, and his environmental policies has done a great deal to benefit Canadians and dialogue with Americans alike. Mr. Harper addressed Mrs. Clinton’s assessment of its neighbours as well, making the strong point that in this global energy crisis, Canada is one of the world’s largest exporters of petroleum and gas to the US and has a reserve some say as large as Saudi Arabia.

Harper has always been amicable to the US President, but is clearly not a George Bush of Canada. His support of Canada’s national healthcare system and standing social policies would be savored by many Democrats in the US during an election campaign. Harper clarified his relationship with Mr. Bush at the Summit: “What I appreciate most, what I’ve appreciated in our relationship over the past couple of years, is the fact that whether we agree or disagree, we’re always able to talk very frankly, very upfront,” Felipe Calderon of Mexico also promoted the benefits of NAFTA, helping to grow the Mexican economy to one of its most stable periods since the late 1960s. Both leaders, while surely realising the unpopularity of President Bush, coordinated their address at the Summit in support of NAFTA and against major changes or eliminating the agreement altogether. In the end, anti-NAFTA talks will likely progress into anti-China trade or simply disappear when Clinton loses the nomination for her party to Mr. Obama. With the recognition of America’s neighbours as true colleagues, issues of trade, aid and immigration can be addressed in a progressive manner in Obama’s or McCain’s first term of office.

In an article released last week by Spiegel International, evidence of FARC activities have been discovered after the killing of one of its leaders in Ecuador last month. The article goes into detail on what information was discovered. Information about the state of Ingrid Betancourt was detailed in the files. What most expected, is that she is quite ill and is putting up a strong front against her kidnappers. Another piece of valuable information is that the FARC is also in possession of 30 kilos of Uranium, not suitable for making bombs but useful in the production of armor piercing rounds which can cut through most modern tanks and APC’s possessed by the Colombian military.

What was most striking about the recent information is the evidence found linking Hugo Chavez with the FARC. Beyond mere sympathy for their cause, the documentation lists funds and weapons from Chavez’s Venezuela going to FARC rebels in Colombia. Despite threats by Chavez against Colombia a few weeks prior, it is in fact Chavez who is supplying arms against Colombia via the FARC according to Spiegel International. Details of Chavez’s assistance to the FARC includes $300 million in aid to the FARC as well as arms from the Venezuelan military and even a suggestion of giving the FARC shares from Venezuela’s oil revenues. Moreover, suspicions of Venezuela’s cooperation in the drug trade have been a constant concern of the Colombian government. The FARC makes most of its revenue from narcotics, but getting the drugs to Europe and the US is said to be done in some part through Venezuelan airports. An estimated 30% of the narcotics are said to go through Venezuela to outside markets according to Colombian drug authorities. A captured narcotics boss even referred to Venezuela saying “Venezuela is the drug trafficking mecca” in a statement made after his arrest.

With the release of this evidence to the international community is will be interesting to see how much the EU and US are willing to support a possible hot conflict in South America. With the War on Terror siphoning resources, a US election which is increasingly anti-trade and protectionist and years of ignoring foreign policy issues in the Andean region by most countries, Colombia has had little effective aid in the last 8 years except from Sarkozy of France. Evidence of the possible direction of the next US President may have taken its form in the recent discussion of opening a Free Trade Agreement with Colombia. The current debate between President Bush and the Democrats in Congress concerns threats in Colombia against local labour leaders. A debate to suspend the FTA has strong support in reaction to Colombia’s record of violence against local labour leaders, according to Human Rights Watch. Alternatively, the debate to increase trade has been linked with the current battle against the FARC in Colombia by addressing poverty in the country through helping grow the Colombian economy and eliminate the need for a paramilitary state and the need for drug money to support the underground markets in Colombia. The export of flowers and coffee and other agricultural products, grown on massive scale in Colombia may have the effect of displacing the need for illegal crops and create new markets for Colombia’s legal commodities. To date, Bush is pushing to pass the FTA through despite opposition. Trade might become the major election issue indeed, with Clinton gaining a lifeline from much of the debate against Obama who has taken a recent hit due to comments made about small town Americans. And it continues on and on…

An April 17th article by the Economist.com challenges the issues discussed above. The Economist suggests that for the last 6 years of Uribe’s Presidency, he has done everything a US ally who is fighting a War on Terror should do, and that is to win. His successes in driving the FARC from Bogota towards the small grottos in Colombia’s jungles and his support for the US Plan Colombia has made Uribe a poster child for US support abroad. With challenges due to human rights issues in the US Congress and the likely failure of a future FTA, pressure on Uribe may be limited as temporary trade measures currently in place can be extended towards Colombia. The real effect of US pressure as suggested by The Economist may have little weight as the security situation in Colombia, as support by most of the population in Colombia, takes precedent over any politics abroad. A possible end to the FARC and Uribe’s hand in those action will prove to reward Uribe in a Colombia free of major internal threats and strong enough to resist pressures from Washington. With threats from its neighbours as well, Uribe will likely get as much support as he needs if Colombia is threatened with any coercive actions which may help the FARC or the drug trade in Colombia originating from a foreign power. The US will likely be seen as abandoning its allies if it lets Colombia be attacked from abroad. It will be a likely paradox for the next President, if they give aid for security reason, but will not allow trade and development in the process. US Foreign Policy may seek to aid in a success in Colombia, as failures in Iraq and possibly Afghanistan may be the only legacy of US Foreign Policy for the next decade.

The real problem may be a current of anti-trade in the upcoming US election. While Colombia does have issues with its labour leaders, countries like Mexico and even Canada have been placed in the penalty box in Clinton’s speeches towards the electorate in Pennsylvania in order to gain more votes by poking at trade and immigration issues with its neighbours amidst the growing concern over trade with China. Depending on who becomes the next US president, it is certain that trade with any country in the Americas will be threatened if it will gain more votes for their candidate. Unfortunately reality and politics may never meet in that dialogue and US relations with its neighbours and assistance to Colombia will continue to be a problem for another 4 years of the American Presidency. The next vote will likely have as great an effect on America’s neighbours as it does on Americans themselves. The most interesting result may be to what degree will the next President placate China while placing economic and security concerns on its friendly neighbours to the north and to the south. What remains to be true is that a conflict in South America may mirror the next decade of international politics, which unfortunately may be as obtuse as the last eight years of ineffective foreign policy towards Colombia and Venezuela.

Behind oil export and above tourism, remittances from Mexicans abroad to their home country makes up a large part of the cash that builds homes and futures in many Mexican communities. With the recent economic crisis in the US, America’s neighbours are starting to feel the fallout of the Mortgage Crisis that is slowly presenting problems in countries outside of the G8. With many Mexicans living in the US in hard hit areas, those funds that used to pay for medicine, food, homes and everything else for families of migrants from Mexico are now suddenly being cut off with great effect.

With a decline in remittances of 7% since last year, many in Mexico who were just keeping afloat may slip into poverty this year. Many small villages who sent their young men and women over the border and who often are mired in economic troubles are the hardest hit communities in Mexico when economic troubles loom. With remittances to Mexico increasing five and a half times since 1997 to $24 billion, these funds are not only a necessity, but is Mexico’s second largest source of foreign revenue. What also seems to focus the tension on Mexico is that areas in the US where Mexicans have migrated to are also those worst hit by the crisis. While migrants from El Salvador and Guatemala are also affected, those communities often have settled in the Washington-Maryland areas which have been less affected by the crisis according to The Washington Post.

The likely effect of the crisis outside the US may result in more illegal migration across the border. Despite the troubles in the US, communities in Mexico near poverty will not weather the lack of funds as easily as much of the United States. Economies tied in with the US will slowly feel the effects of economic troubles in their largest export market. The lack of sympathy for future trade agreements and harder policies on immigration will also likely take hold with the poor economy and continued anti-NAFTA and FTA sentiments in the US Congress. The next American President will have a lot of repair work when beginning his or her job in 2009.

I was happy to read a clever article called: Linking NAFTA and Immigration by Ted Lewis of the San Diego Tribune as he discusses the campaign issues and how they are being spun to effect the campaign and America’s neighbours in a negative fashion. Lewis suggests that reform in NAFTA and effects on the poorest in the three member states needs to be addressed in a logical fashion, and not via the lens of the complete benefit of free trade or lowbrow electioneering. Addressing poverty and its root causes of increased unemployment in Mexico needs to be addressed in any future NAFTA negotiation. Lewis states that much of the illegal immigration comes from a lack of economic progress in Mexico since the agreement began and has lead to massive amounts of immigration to the US. Lewis also mentions that the electioneering between Obama and Clinton creates arguments against free trade, and in my impression creates intentional dissent in the US against Canada and Mexico. While Obama was blamed for not being serious in changing NAFTA, Clinton has used this small scandal to re-ignite her campaign. Ironically, the alienation of friendly foreign governments was always something linked with Bush, but support for the next Clinton Presidency may rest on the backs of Canadians and Mexicans alike if it continues to hurt Obama.

With much of the support for the Clinton campaign coming from the blue collar democrats in the northern states and America’s traditional industrial heartland, it makes sense that Clinton would use Canada and Mexico to blame for poor US policy in the past, much of which came under her husband’s term in office. In reality, the Mexican economy has purged its traditional weaknesses since 1994 and has maintained a solidly valued Peso, growth in the long run and even produced a more equitable government with the PRI dominated Presidency toppling a few years after NAFTA came into effect. The reality is that Mexico is a developing nation in many ways and has problems which 10 years of trade policy could never resolve in its best performance. To end poverty and develop a country a generation is needed to end generations of poverty and inequality. Targeted anti-poverty policy is needed to help remove the 30% of Mexicans who live in poverty and have always lived in poverty. Economic progress in Mexico has created such negative results because the flow of money often reaches the poorest last. This is the trend in almost every country where poverty dominated the political agenda. No one has addressed this in the Obama camp, and with the Clinton campaign it seems that immigration and NAFTA come second to embarrassing Obama as much as possible.

While poverty and success in Mexico’s economy can always be debated, the main issue of concern is that anti-immigrant and anti-NAFTA effects of running a negative campaign. It seems apparent that even though NAFTA is a mixed blessing, the current concerns with China seems to be targeted towards America’s neighbours. While China has a right to progress economically and diversify its society as it wishes, Americans need to debate how they want to proceed with their neighbours and China in a logical, fair and respectful manner and choose where they wish to take America in the future. No country can live in a vacuum, but every country has the ability to take measured and fair responses to grow its own economy and produce trade and development to assist its own people, create a net benefit in jobs and reduce poverty.

In a response to one of the FPA’s blogs, a candidate for Congress in the US claimed the wholly negative effects of NAFTA and America as losing its sovereignty over NAFTA. I responded in kind in order to dispel myths which seek to create straw man arguments of America’s friends and neighbours. I encourage readers to read the responses to the blog and address their concerns in kind. All fair points of view are respected and I encourage open debate. The response is noted in the FPA’s Latin America Blog: Paranoia on the Frontier: NAFTA and the US Election

No other issue seeks to dominate the next few months than the troubles in the US economy. Besides the well documented mortgage lending scandal, the roots of the fragile US economy are the movement of large amounts of manufacturing jobs to China as well as the approximately one-third to one-half of US debt that is held by China, Japan and other foreign creditors in order to assist the US fund the wars in Iraq and Afghanistan. During the last week of campaigning a new nemesis has been created within the dialogue between Clinton and Obama, that is the NAFTA agreement and the threat Mexico and Canada pose to the US economy.

In reality the United States has often determined the course of NAFTA and its rulings since the agreement came into effect with Canada and Mexico in 1994. Until recently, Canada and Mexico have been the top trading partners with the United States, switching between Japan and the EU for top spot which has recently been adopted by China. Trade with the US and its neighbors is more than 92% with Canada and approximately 80-85% in Mexico and has increased more than 100 percent with both neighbors since 1994. The US’s NAFTA partners do not only export to the US, but import the majority of their goods from the United States, becoming a net benefit to US exporters in the process, especially those in border states such as Texas, California, Michigan and New York.

Problems encountered by the Canadian and Mexican governments often had to deal with the reality of the US holding a lot more economic weight and power in commercial activities, political weight, and control in official NAFTA hearings which often did not have any real power in enforcing its decision inside the US. Of great concern was NAFTA Chapter 11 which details the rights of companies to have legal recourse over government policies if they believed harm was done to them. This was one of the first times in international law where a company was represented without the support of a country, as before Chapter 11 only states had legal rights of representation under international law. In case law, American companies and policymakers who for the first time promoted the ability for a private company to gain a legal reward often supported this policy. The results were cases such as Metalclad, where a Mexican municipality was denied the right to stop the creation of a waste management plant, despite its concerns that it would harm the local environment. In S.D Myers, a Canadian law preventing the ban of toxic waste to the US was challenged as well, despite the regulations being there to protect the health and safety of the environment in both jurisdictions. Change only came in recent appeals in the NAFTA appeals hearing regarding Methanex, which challenged California state policy to prevent environmental damage inside the United States itself, the first of a number of appeals limiting the rights of companies over governments, namely the governments of California and the US.

Despite the recent criticisms by Clinton and Obama, it was Bill Clinton who ratified NAFTA during his time as President with no opposition from his wife, as well Obama who did little to appease the passing of NAFTA until the United States opened trade relations with China upon its acceptance into the WTO. The effect of the Methanex appeal is that the US trade policy has moved towards fair and equitable treatment of companies. As seen in the newest version of the US Trade Act and new trade agreements with Singapore and others, public policy is paramount over a companies rights over its investment as long the treatment is fair and equitable with due process and just compensation. This turn around took place not for Chapter 11’s negative effects on Mexico or Canada, but on the US itself. Policies from the US and American Labour Unions challenging Canadian softwood lumber, or taking the production of corn, a staple of Mexico, and limiting it through NAFTA rules was a power advantage of the United States over its greatest trading partners in many cases. As seen in NAFTA tribunal cases and trade policy, the US has nothing to fear from its neighbors, but more from its debt and poor leadership which has sent American jobs and money to China. Criticisms of Mexico and Canada have died out long ago, and do nothing but create scapegoats such as NAFTA in order to win votes in Ohio and Texas.

John McCain this week showed his prudency in this election campaign. Despite talk of referring to Mr. Obama as Barak Hussein Obama and actions by his opponents in defacing America’s good trading partners in Canada and Mexico, McCain had tried to keep the election campaign free of issues which seek to rip apart the country and mire the election in issues which do nothing more than to create a false crisis and give the Presidency to someone who can create the most paranoia for the American people. Ironically this tactic that was used so effectively by Bush is being countered not by the Democrats, but by another Republican. In reality, the Democrats are creating a lot of political tensions for something which has been created by American companies themselves. American companies have moved to Mexico and put Mexican companies out of the agriculture business while solidifying their control over staple Mexican products. American Auto manufactuers have taken advantage of the state sponsored health care system in Ontario to set up auto manufacturing in Canada. While these moves do hurt American manufacturing, it is the policies of American companies which have taken employment across the border.  Companies such as Walmart and other retailers have created the most intense changes in the modern US economy by taking advantage of loose rules and laws in China who is slowly absorbing the world’s manufacturing base without Labour Rights or accountability to its employees. Clinton and Obama would do well focusing on China as opposed to scapegoating Mexico and Canada. These two countries do more to purchase American goods than any other countries in the world. It is hard to manage a relationship with a giant, but it is impossible when that giant claims to be the victim of trade, when its certain the American people are being set up to be the victim of politics.