Free Trade Around the World: Recent Developments
Free Trade Around the World: Recent Developments

United States
In July 2010, President Barack Obama reported that the U.S. was ‘on track’ to double its exports within the next five years,1 a goal he had set in his State of the Union Address on January 17, 2010.2

To reach his goal, Obama is pushing Congress to ratify three pending Free Trade Agreements (FTAs) with South Korea, Colombia and Panama. All three agreements were initiated under his predecessor, George W. Bush,3 and all are being held up in Congress, with significant opposition.

While some interests, like labor unions, categorically oppose FTA’s, each of the three agreements has drawn its own unique set of criticisms. Critics of the Colombia agreement cite a history of human rights violations and labor leader killings under the Presidency of Alvaro Uribe.4 Uribe’s handpicked successor, Juan Manuel Santos, assumed power in early August. Santos worked under Uribe as a minister of defence. The U.S. hopes to use the pending FTA as incentive for Santos to change Colombia’s stance toward union activists.5

Opposition to the FTA with Panama comes from another realm: financial secrecy. Because of Panama’s lax financial regulations, it has become an international haven for money laundering and tax evasion. The proposed agreement does nothing to address these concerns.6

The FTA with South Korea is contested not because of any flaw unique to the Korean government. Rather, opponents to the agreement use it as a point of departure to air grievances with the way FTA’s are structured in general, particularly how they affect the sovereignty of local governments.

Governments vs. Corporations

As noted in the Trade Issue in Depth, WTO rules give a significant amount of power to foreign investors to sue governments for policies that limit their investment capabilities. These policies often relate to protection of the environment, labor, and public health.

One recent example of such investor power comes from El Salvador, a member of the Central American Free Trade Agreement (CAFTA), signed with the United States in 2004. The Pacific Rim Corporation, a mining company, has sued the Salvadoran government, accusing it of violating CAFTA. On August 2nd 2010, a World Bank tribunal dismissed the government’s appeal of the suit.7

The circumstances of the case highlight how FTA’s can interfere with local governmental policy. The corporation had received an exploration permit to examine the basin of the Rio Lempa, the largest river in El Salvador, for gold mining. Concerns arose over contamination of the river from the cyanide ore processing required for gold mining. Non-governmental organizations organized a public opposition to the project, even persuading the government to review its mining policy. Sensing that its presence there was unwelcome, Pacific Rim abandoned the project. It is now suing the government for hundreds of millions of dollars for not creating a stable investment environment.

According to Lori Wallach, director of Public Citizen’s Global Trade Watch, this is exactly the kind of corporate influence that pervades NAFTA- and CAFTA-style FTA’s. Governments, setting policy in protection of their constituents, are vulnerable to attacks from corporations, creating disputes that are then resolved in private tribunals.8 Indeed, the National Conference of State Legislatures recently passed a “Free Trade and Federalism” resolution, demanding new trade policy that does not undermine local governmental authority.9

Thus, the opposition to the Korea trade agreement. The U.S. is home to over 80 Korean corporations, with around 270 establishments.10 Because the agreement includes financial rights for investors, these corporations might be able to skirt the recent financial regulations passed by Congress. In a letter to President Obama, 110 House Democrats demanded that the agreement be amended to reflect these concerns.11

Trade Updates: The WTO Under Fire

While the South Korea, Colombia and Panama FTAs face significant challenges, international trade agreements in general are facing increasing opposition.

-A recent U.N study written by Kevin P. Gallagher, professor at Boston University, warned developing countries around the world to be wary of joining the WTO or signing WTO-like agreements. The issue at hand was capital controls, a governments ability to regulate money flowing in and out of a country. At a meeting of Asian Development Bank Taiwan’s Central Bank, its governor, Perng Fai-nan, advised emerging markets in Asia to use capital controls. Indeed, Ghallagher points out that developing countries who did employ capital controls were among the least hurt by the recent global economic crisis. WTO members are prohibited from using capital controls, leaving countries like Singapore, Indonesia, the Philippines and Argentina particularly vulnerable to this kind of financial instability.12

-Meanwhile, the Doha Round of WTO trade negotiations, intended to create trade rules beneficial to developing countries, remains stalled, with few signs of progress.13 As the trade talks drag on, the WTO’s credibility as a forum for international trade negotiation is undermined.

-For China and Taiwan, the WTO and trade agreements have been a source of political tension between the two countries. A trade deal, signed between them in June, has not been reported to the WTO (members of the WTO are required to report all free trade agreements amongst themselves). China does not want to bring the agreement to the international stage because such a move would acknowledge Taiwan as its own legal entity.14 Similarly, China has objected to a Singapore-Taiwan agreement declaring, “We believe Singapore will adhere to the one-China policy, and properly handle its economic and trade relations with Taiwan accordingly.”15

The debate over free trade continues, with strong forces pushing both towards its expansion and its limitation.


1 Chan, Sewell. “Hurdle’s Deter Obama’s Pledge to Double Exports.” New York Times. August 1, 2010.
2 “Obama’s State of the Union.” Text. New York Times. January 27, 2010.
3 Ibid.
4 Hare, Rep. Phil and Rep. Michael H. Michaud. “Colombia Free Trade Agreement: A Bad Deal for Everyone Involved.” Huffington Post. April 8, 2008.
5 Damme, Lauren. “The Columbia Free Trade Pact is Bad Policy.” The Hill. July 30, 2010.
6 “Panama-US FTA Overview.” Public Citizen.
7 “Pacific Rim Wins First Round vs. El Salvador in Mining Dispute.” The Examiner. August 5, 2010.
8 Wallach, Lori. “CAFTA Attack on Green Policy: Did Obama Need More Reasons to Renegotiate Bush’s NAFTA-Style Trade Deals?” Huffington Post. August 4, 2010.
9 Wallach, Lori. “Turn Away from the Cliff on Trade, State Legislators Group Tells Obama .” Huffington Post. July 29, 2010.
10 Ibid.
11 Wallach, Lori. “CAFTA Attack on Green Policy: Did Obama Need More Reasons to Renegotiate Bush’s NAFTA-Style Trade Deals?” Huffington Post. August 4, 2010.
12 Gallagher, Kevin. “US trade agreements threaten emerging markets’ financial stability.” Financial Times. May 11, 2010.
13 Chan, Sewell. “Hurdle’s Deter Obama’s Pledge to Double Exports.” New York Times. August 1, 2010.
14 Kastner, Jens. “Dancing Around the WTO.” Asia Sentinel. August 16, 2010.
15 Shaw, Joyce C. and Ting-I Tsai. “Taiwan, Singapore to Discuss Trade Pact.” Wall Street Journal. August 5, 2010.
* Picture Uribe:
http://www.flickr.com/photos/worldeconomicforum/4503038719/, Rio Lempe: http://www.flickr.com/photos/cesar2mendez/4408026116/

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