The Adam Noel Darling Memorial Scholarship Fund 
Essay Contest
Spring 2001
Trade, Labor and the FTAA

Alessandra Cortez
1st Year CD Student
alessandra.cortez(a),miis.edu

Chairman Thomas and Distinguished Members of the Committee, 

I would like to begin by thanking each one of you for the opportunity to appear before
you today and discuss what I consider a truly important topic: labor provisions in the Free
Trade Area of the Americas. 

I speak to you on behalf of the Socially Responsible Business Roundtable. The SRBR is
comprised of over 300 American corporations doing business overseas. The members of
SRBR strongly believe that labor provisions should be included in framework of the FTAA. As an organization legitimately concerned with business ethics issues, our stance probably comes as no surprise. I assure you all that our decision is not based solely on moral principles, but also on economic concerns.

I will lay out three economic reasons why it is important to incorporate labor provisions
into the FTAA:

1. Trade promotes social and economic growth, which in turn, promotes stability. The stability of foreign markets will protect American investments abroad and increase the number of American products purchased in the respective nations.
2. The United States must be seen as an equal and honest trading partner by all foreign nations; we cannot allow some partners to practice the same actions we condemn in other partners.
3. Free trade must also be equal and fair trade; we must not permit certain members to have unfair practices over us and other members. 

I will then address the most arguments against including labor provisions in the FTAA
and restate the reasons labor standards will improve not hinder trading success between
the Americas.

1) Trade promotes social and economic growth, which in turn, promotes stability. The stability of foreign markets will protect American investments abroad and increase the number of American products purchased in the respective nations: 

I stand before you today not only as a representative of the Socially Responsible Business
Roundtable, but also as a Brazilian-American. Having spent several years in Brazil I have seen life in a country with immense poverty, where the gap between rich and poor is vast, where a middle class was at one time almost non-existent. Over the last decade Brazil has experienced a growth in trade and foreign direct investment, vastly increasing the job market. As Brazil's economy has improved and trade has grown, the gap between classes has narrowed and the middle class has increased. 

Brazil is an example of how trade can promote social and economic advancement. But it is important to realize that the growth of the middle class could have not been possiblewithout the laws that protect the fiber of Brazil's market, its laborers. Trade alone is not sufficient for social progress it must be accompanied by strong legal regulations of labor. Trade coupled with human rights laws triggers a chain reaction of economic success. Higher wages results in increased spending; increased spending advances trade, increasing economic gains for all nations involved.

The debacle behind the World Trade Organization's Seattle Ministerial was the public's
misconception that only big corporations benefit from trade and globalization, while the workers are further suppressed. The ideal behind the creation of the WTO was not specifically to increase profits from trade, but to use trade as a tool to raise standards of living. This is a daunting task considering the number of members of the WTO and the varying economical and political situations of those member nations. The FTAA should strive to live up to the ideal behind the WTO. Social progression of each member country should be a goal behind every negotiation. Fulfilling this goal should be much more manageable for the FTAA than it is for the WTO considering the FTAA is on a smaller scale.

The possibility of the FTAA presents incredible opportunities; it would create a free trade
system between 800 million people, allowing for revenues of over 10 trillion dollars annually. Although the FTAA is on a smaller scale than the WTO, it would still be the largest free trade system in world. The FTAA should set a precedent for future free trade systems: neglect of human rights will not lead to true economic prosperity, only an illusion of it. Now, let's move onto the second economic reason that labor provisions should be included in the FTAA: the United States must be seen as an equal and honest trading partner by all foreign nations; we cannot allow some partners to practice the same actions we condemn in other partners.

2) The United States must be seen as an equal and honest trading partner by all foreign nations; we cannot allow some partners to practice the same actions we condemn in other partners:

As a major player in the FTAA negotiations, we, the United States, have a responsibility
to ensure that labor provisions exist in such a monumental trade agreement. We must also preserve our position on trade standards with other nations. How can we condemn Malaysia for its human rights violations while we engage in free trade agreements with nations committing the same offenses? Permitting practices we normally oppose into the FTAA, our largest trade agreement, could weaken our position in future negotiations. Trade partners may see us as bluffers who are willing the compromise our standards if the compensation is enticing enough. This brings me to the third economic reason I stated at the beginning of my speech: free trade must also be equal and fair trade; we must not permit certain members to have unfair practices over us and other members.

3) Free trade must also be equal and fair trade; we must not permit certain members to have unfair practices over us and other members:

We must also protect our own economic interests by ensuring that all members of the
FTAA are on level trading grounds. Allowing unfair competitive advantages for certain
members would hamper the benefits of a free trade agreement. Applying low labor standards in a country leads to low production cost, and consequently, low prices for exported goods. This can lead to difficulties in certain labor-intensive areas such as textiles for developed countries. In a speech regarding fast track. Senator Max Baucus points out that American workers will pay the price if foreign companies are permitted to abuse their laborers.

Common Arguments Against Including Labor Provision in the FTAA:

The most common objection to including labor provisions in the FTAA is that the economic variations between countries are too vast and unfair to developing nations who are struggling in their competition with developed nations. As I previously noted, trade can stimulate economic the growth of a country, helping to transform a developing nation into a developed nation, but this can only happen if trade is used to reduce poverty and generate a middle class. Including detailed labor standards in the FTAA will no doubt be challenging because the prospective members have such varying social and economic situations. A universal minimum wage for example would not be realistic; however, ensuring that the minimum wage in each country allows workers to maintain a sustainable standard of living is a fair requirement. Requiring sustainable standards of living also permit the middle class to
grow as discussed earlier. The FTAA should also incorporate the basic labor standards set
by the International Labor Organization, which include:

• Freedom of association and protection of the right to organize.
• Right to organize and collective bargaining
• Minimum age for the employment of children
• Prohibition against forced labor
• Abolition of forces labor
• Discrimination, both employment and occupational

Concerns regarding government enforcement of labor provisions arise in the context of developing countries. It is one thing to agree to labor laws in trade agreements; enforcement of those laws is another matter. The labor provisions should allow for periodic inspections by the ILO and NGO's; if violations are found trade sanctions or fines may be imposed on the country, regardless of developed or developing status. 

We, the developed countries should assist the developing countries with the implementation of labor standards in every way possible. We should strive to convince developing countries of the importance of labor standards, and assure them this is not a tool to be used against them. Labor standards play a crucial role in the long-term social and economic improvements of Latin America's developing countries. Allowing for a gradual implementation of labor laws over a set period of time may ease the strains those laws may initially place on production in developing countries.

Conclusion:

If the FTAA becomes a reality, it will be the largest free trade system in the world. It has
great potential and promise. Failure to include labor provisions in the agreements will stunt the possibilities the FTAA presents for social and economic improvement through trade. Latin America is a collage of many different worlds: countries that have lifted themselves out of the developing status and are on their way to becoming developed nations and countries for whom the road to developed status still long in coming. The Socially Responsible Business Roundtable believes labor provisions in the FTAA can help shorten the journey. Brazil is an excellent example that trade, in conjunction with human rights regulations, can promote social advancement. Labor laws in the FTAA will equally benefit the developed members by protecting their investments in developing countries, increasing the sales of their products in developing countries and helping to prevent unfair competitive advantages. 

When the Ministers of the FTAA created the San Jose Declaration they laid out two main
goals:

• To promote prosperity through increased economic integration and free trade among countries of the Hemisphere, which are key factors for raising standards of living, improving the working conditions of the people in the Americas...

and

• To further secure, in accordance with our respective laws and regulations, the observance of internationally recognized core labor standards and acknowledging that the International Labor Organization is the competent body to set and deal with these standards.

The SRBR supports these goals and is confident they will help trade reach its potential of improving social and economic standards in developing countries. I would like to thank you all again for inviting me to testify on this important issue. I hope I have been able to help you come to a decision on the matter before us.