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CFR Symposium: The International and the Domestic - Latin America and U.S. Policies and Politics, Session One

Panelists: Janice O'Connell, Senior International Adviser, Hogan & Hartson, Llp, Carl E. Meacham, Senior Professional Staff Member, Senate Foreign Relations Committee, and Kimberly Ann Elliott, Senior Fellow, Peterson Institute For International Economics
Moderator: Elizabeth H. Becker, Fellow, Economic Policy Program, The German Marshall Fund of The United States
September 12, 2008
Council on Foreign Relations



This event was part of the symposium, The International and the Domestic - Latin America and U.S. Policies and Politics, which was made possible by the generous support of the Ford Foundation and the W.K. Kellogg Foundation.


Washington, D.C.

JULIA E. SWEIG:  Good morning, everyone.  Good morning.  I am Julia Sweig and I can't see as far back as we have people sitting.  So if you feel, during the course of the morning, that you'd like to move up, at least so I can see you, that would be wonderful, but also so our panelists can see you.

I direct the Latin America program here at the Council on Foreign Relations.  I want to welcome all of you, and thank you for coming.  Many of you know that at the Council, in our Latin America program, we have been trying to think through what a new framework for Latin America, for U.S. policy toward Latin America could be going forward and have recently published a study to that end, which is floating around here.

But in doing that, in looking at developments over the last 10, 20 years on the ground in Latin America and in the United States, of course, and in our bilateral ties, it's become just abundantly clear that almost all the major policies that the United States has had and may be able to craft going forward toward Latin America are very much constrained, driven, sometimes distorted, shaped by our own domestic politics here in the United States.  And we wanted to put that on the table and be a little honest about that.

So we have shaped this morning to address some of those issues -- trade, immigration, energy, followed by a discussion of the significance of the Latino demographic boom in this country, to sort of cover the picture from the United States going forward, and also to take a look at how domestic politics in Latin America also shape how Latin American governments deal with the United States.  And, of course, there's a backdrop today and yesterday about how domestic politics can shape our bilateral ties with some of the recent announcements by two governments in the region.

But leaving that aside, there's one important issue before I turn it over to Elizabeth Becker, who will preside over the first panel, to say that we don't have a panel today on Cuba, which is a big domestic political issue here, but it is another issue today that has been present, given the hurricane and given its effect in Cuba and given some of the constraints that we're facing and sort of getting just humanitarian assistance to the Cuban people, as well as for the Haitians.

So I would be neglecting a big issue if I didn't mention Cuba as a part of the domestic political framework that we're dealing with today, but that's all that's going to be said.

Anyway, thank you very much.  We have several members of the diplomatic corps that will be coming in and out today.  I'm grateful to all of you for coming.  I understand that many people -- many of you have lots of other work to do.  So if you need to come and go today, of course, that's understood.  But we hope that you'll do it discreetly.

And thank you again to all of our panelists, those of you that are here now, to our presiders, and to the terrific staff at CFR that put all of this together, and welcome and enjoy.  And we will have time for Q&A throughout the day.  Thanks so much.  (Applause.)

ELIZABETH BECKER:  Welcome to the first panel, which is on trade.  Welcome to the meeting.  My first obligation is to ask you all to please completely turn off your BlackBerrys, cell phones, et cetera, not even have them on vibrate.  This is important to avoid any problem with the sound system, and also to remind everyone that this is also a meeting on the record.

Of all the panels, I think trade is the one that is hardest to cut through because it's become so ideologically a thornbush with domestic and foreign policy.  Fortunately, we have on our panel three people who are used to not talking in buzz words and who -- you won't hear those codes of "free trade always" or "fair trade always."  You're going to hear people talk about what is in a trade agreement and why there is growing, growing dissatisfaction with the trade agreements of the United States.

One of the things that was remarkable during the Democratic primaries, because the issue came up more often then, was several polls came out showing the dissatisfaction, reaching at one stage over half of Americans wondering whether or not trade pacts do hurt their chances in the economy, in their job.  So this is a very strong domestic issue.

And, of course, we know from CAFTA and NAFTA that it raises very strong emotions overseas.  We remember some of the demonstrations around CAFTA.  I think in one country there was actually a death and injuries at one of the demonstrations.  So this is a very important bread-and-butter as well as ideological issue.

We're starting first with Kimberly Elliot, who is at Peterson Institute across the street, the Center for -- oh -- Global Development -- (laughs) -- and is well-known for taking the domestic piece and looking at it.  It's becoming, slowly but surely, part of received wisdom that the American dissatisfaction is not linked simply to what's in the trade agreement but what is not part of the American worker's life, and that being the safety net.  And this is one of those rare issues where tying this together could take away some of the ideological partisanship.

So, Kim, please.

KIMBERLY ELLIOT:  Thank you, Elizabeth.  And I thank Julia and the CFR for including me today.  I'm really looking forward to the morning.

Yeah, I think that Elizabeth is -- this is really the core of the trade issue is actually domestic policy in the United States now.  It has become so politicized.  And while globalization gets much more of the blame than it actually deserves for a lot of the anxiety that people feel, Americans feel in their lives, it's nevertheless something tangible that people can grasp onto.

And I think the answer that "Well, it's not globalization, it's technology" doesn't really satisfy very many people, and shouldn't, actually, because those two things are so intertwined now.  It's the globalization that allows the technology to be spread around the world.  It's the technology that allows sourcing to go around the world.  And so those things are so intertwined.  That alone has clearly not been a satisfactory response for a lot of people.

And so I think that we need to address the domestic political agenda in a way that really addresses people's concerns, regardless of the cause.  And it's something that we ought to do in many areas anyway.  For example, health care has been a big part of the debate, and it's clearly something where our current system is rapidly eroding.  It's becoming too expensive.  We're not going to be able to afford it.  It affects competitiveness; lots of problems there, any way that we need to address it.

But at the same time, I think doing something about health care and about pensions and about unemployment insurance and about trade adjustment assistance, those are things that will also help to lay the groundwork, I think, then to be able to go forward with the U.S. trade policy on a sounder footing.

And just in terms of the language, my colleague, David Richardson, came up with a term that I really like much better than safety net.  That's a little too narrow.  The way I like to think about it is that we're not just sort of -- we need to address the costs that the losers from globalization really do bear.  And they are, for some people, very severe.  But we also need to -- I like to sort of have it be more positive and proactive and forward-looking.  We need to prepare Americans to take advantage of the opportunities that globalization brings.  And that also means bringing in education policy and technology and research and development.

And the term that Dave Richardson coined that I really like is we also need to look at opportunity nets.  We need to build those up.  And so I think that's sort of the -- in my view, if we don't do those things, or at least get started on those things early in the next administration, I just can't see trade policy on any level with Latin America or globally really being able to go forward.

BECKER:  This reminds me of when Pascal Lamy, now the head of WTO, but then the European Union chief trade negotiator, trade minister, was here to negotiate something.  And in an interview he said, "You know the problem with you all?  Every four years you bring up trade, because you're the one developed country that does not have health care.  It's the one developed country that doesn't have those kinds of guarantees, so that, you know, if you lose your job, pretty soon you're on your way to losing your financial well-being, your kids' college education -- (inaudible)."  And I think this is not simply Europe; it's Asia as well, from Singapore to Japan. 

Have you looked at the way other countries' people look at trade and whether or not those social benefits or opportunity benefits, or opportunity net, that that does affect how they look at trade?

ELLIOT:  Well, it certainly seems as though sort of the globalization backlash has been less in other parts of the world.  And I think in Asia, clearly there it's very much seen as an opportunity.  And, of course, it's a very important part of their growth in that part of the world.

And in Europe, I think it's a combination of you have the social institutions so that people are not so -- I mean, obviously there's, I think, something in between where the U.S. is and where Europe is.  I think where Europe is coming under strain is that globalization, I think, does accelerate change.  It does sort of put a premium on flexibility.

And the U.S. is sort of at one extreme in terms of having a very flexible labor market but where people are basically on their own if they lose a job, versus Europe, where it's a much less flexible labor market and people tend to stay unemployed for a very long time in part because they have mechanisms that cushion unemployment.

So it is -- so I think sort of over the longer term, the costs of the European system are also rising and will have to be addressed, but nevertheless, that there's sort of something in the middle where sort of maybe the two sides of the Atlantic need to be moving.

But I do think that there is the concern -- of course, we have our own very, very politicized battles over immigration, and that'll be addressed in the next panel.  But it's interesting that in Asia and in Europe, the concern seems to be more around immigration and those pressures than around trade and even capital flows.

BECKER:  Janice O'Connell -- we all have known her for years at the Senate Foreign Relations Committee.  She's now at Hogan & Hartson.  And she's one of the few people, I think, in this room who has read all these trade agreements and can read them fluently.  (Laughs.)  It's a special kind of literacy.

And I want to first ask Janice to talk a bit about what's inside these trade agreements, because this is not simply border issues and tariffs.  And Latin America, we've had -- NAFTA and CAFTA, our biggest regionals, have been with them.

And I wanted you to just go through those issues that are most prickly and most controversial.

JANICE O'CONNELL:  Well, I did something rare this morning before I came here.  I actually printed out the agreement and read through some of the more contentious and more important parts of the agreement.

First of all, we probably shouldn't call this a trade agreement, because the largest section of the agreement is the investment section, which is 33 pages.  And it has built within it its own dispute settlement mechanism; i.e., binding international arbitration.  That's separate and apart from a separate dispute settlement section which deals with party-to-party disputes.

There's also, for the first time, some would say, a meaningful labor section.  However, the only part of the 16-page title that is enforceable is half a page of the agreement, which says that countries must enforce their own laws.  And if you can -- if you believe that they're not enforcing their own laws, you can challenge them on the agreement.  However, there's no standard for what those laws shall be.  They can be whatever the parties decide.  And they have the ability to change those laws.

If the labor title is weak, the environmental title is frankly meaningless.  And let me read to you the key provision that basically says it all.  "For greater certainty, nothing in this chapter shall be construed to call for the examination, under this agreement, of whether a party's judicial, quasi-judicial or administration tribunals have appropriately applied that party's environmental laws."

So it's not clear to me what the title is about if it isn't -- if there's no ability to challenge how a state is interpreting its laws.

BECKER:  And just to remind, this is CAFTA, the Central America --

O'CONNELL:  This is CAFTA.  I chose CAFTA because it was the most recently enacted, and I think people are more familiar about it.  But the NAFTA agreement has its own side titles for labor and environment.

The progress on CAFTA is at least the labor and environment were not an after-thought.  And there was significant pressure from the Congress to address labor and environmental issues.  So it is contained.  And then the Peru agreement progressively has gotten better.  But I think the protection for capital is ironclad.  The protections for labor are weaker.  The protections for the environment are frankly pretty non-existent.

BECKER:  And then just -- I will play the innocent reporter here, because it took me so long to figure out just that, as you just said, calling it a trade agreement is almost a misnomer, because there's so much beyond-the-border kinds of issues.

Just to remind, within -- one of the reasons this becomes issues is that this is a yes-or-no proposition by the time it's got to Congress.  The fast track -- this is a system that, again, is unique in the United States.  The negotiation is a particular -- and I wanted to just ask you how that system is faring, what you see if the system itself is part of the problem, whether or not the fact that it's a yes-or-no vote hurts, helps, so on and so forth; congressional input.

O'CONNELL:  Well, I think that what happens is the debate about the terms of the agreement are ongoing while the agreement's being negotiated.  The business community has advisory panels.  The administration wisely consults with those interests to try to balance benefits and costs of the various provisions.

And the Finance Committee and the Ways & Means Committee, frankly, have a much greater advantage than the rest of the Congress does in terms of dealing with their particular issues, because there is a mock markup in Finance and Ways & Means, and those committees have significant influence in terms of shaping the final text or the implementing agreement or the side agreements that are ultimately entered into to get the deal done.

Now, in the case of President Clinton, the price of getting NAFTA done was he had to create a whole new institution, a North American Development Bank, as the price for getting enough votes in the Southwest to support the agreement.  So there's always a negotiating session that goes on.  So the up-or-down-vote issue, I think, is probably not quite as accurate as it appears.

I also think that the whole fast-track mechanism has been called into question by this recent dispute between Speaker Pelosi and the Bush administration.  I think the Bush administration really has put at risk this concept of fast track up-or-down vote, because guess what -- the emperor has no clothes.  Each body, through its own mechanisms in the House and the Senate, can change its rules.  So the notion that somehow these agreements cannot be amended, I think, now have been called into question.  The whole process has been called into question.  And I think that was probably not a wise decision by the Bush administration.

BECKER:  Which leads to the obvious follow-up of during the campaign, the one trade issue that's gotten the most ink is whether or not Senator Obama was off the charts when he suggested renegotiating aspects of NAFTA.  As Senator McCain said, this is equivalent to abrogating the agreement.  How does that look from your old perch?

O'CONNELL:  Well, anybody who deals with NAFTA issues knows that, you know, on a daily basis, there are discussions going on about how to implement the thorny aspects of the agreement.

The trucking provision, for example, has been in and out of court here.  Congress passed legislation for a pilot program to allow truckers from both sides to have expanded access and now it looks like that's being called into question.

So the notion that somehow these -- once the ink is dry on the agreement that nothing happens is just frankly silly.

BECKER:  Well, now we get to hear from Carl Meacham, who's on the Senate Committee on Foreign Relations, and deals regularly with relations between the United States and the countries of Latin America.

And you have, you know, sort of that perch where you can tell us what it looks like when you're trying to explain "us" to "them" and what they say in return.

CARL MEACHAM:  Well, yeah.  I mean, I guess I had the privilege of working with Janice for -- how many years was it, three or four years?

O'CONNELL:  Longer that, I thought.

MEACHAM: And I think that, you know, she touched on a lot of important issues that have to do with the free trade agreements.

On the Foreign Relations Committee, since we're not the committee of jurisdiction, we deal with the implications of free trade agreements.  We're not really dealing with the minutia.  So it's a lot broader and a lot philosophical in many respects.

With regards to how we look at free trade agreements, my boss, Senator Lugar, has been very clear that he looks at these things as very important to our interests, but also to the interests of other countries, because of the rapidly changing marketplace.  The demand for products from countries like China and other emerging markets is just overwhelming and we don't want to see ourselves as missing the boat.

So there's this careful balance that has to occur regarding very important issues like labor and environmental standards, but also with regards to facilitating market access -- market access of our products around the world and market access of other folks wanting to sell their own products.  So that's the general framework.

I would say with regards to Latin America, a lot of folks always complain -- and I think rightfully so -- that there isn't enough attention allotted to the region.  We see free trade agreements as an institutional relationship that goes beyond party, goes beyond Congress, goes beyond administration in creating a relationship with countries in Latin America.

Now, there are flaws and I think we're all familiar with the flaws in the free trade agreements.  We talked a little bit about NAFTA.  And I think that regardless of what we see in the campaigns -- and a lot of folks campaign differently than they govern, et cetera -- but if we get into this conversation, for instance, with the NAFTA, I remember after these statements were made in Ohio -- I think it was in Ohio when these statements were made -- you know, I had the Canadians and I had the Mexicans come up and say, hey, you know, you guys want to open up NAFTA?  Great!  We got lots of complaints. 

You know, there's a lot of things we'd like to improve on the free trade agreements from softwood lumber and the treatment to, you know, issues that had to do with corn and high fructose syrup and that kind of thing.  So I think it works both ways.

As it relates to the state, specifically Indiana, I mean, that's really where you deal where the rubber hits the road.  You're dealing with the domestic sources of foreign policymaking.  And you have all kinds of different groups that are affected adversely or positively from trade. 

There's an issue that always seems to come up that a lot of folks don't really like to talk about -- but one of the areas where we've received a lot of interest -- is in the ability of folks in Indiana to be able to sell products to Cuba.  That's more of an interesting trade issue that I think, as we go forward, is going to start changing the equation insofar as trade. 

And I just say this, because we talk about the free trade agreements that have passed during the last, what, 18 years -- almost, a little less than 18 years, right?  But there's also how we go forward and different areas of focus that exist in the country and in the states themselves and how they want to look at these things.  And that's really what I get to deal with.

So having said that, for us these free trade agreements -- I guess we're on the frontlines, because we're hearing from our constituents from the states and that pretty much becomes the priority for us.

BECKER:  But some -- for instance, covering it, there seem to be a couple of key things where the United States and Latin countries didn't agree.  Obviously, farm subsidies and the United States didn't budge; IP -- intellectual property rights and what that means in terms of pharmaceuticals, access to generic medicines -- particularly for the less developed countries that need it; and then, as always, labor and environment.  And no two Latin American countries agree on this and no two constituents in the United States do.

So how do you juggle that?  I mean, what do you see coming forward and where are Latin American countries getting more together on this?

MEACHAM:  Sure.  I haven't -- in the big picture, you usually have Latin American governments coming and want free trade agreements.

BECKER:  They do?

MEACHAM:  Yeah, straight out.  But then you have different constituencies within the states -- with the countries, I'm sorry -- that have their complaints.  A lot of folks feel that there are going to be displaced people and the rural areas are going to be displaced and the jobs that they do -- small farmers in particular -- they feel that they're going to be eliminated; that large companies are going to come in and their jobs are going to go away.  That's one issue when you deal with the countries themselves.

As far as farm subsidies, I have the privilege of working for a member who is against subsidies and is from a state that does a lot of farming issues and is very agricultural; nevertheless, my boss is very clear he believes in free trade, he believes in doing away with restrictions and subsidies for all products.  So I have that luxury.

With regards to intellectual property, again, you get into a lot of the minutia that the different trade agreements have and the mechanisms within those trade agreements to deal with those things.  The interpretation of different countries of those things -- it comes to mind pharmaceuticals in Chile came to mind.  What that -- it's going to be different.  But again, you have a framework there to be able to deal with those things.

BECKER:  Kimberly, in the fact of all of that, do you think -- to complete the circle -- do you think that with more of a net of opportunity, rather than -- more of a net of opportunity for Americans, that they would be more willing to listen to these issues, rather than just say the consequences of these free trade agreements are too vague, too scary for me?  Do you think that that would have confidence so that this discussion we've just had with Janice and Carl would be a little less scary and a little more moving towards opportunities?

ELLIOT:  Well, I think that that's -- I mean, obviously, there's no guarantee that if we do what we need to do anyway on domestic policy that it would also bolster the trade agenda.  I mean, I think that it would, because people wouldn't be as concerned about losing a job. 

I mean, that's the basic connection, you know, between trade and the anxieties that link to domestic policy is that people -- the cost of losing a job in the United States are so high that sort of any risk then becomes -- you know, the risk -- the probability of losing your job, especially due to trade -- may be very, very small, but the costs are potentially so high that people sort of -- they weigh those costs more highly than the benefits.

So I do think that if we could address those costs, that that would also help the trade agenda.  And I think -- if I could just say a word or two about some of the other issues we've been talking here about the content of trade agreements.  And putting on my Center for Global Development hat for a minute, I mean, I think that the -- you know, in the U.S. debate, for lots of reasons, we focus a lot on the labor and environment and investment provisions in these agreements, because of how we perceive they affect us.

Now, you know, one of the arguments I would make is that, you know, possibly you could take some pressure off of the labor issues by again addressing these concerns that people have.  They perceive that raising labor standards in our trading partners will help workers here.  Well, based on my research, I don't think that's correct.

I mean, I don't think that what we call the core labor standards, which are the focus in these agreements, that those would have a big enough impact on costs that it would affect the trade flows much if at all.  So it's going to have -- that part of it helps workers, in my view, in those countries if we do it right, but it has very little affect on workers here. 

And so to address the concerns of workers here as to domestic policy agenda, but then we don't talk very much here about those other provisions that you mentioned where -- I mean, there's a big question whether we even need to have an intellectual property chapter, because we have multilateral rules under the World Trade Organization.  And in essence, what these bilateral agreements are doing is going beyond, if we don't think that what's in the WTO is strong enough. 

But in fact, when you're dealing with smaller, poorer developing countries and the issue of drug access, I think there is a real question whether the provisions of those agreements are in the interest of our developing country partners -- especially the poorer ones like Honduras and Nicaragua that really don't have a lot of resources for their public health system.

Another area that hasn't come up at all are the provisions on capital controls where -- you know, I remember during the capital debate I actually went to Costa Rica and I was interviewing some people down there.  And they said, well, we don't really -- we don't get big inflows of capital, so we're not really concerned about it.  But sort of, you know, I think there's a lot of questioning that, including at the International Monetary Fund and other places, about the role of capital controls.  And right now we're in yet another global financial crisis, or potentially spreading globally from the United States.  You know, whether that's really -- whether that's good development policy to force countries in these bilateral agreements to completely forgo capital controls.  Again, it may not matter to some countries, but for others -- Korea's been through one crisis. 

So I think there are some of those other provisions where we're really going at these things, when we negotiate the details of them, very much focused on the narrow trade interests and not on development in our broader foreign policy interests, which might suggest that we don't have a single template for every country, but that we, you know, pay more attention to some of these other issues.

BECKER:  Janice, do you want to add anything before we open it up?

O'CONNELL: No.  The only thing I would say on the intellectual property issue is it's basically David and Goliath negotiating when we're talking about a bilateral negotiation.  And so the only opportunity for balance with IP, I think, are at the --

BECKER:  At the WTO.

O'CONNELL:  At the WTO, which ends up basically setting the floor.  And then through these bilateral agreements they nibble away at the floors, I think.

BECKER:  And then we have to remind ourselves that Doha is this side of dead.

O'CONNELL:  It's in suspended animation.  (Laughter.)

Now, I would argue the Obama administration, for sort of developmental purposes, might go back to the original intent of Doha and take a look and see whether or not there are ways to resuscitate this thing in a way that's meaningful for everybody.

BECKER:  Okay.

And Carl, you get one last before we open it up.

MEACHAM: No, I would just say I think the point that Kimberly made about folks not having a clear sense or a clear idea of what free trade agreements are for, in many respects, is true. 

I mean, I think from an analytical perspective, I think when you look at how the debate has gone with Republicans and Democrats, you have a clear emphasis from the Republicans on market access issues.  And you have a clear emphasis from Dems -- I wouldn't say polar opposite.  I wouldn't say that, because I think it's pretty much --

O'CONNELL:  I think that's an overstatement.

MEACHAM:  I would say -- if I had to use generalities, I would say that there's a little bit more on labor and environmental standards.  I would just say that.  And I don't think that that's a bad thing.  I'm not trying to make a partisan statement here.  I'm trying to be very analytical.

And I think that that really is something that we really have to deal with.  And then dealing in the foreign policy side of things, yeah, what are the implications of these free trade agreements, how we do them and what we emphasize.

BECKER:  And does it undercut our development agenda --

MEACHAM:  That's right.

BECKER: Does it undercut our security agenda, you know?

MEACHAM:  And then how does it undercut our own markets and our own productivity?  I mean, you've got to look at all those things.

So you have the TAA -- the trade adjustment assistance aspect of it, which is an important one.  You know, we don't want to displace people, but there's also displacement going on in the foreign countries themselves.  How do we deal with all of those things together.  I mean, these things are not black or white.  I mean, there's a lot attached to this.

BECKER:  TAA is this side of a (temple ?) when it comes to trade -- I mean, to real trade adjustment.

MEACHAM:  You're right.  You've got to put more money in those things, sure.

BECKER:  Which keeps being refused.

Okay, I want you all to realize that this is probably one of the more open, freewheeling discussions that we can say it about trade.  And I want to thank all three of you.  And now you get to be asked all kinds of questions.

Are there any out there?  Julia.

QUESTIONER:  Thanks to all of you.  Julia Sweig.

I guess just kind of drawing on the tiny bits of sparks between Carl and Janice at the very end and picking up on Kimberly's introduction, where you did begin to sort of flesh out what the sort of elements of the social contract are in terms of education and sort of training and making the kinds of investments at home so that Americans can feel less threatened by a trade agreement or the prospect of one.

Is there -- just looking beyond this election, please, going into next year -- is there sort of an understanding, would you say, among the thoughtful, thinking people in both parties about this kind of need to demagnetize the trade issue by really looking seriously at the domestic investments we need to make in order, long term, to secure market access, deal with globalization?

I mean, are we going to be able to get a discussion like that we're having today going forward, taking place between the two parties and within the two parties?  Can I be hopeful about that?

And then related -- a foreign policy question is there the prospect, therefore -- if we could get there -- that trade could become sort of less the uniform and only kind of thing the United States has to offer to Latin America -- especially as sort of the core of its foreign policy and ties, because that's, of course, one of the reasons for this tension is that, you know, we got trade and not so much else.

BECKER:  Drug programs.

QUESTIONER:  Trade, drugs.  Right.

BECKER:  Kim, that's an easy question.

ELLIOT:  Well, I mean, obviously, you know, health care is one of the big issues in the campaign.  You know, education has been a relatively -- especially the last few days -- has been in the campaign.

So I think there are -- I mean, I think the domestic reasons for doing some of this are there.  You know, unemployment insurance -- my colleague, Howard Rosen, has been working on this.  And I was actually stunned to learn that only one-in-three unemployed workers now is eligible for unemployment insurance, because of how it's defined.  It doesn't apply to temporary or part-time workers and just a lot of people end up falling completely through the cracks.

And so I think there are -- there is clearly a lot of pressure to do this.  And I guess that the -- sort of how you would hope that the globalization and trade bit of it would kind of play in is that the business community, which has been skeptical on some of these -- the domestic policy side -- would then, you know, reconsider and perhaps be willing to at least engage in the discussion and be more supportive of doing something on some of those domestic policy issues.  Again, in part, because I think they need to be at the table, because we're going to have to deal with a lot of these things, A; and B, because it could then also free up the globalization and trade agenda.

BECKER:  Janice, did you have something?

O'CONNELL:  I think this debate is going to happen regardless of who becomes president.  Assuming that the Congress -- the trends for the Congress look like it's going to remain Democratic -- both in the House and the Senate.  So regardless of whether Obama's president or McCain is president, in order to move forward the trade agenda, this debate is going to have to happen.

Now, I think it'll be a more collegial debate in an Obama administration.  But an Obama administration's going to have to take into account the business interests as well.  And it's going to have to figure out ways to balance all the other interests that are not traditionally called pure trade or investment issues.

So I think going forward, we're at a turning point in terms of how we approach trade in this country.

BECKER:  Did you have anything to add?

MEACHAM: Yeah, I would add -- I would say that we've seen a lot of what the conversation could be about with what the speaker -- Speaker Pelosi and the administration hammered out a little bit with something called Strategic Worker Assistance, that would focus -- be a little deeper than the trade adjustment that would focus on education, job training and Social Security things, which are things that folks are worrying about here with regards to displacement.  How do things like being consistent with ILO standards and that kind of thing is also important and I think are starting to become more of the mainstream in these free trade agreements -- or the conversation of.

Insofar as your question, Julia, about a policy towards the region that's broader, then what are the options other than trade? 

I think that there are a lot of options, but I think that we have for far too many years a -- not that much focus on Latin America and what we can get out of Latin America from a strategic standpoint, as well as our interests and as well as their interests and why helping them is helping us.  So I think that what you should be saying is,  -- an Obama or a McCain administration, is a focus on broadening our relationship.  My boss has been pretty big with regards to energy and focusing on energy and making energy more of a framework for the relationship.  Because at the end of the day, we want to make countries more independent, not reliable on larger countries in the region, more dependent on themselves for their own security and their own welfare.  So that's one area.

I would say other things have to do with institutional agreements and institutional kinds of relationships with countries so you don't have this thing every four years, every eight years of, what are we going to do with the region now?  And what's the priority going to be?  Is it going to be trade?  Is it going to be narcotrafficking?  Is it going to be what?

No, we want to establish these institutional relationships and agreements and trade is an institutional kind of relationship.  So I think conceptually that's the right way to go.  But we need to fill it up a little bit more.

BECKER:  Yes, back there.

QUESTIONER:  Thank you.  I am -- (name inaudible) -- from the Institute for Public Studies.

And I think that many times criticism towards free trade agreements has been simply -- (inaudible) -- ideological.  But I think there is a lot on the very strong coincidence in (these years ?) from what many organizations in Latin America criticize for free trade agreements with what Mrs. Elliot and Mrs. O'Connell have said.  So they have demonstrated that criticism goes much beyond ideological and emotional responses to very concrete and specific criticism to aspects like investment chapters, intellectual property rights, et cetera.

And also, I think that the most important thing here is to open up spaces for those organizations which are not only a minority of (losers ?) in Latin America, they are very broad constituencies that have been working, analyzing and doing very strong propositions of free trade agreements.

And the most important thing is how to open up spaces for them to participate in these kind of dialogues.  I think the problem with free trade agreements is that they have become not only emotional but (so-called ?) functional, there's so much confrontation, and it's precisely because large sectors of society haven't been invited to the table of negotiation and evaluation of the impacts of free trade agreements.  Thank you.

BECKER:  Did you have a question?

QUESTIONER:  No, sorry.  (Laughter.)

BECKER:  Okay, well, I'm going to turn this into a question.  What are those spaces that need to be open?  You know, do you agree that he thinks it's not open?  You were talking about people advising throughout the negotiation process.  Who do you think is shut out here?

MS.     :  Well, my guess is that there's probably much more participation of U.S. interests than there are the foreign interests.  You know, the whole IT debate vis-a-vis pharmaceuticals, basically, the major companies have done battle with generics in this country and now have taken that battle overseas.  And so the major pharmaceuticals are much more powerful than the generics here, and they're certainly much more powerful than the efforts of generics abroad.

So I think, in a way, you could look at these trade agreements as a way to help develop these constituent groups to be more sophisticated and more involved in all aspects of their country's political and legislative laws.

BECKER:  Question back there, the woman with the pink blouse.

QUESTIONER:  Hi.  I'm Barbara Kotschwar from Georgetown University and the Peterson Institute.

And I wonder, you've mentioned labor and the environment and investment and intellectual property rights.  Now, all of these were part of the May 10th bipartisan trade compromise reached last year.  But nobody has mentioned the May 10th agreement.  That's sort of a basis for future trade negotiations.  I wonder whether you think that this is dead.  Or are there still elements of that that could carry forward in U.S. relationships with countries in the next administration? 

And also, there was a criticism of the CAFTA provisions about whether the U.S.-Peru which incorporates them with the May 10th-inspired language, whether that goes further, whether that goes in the direction that you seem to indicate we should be going in our bilateral trade agreements.  Thanks.

BECKER:  Sounds like a Carl question.

MEACHAM:  Well, just on one portion.  The things that I've been mentioned regarding strategic worker assistance and the ILO and enforcible obligations which is another issue are all from that agreement, from that May 2000 agreement.

BECKER:  Do you want to just review a teeny bit?

MEACHAM:  Well, I'm not an expert on it.  I'm just saying that there are certain specifics that were hammered out during that agreement that have to do with reforms or changes that would be made to the framework of free trade agreements and were added in different ways to Peru and to Colombia -- that's right.  And now Colombia has other issues and domestic constituency issues that we can go into if that's what you guys want.

But no, these are newer and, I would say, more ambitious ways of dealing with a lot of the concerns that are out there about the effect of free trade here in the United States.  So yeah, I've been borrowing from that.

MS.     :  Elizabeth, if I could just connect that question in a way to the previous question about sort of opening to other people.  I mean, one of the concerns I have about the direction of these trade agreements, and including the May 10 agreement, they're more and more restrictive and prescriptive in terms of what our trading partners have to do, what laws they have to pass.  They're very intrusive into our trading partners' domestic issues and sovereignty.

And so while I am, you know, a supporter of trying to promote labor standards and, you know, environmental improvements, just to put a really radical, you know, idea on the table, my preference really would be to have some much much more limited provisions, you know, some exceptions for egregious violations of labor rights.  But I would take the labor chapter out. 

I would take the environmental chapter out and do like with Peru.  If there's a specific problem with illegal logging, have a specific agreement that addresses the specific problems.  And get rid of the IP chapter.  I would get rid of all three and have it much much more limited.

Because I think, for the most part, I mean, yes, labor standards can affect trade.  But mostly they affect domestic economies, you know, workers that are involved in domestic activities, not traded activities.

I actually think we're just getting much too intrusive and much too, you know, too constraining in these trade agreements actually.  And I know that that's completely politically, you know, that's, you know, off the table probably. 

MS.     :  (Inaudible.)  Neither side likes that.

MS.     :  Neither side likes it, exactly.  Which is part of why, you know, you take something away from both sides and still it's not quite the middle.  Instead, it just gets (me ?) totally out of the conversation.  (Laughter.)

But just to really stir things up, I put that on the table.

BECKER:  No, I mean, IP, from one end to the other, with Peru, the question of can you sell a foreign country rights to native medicines that you've gathered from the forest, to Australia where can the United States say that they way they set up their pharmaceutical program is anti-trade.  I mean, it's getting, you know, very intrusive.

There was a question back there.

QUESTIONER:  Thanks.  Leonardo Martinez from Brookings.

One of the most sort of symbolically powerful things that can turn people against trade is the closure of a factory in their hometown or in their state.  And of course, nothing has more political impact as well on political support for it from a politician's point of view than a closure.  Nobody has really mentioned outsourcing yet.  And during this campaign, a few of the candidates have suggested perhaps taxing companies that outsource some of the jobs. 

And I'm wondering, obviously, they're connected.  If you can't invest overseas, then trade becomes less interesting to corporations.  I'm wondering if there is an increase in taxes for companies that do that, how will that affect the politics of trade?  Thanks.

BECKER:  Who's the tax person here?

MS.     :  Well, one thing I would say is the tax system already benefits companies who invest abroad.  Because if you leave your profits abroad, they're not taxable.  So I think it's candidate Obama who has talked about I didn't think penalizing, I thought it was more of giving incentives to companies that invest here rather than abroad.


QUESTIONER:  Hi.  I'm Adrienne Rothkopf with the U.S. Chamber.

Julia mentioned in her introductory remarks the current situation with the U.S. ambassadors in Bolivia and Venezuela.  And Janice mentioned in her remarks NAFTA and the cross-border trucking issue.  And I just was interested in hearing from all of you what your thoughts were in terms of how the U.S. is perceived overseas when we negotiate a trade agreement -- for example, like NAFTA and in the campaign period we talk about the possibility of renegotiating it -- or we negotiate agreements, and we don't end up voting on them. 

I'm just interested in your thoughts on how that affects our position and how we're perceived in the world.

MS.     :  Very good question.  Any takers here?  Carl.

MEACHAM:  How to start that?  Well, with regard to free trade agreements, there's such a diversity, I'd say, of preparation from different countries with regards to free trade agreements.  I mean, I'm not going to pick on countries but, some countries are more prepared to negotiate free trade agreements than others.  And you have to be sensitive to that.  And you have to be able to approach the countries that need assistance in a very different way.  I will put it that way.

I think Janice talked about a David-and-Goliath relationship.  We don't want to be perceived as David and Goliath.  We want to be perceived as more giving a helping hand for certain aspects. 

But on the other hand, you look at free trade agreements and they are business agreements, not a philanthropic kind of endeavor.  I mean, we're trying to get what we can on certain products and how we go about lowering tariffs on those products and the other country doing the same thing, that rational actor model, again, that we expect them to be arguing for their self-interest as we will be doing for ours.  So I'd say that that's one issue.

Are we talking about the Bolivia-Venezuela issue?  Or are we talking specifically about the expulsion of the ambassadors?  What are we talking about?  There's so much there.  (Laughs.) 

With those governments, I would want you to specify a little bit more on that.

QUESTIONER:  (Inaudible.) 

MEACHAM:  Sure, well, I don't think I need to educate folks in this room about the relationship the United States has had with different countries in the region.  I mean, we have a relationship that goes far back.  We have a relationship that has to do with the Cold War.  We have a relationship that has to do with the '90s.  And we have a relationship that has to do with 9/11 and from there on. 

So there's grievances, historical grievances, there's present grievances.  And we have to be sensitive to those things.  But on the other hand, I think it's probably going to be more important that we try to be more specific on what our priorities are in the region and that we go about these things in a way that doesn't isolate folks, that doesn't exclude folks from the conversation and that is more about a shared interest and developing a shared agenda to discuss some of these issues.

There's 35 countries in the region.  There are different regions in the region with different particularities.  I don't think there's a one-size-fits-all on that. 

BECKER:  Way, way in the back.

QUESTIONER:  Thank you.  I'm Dan Erikson with Inter-American Dialogue.

I wanted to ask a question about extra-hemispheric actors and how they should influence how the U.S. looks at its trade relationships in Latin America.  Obviously, over the last few years, you've seen China become a much greater factor, a top-five trading partner for most countries.  You have the European Union that has very robust trade.  Iran, Russia or other countries have become more active.

And so does that influence or somehow change the dynamic of the game between the U.S. and Latin America?  Should the U.S. be thinking to respond to this in some factor?  Or is this really just a part of globalization and nothing that we should be worried about in particular?  Thank you.

BECKER:  Who wants to talk about that?  Carl.  (Laughter.)

MEACHAM:  Wow, come on, guys.  Well, I would just say on the China issue that, you know, it just really emphasizes how important it is that we have these free trade agreements.  I mean, the Chinese -- I brought some statistics along here.  China consumes 32 percent of the world's steel, 30 percent of the world's zinc, 25 percent of the world's aluminum.  It's share of world petroleum consumption rose from 4.7 percent in 2000 to 7.1 percent in 2006.

I mean, this is a massive, I would say, change in the dynamic insofar as trade is concerned, et cetera.  When people look at China in the region, a lot of folks want to say, you know, that they're coming and competing on a political sphere with the United States.  The United States still is the biggest foreign-assistance contributor in the region. 

If China's coming into the region to develop its free market agenda and wants to trade and wants to do this ethically and wants to be above board, you know, great.  I mean, more countries participating the better.

The issue is the political implications that some of these relationships have.  You know, the Chinese come in and want some of the countries to stop their relationships with Taiwan, for instance.  You see that.  Well, how does that dynamic affect political relationships in the region?  But on the whole, what we've seen with China is that they're interested in opening new markets.  What we're more concerned with China is that they be ethical and legal in their pursuit of those markets.

MS.     :  Could I add another element here maybe which is -- I mean, if you -- Latin trade with the United States, even those countries that don't have the trade agreements, is growing quite rapidly.  But I think if you dig under a little bit, a lot of it is commodities, a lot of it is oil and other commodities.  And that's true of a lot of the China trade.

And I think, you know, that should be of concern to the United States in the following sense that we know and we've seen with a vengeance this year, you know, commodity prices and commodity trade is very volatile.  And I think that remain the basis of so many Latin economies.  You know, that affects the U.S. because when it goes down again then, you know, you have potential for political instability, increases in poverty, increased immigration pressures.

And so there's a U.S. interest in try to, again, to work on a more positive agenda with our neighbors in Latin America, both on the trade side but also -- I see Nancy Lee, my colleague who is on leave from Treasury at the center this year -- on the investment side.  And I think that's where you could work.  She has a proposal for a hemispheric agreement on investment standards, try and improve the business climate throughout the region, which is, obviously, in our own country's interest but sort of working cooperatively to perhaps, you know, overcome some of the political economy obstacles that have prevented it so far, could perhaps, through peer review, help to encourage countries to do what they need to do.

And I think, you know, an agreement like that would be something that should be of interest.  The U.S. would not have to be, you know, heavy-handed about it. It's not about access, per se, but it's about them improving incentives for foreign investors.  And that that could be very helpful in the long run in terms of both growth and poverty reduction and, therefore stability in the region, which would be very much in the U.S. interest.

BECKER:  There -- up here.

QUESTIONER:  Thank you.  My name is -- (name inaudible) -- I'm an independent journalist.

I was wondering if you can make some comments on multilateral negotiations and bilateral.  Some people say it is better to negotiate in a multilateral (labor ?) over bilateral.  But I keep thinking on the Doha round what's happened there and what will the future be with the free trade agreements with Colombia and Panama.  It states because free trade agreements are becoming more a political tool  than an economic one?  Thank you.

MS.     :  Well, I think, you know, I think the (stalemate ?) that Doha is probably an indication that trade relationships aren't that bad because if there were really, really serious problems on the multilateral front, then governments would be more engaged and more willing to compromise than they appear to be.  Now, India and Ghana and Brazil and Argentina have been major stumbling blocks to moving forward on the Doha round because they have their own interests.

I think in terms of -- Carl talked about the trade agreements being, you know, each side bargaining to get the best it can.  But let's go back to sort of the theoretical proposition of why we do this.  And I think, in a multilateral sense where you deal with rules on a global basis, it's probably more beneficial to making the trading system work better than bilateral agreements where you, perhaps unintentionally, impact another country negatively because you negotiate a bilateral agreement, and then that impacts third-country trade.

So I think the multilateral approach is probably, from a systemic point of view, you get more positive benefits from it.

BECKER:  In the middle there.  Right here, this gentleman here.

QUESTIONER:  Hi.  (Name and affiliation inaudible) -- in Washington.  Thank you very much for your interest and discussion.  I'm really enjoying it.

Not too put Mr. Meacham in the spotlight, but you briefly touched upon Cuba.  There has been a leadership change in Cuba.  Europeans are sort of readjusting their positions.  Of course, it's kind of an extension of U.S. domestic policy.  But what's the state of discussion with regard to Cuba at this particular time?

MEACHAM:  We really don't have very much of a change insofar as the approach of this country to Cuba.  You have different folks advocating.  I would say one is is folks that want to make a lot of changes to the current policy, opening up on trade, opening up on travel because they believe that sending those kinds of signals with the change of leadership that has occurred in Cuba is more constructive.  You've got folks that believe that nothing has changed; therefore, the policy should remain the same and it should even harden. 

Yeah, I've noticed -- but Janice has been doing this for a very long time, so I hope she agrees with this.  But I've noticed that with Cuba policy, in general -- Julia has, too -- with Cuba policy, in general, it takes one issue.  It's all issue related and the response to that issue.  So you had the brothers to the rescue and (shoot down ?).  That made there be a policy.  Then you had Elian.  That made there be another policy.

It seems like something big has to happen for there to be movement in this policy again because, you know, you're not seeing it from folks here in this country and the status quot in the environment right now.

So you know, but there remains many folks in Congress that are looking at this issue from a different vantage point.  And a lot of what you see in Congress has to do with folks saying, we want to sell products to Cuba.  There are certain restrictions in place right now.  We want to facilitate or we want to make it -- it should be easier to be able to sell those products, and this is what we'd like to do.  You have a lot of that.

Nevertheless, you have the argument of the human rights issues that are also very important.  But there hasn't been a change, and still the status quo remains.

BECKER:  One last question in the back.

QUESTIONER:  Hi.  Mark Schneider, International Crisis Group.

I haven't heard a lot of discussion about the counternarcotics policies in the administration.  In the course of the past year, the U.N. has reported increases in coca cultivation.  Cocaine production up apparently and flow into the U.S. has increased.  We still haven't heard what the U.S. figures are in Colombia this year yet.  For some strange reason, they haven't been reported.   In any case, they're unlikely to be very positive. 

Is there any likelihood , since there is a general agreement in both parties that we want to see a reduction of cocaine coming into the United States and we want to see the criminal aspect of drug trafficking cease to be a threat to the democratic institutions in the producing countries, is there a possibility to see some bipartisan decision to have a major review of the nature of our counternarcotics policy, figure out what clearly has not worked and perhaps a more intensive focus on demand reduction here and perhaps agricultural development and rural poverty reduction there, particularly given the rise in food prices and potential for agricultural development in the region?

BECKER:  This is beyond our mandate.  (Laughs.)  It sounds very political.  But someone's raising her hand.

O'CONNELL:  I'm happy to comment on it.  First of all, Mark, as people read the ICG reports, then clearly that should encourage at least a major review of the policy, regardless of which president gets elected.

With respect to the figures on current production, I mean, let's be serious.  The last time the numbers came out and they were increased and the explanation for the increase was, well, it really wasn't an increase over past years.  We just didn't see the production of past years.  They were there, but we didn't count them.  So when we go back and fix the numbers to put in the crops that were there that we missed, then it's basically production hasn't changed.  So the production numbers have become just a farce, an absolute farce in terms of making some judgment about what's happening.

I also think the developments with respect to the FARC, I mean, the FARC is disintegrating.  And that's an additional reason to take another look to see what kind of drug strategy would make most sense.

MEACHAM:  But in the interest to add to what Janice has said, there is a review coming up by the GAO of (plan ?) Colombia.  It should be coming out in the next couple of weeks.  So there is an interest in doing that. 

Second, there has been, as you know, new policies instituted with the Merida Initiative.  People should be looking at the third border to deal with trafficking.  People should be looking at the EASTPAC, the Eastern Pacific, to be dealing with more than just a source-based drug policy, that we actually have to deal with trafficking.

So yeah, I would agree that we need to do these things.  But there are certain things have occurred that are positive, but we still need to do more.

BECKER:  Since it's my prerogative, I wanted to bring up one issue before we wind down.  And the next session is on immigration.  And I'm surprised that no one has asked a question about the relationship between the trade agreements and the immigration issue here in the United States.  I can't think of a single Central American country I didn't visit covering trade where someone would say, a minister of an official would say off the record, please don't quote me, but why can't people be part of these agreements?  Goods, services covered, investment covered, not people.  We are dying while you refuse to talk about all of this as one subject.

And this is part of the image issue that Ms. Rothkopf mentioned, from the chamber.  And I know in the great hands of Ted Alden it will be taken care of.  But never forget that I can't think of -- I'm sure you're the same way -- when have you not had immigration as part of the trade agreements?  And that's going to be a big hole, I think, in the years ahead.

Okay.  Thank you.  I can't repeat what a great conversation this has been.  Thank you so much and a great audience.








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