Ricardo Lagos, David Bonior, and Harley Shaiken "Trade, Development and the Americas" October 2, 2006

With Professor David Bonior (left) listening , President Ricardo Lagos explains his views on the relationship between trade and development on October 2.

- View archived webcast of the event (Real)
- Article on the event by Wendy Muse Sinek

A conversation with:
Ricardo Lagos, President of Chile, 2000-2006;
Visiting Professor, Center for Latin American Studies, Fall 2006
David Bonior, Professor of Urban, Labor and Metropolitan Affairs, Wayne State University; Member of Congress 1977-2003; House Democratic Whip 1991-2002
Moderated by:
Harley Shaiken, Chair of the Center for Latin American Studies; Professor of Geography and Education

A Symphony of Development Through Trade in the Americas
By Lyal White

Ricardo Lagos, former president of Chile, was once described as the “Mozart of the economy.” Credited for his ability to balance economic growth and social delivery in the face of adverse regional and global dynamics, Lagos has steered Chile to new levels of success. During his six-year term, economic liberalization was a priority, and Chile integrated further into the global economy through a range of bilateral and multilateral trade agreements. Today, 70 percent of Chilean gross domestic product is from trade, and close to 80 percent of trade is conducted under preferential trade agreements that span from Asia to Europe and North America. It is little surprise that the Chilean success story is often attributed to trade liberalization.

But free trade is controversial. The lightning rod of anti-globalization protests, trade remains the most tangible result of economic globalization. But the debate, as Harley Shaiken, chair of the Center for Latin American Studies (CLAS) at UC Berkeley, pointed out recently, is polarized and too narrow. Those in favor of the current free trade model are divided by vague differences between the market fundamentalists and the moderate government interventionists. In contrast, those critical of the free trade paradigm are labeled protectionists and most often, especially outside of the United States, carry an ideological stigma.

Shaiken’s comments came as he moderated a discussion between former president Lagos, a social democrat and strong advocate of free trade, and David Bonior, a former member of congress and House Democratic Whip, who has become a voice for the inequities and inequalities of free trade. Perhaps unsurprisingly, these unsuspecting adversaries ¾ one a proponent of free trade from the developing world and the other a critic of economic orthodoxy from the developed world ¾ came up with similar suggestions advocating fair trade practices. But their different points of departure offer somewhat contrasting perspectives on how to achieve this ambitious goal.

Despite the growth in merchandise trade, which exceeded $10 trillion in 2005, trade is about far more than simply the exchange of goods. Trade in services reached $2.4 trillion in 2005 and with that came a range of related issues from intellectual property rights to capacity building and technology transfers, not to mention the ways in which research and development can be utilized as a real source of investment growth. These factors should be balanced with the needs of the people, whether that means providing access to anti-retroviral drugs for persons infected with HIV/AIDS in developing countries or ensuring a more fair and just labor legislation across the spectrum in an effort to empower workers regardless of their geographical location.

Professor Bonior, who as House Democratic Whip was a leader in the negotiations over Nafta, spoke about free trade agreements, labor rights, and the potential for "economic democracy."

Bonior was quick to point out that, “Economic democracy is, at best, in its embryonic stages.” For him the North American Free Trade Agreement (NAFTA) symbolizes all that is wrong with free trade and neoliberalism in general. Social decisions are increasingly left to the auspices of an unregulated market. The results, he believes, have been “catastrophic,” citing poverty levels of above 40 percent in Mexico, over 100,000 job losses in the U.S. automotive industry and the claim that U.S. workers today are currently working 40 percent more than their counterparts in France, Germany and Italy.

In light of these statistics, NAFTA’s successes are often quickly forgotten. Growth in foreign direct investment (FDI) and trade between the United States, Canada and Mexico has exceeded the estimates of even the most optimistic NAFTA proponents. Mexico is the biggest beneficiary of the agreement. During the first 10 years of NAFTA, the Mexican economy grew to become the ninth largest in the world and per capita income rose by 24 percent ¾ well above the Latin American regional average. Democracy was entrenched through a multiparty system instead of single-party dominance, and Mexico was widely perceived as one of the best performing countries in Latin America.

The three participants walk through Sproul Plaza on their way to the event.

Despite impressive aggregate trade and investment figures, it certainly is true that NAFTA fell short of addressing some pertinent issues. The absence of special and differential treatment and lack of any real asymmetrical tariff reductions has had a detrimental effect on certain industries in Mexico, particularly agriculture.

Lagos, who during his term in office signed a record number of trade agreements with a diversity of trade partners from the United States and European Union (EU) to South Korea and New Zealand ¾ not to mention his staunch support for free trade in the Asia-Pacific rim ¾ cited the recognition of asymmetries among trade partners as fundamental to free and fair trade. This is particularly relevant in the Americas where the United States accounts for approximately 80 percent of the total GDP, while the 28 smallest economies make up only 4 percent of the total. Many of these smaller countries rely on tariffs and duties for up to 40 percent of their fiscal income, which is threatened by the prospect of free trade. There is a clear need for export diversification in the region ¾ often a byproduct of free trade ¾ as was the case in Mexico and Chile, both of which diversified from oil and copper exports respectively.

The crowd for the event packed the Toll Room of the Alumni House on the Berkeley campus.

Under Lagos, Chile’s relentless pursuit of global integration can be distinguished from free trade orthodoxy by the emphasis it places on public policies and the conscious decision to extend the benefits of trade deals to the domestic population. Development is key and needs to be incorporated into trade deals. Unfortunately a development dimension is sorely missing in NAFTA and, despite the intention to prioritize development on the multilateral trade agenda, the World Trade Organization’s (WTO) Doha Development Agenda was suspended in July this year after five years of fruitless negotiations.

The rights of labor are also largely absent from the agreements. Both Lagos and Bonior expressed concern over this. Labor is the only factor of production that has not been granted free movement from country to country in both NAFTA and free trade talks in general. More importantly, labor is poorly represented in bilateral and multilateral trade negotiations ¾ if at all. Most trade partners ¾ especially in the Americas ¾ share similar workers’ rights. But it is the enforcement of these rights and the voice labor unions carry in trade agreements that are of principal concern. NAFTA has no forum for discourse where workers or even industry leaders can challenge policy or discuss issues related to the agreement. On the multilateral front, the International Labour Organization is a poor excuse for a counterpart to the much-vaunted WTO.

The depth of trade as a primary instrument and reflection of globalization needs to be recognized. Free trade and market integration should not be perceived as purely neoliberal concepts. Economic globalization is here to stay. But rules and regulations are essential. These help to control the system and steer it in the right direction. That direction should be toward greater economic democracy: empowering workers through their involvement in trade negotiations and extending the benefits of free trade to the masses. This will help restore dignity and stimulate development and perhaps shed the stigma of inequality associated with globalization in so many countries around the world.

The discussion “Trade, Development and the Americas ” was held at UC Berkeley on October 2, 2006 . Ricardo Lagos was the president of Chile from 2000 to 2006 and a visiting professor at CLAS in fall 2006. David Bonior is currently Professor of Urban, Labor and Metropolitan Affairs at Wayne State University . Previously, he was a member of the U.S. Congress from 1977 to 2003 and House democratic whip from 1991–2002. The discussion was moderated by CLAS chair Harley Shaiken.

Lyal White is a visiting scholar at CLAS.

President Lagos talks with students and other members of the audience after the event.

With Harley Shaiken (center), Chair of the Center for Latin American Studies, the three participants prepared for the discussion at CLAS on the afternoon of October 2.

Professor Lovell S. "Tu" Jarvis of UC Davis talks with President Lagos after the discussion.