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U.S./LATAM: Economic Crisis May Overwhelm
Obama's Goodwill
Analysis by Jim Lobe*
WASHINGTON, Mar 18 (IPS) - For all the
goodwill that U.S. President Barack Obama is
showing toward Latin America, he may find
his efforts overwhelmed by the global
economic crisis and growing pressure from
labour unions - a key Democratic
constituency - opposed to the kind of "free
trade'' agreements favoured by his two
predecessors, Bill Clinton and George W.
Bush.
While the balance of power within his
administration tilts heavily toward
officials who promoted the free-trade
ideology embodied in the 1994 North American
Free Trade Agreement (NAFTA) and its
Bush-era progeny, the Dominican
Republic-Central America Free Trade
Agreement (CAFTA), the position of those in
Congress who want to revisit those accords
in the spirit of "fair trade" was
substantially enhanced by the November
elections.
And the growing economic crisis, which has
seen some 3.3 million U.S. workers lose
their jobs in the past six months, is
certain to strengthen the unions' position
and dampen prospects for Congressional
ratification of pending free-trade accords
with Panama and Colombia.
Already, an 18-month-old NAFTA-related
"pilot project" that permitted some 100
Mexican trucks to travel U.S. highways was
effectively cancelled by an appropriations
bill approved by Congress and signed by
Obama into law last week.
Mexico responded by announcing Monday that
it will impose tariffs on more than two
billion dollars worth of U.S. industrial and
agricultural products, provoking threats
even by normally free trade Republicans that
such a move would invite serious
retaliation.
That dynamic was precisely what visiting
Brazilian President Luiz Inacio Lula da
Silva had in mind when he met with Obama and
other U.S. officials this past weekend. In
talks with the press before the meeting,
Lula made clear that fighting protectionist
impulses should get top priority as nations
deal with the global economic crisis.
"Protectionism can seem beneficial at first.
But in the long run, it wounds countries,
above all the poor countries, which need to
sell their goods to the rich countries in
the global economy," Lula told the Wall
Street Journal.
He also told the Journal he would lobby
Congress for a U.S.-Colombia free-trade deal
- the deal signed by Bush has been held up
by Democratic demands, including Obama's,
that Bogota do more to protect the lives and
safety of union organisers - even if it hurt
his country's own exports.
His offer, which was repeated in his meeting
with Obama, according to knowledgeable
sources, was taken as an indication that
even centre-left leaders see a deal with
Colombia as a test of how much political
capital the new administration is willing to
spend on improving ties with the region and
resisting protectionist pressure in the
worsening economic climate.
Since his inauguration two months ago, Obama
has made clear he hopes to establish a new,
much more positive and inclusive
relationship with Latin America than that
which prevailed under Bush.
His administration has already indicated it
is prepared to ease, if not eventually lift,
the nearly 60-year-old trade embargo against
Cuba. It even praised the conduct of last
month's referendum in Venezuela, keeping its
displeasure with President Hugo Chavez'
victory to itself. The administration has
also suggested that its anti-drug policy
will be more responsive to long-standing
calls by Latin American leaders to focus
more on reducing demand at home and somewhat
less on reducing the supply from the region.
And, in marked contrast to Bush's record of
intervention, the administration also took
an ostentatiously neutral position on last
Sunday's presidential election in El
Salvador, which was won by the candidate of
the left-wing Farabundo Marti National
Liberation Front (FMLN).
That neutrality and the immediate dispatch
of Assistant Secretary of State for Western
Hemisphere Affairs Thomas Shannon - and
later, Obama himself - to congratulate the
winner, Mauricio Funes, signals "a deep
shift in official thinking, by which groups
like the FMLN are no longer automatically
suspect, let alone demonised," according to
Geoff Thale, a veteran analyst at the
Washington Office on Latin America (WOLA).
"The Cold War in Latin America is finally
over."
While that shift marks a major milestone in
Washington's attitude toward the Latin
American Left, it may not be enough to
overcome the challenges the administration
will face in persuading the region of its
goodwill, particularly if the economic
crisis grows substantially more severe.
Not only will rising unemployment likely
translate into growing popular pressure for
a harder line on immigration and trade
protection here, but the impact of the
crisis on Latin American economies will also
almost certainly foster anti-Americanism in
the region, particularly because its causes
are widely seen as having been "Made in the
USA" by precisely the same forces on Wall
Street that promoted the "neo-liberal"
ideology that underpinned the free-trade
accords.
"Latin America is going to be profoundly
affected by this crisis," according to
Michael Shifter, a regional specialist at
the Inter-American Dialogue, an influential
think tank here. "The economic distress
that's already being felt could well become
more acute, and that does contribute to
resentment towards the U.S."
Indeed, the Inter-American Development Bank
(IDB) reported Monday that remittances from
Latin American workers in the U.S. are
expected to decline for the first time since
the bank began tracking annual flows in
2000, with Mexico and Central America taking
the brunt of the losses. Private U.S.
investment in the region has also fallen
steeply.
The International Monetary Fund (IMF)
predicted two months ago that Latin
America's overall economic growth rate will
decline from nearly five percent last year
to just 1.1 percent in 2009 - an estimate
now widely considered to be optimistic.
"As the economic climate erodes, the kinds
of policies that the U.S. is seen as having
promoted for all these years, including the
(trade) agreements, will come increasingly
into question, both here and in the region,"
said Shifter.
Indeed, voices calling for major changes to
U.S. trade policy and even for renegotiating
of NAFTA and DR-CAFTA - something Obama said
he supported during the campaign but has
since backed away from - are growing louder,
as evidenced by the meeting here this week
of key trade-union leaders from the U.S.,
Mexico, Central America, and Colombia that
was co-sponsored by the Economic Policy
Institute (EPI) and the International Labor
Rights Forum.
They called for the adoption of new policies
that would strengthen worker rights and
environmental protections throughout the
region and ensure that the interests of
local business and communities are not
subordinated to those of foreign investors.
"There was a consensus that the NAFTA/CAFTA
model has utterly failed to produce the
benefits that were promised, either here or
in Latin America, and that the future lies
with agreements that give precedence to
workers’ rights, development and the
environment," said Tony Avirgan, director of
EIP's Global Policy Network. "The current
crisis has exposed this more clearly than
ever and offers an opportunity for Obama to
fundamentally reshape U.S. policy."
While Shifter insisted that re-opening
existing trade deals is highly unlikely, he
said the administration could support review
processes designed to set new standards and
ensure enforcement. "There's a broad
consensus, both here and in the region and
certainly within the administration, that a
lot of the trade deals of the 90's need to
be beefed up, particularly on labour and
environmental standards," he said.
"Much depends on how much worse the economic
crisis becomes and how much political
capital (Obama) has to spend in the battles
he's already waging in Congress over the
bailout and stimulus packages," he said. "If
it's eroded by all the problems that he has
now, then protecting those deals and gaining
Congressional approval for more will be much
more difficult."
*Jim Lobe's blog on U.S. foreign policy can
be read at http://www.ips.org/blog/jimlobe/.
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