Tuesday, January 16, 2007

Comment on Zoellick's AAFTA and a New Link

I've added a link to the new-ish International Economic Law and Policy Blog. The blog is the collective work of a number of leading academics in the trade arena including my occassional guest lecturer Todd Weiler (who may be the hardest working lawyer doing NAFTA arbitration work). His site NAFTAclaims.com is invaluable to those interested in the topic.

The blog includes an excerpt from former USTR Zoellick's WSJ op-ed piece advocating an association of existing western hemisphere free trade agreements. Essentially, this seems like a way to pour the old FTAA into a slightly new decanter. Rather than negotiate a new deal, Zoellick's idea is to forge links between the existing agreements. As a political matter, this seems like a dubious prospect. The current congressional leadership appears to be very sceptical of free trade either as a matter of economic philosophy or political strategy. Either way, the idea of an AAFTA seems unlikely to get much political traction.

Is it really a good idea? Probably. Unrestricted trade in goods and services allows countries to benefit from their comparative advantage. If that is labor, natural resources, or technical innovation, countries will profit from what ever it is they do best and outsource the areas in which they can't efficiently compete. Of course, the difficulty is in preventing countries in need of foreign investment dollars from using lax labor and environmental standards as their comparative advantage. That means addressing labor and the environment in these agreements to prevent the proverbial race to the bottom.

In NAFTA, we did this by agreeing not to reduce standards and by setting up an elaborate (and largely ignored) bureaucracy to monitor compliance. The better model is the so-called "Jordan Standard" found in the U.S-Jordan FTA. That agreement requires that the parties "strive to ensure" that their labor laws meet international standards AND permits the use of the built-in dispute resolution process to possibly impose sanctions for failing to do so. While it remains to be seen whether there are any actual teeth in this provision, at least it holds out the possibility for labor standards to be protected in an FTA. That is something the Democratic congress' traditional constituency might be able to get behind even in the context of a free trade agreement.

2 comments:

Anonymous said...

Looks like I am the first one trying to access the link, but it is not found. Any thoughts?

Larry F. said...

The link is fixed. Sorry about that. The fault was entirely mine. Thanks for letting me know.