Congress Passes Three Major Trade Deals, Ending Political Standoff
WASHINGTON - Congress -- if you listen to pundits and Washington politicians -- is completely broken. But when multinational corporate interests are at stake, suddenly the institution figures out how to get to work. On Wednesday, both chambers passed three sweeping trade agreements with bipartisan majorities, against the opposition of labor unions worried about job losses that would result.
President Obama and members of Congress from both parties have trumpeted the agreements for their job creation potential, but that assertion was undercut by the deal itself, which included funding for workers whose jobs will be lost as a result of the deals.
HuffPost has reported extensively on the deals, which involve Colombia, Panama and South Korea.
In 2004, Hyundai inked one of the best land deals in history. For a mere $12 million, the South Korean conglomerate secured the rights to 50 years of use on over 41,000 square miles of industrial space -- $292 per square mile, only about 10 percent higher than the rate the U.S. paid France under the Louisiana Purchase.
For a manufacturing giant, the Hyundai deal was a dream: plenty of space for factories, room for worker housing and a population that would work for less than half the wages that Hyundai was accustomed to paying for labor in its Chinese factories (the Hyundai conglomerate that signed the deal still conducts manufacturing operations, although it spun-off the division that manufactures cars in 2001).
The land Hyundai leased was located in North Korea, just beyond the U.S.-patrolled Demilitarized Zone, which separates the economically depressed, dictatorship-led North from the world's 14th-largest economy in the South. The land deal formed the basis for the Kaesong Industrial Complex: a conglomeration of factories and residencies dedicated to lowering labor costs for South Korean corporations. Over 47,000 North Korean laborers are currently performing work for over 120 South Korean firms doing business in the area.
South Korea defends the arrangement, arguing that working standards in Kaesong are better than in other areas of North Korea, a contention affirmed in an April Congressional Research Service report. But working standards are nevertheless horrifying. Workers officially make a minimum wage of $60.78 per month -- 35 cents an hour based on a 40-hour work schedule -- but South Korean companies have almost no oversight capacity, according to the CRS. Laborers are hired, disciplined and fired by the North Korean government, and the wages are kept low via intense citizen repression.
"They're treated better than other workers in North Korea, which is not inconsistent with it being a slave labor camp," says Rep. Brad Sherman (D-Calif.), one of just a handful of legislators seeking to curtail abuses at Kaesong.
And if a trade deal between South Korea and the U.S. is approved by Congress as expected, products from Kaesong could be sold in the U.S. tariff-free.
"The working conditions in the Kaesong Industrial Complex are among the worst in the world," says Thea Lee, deputy chief of Staff for the AFL-CIO, the largest U.S. federation of labor unions. "Workers have no rights."
Panama's entire annual economic output is around $26.7 billion a year, according to The World Bank -- only about two-tenths of one percent of the U.S. economy -- making the effect on jobs minuscule at best. Some economists expect other agreements with South Korea and Colombia to create net job losses in the U.S., as corporations ship American jobs overseas to take advantage of cheaper labor.
It may not have a large economy, but Panama does have some of the most stringent bank secrecy laws in the world, making it extremely easy and inexpensive for U.S. citizens to set up offshore corporations and bank accounts. Establishing the corporation and bank account costs less than $2,000, and any money that Americans stash in these entities is not taxed. Bank secrecy laws and extremely lax corporate registration standards make it very difficult for the Internal Revenue Service to track transactions transferring funds to these Panamanian destinations from the United States. Small surprise, then, that Panama is home to nearly 400,000 offshore corporations, more than any other nation except Hong Kong.
"A tax haven . . . has one of three characteristics: It has no income tax or a very low-rate income tax; it has bank secrecy laws; and it has a history of noncooperation with other countries on exchanging information about tax matters," said Rebecca Wilkins, senior counsel with Citizens for Tax Justice, a nonpartisan nonprofit dedicated to improving U.S. tax policy. "Panama has all three of those. ... They're probably the worst."
The trade agreement with Panama would effectively bar the U.S. from cracking down on this activity. The U.S. would not be allowed to treat Panamanian financial services transactions differently from transactions in nations that are not tax havens. It would also be unable to pursue some standard anti-money laundering techniques in Panama. Combating tax haven abuse in Panama would be a violation of the trade agreement, exposing the U.S. to fines from international authorities.
Union leaders and an unusual bipartisan coalition in the House remain opposed to the pacts, with resistance centered on the continued, rampant violence against union workers in Colombia.
As HuffPost's Dave Jamieson reported in July, union members in Colombia are routinely murdered with impunity. Over the past 25 years, nearly 3,000 workers have been killed in the country, with convictions resulting in just six percent of all cases.
That violence has continued, and even escalated, since President George W. Bush first negotiated the trade deal with Colombia in 2007. That year, 37 union workers were killed. The next year, 52, followed by 49 in 2009 and 51 last year.
As a result, unions in the U.S. are strongly opposing the trade deal with Colombia, a move led by the AFL-CIO, the country's largest federation of organized labor groups. The AFL-CIO has said it does not want to see the U.S. condoning violence against workers, nor does it want American workers to have to compete with wages that are depressed using the credible threat of murder.