Economic crisis Albatross around Obama’s neck

For all the goodwill that US 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 US 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 US 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 US 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 US 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 US-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. “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 US.”

The Inter-American Development Bank (IDB) reported Monday that remittances from Latin American workers in the US 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 US 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 per cent last year to just 1.1 per cent in 2009 — an estimate now widely considered to be optimistic.

Indeed, voices calling for major changes to US 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 US, 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 US policy.” — IPS