The role of multilaterals as ideal delivery platforms for the neoliberal agenda were torpedoed by popular protests and profound disagreements even among WTO members. From the Seattle Ministerial in November 1999 to the Geneva talks in July 2006, festering resentments against Northern dominance repeatedly led to deadlocks in negotiations, exerting pressure on bilaterals – heretofor considered a secondary delivery platform – to compensate for the more coherent but scuttle-prone multilaterals.

The Asian Development Bank (ADB) admits: ”Such disappointing consequences have forced the WTO member countries (US and EU in particular) to choose alternative paths such as FTAs to promote trade. The trend toward FTAs has generated a domino effect in which one FTA triggers the creation of others.” (ADBI, 2009)

With NAFTA already serving as a “successful” model towards bilateralizing globalization, two nodal points in WTO’s crisis-ridden history gave further impetus for FTAs and other bilaterals to assume the lead role in liberalizing international trade:

Cancún Ministerial – WTO’s second major breakdown triggered a significant shift of pressure and focus towards FTAs. Robert Zoellick, then US Trade Representative, immediately retaliated with his “competitive liberalization” program, whereby the US would pit Southern countries against each other to fight for US market access on a select one-by-one bilateral basis. In no time, Washington announced FTA negotiations with Thailand, Ecuador, Peru, Colombia and, soon after, five countries in Central America. Japan, China and many other Asia-Pacific governments also started looking much more earnestly into FTAs and jumping into negotiations. It was during this period that many people adopted Columbia University economist Jagdish Bhagwati’s phrase “spaghetti bowl effect” to describe the dangers of a complicated web of divergent bilateral trade rules replacing a more coherent multilateral regime that only a global forum like the WTO could maintain.

Doha Round – the July 2006 suspension of talks triggered yet another serious shift towards FTAs. While the US did not start new negotiations as a result, the EU was boosted into launching major new FTA talks with 21 countries in Latin America and Asia. By then, however, much had already changed since Cancún. Latin American countries had more or less “buried” the Free Trade Area of the Americas (FTAA) initiative, and some, led by Venezuela, had embarked on a rival Bolivarian Alternative for the Americas (ALBA). Venezuela had bolted from the Andean Community and joined Mercosur in protest against several Andean states’ FTAs with Washington. The 77 African, Caribbean and Pacific countries of the ACP group were entering into the last phase of their negotiations with Brussels on economic partnership agreements (EPAs). And China – having secured partial but significant deals with Thailand and with ASEAN as a whole, besides starting to engage the West by initiating comprehensive FTA talks with New Zealand and then Australia – was embarking on a broader multi-tiered FTA strategy.

While it would be imprudent for critics to dismiss the WTO altogether especially in the light of the current global economic crisis (which can become an opportune argument for multilateralism), the trend towards bilateralism is clearly impelled by this organization’s failure to create binding unities among such widely divergent streams of economic and geopolitical interests. This monumental miscarriage is understandable given that the inherent contradictions within the world capitalist system itself precludes long-term, stable compromises, and given that the type of methods WTO is compelled to employ in facilitating the neoliberal agenda – high-profile, multilateral, and with pretensions to “non-discrimination” – tend to encourage the formation of resistance clusters (internal) and movements (external) that can seriously impede efforts to stitch together multilateral trade agreements, such as happened in Cancun and Doha.

The second point is useful in highlighting bilateralism’s comparative advantage over the more hegemonic multilaterals. Not being scrutinized as closely as the latter, FTAs, BITs and EPAs have more elbow room for evading internationally-agreed principles of transparency, non-discrimination and accountability caveats that can make them vulnerable to global advocacy campaigns. Furthermore, negotiations for an FTA are often cloaked in secrecy and conducted only by heads of state, with public debates occurring only after ongoing deals are exposed inadvertently. This allows bilaterals – especially North-South ones – to easily circumvent national laws that happen to be asynchronous with certain agreements.

Such built-in conveniences have spurred the proliferation of FTAs not only between North-South countries but also among South-South ones. According to the World Bank, by mid-2004 there were a total of 229 FTAs in force worldwide, with 174 countries having signed on to at least one. It does not take into account FTAs signed but not in force, nor those under negotiation or in the pipeline. On the other hand, the Asian Development Bank (ADB) says that by the end of 2006 there were 192 FTAs – 84 concluded, 57 under negotiation and 51 proposed – in Asia and the Pacific alone. In Latin America, the Organization of American States speaks of 81 FTAs (of all sorts) in force from Canada down to Chile. The numbers of FTAs are relatively easy to track over time, but by themselves the numbers do not indicate the importance of FTAs to economic activity or trade at the national level. It is informative to get an idea of how much of a country’s world trade is covered by FTA provisions.

The spread of FTAs may be roughly divided into a North-South or a South-South axis. North-South bilaterals tend to be by-products of existing neocolonial relations and are dominated by the US, Japan, EU, Australia and New Zealand. All are trying to carve out FTAs for themselves in Asia, Africa, Latin America and the Caribbean. The South-South bilaterals axis, on the other hand, is led by such major FTA players in the region as China, India, Korea, Singapore, Thailand and Taiwan. FTAs between Southern countries generally do not impose major policy changes on each other, the big exception being restrictions on labor mobility within the axis as sought by receiving countries such as Singapore, South Korea, Malaysia, China (Hong Kong) and Taiwan.

FTAs and labor mobility

Bilateral agreements have been increasingly used by labor-receiving countries to liberalize and regulate labor migration. Such accords provide labor-receiving countries a country-specific, tailor-made solution to labor mobility. Through them, host economies can determine the sources of migrant workers based on their political and strategic interests or historic and cultural links.

On the other hand, ambivalence marks labor migration both as state policy and as riders in international trade agreements, a manifestation of social tensions within the host country itself. While both Northern and Southern TNCs vigorously pursue greater labor liberalization at both the multilateral and bilateral levels, industrial unions – rightfully threatened by cheaper and more docile migrant labor – also exert a counterpull of their own through parliamentary lobbying aimed at limiting labor market access to Southern job subcontractors.

At a European Trade Policy enquiry in 2008, Linda Kaucher of the London School of Economics (LSE) argues:

“Corporate sector lobbying to encourage labor liberalization may have several congruent aims. One is to increase the easily available supply of ready-trained workers, while encouraging a competitive wage market with downward pressure on wages and working conditions to increase profit, or ‘competitiveness’. But in addition, labor liberalization enables overseas companies providing outsourcing operations to bring their own imported workforce. Thus it serves to facilitate low cost outsourcing here, allowing corporations to offload employer responsibilities, without the disadvantages associated with offshoring.

Clearly, however there are other perspectives to be considered, related to jobs, effects on labor standards, and the broader social effects of such employment shifts, as well as the implications of increased migration, for instance affecting housing supply and public services.”

While FTAs serve a multitude of objectives that are even more important than facilitating labor mobility, their efficacy as cross-border instruments for regulating labor flows has been an established fact since NAFTA. Depending on the workforce needs of a signatory entity and how the tensions between corporate and trade union interests play out in the receiving country, an FTA may provide for greater or lesser inflows of migrant labor – often with provisions that do not allow for permanent migration or regularization. Especially during economic downturns, FTAs tend to restrict rather than encourage new entrants into the migrant labor pool.

ASEAN FTAs and Labor Migration

The Association of Southeast Asian Nations (ASEAN) is a geo-political and economic organization composed of Indonesia, Malaysia, Philippines, Thailand, Singapore, Brunei, Myanmar, Cambodia, Lao PDR and Vietnam. As a cornerstone of US foreign policy in East Asia, it was expressedly formed in 1967 to counter “the growing threat of communism”.

After a period of relative irrelevance after the Cold War, ASEAN found new lease in life as an “FTA darling” – a much sought-after partner in plurilateral trade deals. Emerging as a major regional hub linking country-members with the world’s larger economies and whipping up its own “spaghetti bowl” of trade agreements, ASEAN already has FTAs with PRC, Japan, South Korea, India, Australia and New Zealand, and is considering negotiating an FTA with the EU.

ASEAN’s member countries are also active in forging their own FTAs bilaterally inside and outside the sub-region, with Singapore by far the most active with 18 agreements. The country is a founding member of the ASEAN Free Trade Area (AFTA) and has implemented or concluded agreements with the largest Asian economies—PRC, India, Japan, and Korea—as well as economies outside the region, including the United States (US) and Australia. The US–Singapore FTA, which has been in effect since 2004, was the first such agreement made by the US in Asia and is reputed to be a model agreement in terms of scope.

The scramble for plurilateral or bilateral FTAs in the ASEAN is dictated by its member-countries’ increasing reliance on labor mobility to drive their respective economies. For underdeveloped countries, remittances remain the second largest source of finance after foreign direct investments (FDIs). An estimated 12 million migrant workers are of ASEAN origin, and their share in ASEAN GDPs averaged 10.9% in 2009, with Lao PDR highest at 34.5%. Of its ten members, the Philippines, Indonesia, Myanmar, Thailand, Vietnam, Laos, and Cambodia export labor while Singapore, Malaysia and Brunei import it. Malaysia and Thailand are both source and destination countries, although Malaysia receives far more migrant workers than it sends. Malaysia is also the largest labor importer in the sub-region.

Beyond traditional trade policies of tariff and non-tariff barriers, ASEAN-based FTAs often include provisions for services liberalization and labor mobility, acting as legal leverages for securing labor-sending countries’ cooperation in managing irregular migration. For instance, Malaysia and Thailand have sought bilateral agreements with large sending countries to manage such migration and try to ensure orderly labor flows. Malaysia has signed bilateral agreements with Bangladesh, PRC, Indonesia, Pakistan, Sri Lanka, Thailand, and Viet Nam. In 2003, Thailand entered into agreements with Cambodia, Laos, and Myanmar for government-to-government recruitment of migrant workers. South Korea has also forged bilateral labor agreements with Indonesia, Mongolia, Philippines, Sri Lanka, Thailand, and Viet Nam under its Employment Permit System (EPS), partly motivated by the desire to reduce irregular labor migration. Overall, the preferred policy for migrant workers is the ‘guest-worker’ rotation system, which does not allow for settlement by migrants.

Affirming the economic role of migrant labor in both sending and receiving countries, ASEAN issued its “Declaration on the Protection and Promotion of the Rights of Migrant Workers” in January 2007 ostensibly aimed at protecting their rights and improve their quality of life. Like all policy declarations on labor migration, however, the policy document reflects the hypocritical attitude of governments and big capital in receiving countries towards migrant workers and their reluctance to make any significant concession. While paying lip-service to promotion of migrant rights and welfare, the Declaration (like the GATS Mode 4) omits any reference to permanent migration or regularization of irregular (undocumented) migrant labor. Further, its impact as a serious policy instrument has yet to be felt given the absence of specific mechanisms for its practical implementation.

In sum, migrant labor is no better off under bilaterals than in multilaterals. The terms on labor mobility defined under WTO’s GATS Mode 4 has become a benchmark of sorts for bilaterals to work with, and highlights the limits of reform in this area within the neoliberal regime. At the end of the day, rejecting FTAs as globalization’s post-WTO workaround and digging deeper into the roots of labor migration for long-term solutions become the only real forward movement for both social advocacies.

Endnotes

1    Aziz Choudhry et al, “Today’s FTA Frenzy”, Fighting FTAs: The Growing Resistance to Bilateral Free Trade and Investment Agreements, December 2007, http://www.bilaterals.org/article.php3?id_article=15222

2    “Sending Money Home: Trends in Migrant Remittances”, Finance and Development, Vol. 42, No. 5, International Monetary Fund (IMF), December 2005. (http://www.imf.org/external/pubs/ft/fandd/2005/12/picture.htm)

References

1    Abella, M. and G. Ducanes. 2009. The Effect of the Global Economic Crisis on Asian Migrant Workers and Governments’ Responses. Manila: International Labour Organization

2    Choudhry A., R. Vellve and W. Chamroon. 2007. Fighting FTAs: The Growing Resistance to Bilateral Free Trade and Investment Agreements. Bangkok: bilaterals.org

3    Hirastuka D., H. Sato and I. Isono. 2009. Impacts of Free Trade Agreements on Business Activity in Asia: The Case of Japan. ADBI Working Paper Series No. 143. Tokyo: Asian Development Bank Institute

4    Kaucher, L. 2008. Submission to the House of Lords European Union Committee, Sub Committee A (Economic and Financial Affairs and International Trade). Enquiry into European Trade Policy. London: London School of Economics

5    Kawai M. and G. Wignaraja. 2009. Asian FTAs: Trends and Challenges. ADBI Working Paper Series No. 144. Tokyo: Asian Development Bank Institute

6    Tomer, B. 2007. The WTO/GATS Mode 4, International Labour Migration Regimes and Global Justice. Amsterdam” Free University

Joselito Natividad is the Executive Director of the Ecumenical Institute for Labor Education and Research (EILER). This article is excerpted from a longer paper of the same title presented at the “Asia-Pacific Roundtable on the ASEAN Labor Migration and Free-Trade Agreements”, a regional workshop co-sponsored by Asia-Pacific Mission for Migrants (APMM) and Asia-Pacific Research Network (APRN) held in the Philippines from September 19-20, 2009.