Has Free Trade Fulfilled its Promise? Canadian Experiences for Colombia.

Written by Mario Alejandro Valencia. Jan 17, 2008.
Translated by Carmen Norris, La Chiva

On January 2, 1998, Canada and the United States signed a treaty for Free Trade. This case dealt with developed nations whose governments promised, in light of recent theories, that free trade would generate more and better jobs, improve public services, and increase the standard of living for everyone. Years later, in 2006, Colombia subscribed to a TLC (Tratado de Libre Comercio, FTA - Free Trade Agreement) with the United States and hopes to sign -in absolute secrecy- an FTA with Canada. An important sector of the democratic party of this country objects to this agreement because of connections between Uribe’s government and paramilitary groups and drug traffickers and because of the loss of jobs suffered by Canada.

In the first agreement with the United States, the Canadian government promised its people that free trade would usher in “new era of prosperity”. 20 years later, the Canadian Centre for Policy Alternatives, a progressive organization for research and social and economic studies, published a study analyzing who has benefited from this agreement called: Has free trade fulfilled its promise?

This study reveals that the most powerful group of Canadian employers, associated with the Canadian Council of Chief Executives (CCCE), put an enormous amount of pressure on the government of Brian Mulroney so that he would sit down and negotiate with Ronald Reagan. But has the FTA improved of the quality of life for those living under it? Has it fulfilled its promise of prosperity for everyone? The results of this study are quite telling:

One significant fact shows that between 1987 and 2006, the150 companies that make up the CCCE tripled their accumulation of wealth. But has this increased wealth resulted in the generation of more and better jobs? Well, of the 41 companies analyzed in this study, 28 reduced salaries for 205,062 of their employees at a time when their overall income increased by 93 million dollars. The three largest companies in Canada reduced their labour force from 87,626 workers to 43,000 while over the last 20 years their income grew from 38.9 million dollars to 67.3 million.

Surprisingly, after Alberta’s petroleum ‘boom’, the three largest petroleum companies in Canada laid off 7,072 workers, even though their income increased by 290%. In the manufacturing sector, which is responsible for a major portion of revenue, there are 100,000 less employees today than there were in 1987. Consequently, their workers have had to find jobs in other sectors, mostly in service, which offer much lower wages. Finally, the combined income of these 41 companies has increased by 127%, rising from 137 to 310 million dollars. During the last 20 years, these companies have reduced their labour force by 118,482 employees.

According to the study, before the implementation of the FTA this is the first time since 1914 that Canadian salaries have not gone up.

The study concludes by indicating that it was large companies and their highest executives that harvested the profits of the economic growth over the last 20 years in Canada; companies that also benefited from enormous taxes breaks. Much less, the vast majority of Canadians have not prospered as a result of free trade. In spite of having to work much harder and in more precarious conditions, workers wages have gone down. The promise of a better life for every Canadian has not been fulfilled.

Keep in mind that all his happened in Canada, home to one of the world’s most industrialized economies. One can only imagine what would happen if Colombia was to enter into a FTA with the United States.

Recent studies from the Centre of Development Research at the National University reveal the precarious nature of labour conditions for Colombian workers. Big business, aided by two labour reforms (Law 50 in 1990 and 789 in 2002), obtained the tools necessary to be able to hire and fire at will. The result: Law 50 eliminated 33,000 jobs and substituted 225,000 permanent positions for temporary ones. Today, 56% of employment in the 13 principle cities is informal and the number of independent jobs went from 4 million in 1994 to 6.7 million by 2007. The entire industry has not created a single permanent position in the last 14 years. To the opposite effect, it has actually eliminated 215,000 jobs.

Many workers are contracted to work in the worst conditions through Cooperatives of Associated Work, which allows companies to save 37% in taxes. Even still, the very own National Department of Planning fails to recognize that relaxation of labour laws is responsible for reducing Colombian wages (Portafolio, 5 Sep. 06). Minimum wage, earned by close to 2 million people, is not enough to supply the basic necessities to live with dignity. As far as social security is concerned, the numbers are no less dramatic: 4 million workers do not have severance pay and only by means of a salaried position can one earn a pension. Not to mention, there are 3 million workers without EPS.

All of this happened while the government showed great pride in how the long awaited foreign investment in Colombia beat surpassed expectations in 2007. This occurred thanks to the sale of Colombia’s national wealth to foreign capital and was accompanied by all of the official guarantees: legal stability, lower rent taxes, special legislation zones, incentives and subsidies; all for the capital, nothing for the worker.

With the signing of FTA’s, the Colombian government surrendered and continues to surrender the wellbeing of its workers. ‘Free Trade’, as has been the case in Canada, only benefits the most powerful transnational companies who seek out nations for their cheap labour. Not even a modified protocol would benefit Colombia because it is designed, in the strictest sense, to protect only the American worker. If Canada, which is a more developed nation and possesses strong and effective union syndicates, suffered devastating blows to their job market and massive reductions in employment, what can be expected from a FTA signed with Colombia, a nation who already suffers from the industrial weaknesses highlighted above?

Mario Alejandro Valencia is an analyst with the Colombian Network in Response to Free Trade (RECALCA) and is based in Bogota.