Tuesday, February 17, 2009

South Koreans push back against Free Trade Agreements with Canada, US

An Interview by Stefan Christoff

Since the collapse of the last round of World Trade Organization (WTO) negotiations in Cancun, Mexico, in September 2003, Canada and the US have rapidly signed several bilateral trade accords.

South Korea, a major Asian economic power and the fourth largest in the region, has recently signed a major bilateral accord with the US and is currently negotiating a similar deal with Canada.

Social movements in Korea have vigorously opposed the country's succession into the WTO since the mid-1990s and have actively mobilized in opposition to the more recent bilateral trade initiatives.

Opposition from Korean peasant movements to 'free trade' policies gained international attention in the September 2003 Cancun meetings when Korean farmer Lee Kyung Hae took his own life in protest while holding a sign reading "WTO kills farmers."

Hundreds of thousands participated in street protests in Seoul this past summer to oppose recent changes to US-Korean trade policy that was to allow US beef to re-enter Korean markets. Sale of US beef had been banned in Korea since the discovery of Mad Cow Disease in some US cattle. Recent protests in Korea against US beef imports mark the largest anti-government protests in decades.

Opposition to US trade policy in Korea extends past US beef, to the recently negotiated US-Korea bilateral trade deal - after the North American Free Trade Agreement (NAFTA), the largest regional trade agreement signed by the US.

In December 2008, scuffles broke out at the National Assembly in Korea as opposition politicians attempted to enter a locked-door session of the parliamentary committee on trade discussing the US bilateral deal, which remains extremely controversial in Korea.

In parallel with the US-Korea deal, officials from the Conservative government in Canada have been pushing to sign a similar bilateral deal. Labour unions in both countries have opposed the deal, including the Canadian Autoworkers Union (CAW). The CAW stated, "We refuse to enter into a competition with Korean workers for future prosperity. Working people in all countries have the right to job security, fair trade, and economic and social development."

In an attempt to understand the drive from US and Canadian officials to secure bilateral trade deals with Korea, Stefan Christoff spoke with Christine Ahn of Korean Americans for Fair Trade on the bilateral trade accords and grassroots opposition in Korea.

Stefan Christoff: Concerning the Korea-US Free Trade Agreement and also the Canada-Korea FTA, can you outline how this agreement will impact environmental and labour standards in South Korea, Canada and the US?

Christine Ahn: Impacts on working people stemming from the North American Free Trade Agreement (NAFTA) in Canada, Mexico and the US make it clear that extending similar trade policies to Korea will only create further damage [for] all countries involved.

Essentially, economic and trade policy being pushed on Korea through the WTO and the IMF-imposed structural adjustment following the Asian financial crisis in the late 1990s have moved Korea from a relatively self-reliant, industrial and agrarian economy to an economy increasingly dependent on exports and international market trends. This economic transformation, led by structural adjustment, broke the backbone of the trade union movement. Today in Korea over 50 per cent of the workforce are now irregular workers.

Trade unions in Korea had succeeded in creating a situation in which workers' rights were beginning to improve in Korea in the early 1990s, whereas for decades under authoritarian regimes workers were seriously oppressed; now again under neo-liberal economic policies, workers' rights are being seriously undermined.

Past experiences of workers throughout North America under NAFTA and the plight of Korean workers under neo-liberal policies make it extremely clear that the Korea-US trade agreement, the second largest US trade deal after NAFTA, must be opposed.

Christoff: Can you outline how the US-Korea trade accord would impact different elements of Korean society, for example on the national healthcare system and also on the peasants which have a long history of political mobilization in Korea?

Ahn: Pharmaceutical provisions that are included under this US-Korea Free Trade Agreement are terrible. Korea does not have the best universal health care system but there is a public system intact. Under the US trade agreement the current list of medications that are available to people through public healthcare would be challenged.

US pharmaceutical companies have been trying to push for a new pharmaceutical list, which would stack the list with US-patented pharmaceuticals which are so much more expensive than generic pharmaceuticals, putting a major strain on Korea's healthcare system and ensuring profits for US pharmaceutical companies through Korea's national healthcare system.

Exporting the US model for healthcare is a disastrous idea. In the US, there are over 45 million people who do not have healthcare, which is certainly a scenario not to encourage in other countries.

Clearly workers' rights will be detrimentally impacted by this agreement both in North America and in Korea. Under such agreements corporations can simply pick up their operations and move them to other countries that have weaker environmental and labour standards, lower production costs, while [the same companies] have the ability to send their produced goods around the world without paying any tariffs.

Only 10 years ago, Korea once was a largely agrarian economy with around 10 million farmers and now there are only around 3.5 million farmers. A mass migration has taken place, people moving from the countryside into the cities, contributing to growing unemployment rates, as fierce competition has also driven down the wages in the country. Also, there is a massive depression of Korea.s rural economy due to the flight to urban centres. This mass internal migration has severely impacted the economy of Korea's non-urban centres.

Under NAFTA, the US ensured that agribusiness was subsidized with hundreds of millions to 'compete' with the small-scale South Korean farmers. It is positive that rice is not included in this agreement because in Korea rice farmers make up the largest number of peasants in the country, who would be seriously impacted by imports of cheap rice from the US. Under WTO regulations, however, Korea will eventually have to erase the tariffs on imported rice anyway, so even rice farmers will be hit by cheap imports.

The Korea-US bilateral trade agreement is worsening the situation for people in Korea and in the US. The agreement will eliminate tariffs that protect local industries while granting further rights to corporations to privatize further many social and public industries.

Christoff: Can you talk about some of the main issues that people highlighted on the ground in Korea as concerns this agreement?

Ahn: A major issue is beef, which isn't currently included in the agreement, however [it] has been used as a leveraging tool by the US.

US negotiators are pushing Korea to remove the 2003 ban on US beef imports, imposed after Mad Cow Disease was discovered in the US, seriously impacting US beef imports to Korea. During this process there were major education campaigns within Korea and also in Japan, educating the public concerning the potential harm stemming from US beef.

As a pre-condition to negotiations surrounding the US-Korea Free Trade Agreement, negotiators on the Korean side are being pressured to weaken laws concerning the imports of US beef. Essentially the US has been using the beef issue within the negotiations as an exchange to allow Korean industries to export greater amounts of electronics, conductor chips and automobiles into the US.

In the US and Canada, autoworker unions are highlighting the major imbalance between the number of automobiles being exported by Korea into the US and the limited number of automobiles that US manufacturers are exporting to Korea; a trade imbalance.

Autoworker unions in the US and Canada are saying that these bilateral accords should only be signed if a certain amount of automobile exports to Korea are secured. Actually, on the Korean side there is concern about importing larger numbers of US-manufactured automobiles because generally the engines are less environmentally friendly. So these bilateral agreements are flawed on both sides as they are fundamentally market-driven, agreements that don't prioritize other critical points such as the environment, health or labour standards.

People in Korea are very concerned that the US is using this agreement as a wedge to dismantle health, environment and labour laws, and also the national healthcare system. These are real concerns in Korea as opposition to this agreement and are being most strongly pushed by peasants and farmers who have direct, first-hand experience of the impacts of neo-liberal economic policies in Korea.

Korean peasants have really galvanized a strong opposition to neo-liberal economic and trade policies within peasant movements in the country, but also throughout the Third World. This opposition was strongly felt in Cancun, Mexico, during the WTO negotiations and again in Hong Kong.

Essentially these bilateral accords are viewed by Korean peasants as [leading to] a loss of their dignity and autonomy.

* Stefan Christoff is a journalist and community organizer. This interview was originally produced for the Fighting FTAs project, an international project that provides a global picture on free trade agreements (FTAs), and insight into struggles being waged by social movements fighting back.

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Wednesday, February 04, 2009

Obama imposes salary cap for firms that join bailout

If business that make billion dollar deals can fail, why are they able to cough up high salaries? Who is reponsible for the rich / poor divide?


President Barack Obama on Wednesday imposed a salary cap of $500,000 for top executives at companies that receive large amounts of bailout money, saying that some executives were being "rewarded for failure," in part with taxpayer-subsidized money.

"We all need to take responsibility," the president said as he prompted Congress once again to act on his economic stimulus program and repeated his comments that some Wall Street executives had shown "the height of irresponsibility."

He urged the Senate to pass his economic stimulus package, now calculated to exceed $900 billion, perhaps even $1 trillion, saying: "A failure to act, and act now, will turn crisis into a catastrophe. Millions more jobs will be lost."

A handful of companies will probably be most directly affected by the salary cap - Citigroup, Bank of America, American International Group, General Motors and Chrysler - though others will also face tighter restrictions. All the companies are expected to look for ways to remain competitive in the fierce bidding for the most talented executives.

The move, which Obama described as "basic common sense," reflects rising public and congressional resentment at the notion of money-losing companies drawing federal aid while paying multimillion-dollar bonuses to top executives.

"We don't begrudge anybody for achieving success, and we believe that success should be rewarded," he said. "But what gets people upset - and rightfully so - are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers."

Treasury Secretary Timothy Geithner, appearing with the president for the White House announcement, said that many less wealthy Americans felt that they were bearing a heavier burden from the financial crisis than were those who helped create it.

The Bush administration had imposed general restrictions on executive pay, but the new rules are far tougher and could force executives to accept deep pay reductions. The impact probably would be felt most acutely in financial centers like New York.

Executives at companies that have already received money from the Treasury Department would not have to make any changes. But analysts and administration officials expect a huge wave of new losses, largely because of the deepening recession, and say that many companies that have already received federal money may come back.

Other countries have also considered pay limits, though not as strict. European Union finance ministers declared that managers of bailed-out European banks should "not retain undue benefit," but they left it to member states to define specific limits. Germany plans to ban bonuses and set a ?500,000, or $640,000, pay limit for executives at rescued banks, Reuters reported.

Obama's announcement on pay seemed to have a clear political component: He was trying to regain the initiative after a day in which two important political appointees, Tom Daschle and Nancy Killefer, withdrew from consideration over tax problems. Obama subsequently conceded having "screwed up" by pushing Daschle's appointment to head the Health and Human Services Department.

In a comment regarding Daschle that might almost have applied to executive pay, Obama told NBC on Tuesday: "Ultimately, it's important for this administration to send a message that there aren't two sets of rules. You know, one for prominent people and one for ordinary folks."

Obama said Wednesday that Geithner would introduce a major new plan next week to further shore up banks - and reportedly also help homeowners and home buyers. Laying the groundwork for that, the tough language on executive pay now might help defuse the angry opposition he surely will face over another big spending plan.

"We will have to do more, substantially more, to fix this crisis," Geithner said.

The new rules would have these effects on the companies receiving the largest amounts of bailout money:

Senior executives would be limited to $500,000 in total annual compensation, other than restricted stock. They would be able to cash in such stock only after the government had been repaid.

Executive compensation terms must be fully disclosed and subject to a so-called "say on pay" provision - largely a question of accountability, meaning that they must be submitted to a nonbinding vote by shareholders.

Previously, the top five executives in a given company had to have "claw-back" provisions meaning they could pull back bonuses or incentive pay from anyone found to have knowingly provided inaccurate financial information used to calculate incentives; now that will extend to the next 20 executives as well.

Before, the top five executives at each company were barred from receiving "golden parachute" payments upon severance. Now that will extend to the top 10, and the next 25 will be barred from severance payments exceeding a year's compensation.

For companies receiving smaller bailouts, the $500,000 compensation limit applies, but it can be waived if they fully disclose compensation terms and adopt a "say on pay" approach. The claw-back provisions apply. And the top five executives will be allowed a maximum one-year compensation upon severance, not the current three.

Last May, the insurer Aflac became the first American company to adopt a say-on-pay approach. Other U.S. companies are following suit.

Say-on-pay votes have long been common in Britain and Australia, and experts believe they have helped slow the rise of compensation.

Under the U.S. Treasury's $700 billion rescue program, most companies that have received money so far have been classified "healthy" rather than on the brink of collapse.

But those receiving "exceptional assistance," like Citigroup and the others, faced acute problems. And top executives at those companies made far more than $500,000 in recent years.

Kenneth Lewis, chief executive of Bank of America, took home more than $20 million in 2007, including $5.75 million in salary and bonuses.

Vikram Pandit, who became chief executive of Citigroup in December 2007, made $3.1 million.

Richard Wagoner, chief executive of General Motors, made $14.4 million, most of it in stock, options and other noncash benefits.

Public and congressional pressure has grown so sharp that Wagoner, and also Robert Nardelli, chief executive of Chrysler, recently said they would reduce their personal compensation to a dollar a year.

Robert Frank, a Cornell University economist, wrote recently in The New York Times that "executive pay in the United States is vastly higher than necessary," and the public condemnation entirely understandable.

"Executives in other countries, whose pay is often less than one-fifth that of their American counterparts, seem to work just as hard and perform just as well," he wrote.

Frank argued against a pay cap, however, saying that "in large companies, even small differences in managerial talent can make an enormous difference."

James Reda, managing director of James F. Reda & Associates, a compensation consulting firm, said that such limits would make it hard for big companies to recruit and keep executives.

"I don't think this will work," he said, adding that for top executives, the new cuts would be "pretty draconian."

But others say that excessively high executive pay has tended to foster a dangerous culture of excessive risk, much as flourished before the Great Depression.

"Wages in finance were excessively high around 1930 and from the mid-1990s until 2006," according to a National Bureau of Economic Research paper by Thomas Philippon and Ariell Reshef.

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