A Better Alternative to a Showdown Over Free Trade

By Marcela Sanchez
Special to washingtonpost.com
Friday, March 21, 2008; 12:00 AM

WASHINGTON -- I recently had the chance to talk with two of Mexico's most prominent business leaders, Emilio Azcarraga Jean, chairman of television giant Televisa, and Roberto Hernandez Ramirez, chairman of the board of Banamex. Among other things, we spoke about the pledges of candidates Hillary Clinton and Barack Obama to renegotiate the North American Free Trade Agreement.

Both dismissed such talk as campaign rhetoric with little consequence. While Obama wants to better enforce labor and environmental standards and Clinton promises a "trade timeout," the connections among NAFTA partners now are too deep -- and too complicated -- to be easily rescinded or "reformed" without causing more damage than the candidates seek to repair.

Such views don't come as a surprise from billionaires with vested interests in easier access to the United States, the hemisphere's richest market. But few Latin American experts in this country would disagree with their perspective, including many Democrats, particularly free-trade Democrats.

Christopher Sabatini, who worked at the U.S. Agency for International Development during the Clinton administration and is now at the Council of the Americas, calls the rhetoric of both campaigns "dishonest and cowardly." He adds that "the actual tinkering that can be done with NAFTA is not going to have much of an impact on the average worker who feels, rightly or wrongly, that he has been affected."

So where does that leave those who feel NAFTA, and free trade in general, have hurt them or the environment? Certainly, concerns over social dislocation or deepening inequality caused by globalization and free trade, even though manipulated by politicians, are no less valid. But if the candidates could be taken at their word, it is not clear that a showdown between corporate interests and protectionists would put dismissed workers back on the job, or improve labor and environmental conditions.

A more constructive and potentially far more effective approach would be for governments to get behind the growing corporate social responsibility movement, or CSR. Over the last decade, many in the private sector have come to realize that it is in their own interests to commit to better social and environmental conditions. The movement is monitored by the European-based Global Reporting Initiative.

Corporate social responsibility works on what could be called the Kathie Lee Gifford principle. In 1996, a U.S. human rights group denounced the clothing line sold at Wal-Mart under the television personality's name because it was manufactured by child laborers in Honduras. Gifford denied any knowledge of the practice and eventually became an advocate for better pay and legislation banning sweatshops. Shame and market forces -- rather than government regulation or free trade arbitration -- brought change.

In like manner, companies such as Nike, Chiquita Brands and Levi Strauss now dispatch their own monitors to ensure that subcontractors worldwide are meeting core standards. It is hard to imagine a more persuasive tool to promote better labor or environmental practices than a threat from a big multinational buyer to take its business elsewhere.

While CSR is clearly here to stay, especially for those businesses that compete in economies with broad market choices and more affluent consumers, only a very small percentage of Latin American companies have joined the movement. Writing in the latest issue of the Americas Quarterly, former Clinton administration adviser Richard Feinberg noted that only 93 of Latin America's top 500 firms participate in the Global Reporting Initiative, and 40 of those companies are from Brazil.

Still it is in regions such as Latin America, with a tradition of monopolistic and oligarchic business practices and persistent inequality, where CSR is especially needed. CSR could become a useful tool for businesses to counter the anticapitalistic rhetoric of some regional leaders. CSR could also connect businesses in new ways to their customers by demonstrating not just an interest in taking their money but also in their well-being.

Azcarraga, the Mexican television tycoon, believes that "there is an ever increasing (social) awareness" in Latin America, whereas the private sector is looking for ways to join governments and nongovernmental organizations in attempts to alleviate poverty. It is precisely because of this that Feinberg believes the next U.S. administration "can readily find common ground in Latin America" through new forms of partnerships to promote social and economic development. "If you can do it in a more coordinated way," Feinberg told me, "you are talking about leveraging tremendous market power."

Marcela Sanchez's e-mail address is desdewash@washpost.com.

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