(Washington D.C.)- U.S. Rep. Sander Levin, a senior Democrat on the House Ways and Means Committee, spent a week in January on fact-finding trip to Peru and Panama in advance of Congressional consideration of these trade agreements.  A summary of the findings during four days in Peru is attached to this statement:

"It is disappointing that the Bush Administration and President Toledo of Peru are rushing forward to sign a flawed Free Trade Agreement (FTA) that will not garner broad bi-partisan support should it be brought to a vote in the Congress.

"This agreement is a seriously missed opportunity to shape expanded trade and make globalization work so the benefits are widely shared by citizens of both our nations.

"Consider the conditions in Peru where they have experienced some economic growth in recent years:

 -- Recent estimates are that about 50% of the population in Peru lives in poverty, defined as under $58 a month, and about 20% in extreme poverty, defined as under $32 a month.

 -- There are huge disparities of wealth and income.  In Peru, the richest 10% received 37% of the income, while the bottom ten percent receives only 0.7% of the country's income.

"The U.S. -- Peru FTA fails to address the reality on the ground in Peru where workers do not have their rights in law or in practice.  Without basic internationally-recognized worker rights Peruvians will not be able to fully address the conditions of poverty and deep income inequalities which are causing such turmoil in the electoral process.

"I favor a U.S.- Peru FTA, but this Agreement is bad for U.S. standing in the Latin American region.  In negotiating trade agreements, the U.S. should not once again be locking in the status quo, but given constructive opportunities, helping to leverage change.  The use of the standard, "enforce your own laws" in relationship to workers and their rights, when change is vitally needed, puts us on the wrong side of people who know the current law is not working to their benefit.

"The FTA signed today is bad for Peruvians who need economic growth couple with equity and it is bad for U.S. workers and businesses who need trade agreements that level up, not down to create consumer markets for our goods and services."

 SUMMARY OF U.S. REP. SANDER LEVIN'S TRIP TO PERU

In late January, in a trip to Peru, I attended a broad range of meetings that focused on three issues in the U.S.-Peru FTA: agriculture, including the impact on small farmers; medicines; and worker rights.

Workers

There are serious issues relating to worker rights in this FTA.  Nevertheless, USTR has insisted on using the standard, "enforce your own laws."
    
As to the conditions for workers, it was clear before I left from ILO and State Department reports that there were deficiencies as to ILO standards in law and practice in a number of areas, as identified in a memo from Ways and Means trade staff. For example, Peru's laws do not provide sanctions against acts of interference in trade unions in violation of ILO standards.  In addition, judicial procedures for dealing with complaints of anti-union discrimination or acts of interference are too slow to be effective, and Peru's labor law requires that a majority of workers in a workplace vote in favor of a strike before that strike can take place, also in violation of ILO standards.  

What was less covered in the reports and became a focal point of discussions in Peru was the persistence of a basic change started under the Fujimori regime. It legalized a system under which a company, rather than hiring workers on a permanent basis, can employ them either under short-term individual contracts subject to non-renewal at the mercy of the company or through use of subcontracting.

As a result, according to officials of the Mine Workers Union, while there were once 70,000 working as direct hires that were union members and under whatever were the protections of Peruvian laws, now there were less than 20,000.

So the conditions of work had dramatically deteriorated in terms of hours of work, pay, pensions, safety, etc.  A similar story was told by representatives of workers in the communications industries. I was told that huge numbers of workers in the large export agro-business industries (mainly asparagus and artichokes) had been hired under the same short-term or subcontracting structures, so they are working with miserable pay and under repressive conditions.

Under this system of short-term individual contracts or subcontracts, people work at the whim of the company and anyone who thinks of starting or joining a union can be let go with impunity.  While the estimate is that 20 years ago about 20% of the workers were represented by unions in Peru, today the figure is 3% or 4%.

There has been substantial economic growth in Peru over the last five years.  There has been some reduction in poverty. Today, however, about 50% of Peruvians live in poverty under Peruvian standards (less than $58 per month) and 20% in extreme poverty (less than $32 per month.  Income distribution in Peru is dramatically skewed -- the richest 10% receives 37% of the income, while the bottom ten percent receives only 0.7% of the country's income.

Some in the business community and in the government suggested that while the short-term individual and subcontracting system existed, it applied only to people doing jobs like cleaning and maintenance, not the basic jobs like in mining, agro-business production and communications, contrary to what was described to me in detail by worker representatives. Some business consultants urged that one should not worry about conditions for workers in the formal sector (about two million) but instead about the larger number in the informal sector moving into the formal economy.

When I asked two ILO representatives in Lima whether workers in Peru in the formal sector possess basic ILO rights, the answer was a categorical "NO". This was the vigorous reaction of many I talked with in civil society, whether NGOs or lay or religious leaders affiliated with Peru's Catholic Church.

My judgment is that if the benefits of economic growth are to be shared in Peru -- vital to what happens there and the rest of Latin America -- President Toledo was right when he told Ways and Means members last fall that for globalization to work it was vital that workers have their basic international rights and to accomplish that those rights must be incorporated with enforceability into the FTA.

Agriculture

It is clear that reduction in Peruvian tariffs will provide added access to Peru's market for U.S. agricultural products, aiding Peruvian consumers where there is no major source within Peru.  Peru's agricultural exports, which have grown under the Andean Trade Preference programs, would be accelerated, especially asparagus and artichokes where there is some competition with the U.S. and fruits where there is less because of seasonal complementarities.  However, I heard in Peru about the agriculture provisions of the FTA very polarized views about the impact on small farmers.  They are reflected in a study issued last year by the Carnegie Endowment, i.e. that expanded trade under an FTA would have an "unambiguous positive impact" on some of the economy but "{t}he brunt of the adjustment costs are largely to fall on farmers and the rural population" in the Andean countries. 

Message to the Bush Administration

With the signing of the U.S.-Peru FTA, the message to the Bush Administration must be clear. We prefer to support an FTA with Peru but cannot do so unless the ILO rights of workers are incorporated in the FTA itself. Doing so ?C in contrast to moving further down the slippery slope of "enforce your own laws" -- would build a strong foundation for bi-partisan support so badly needed regarding international trade.

NOTE:  This document is a summary of remarks originally presented by Rep. Levin at the Carnegie Endowment for International Peace on March 14, 2006.  For the full text of these remarks please visit: http://www.house.govpr031406.html

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