Using Trade Measures to Promote Democracy, Human Rights, Etc.

A couple days ago, I posted about Pascal Lamy's speech on human rights, where he said, among other things, that "trade measures are the most commonly used instrument in developed countries to put pressure on states violating human rights."  Presumably, one type of measure he had in mind was the use of conditions in tariff preference measures, such as the Generalized System of Preferences.  Basically, the grant of the preference is conditional on meeting designated human rights standards.

In addition to human rights, these measures are also used to promote other goals, including democracy.  Here's a Reuters article from a little while ago regarding preferences under the African Growth and Opportunity Act (AGOA), a U.S. preference program for Africa:

President Barack Obama said on Wednesday he has terminated trade benefits for Guinea, Madagascar and Niger, three African countries where democratic progress is threatened by political turmoil.

In a statement, Obama said the three countries had failed to make "continual progress" in meeting U.S. requirements for the African Growth and Opportunity Act.

"Each of these countries has experienced an undemocratic transfer of power, which is incompatible with making progress toward establishing the rule of law or political pluralism," said a White House official.

"These circumstances also make it extremely difficult to achieve the progress necessary to satisfy the other AGOA eligibility criteria," the official added.

The Eyes on Trade folks at Public Citizen's Global Trade Watch are happy that the Obama administration has suspended these preferences on the basis that the recipient countries are not being democratic enough.  But they are annoyed that agreements like CAFTA prevent similar actions against countries with whom the U.S. has negotiated trade agreements:

The Obama administration suspended the trade preferences of Niger, Guinea, and Madagascar because they have all experienced undemocratic transfers of power recently.

It’s too bad the standard trade agreement model doesn’t contain these types of democracy-preserving provisions, as Hondurans found out when their democratically elected President was ousted in a coup this June. 

...

Our trade policy should be promoting democratic governance instead of handcuffing our ability to discourage coups and dictatorships.  Signing CAFTA-style trade agreements is a surefire way to diminish our capacity to conduct effective foreign policy.

Lawrence Friedman of the Customs Law blog comments:

The reason is that AGOA, GSP, and other unilateral preference programs belong to the United States. The US made the rules and can kick out a country that fails to satisfy the rules. CAFTA, like NAFTA and the other bilateral or multilateral trade agreements, are different. The rules were negotiated between and among the parties. Since no one will agree to negotiate and implement a trade agreement from which they might be ejected, the agreements contain no such provisions.

Public Citizen may not like it, but the practical reality is that the trade agreements just don't work that way.

There are several points I'd like to make here.

First, I've heard it suggested that smaller, poorer countries get taken advantage of when they negotiate with a powerful country like the U.S., and that as a result the terms of such FTAs are unfair to the smaller countries.  However, one benefit to these countries is that under an FTA, they no longer have to worry about these kinds of trade measures being used to coerce them to adopt particular policies or do certain things.

Second, as for the legality of revoking unilateral trade preferences in situations like this, I'm not sure it would be consistent with the non-disrimination requirement of the Enabling Clause, based on the Appellate Body's Tariff Preferences ruling (from what I could gather, a WTO waiver has been requested for the AGOA, but not yet granted).  There's a lot the Appellate Body didn't say in that case, so there are plenty of arguments left on both sides.  But if I had to guess, I think the Appellate Body would reluctantly find that what the U.S. did here is not consistent with the rules.  Of couse, it is unlikely that such actions would ever be challenged, as there would probably be political repercussions from doing so.  But technically speaking, it is very possible the U.S. actions would violate the rules.

Finally, I can understand the desire to promote democracy abroad.  You won't get much argument from me that democracy is a good thing.  But it has always made me a bit uncomfortable using U.S. economic power to tell other countries how they should run things, and to punish them when they don't do what we want.  I don't mean to dismiss the argument that if we have the power to make things better and to help those in need, we should use it.  But I wonder if perhaps such actions would be more effective, and less susceptible to inconsistent application and abuse, if they were more multilateral in nature.

ADDED:  In the comments, Isabel Feichtner clarifies that a waiver has been granted for the AGOA (and two other preference programs).