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Bottom Line: Does the TPP Trade Deal "Put American Workers First"?

Sunday, November 8th, 2015

Dave Johnson

The full text of the Trans-Pacific Partnership (TPP) has finally been released and We the People can see what has been negotiated in our name. President Obama laid out the bottom line, saying the deal “puts American workers first.” Does it?

TPP Text

The full text of TPP can be seen here. The text consists of more than a thousand pages of incomprehensible legalese like this:

… the rate of customs duty applicable to the originating good from the Party where the good acquired the originating status in accordance with the process requirement or change in tariff classification requirement set out in Annex (PSR); or (ii) the rate of customs duty applicable to the originating good from the Party where the largest value was added among claimed production process, or the highest rate among the rates applicable to the originating good from those Parties involved in claimed production process, when the good acquired the originating status through a production process in accordance with the requirement set out in Article DD. 2(a), (b) or the regional value content requirement set out in Annex (PSR).

and this:

Pursuant to paragraph 1(b), the Commission shall review the operation of this Agreement with a view to updating and enhancing this Agreement, through negotiations, as appropriate, to ensure that the disciplines contained in the Agreement remain relevant to the trade and investment issues and challenges confronting the Parties.

You get the picture. This is going to take time and experts to figure out. Worse, it was negotiated in a corporate-dominated process, so if TPP is approved we have to assume that anything that is hard to understand or ambiguous will later be used to justify taking from We the People and giving to A Few People.

So Does TPP “Put American Workers First”?

President Obama set down the bottom line of TPP by releasing a statement calling TPP, “a new type of trade deal that puts American workers first.” In the statement he wrote, “If you’re an autoworker in Michigan, the cars you build face taxes as high as 70 percent in Vietnam.”

It is interesting that he would use the example of auto workers here. The September post “TPP Terms Are Even Worse For U.S. Than NAFTA?” looked at how TPP will affect the American auto industry and found:

Under NAFTA 62.5 percent of the value of cars and 60 percent of auto parts must be made in NAFTA countries, or a tariff will apply. But for TPP the U.S. Trade Representative Michael Froman appears to have made a deal saying only 45 percent for cars and 30 percent for parts need to be made in TPP countries – the rest of that business goes to China and other non-TPP, low-wage, low-labor-standards and low-environmental-protection countries. The result will be a huge shift of jobs and business away from American, Mexican and Canadian auto and parts makers.

Now we know the actual terms. Canada’s Globe and Mail reports, in “Canadian auto sector alarmed by concessions revealed in full TPP text ,” that

Canada’s auto parts makers, who employ 81,000, say the text of the agreement shows the local-content protections for vehicle components are significantly skimpier than the former Conservative government had advertised. Former prime minister Stephen Harper had said local-content requirements for important vehicle components would be between 40 per cent and 45 per cent.

… Engine parts and such body stampings as truck frames and metal roof panels will only be required to have TPP content of 35 per cent.

Basically when we are talking about “non-TPP countries” getting some percent of the business, we are really just talking about China. So says tariffs do not apply if 35 percent to 45 percent of the car and parts are made in TPP countries. This means that 55 percent to 65 percent of the car and parts can be made in China and still be tariff-free. This is much worse than even NAFTA, which, as we know, destroyed American auto and parts manufacturing jobs and entire regions of our country.

Kevin L. Kearns, President of the U.S. Business and Industry Council, in the post “Domestic Manufacturers Call Full Text of Trans-Pacific Partnership (TPP) Agreement a ‘Very Bad Deal for America.’” says of this,

“Apparently, one of America’s biggest economic problems is that Toyota does not sell enough cars and trucks here, and thus does not displace enough American jobs. The TPP deal allows Toyota and other Japanese automakers a special concession to keep their global supply chains intact.”

So the president’s singling out of auto workers as benefiting from TPP was unfortunate. They do not, and American auto workers will be hit hard as production moves to China.

In the release statement Obama also wrote, “If you’re a worker in Oregon, you’re forced to compete against workers in other countries that set lower standards and pay lower wages just to cut their costs.”

Does TPP stop the competition of Oregon’s workers “against workers in other countries that set lower standards and pay lower wages just to cut their costs” as the president promises here?

The athletic apparel maker Nike is based in Oregon. The workers who actually make Nike’s shoes are already all outsourced, already located in countries “that set lower standards and pay lower wages just to cut their costs,” including TPP signatories Vietnam (where it employs 345,000 workers), Mexico and Malaysia. TPP will remove tariffs already charged on those shoes and garments as they come into the U.S., making it even more attractive to outsource production to countries “that set lower standards and pay lower wages just to cut their costs.” Nike will be rewarded by that tariff cut with greater profits from their choice to outsource.

Meanwhile Nike competitor New Balance has been trying to continue to make shoes in the U.S., and this removal of tariffs is likely to force them to give up. TPP lowers the cost of moving production to countries “that set lower standards and pay lower wages just to cut their costs.”

So the president cited autos and Oregon, but a close look reveals these to be unfortunate choices. In both cases American workers are put first – first in line to be laid off as even more production shifts out of the country.

Does TPP Put American Steelworkers First

If TPP truly puts “American workers first” you’d think that American workers would be happy about TPP. They aren’t. The United Steelworkers said of the TPP text:

“It’s a dagger twisting in the heart of American manufacturing,” the USW said in a Nov. 5 statement. “Even the Wall Street Journal predicted the deal would cause a massive trade deficit in manufacturing, which would result in hundreds of thousands of job losses.”

The TPP, the union said, provides incentives for U.S. companies to outsource production and send jobs overseas. It would cause dramatic job losses in the U.S. manufacturing sector, and its rules of origin for automobiles and auto parts would allow China to provide the majority of a vehicle’s content, it said.

The TPP also would allow currency manipulation to continue, do nothing to prevent state-owned enterprises from receiving state support and protection, and allow foreign workers to continue to suffer violations of their rights, the USW said.

So it looks like TPP does anything but “putting American workers first.” It puts them first in line to be laid off.

Economic Theory

So why the big push for TPP?

Here’s the thing. By moving production to low-wage countries with poor environmental and safety (and other) regulations that protect people, American companies can lower the cost of production. Economic theory says this “frees up resources” in our own economy to be put to “more productive uses.” Economists say the workers can thereby move into higher-paying jobs, doing things that can’t be done in Vietnam.

But of course this is not what has been happening since the country’s elites were sold on the “free trade” agenda decades ago. We have seen the financial sector (and its associated value system) increase as the manufacturing sector (and its associated value system) declines. We have seen a dramatic increase in inequality as the “investor class” pockets the wage and other cost differential from moving production out of the country. We have seen entire regions of the country literally devastated (see Detroit and the “Rust Belt”) because the resources released by outsourcing America’s production have not been reinvested in the U.S. They have instead found their way to foreign tax shelters. We have seen the country lose entire industries, and the supply chains, “know-how” and other elements of a manufacturing ecosystem that might enable us to rebuild someday.

Now that we can actually read it we can see that TPP is just one more “NAFTA-style” power-grab elevating the “investor class” above the rest of us and our ability to run our own government in ways that make our lives better. TPP is about taking from We the People and giving to A Few People. It is a bad deal and it must be stopped.

This blog originally appeared in Ourfuture.org on November 6, 2015. Reprinted with permission.

About the Author: Dave Johnson has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.

It's All Your Fault, Economy!

Monday, January 9th, 2012

Maria SaabThe beginning of a new year is a time of reflection- what am I going to bring forward into the new year and what I am going to leave behind in the old year. Recently having celebrated a birthday and reaching the “I’m half-way done with law school” milestone, I have found myself reflecting more and more about where I stand as a young adult. While every human has that moment, or has the several moments, where they stop to think about where they are going and what they are doing with their lives, I feel like I spend most of my days pondering these questions. I know what you may be thinking- bring out the violins, another sob story (My comeback, however, is that this is no sob story, but a Saab story. Get it? A little homophone if you will). I largely attribute this feeling to the state of the economy , which at this point is an easy target and a catch-all reason to blame many of our sorrows upon.

However, my problem with the economy is not so much the scarcity of jobs- but the decreasing number of opportunities to follow your dreams, capitalize on your interests, or even develop a passion (I’ll elaborate more on this-just you wait). I recently read an expose in The Washington Post about the  top fourteen college majors with the highest unemployment rates. Lucky for me, my liberal arts degree and my yet-to-be-completed Juris Doctor help me to occupy two of the fourteen categories for highest unemployment but I digress. Most of the majors in this list can be categorized as part of the social sciences and liberal arts. While the hard sciences like engineering and computer science did make the list, most of the majors with the highest unemployment rates were not of technical backgrounds.

With this in mind, I registered to attend the Center of American Progress’s presentation “Keeping the American Economy Competitive in the 21st Century.” At the presentation, Secretary of Commerce John Bryson unveiled the COMPETES Act report on U.S. economic competitiveness and innovation. The presentation was timed perfectly with President Obama’s announcement that 200,000 jobs had been created in the past month. The report was prepared by the Department of Commerce in consultation with the National Economic Council and addressed topics such as tax policy; general business climate in the U.S., regional issues such as the role of state and local governments in higher education; barriers to set up new firms; trade policy; and science and technology education. Some of the key conclusions of the report outlined the need to invest more money in research and development initiatives, including investment in higher education focused on science, technology, engineering an mathematics (STEM) as well as mediums for increased innovation.

The panelists spoke of innovation as being a key element of our economic success- but elaborating on a sense of stalled innovation in the American economy. For example, Aneesh Chopra, U.S. Chief Technology Officer, spoke of America inventing wireless broadband, but that most broadband headquarters are no longer in the U.S. There is no doubt that innovation and invention are the key cornerstone to economic success. Even Steve Jobs once said “innovation distinguishes between a leader and a follower” and I believe him wholeheartedly- as I type away this blog post on my MacBook Pro, while holding my iPhone, and jamming out on my iTunes (loyal consumer is what you may call me). The report emphasized that by positioning American efforts on innovation, there will increased investment in STEM education, resulting in a greater demand for individuals in jobs within these fields. In order for America to move forward and continue to stay competitive in the global economy, it will need to be able to explore, invent, and create cutting edge technologies.

The presentation was excellent- I really enjoyed listening to the panelists and listening to their responses to questions I never would have thought to have posited myself. I did get to ask a question in the break-out session, where event attendees could ask questions to some of the researchers involved with the report. The question I posed was largely based on the Washington Post article I recently read. If our current economy is lagging because of high unemployment rates, but the highest unemployment rates come from fields not within the hard science background, why choose to invest our federal dollars in a sector that is not ailing? Can we stay competitive and keep our economy afloat by relying solely on innovation and R&D in technology? The response I received was that this report didn’t address that issue, but focused on the topics presented that day. I guess it wasn’t a bad answer- it was the truth, but it left me pondering and I hate to say this, but also a little disheartened. I had the Washington Post and the Department of Commerce telling me I probably would have been better off pursuing a different field of study. This is where I can clarify my statement about the economy- I genuinely enjoyed being a liberal arts major and I have always wanted to become a lawyer. To hear that things are moving in a direction that I am clearly moving the opposite of kind of stings. While things, I know, won’t come easy and perseverance and dedication always are rewarded- for now,  I’ll just blame the economy.

About this Author: Maria Saab is a law student intern at Workplace Fairness. Her Bachelor of Arts in International Studies combined with her career experiences working on Capitol Hill and with Barack Obama’s presidential campaign in 2008 encouraged her to pursue law school. As a hopeful lawyer, she plans on specializing in regulatory law and hopes to one day concentrate her work efforts towards policy development.

The End of Enemies at Work

Monday, March 1st, 2010

Image: Bob RosnerMicrosoft and Yahoo recently received permission to move forward with their joint venture on search from both US and European regulators.

Competition makes strange bedfellows. And nary a day goes by today that Microsoft isn’t announcing a new partnership, or a partnership discussion, with a company that it formerly tried to crush. Real Networks, Palm, AOL, Apple, the list just keeps growing and growing.

Believe it or not, Microsoft’s new make-nice approach impacts each and every one of us who works today. Because it signals the end of the “enemy,” at least as we’ve known it in business for the last hundred years. Let me explain…

The “enemy” has been a great rallying cry in business. To paraphrase General Patton, your goal is to kill the other guy before he has a chance to kill you. And that is how business tended to operate.

We learned from our earliest days in the corporate corridors to identify our enemies and create a healthy disdain for them. And it was so simple to do. G.M. hated Ford. M.G.M. hated Universal. It was easy to identify your competitors and once you did then you let the hatin’ begin.

That is until today. Now, auto companies collaborate on technology to improve fuel mileage with competitors and movie studios collaborate on producing films. And the former 99-pound weakling turned monopolist, Microsoft, can’t seem to find anyone outside of Google that it doesn’t want to take a turn around the dance floor with. What a difference a few years can make.

What is becoming clear is that today’s enemy at work could very well be your company’s next strategic marketing partner, merger partner or the company that purchases your firm. So the enemy is dead, long live today’s competitor who might be tomorrow’s collaborator. Why? Because you can’t afford to alienate your next business partner. Or worse, your next boss.

How do we survive this new competitive landscape? We need to resist the temptation to bad mouth a competitor. We need to always fight fair. We need to reach out to competitors at industry conferences and trade shows. We need to resist short term thinking and learn to adopt a longer view. In short, we need to always anticipate the future where we just might be on the same side with our current competitors.

I’m looking forward to the day when I can wax nostalgically about the enemies that I did battle with at work to my child. Because it increasingly appears that the enemy’s days are numbered. And being a guy who can nurse a grudge as well as the next guy, I think this could usher in a great new environment in which to do business.

About the Author: Bob Rosner is a best-selling author and award-winning journalist. For free job and work advice, check out the award-winning workplace911.com. Also check out his newly revised best-seller “The Boss’s Survival Guide.” If you have a question for Bob, contact him via bob@workplace911.com.

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