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Posts Tagged ‘free trade agreements’

Trade Is Trump’s Biggest Broken Promise

Monday, April 3rd, 2017

Say anything – literally anything – to sway working-class voters. Get elected, then loot the country. Hey, it worked for this guy.

If there was a singular issue Trump campaigned on, it was trade. Everywhere he went, Trump swore the North American Free Trade Agreement (NAFTA) was “the worst trade deal maybe ever signed anywhere” and “a rape of our country” – and whatever else he needed to say to sway working-class voters who felt betrayed by our economy and our trade deals.

Like other candidates before him, Trump wanted to win votes in places like Ohio, Pennsylvania, Michigan, Wisconsin and other states devastated by the loss of manufacturing jobs to “trade.”

In his speeches he complained that candidate Hillary Clinton had aligned herself with a”financial elite” to “betray” working people.

“Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.

[. . .] Hillary Clinton and her friends in global finance want to scare America into thinking small – and they want to scare the American people out of voting for a better future.

My campaign has the opposite message.

Later, he outlined specific complaints about the content of trade agreements, referring to Trans-Pacific Partnership (TPP) signed by President Obama, but clearly he meant multilateral trade deals in general. He said these trade deals had left decision-making to “an international commission” and that they do nothing about “currency cheaters.”

The “international commission” he refers to is a provision in trade agreements knowns as Investor-State Dispute Settlement (ISDS), more commonly known as “Corporate Courts.”

It would give up all of our economic leverage to an international commission that would put the interests of foreign countries above our own.

It would further open our markets to aggressive currency cheaters.

Specifically about ISDS provisions,

The TPP creates a new international commission that makes decisions the American people can’t veto.

These commissions are great Hillary Clinton’s Wall Street funders who can spend vast amounts of money to influence the outcomes.

Of course, that was then.

Never Mind

Trump, who campaigned promising to “drain the swamp” in Washington, has filled his administration with the very swamp creatures his voters hated. Billionaires, Goldman Sachs executives, lobbyists, and so on.

Now the very “financial elite” he railed about during the campaign appears to be having its way with him on trade. If the details in a draft letter circulated to members of Congress this week are true, Trump is not scrapping NAFTA after all.

In fact, he’s not even addressing what he had said were his biggest concerns in the trade agreement. A NY Times report explains,

Rather than scrap NAFTA’s arbitration tribunals, regarded by some free-trade critics as secretive bodies that give private corporations unbridled power to challenge foreign governments outside the court system, the letter proposed to “maintain and seek to improve procedures” for settling disputes.

It made no mention of currency policy, an issue many trade experts had thought might be on the table.

Trump wants minor tweaks to the agreement. ISDS still there. Nothing about currency. Too bad. Sad!

“The Same Corporate Wish List”

There were a number of reactions to Trump’s NAFTA reversal.

“Mostly what I see here is the same corporate wish list and a set of international rules that work quite well for global corporations,”  said the AFL-CIO’s trade policy specialist, Celeste Drake, to Politico.

AFL-CIO President Richard Trumka weighed in as well:

This draft leaves standing the worst and most oppressive parts of NAFTA. It leaves in place the right of foreign investors to sue the U.S. in private tribunals in order to skirt health, safety and environmental laws. On other important issues, including rules of origin for automobiles, labor and environmental standards, currency misalignment and procurement, the draft plan is either silent or so vague that it could be describing the now defunct Trans-Pacific Partnership – an agreement working people wholeheartedly opposed.

Rewriting the rules of our economy, and specifically changing the way we do trade, was one of the most important issues that voters went to the polls on. If the president wants to keep his promises, he needs to bring that same tough stance he had on the campaign trail to renegotiating America’s trade deals.

Politico’s Morning Trade carried reactions from Democrats in Congress:

Rep. Bill Pascrell, the ranking member of the House Ways and Means Trade Subcommittee, called it “baffling” that the draft left out currency manipulation, which Trump had made a signature campaign issue – “let alone call for strong and enforceable commitments.” “And I do not get the sense that the administration yet understands the importance of ensuring full implementation of international labor standards in Mexico to ensure the competitiveness of U.S. workers in the North American market,” the New Jersey lawmaker added in a statement.

So there it is. The guy who set up Trump University has now set up the Trump administration. It is staffed by family members, Breitbart editors, kooks, and, of course, the upper crust of the very “financial elite” he supposedly ran against.

After scarcely two months in office, the new administration is under investigation for violations ranging from breaking ethics rules to corruption and espionage. Trump has spent roughly a third of his time as president vacationing at his Mar-a-Lago golf resort in Florida and other Trump properties, with the government paying a huge tab – to him – for Secret Service, staffers and others who are along for the ride.

He said what he had to say to win. Now we’re stuck.

This post originally appeared on ourfuture.org on March 31, 2017. Reprinted with Permission.

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.

 

Make American Jobs

Monday, February 13th, 2017

President Donald Trump had Harley-Davidson executives and employees over to lunch at the White House last week and reiterated his promise to end wrong-headed trade policies that enable foreign countries to eat American workers’ lunch.

Trump reassured the Harley workers from the United Steelworkers (USW) union and the International Association of Machinists (IAM) that he would renegotiate NAFTA and other trade deals.

“A lot of people [have been] taking advantage of us, a lot of countries [have been] taking advantage of us, really terribly taking advantage of us,” he said as news cameras clicked. “We have to be treated fairly.”

No promise could be more heartening to workers as corporations like Carrier and Rexnord continue to move jobs to Mexico. No news could be better in the same week that the Economic Policy Institute (EPI) released research showing that since 2001, the United States’ massive trade deficit with China cost 3.4 million Americans their jobs.

EPI-jobs-China-Gerard-OurFuture

Workers, families and communities have suffered as trade and tax policy over the past quarter century encouraged corporations to off-shore factories and jobs. Flipping that philosophy to favor American workers and domestic manufacturing is exactly what labor organizations like the USW have long fought for. If Trump actually achieves that, all Americans will benefit.

In the meantime, Rexnord Corp. has finalized plans to uproot its bearings manufacturing machines in Indianapolis, transport the equipment to Mexico and throw 300 skilled and dedicated workers, members of my union, the USW, into the street. Terminations begin Feb. 13.

Automation did not take these workers’ jobs. The lure of dirt-cheap wages in Mexico and tax breaks awarded for the costs of moving jobs and machinery stole them.

Trump talked to the Harley workers and executives about changing tax policy. Ending all special tax deals and loopholes that corporations like Rexnord and Carrier use for shuttering American factories and shipping them to other countries would be a good first step. U.S. policy shouldn’t reward corporations like Rexnord and Carrier that profit from exploiting the international wage race to the bottom and the wretched environmental regulation of emerging nations.

Harley-Gerard-OurFuture

Caption: Photo by Vlad/Flickr

The next logical step would be establishing consequences for those corporations — like requiring them to pay substantial economic penalties if they want access to the U.S. market for their once-domestic and now foreign-made products.

In addition, American policy must be —  just as Trump promised in his campaign — to stop trade law violators who are trampling all over American workers.

The EPI study detailed the devastation caused by the worst violator — China. American workers and companies can compete on a level playing field with any counterpart in the world. But the EPI study shows just how much American workers and their employers suffer when the United States fails to strictly enforce international trade law.

Of the 3.4 million jobs lost between 2001 and 2015 because of the U.S. trade deficit with China, EPI found that nearly three-quarters of them, 2.6 million, were manufacturing jobs. Every state and every congressional district was hit. These are jobs fabricating computer and electronic parts, textiles, apparel and furniture.

Manufacturing jobs such as these provide family-supporting wages and benefits such as health insurance and pensions. As these jobs went overseas, American workers’ income stagnated while those at the top — executives, 1 percenters and corporate stockholders — benefited.

As the rich got richer, the EPI researchers found, all non-college educated workers lost a total of $180 billion a year in income.

When the United States agreed to allow China into the World Trade Organization (WTO) in 2001, former President Bill Clinton said the access that the deal provided American companies to the gigantic Chinese market would create jobs. Promises, promises.

It’s possible no one guessed just how massively China would violate the trade rules it agreed to abide by under the WTO pact. Numerous investigations by the Department of Commerce have found China improperly subsidizes its exports by providing artificially cheap loans, free land, and discounted raw materials and utilities. To keep its workers employed, China helps finance overproduction in industries like steel and aluminum, then dumps the excess at below-market prices in the United States, bankrupting mills and factories here.

China pirates innovation, software and technology from foreign producers. To steal trade secrets, its military hacked into the computers of American corporations and the USW. In addition, China has manipulated the value of its currency so that its exports are artificially cheap and imports from the United States are artificially expensive.

Even if the scale of violation was underestimated, when it occurred, the American government had a responsibility to take action, to file trade cases, to take issues before the WTO, to negotiate to bring China in line with international standards and protect American jobs and preserve domestic manufacturing, which is crucial to national defense.

Precious little of that occurred. The trade deficit with China exploded, obliterating American jobs — a quarter million on average every year since China joined the WTO in 2001. China exports to the United States its overproduced aluminum, steel and other commodities, but also its unemployment.

After that lunch, Trump thanked Harley-Davidson for assembling its iconic motorcycles in America. He extended his hand in aid, saying, “We are going to help you, too. We are going to make it really great for business, not just for you, but for everybody. We are going to be competitive with anybody in the world.”

American workers and domestic manufacturers already are competitive. What they need is a government that doesn’t require them to compete with a handicap so huge that it’s like asking Evel Knievel to jump his Harley-Davidson XR 750 over 19 cars without a ramp. What they need is tough action against corporations that renounce their birthplace for profit and against flagrant, job-stealing trade violators like China.

This post originally appeared on ourfuture.org on February 7, 2017. Reprinted with Permission.

Leo Gerard is the president of the United Steelworkers International union, part of the AFL-CIO. Gerard, the second Canadian to lead the union, started working at Inco’s nickel smelter in Sudbury, Ontario at age 18. For more information about Gerard, visit usw.org.

6 Ways We Could Improve NAFTA for Working People

Friday, December 30th, 2016

Today we released a blueprint for how to rewrite NAFTA to benefit working families. This past election there was much-needed discussion on the impact of corporate trade deals on our manufacturing sector and on working-class communities. The outline below puts forward real solutions that should garner bipartisan support if lawmakers are truly serious about realigning our trade policies to help workers.

We need a different direction on trade. This movement has been largely driven by working people. As we approach the inauguration of a new president, it is important that everyday working people’s perspectives lead the debate, starting with how to rewrite NAFTA.

The AFL-CIO has long supported rewriting the rules of NAFTA to provide more equitable outcomes for working families. To date, the biggest beneficiaries of NAFTA have been multinational corporations, which have gained by destroying middle-class jobs in the U.S. and Canada and replacing them with exploitative, sweatshop jobs in Mexico. It doesn’t have to be this way. With different rules, NAFTA could become a tool to raise wages and working conditions in all three North American countries, rather than to lower them.

6 Ways We Could Improve NAFTA for Working People

Key Areas for Improvement

1. Eliminate the private justice system for foreign investors.

NAFTA established a private justice system for foreign investors, thereby prioritizing corporate rights over citizens’ rights, giving corporations even more influence over our economy than they already have. This private justice system, known as investor-state dispute settlement, or ISDS, allows foreign investors to challenge local, state and federal laws before private panels of corporate lawyers. Although these lawyers are not accountable to the public, they are empowered to decide cases and award vast sums of taxpayer money to foreign businesses. Under NAFTA, these panels have awarded millions of dollars to corporations when local and state governments exercise their jurisdictional power to deny things such as municipal building permits for toxic waste processing facilities. ISDS gives foreign investors enormous leverage to sway public policies in their favor. Scrapping the entire system would help level the playing field for small domestic producers and their employees.

2. Strengthen the labor and environment obligations (the North American Agreement on Labor Cooperation and the North American Agreement on Environmental Cooperation), include them in the agreement, and ensure they are enforced.

The NAFTA labor and environment side agreements were not designed to effectively raise standards for workers or to ensure clean air and water. Instead, they were hastily patched together to quiet NAFTA’s critics. These agreements should be scrapped and replaced with provisions that effectively and robustly protect international labor and environmental standards. Violators should be subject to trade sanctions when necessary—so that we stop the race to the bottom that has resulted from NAFTA. Without stronger provisions, environmental abuses and worker exploitation will continue unchecked.

3. Address currency manipulation by creating binding rules subject to enforcement and possible sanctions.

Within months after NAFTA’s approval by Congress, Mexico devalued the peso, wiping out overnight potential gains from NAFTA’s tariff reductions. This devaluation made imports from Mexico far cheaper than they otherwise would have been and priced many U.S. exports out of reach for average Mexican consumers. Countries should not use currency policies to gain trade advantages—something China, Japan and others have done for many years. All U.S. trade agreements, including NAFTA, should be upgraded to create binding rules, subject to trade sanctions, to prevent such game playing.

4. Upgrade NAFTA’s rules of origin, particularly on autos and auto parts, to reinforce auto sector jobs in North America.

NAFTA’s rules require that automobiles be 62.5% “made in North America” to qualify for duty-free treatment under NAFTA. Even though 62.5% seems high compared with the Trans-Pacific Partnership’s inadequate 45%, it still allows for nearly 40% of a car to be made in China, Thailand or elsewhere. The auto rule of origin should be upgraded to eliminate loopholes (through products “deemed originating” in North America) and to provide additional incentives to produce in North America. This, combined with improved labor standards, will contribute to a more robust labor market and help North American workers gain from trade.

5. Delete the procurement chapter that undermines “Buy American” laws (Chapter 10).

NAFTA contains provisions that require the U.S. government to treat Canadian and Mexican goods and services as “American” for many purchasing decisions, including purchases by the departments of Commerce, Defense, Education, Veterans Affairs and Transportation. This means that efforts to create jobs for America’s working families by investing in infrastructure or other projects, including after the financial crisis of 2008, could be ineffective. This entire chapter should be deleted.

6. Upgrade the trade enforcement chapter (Chapter 19).

NAFTA allows for a final review of a domestic anti-dumping or countervailing duty case by a binational panel instead of by a competent domestic court. This rule, omitted from subsequent trade deals, has hampered trade enforcement, hurting U.S. firms and their employees. It should be improved or omitted.

This blog originally appeared at aflcio.org on December 20, 2016.  Reprinted with permission.
Jackie Tortora is the blog editor and social media manager at AFL-CIO.

Is TPP Really Dead?

Tuesday, November 15th, 2016

dave.johnsonIs the Trans-Pacific Partnership (TPP) dead or not? The President-elect says he is against TPP. TPP may be the thing that cost Clinton the election. The voters obviously were against it. The head of the Senate says he won’t bring it up for a vote. But House Speaker Paul Ryan hasn’t said a thing. And, of course, Wall Street and the giant multinational corporations want TPP and they want it bad.

 

Trump, Senate Leaders, Voters Opposed To TPP

Donald Trump campaigned and won on opposition to past trade agreements and the upcoming TPP. Because of this the leaders of the Senate are saying there won’t be a TPP vote in Senate during the “lame duck” session of Congress. This week Senate Majority Leader Mitch McConnell (R-Obstruction) said that there will be no Senate vote on TPP before next year. Sen. Chuck Schumer (D-Wall Street), who is expected to be the next Senate Minority Leader, told the AFL-CIO executive council the same.

Further confirming the importance of trade in the election, some are saying that TPP may have cost Clinton the presidency. Friday’s Politico Morning Trade quotes Rep. Rosa DeLauro (D-CT),

DELAURO: TPP PUSH MAY HAVE COST CLINTON THE ELECTION: The White House’s push for approval of the TPP may have cost Hillary Clinton the election, even though both she and Donald Trump opposed the pact, Rep. Rosa DeLauro said.

“In those states, where we lost by a point or two, it was all about trade,” the Connecticut Democrat said in an interview, arguing that the possibility of Congress voting on the agreement in the lame duck may have motivated a higher turnout in industrial swing states — to the benefit of Trump.

Clinton’s refusal to say she would push hard to get democrats to oppose TPP certainly didn’t help her with voters concerned about the effect of trade policies on their jobs and communities.

So Is TPP Dead Or Not?

With all of that opposition it would seem that TPP is dead. But TPP is at the very top of the “corporate agenda” because it moves those pesky governments and voters and their interference with corporate goals out of the picture. Wall Street and the giant multinational corporations want TPP and Wall Street and the giant multinational corporations get what they want.

Morning Trade explains how this can still happen,

“I’m not so sure TPP is in the dustbin,” Susan Ariel Aaronson, a research professor of international affairs at George Washington University, told Morning Trade. The argument – which she stressed was “not likely, but a possibility” – is that Republican leaders in Congress could feel pressured to move by two important constituencies: multinational businesses that have value chains in Asia, and the military.

“If Congress is willing to move quickly … there’s a lot of pressure on Republicans from those two sources,” she said. “And I do think that it’s possible that all this pressure to move quickly on trade will lead to some sort of collaboration between internationalist-minded Republicans who will have NAM, the Chamber of Commerce, Business Roundtable, the tech sector, who really want TPP to happen. Plus the military.”

Remember, Republican opposition was based on trying to keep President Obama from getting things he was asking for. Now Obama is out of that equation, while the true owners of the Republican Party — Wall Street and the giant multinational corporations — want TPP and want it bad.

House Speaker Paul Ryan is the key. Ryan has not yet said that there will not be a vote on TPP in the coming “lame duck” session of Congress.

But wait, there’s more. Trump said what he needed to say to get elected. Not he’s elected and he doesn’t need to keep saying it. It’s not like he isn’t himself a huge supporter of the agenda of Wall Street and the giant multinational corporations. His tax plan cuts their taxes dramatically and lets them off the hook for taxes already owed on profits stashed in tax havens. He wants to gut the Dodd-Frank legislation that reined in Wall Street a tiny bit. He will also help gut the Consumer Financial Protection Bureau (CFPB). And, of course, he says he will gut government regulation of corporations. So next year it’s quite possible that Trump could endorse a (possibly renamed) TPP agreement that has been modified a bit, saying it’s fixed. Because that is what Wall Street and the giant multinational corporations want.

So until the lame duck session is over we are still in wait-and-see mode. A TPP vote could still happen before next year.

This post originally appeared on ourfuture.org on November 11, 2016. Reprinted with Permission.

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.

AFL-CIO Report Warns TPP Will Force Another Mass-Migration Into US

Friday, October 28th, 2016

dave.johnsonTrade agreements can be used to boost prosperity on all sides of trade borders by increasing business opportunities, raising wages and increasing choices. Or they can be used to concentrate corporate power, cutting wages and choices.

Guess which model our country’s corporate-written trade agreements have followed? (Hint: look around you: we have ever-increasing concentration of corporate power and concentration of wealth, limited competition, falling wages and limited opportunities to start new businesses.)

One way our corporate-written trade agreements have hurt most of us has been through forcing working people to compete in a race to the bottom. The effects on most of us are just devastating. For example:

“The Men Have Gone To The United States”

The North American Free Trade Agreement (NAFTA) forced many small Mexican farmers out of business. Many of these small farmers were forced to migrate north in search of a way to make a living.

A McClatchy Newspapers report from February, 2011, “Free trade: As U.S. corn flows south, Mexicans stop farming,” examined the dynamic:

Look around the rain-fed corn farms in Oaxaca state, and in vast areas of Mexico, and one sees few young men, just elderly people and single mothers.

“The men have gone to the United States,” explained Abel Santiago Duran, a 56-year-old municipal agent, as he surveyed this empty village in Oaxaca state.

… A flood of U.S. corn imports, combined with subsidies that favor agribusiness, are blamed for the loss of 2 million farm jobs in Mexico. The trade pact worsened illegal migration, some experts say, particularly in areas where small farmers barely eke out a living.

The Communications Workers of America (CWA) gathered migration facts in, “How U.S. Trade Policy Has Contributed to Mass-Migration to America.” Some of the numbers:

In total, nearly 5 million Mexican farmers were displaced while seasonal labor in agro-export industries increased by about 3 million – for a net loss of 1.9 million jobs.iii

The annual number of immigrants from Mexico more than doubled from 370,000 in 1993 (the year before NAFTA went into effect) to 770,000 in 2000 – a 108% increase.

That Was Then, This Is TPP

Now another corporate-written “trade” agreement called the Trans-Pacific Partnership (TPP) is probably coming before Congress in the “lame duck” session following the election. Like NAFTA, this agreement is likely to cause another forced migration northward from Mexico, Central and South American countries as jobs move from those countries to even lower-wage countries like Vietnam.

A report from the AFL-CIO titled “Trading Away Migrant Rights: How the TPP Would Fuel Displacement and Fail Migrant Workers” warns:

The TPP categorically fails to protect workers in the Pacific Rim. As currently drafted, the TPP would increase corporate profits and power while exposing working people to real and predictable harm, including lost jobs and lower wages. Migrant workers already are subject to extreme rights violations in some TPP countries, and this new trade deal would make it even harder for many families to find decent work at home.

The TPP is a recipe for destabilizing communities, perpetuating low wages and stifling labor rights—all of which are factors driving migration.

On a Monday press call discussing the report Celeste Drake, Trade and Globalization Specialist with AFL-CIO, explained how the report shows that TPP is likely to make working families in TPP countries less secure.

The agreement fails workers by offering no transition assistance or safety net for workers who lose their jobs. Mass displacements are not easily remedied which can spur mass migration. Then as economic factors increase migration TPP provides displaced workers with no protections, no labor rights and does not set up a task force to address trafficking and abusive practices by labor recruiters.

Shannon Lederer, AFL-CIO’s Director of Immigration, explained that migration should be a choice not a necessity for survival. Trade should lift all boats, not facilitate a race to the bottom. But TPP would not help to advance these goals. It would in fact make efforts to achieve them harder. She also noted that TPP has a complete lack of protections for migrant workers. Migrant workers face exploitation and trafficking.

The AFL-CIO report explains how TPP will kill jobs in Mexico , Central and South America, forcing people to migrate:

The TPP is poised to disrupt North and Central American supply chains by granting substantial trade benefits, including eventual duty-free access for all TPP countries to the U.S., Mexican and Canadian markets. This will set CAFTA and NAFTA countries up against even lower wage countries in the TPP like Vietnam and Malaysia.

… The inclusion of Vietnam in the TPP is a major concern to apparel workers due to the size of Vietnam’s apparel industry and extensive government subsidies and ownership of large apparel manufacturing facilities. Vietnam is already the second-largest textile and apparel exporter to the United States, shipping more than $11 billion in product to the United States in 2014. This level could surge under the TPP, which would put enormous pressure on Central American manufacturers and workers. Much Central American production could transfer to Vietnam, with its lower wages and authoritarian regime, further degrading Central America’s jobs base and uprooting those dependent on textile jobs.

Likewise, Malaysia’s electronics industry is rife with forced labor, according to the U.S. government’s own reports; yet the TPP would force workers in Mexico’s maquila sector to compete with Malaysian production standards. Loose rules of origin requirements mean that competition not only will come from Vietnam and Malaysia, but also China. Workers in the Americas displaced by these factors may have few options but to emigrate in search of better opportunities in the United States and elsewhere.

Meanwhile, changing economic opportunities associated with increased production and growth in countries like Brunei, Malaysia, Peru and Vietnam could amplify job churn and both “push” and “pull” workers into countries with poor labor rights records.

TPP offers nothing to protect these workers or protect the rest of us from the resulting race to the bottom. But maybe that’s the point.

This post originally appeared on ourfuture.org on October 26, 2016. Reprinted with Permission.

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.

What’s The Problem With “Free Trade”

Monday, March 14th, 2016
Dave Johnson

Our country’s “free trade” agreements have followed a framework of trading away our democracy and middle-class prosperity in exchange for letting the biggest corporations dominate.

There are those who say any increase in trade is good. But if you close a factory here and lay off the workers, open the factory “there” to make the same things the factory here used to make, bring those things into the country to sell in the same outlets, you have just “increased trade” because now those goods cross a border. Supporters of free trade are having a harder and harder time convincing American workers this is good for them.

“Free Trade”

Free trade is when goods and services are bought and sold between countries without tariffs, duties and quotas. The idea is that some countries “do things better” than other countries, which these days basically means they offer lower labor and environmental-protection costs. Allowing other countries to do things in ways that cost less “frees up resources” which can theoretically be used for investment at home.

Opponents of free trade ask for tariffs to “protect” local businesses, jobs, wages and the environment from being undermined by low-cost goods from countries where people and/or the environment are exploited.

Free trade is generally sold as offering lower prices to consumers. It is also sold with claims that it “opens up foreign markets” to U.S. exporters. But it also opens up U.S. markets to imports.

Does Trade Really “Open New Markets?”

“When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy.”
– President Barack Obama

“[W]hen 95 percent of the people we want to sell something to live outside of the United States, we must open foreign markets to American goods and services so we can create jobs at home.”
U.S. Chamber of Commerce

“Ninety-five percent of America’s potential customers live overseas, so closing ourselves off to trade is not a solution.”
Hillary Clinton

It is a fact that only 5 percent of the world’s population lives in the United States. The problem is that the line of argument that opening up trade “opens markets” brings with it certain misleading assumptions. It assumes first that non-U.S. markets are not already being served by local companies. Second, it ignores that free trade also opens our own markets to others. Third, it ignores that U.S. companies already can and do sell to most of the world’s markets and vice versa. (For example, U.S. companies were already moving production to Mexico before NAFTA, the North American Free-Trade Agreement.) Suggesting that alternative approaches to trade would “close us off from trading” or “wall our economy off from the world” are ridiculous, misleading arguments.

If local companies are already meeting the needs in U.S. and non-U.S. markets, what does a trade deal really enable? Trade deals indeed “open up new markets” – for giant, predatory multinational corporations. They enable large, predatory companies that have enormous economies of scale to come in and dominate those markets, putting smaller, local companies out of business. So trade deals mean the biggest multinational companies get bigger and more multinational – at the expense of all the other companies. This includes enabling non-U.S. corporations to come to the U.S. and take over markets already served by smaller companies here.

The net result of allowing goods to cross borders without protecting local businesses is a “more efficient” manufacturing/distribution system powered by the biggest and best capitalized operations. The rest go away. Economists will tell you that these increased efficiencies allow an economy to best utilize its resources. But obviously one effect of this “increased efficiency” is fewer jobs, resulting in lowered wages on all sides of trade borders.

After NAFTA, for example, smaller, more local Mexican farms were wiped out by large, efficient American agricultural corporations that were able to sell corn and other crops into Mexico for low prices. The result was a mass migration northward as desperate people could no longer find work in Mexico.

Economists say even this is good because when costs are lower the economy can apply its resources more efficiently and increased investment can put the displaced people to work in better jobs. But we can all see that in our modern economy that’s not what is going on. Investment in our economy is not increasing, partly because the resulting downward wage pressure has resulted in an economy with decreased demand. Fewer customers with money to spend is not a good environment for investment. Instead of these “freed up” resources (money) being used to provide better jobs with higher wages for everyone, they are instead being concentrated into fewer and fewer hands.

As for opening new markets for American exporters, note that the record since the ascendance of free-trade ideology in the 1970s we have seen continuing and increasing U.S. trade deficits, with imports exceeding exports, resulting in flat wage growth.

Freeing up trade does not “open new markets” as much as it enables giant, multinational corporations to become even more giant and more multinational – at the expense of smaller companies and the rest of us.

Comparative Advantage

Economists say that free trade allows us to take advantage of the “comparative advantages” offered by other countries. A comparative advantage exists when one country can do something better than another country. For example, Central and South America can grow bananas better than the U.S., and we can grow wheat better than they can. So trading wheat for bananas makes sense.

Unfortunately, economists also say that low labor and environmental-protection costs are a comparative advantage. They say it is good for U.S. companies to take advantage of countries with governments that exploit labor and the environment, because they offer lower costs for manufacturing. (Of course, the ultimate form of such a comparative advantage would be slavery.)

Here’s the thing. Buying goods from low-wage and low-environmental protection countries means not making them here anymore. “Trade” increases, but so does our country’s trade deficit as imports rise and exports fall. Factories here close, people here get laid off, wage pressures here increase and overall demand in our economy decreases.

When “thugocracies” that exploit workers and do not protect the environment are able to offer a comparative advantage over our democracy, then free trade makes democracy with its good wages and environmental protections into a comparative disadvantage.

Free Trade Undermines Democracy And Wages

“Give us a protective tariff, and we will have the greatest nation on earth.” – Abraham Lincoln.

Democracy has a short-term “cost” with a longer-term gain. In countries where people have a say, the people say they want higher wages and benefits, good infrastructure, good education, a clean environment, safety on the job, and other services. These things all lead to a prosperous economy later, as long as benefits from this system are fed back into maintaining that infrastructure, education and services. This prosperous economy made America a desirable market to sell things to.

When the country and the idea of democracy were young we “protected” this concept with tariffs, so that goods from places where labor was cheap (or free) did not undermine our democracy. Those tariffs in turn funded investment in infrastructure and other common needs that enabled productivity gains that made our goods competitive elsewhere. But generally companies here served the population here and grew and prospered along with the rest of us.

At some point elites and free-market “economists” began an effort to convince us that “free trade” is a good thing and “protectionism” is not. We used to “protect” our country’s manufacturing base from being undermined by goods from low-wage countries that don’t protect workers or the environment. Then we didn’t.

“Free trade” broke down those borders of democracy. It enabled goods from low-wage countries into the U.S. with no protective tariffs. This made the low wages and lack of environmental and worker protections in some countries into a “comparative advantage” – which meant democracy because a comparative disadvantage. We stopped “protecting” American jobs, and allowed companies to freely lay off workers and close factories here and we have seen what has happened since.

The fact is, a democracy cannot “play by the same rules” as a country that can make people live in barracks at the factory and call them out to work at midnight if an order comes it, make them stand all day, pay them very little, pollute the environment, etc. The rules should instead be that we impose a tariff on goods from such countries unless they “level the playing field” and “play by the same rules” as democracies by giving people a say, paying more and protecting the environment.

Free trade became a scam intended to get around those costs of democracy – good wages, environmental protection and other common goods – but also to use cheap foreign labor and low regulation as a wedge to drive down those costs here as well, and ultimately weakening democracy itself. Every time you hear that regulations make “us” “less competitive” etc. you are hearing an appeal for our country to become more of a low-wage, low-cost “thugocracy.”

Does Protecting Democracy Cause Trade Wars And Depressions?

Free-trade advocates claim that restoring tariffs to protect wages and democracy would start trade wars and even cause recessions and depressions. One claim they make is that tariffs helped cause the Great Depression of the 1930s. Economist Paul Krugman took on that argument in 2009’s “Protectionism and the Great Depression,” writing,

I’ve always seen this as an attempt at a Noble Lie; there’s no good reason to believe that it’s true, but it has been used to scare governments into maintaining relatively free trade.

But the truth is quite different, as a new paper by Barry Eichengreen and Doug Irwin shows. Protectionism was a result of the Depression, not a cause. Rising tariffs didn’t even play a large role in the initial trade contraction; like the spectacular trade contraction in the current crisis, the decline in trade in the early 30s was overwhelmingly the result of the overall economic implosion. Where protectionism really mattered was in preventing a recovery in trade when production recovered.

As for trade wars, economist Ian Fletcher points out in “Free Traders Can’t Name a Single Trade War“:

Trade wars are mythical. They simply do not happen.

If you google “the trade war of,” you won’t find any historical examples. There was no Austro-Korean Trade War of 1638, Panamanian-Brazilian Trade War of 1953 or any others. History is devoid of them.

[. . .] Trade wars are an invented concept, a bogeyman invented to push free trade.

The giveaway, of course, is that free traders claim both that a) trade wars are a terrible threat we must constantly worry about, and b) it’s obvious no nation can ever gain anything from having one. Think about that for minute.

Voters Finally Pushing Back

These are the reasons that voters across the country are finally pushing back against politicians selling “free trade.” Friday’s post, “‘Free Trade’: The Elites Are Selling It But The Public Is No Longer Buying” explained how Donald Trump and Bernie Sanders are gaining from their opposition to free trade deals like NAFTA and the upcoming Trans-Pacific Partnership. From the post: “Voters have figured out that our country’s current ‘free trade’ policies are killing their jobs, wages, cities, regions and the country’s middle class. Giant multinational corporations and billionaires do great under free trade, the rest of us not so much.”

Free trade encourages further exploitation of workers and the environment in other countriesand here. It helps fuel calls inside of our own country for “less regulation” (fewer environmental protections), “right-to-work” laws (that break unions and lower wages) and “more competitive” tax policies (that defund democracy and our ability to provide public services) to “attract” companies back to the U.S.

It is time for Washington elites to scrap our current “free trade” negotiating model that allowed giant, multinational corporations to dictate our trade policies, and open up the process to all of the stakeholders, including labor, environmental, consumer, human rights and other groups. Then we can begin to negotiate trade policies that lift American workers along with workers across the world, while protecting the environment.

This blog originally appeared at ourfuture.org on March 13, 2016.  Reprinted with permission.

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.

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