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  • Eyes on Trade is a blog by the staff of Public Citizen's Global Trade Watch (GTW) division. GTW aims to promote democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor "free trade." Eyes on Trade is a space for interested parties to share information about globalization and trade issues, and in particular for us to share our watchdogging insights with you! GTW director Lori Wallach's initial post explains it all.

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March 24, 2017

Pharmaceutical Giant Threatens to Drag Government Before Corporate Tribunal for Trying to Make Essential Cancer Drug Accessible

Novartis Battle Against Colombian Government Highlights the Threats to Public Health Posed By the Outrageous Investor-State Dispute Settlement Regime and Bad “Trade” Deals

By: Haytham Hashem, GTW Intern

Swiss pharmaceutical giant Novartis appears to have used trade and investment agreements to launch a legal and political pressure campaign against the government of Colombia’s efforts to make a Novartis leukemia drug accessible to cancer patients.

The drug, imatinib, also known as Gleevec in the United States, is a chemotherapy medication used to treat several forms of leukemia. A preferred choice for many leukemia patients and their doctors, imatinib is designated an “essential medicine” by the World Health Organization due to its record of effectiveness and safety. The drug must be taken daily, with the duration of treatment typically a minimum of 36 months, although courses commonly continue for five or more years.

Imatinib has led global sales for Novartis, generating $4.6 billion in 2015.

Currently, the medicine costs $15,000 per patient per year in Colombia, a country with a per capita GDP of just $6,105. Colombian civil society groups asked their government to issue a compulsory license for the medicine. This would end Novartis’ current monopoly rights to produce the drug and authorize generic competition, the most effective means of reducing price. A Colombian legislative committee urged the Minister of Health to declare a matter of public interest, a key procedural step toward allowing competition from generics.

Novartis and U.S. government representatives pressured Colombia not to issue the compulsory license. Colombia instead followed a more conservative course toward modest price controls. The Colombian Ministry of Health issued the public interest declaration, but indicated that a compulsory licensing would only be employed in case of acute shortage.

Nevertheless, last year Novartis provided formal notice of a dispute against the Colombian government using the controversial Investor-State Dispute Settlement (ISDS) system under the Swiss-Colombia Bilateral Investment Treaty. That agreement includes ISDS provisions similar to those found in the North American Free Trade Agreement (NAFTA). The period for trying to resolve the dispute expired in the end of 2016. In late December 2016, the Health Ministry announced that, in accordance with the public interest, price would go down by some 44 percent. Due to the secretive nature of ISDS cases, Novartis’ next steps in the ISDS case — and the specific charges against Colombia — are unknown.

Novartis isn’t the first drug company to use the extraordinary rights in trade and investment treaties to challenge governments’ medicine pricing policies: Eli Lilly attempted to use NAFTA to demand $450 million from Canadian taxpayers over Canadian courts’ decisions that the firm’s monopoly patent rights for two drugs did not satisfy the country’s standards to obtain a patent.

ISDS empowers multinational corporations to sue governments before panels of three corporate lawyers. These corporations need only convince the corporate lawyers that a law or safety regulation violates their new investor rights. The corporate lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits the corporations claim they would have earned if the domestic policy was never enacted. The corporate lawyers’ decisions are not subject to appeal and the amount they can order taxpayers to give corporations has no limit.

Public backlash against ISDS was one of the primary reasons that the Trans-Pacific Partnership (TPP) could not obtain majority support in the U.S. Congress and negotiations for a Transatlantic Trade and Investment Partnership have been sidelined.

Novartis’ threatened ISDS claim appears to be just one element of its extreme pressure tactics to strong-arm the Colombian government. A shocking, leaked letter from last year (English available here) from the Colombian Embassy in Washington, D.C., to the Colombian Minister of Foreign Affairs discusses mounting political pressure from U.S. Senate staff, the Office of the U.S. Trade Representative (USTR), and unnamed pharmaceutical companies to dissuade Colombia from moving forward to make the leukemia drug more accessible to those who needed it.

The leaked diplomatic communication warns that Colombia’s actions to lower the drug’s price could risk U.S.-Colombia relations, Colombian membership in the TPP, and trigger consequences under the 2012 Colombia-U.S. Free Trade Agreement. Threatening Colombia’s potential membership in the TPP over an access to medicines effort was particularly perverse, given that Doctors Without Borders called the TPP “the worst trade agreement for access to medicines in developing countries.”

Perhaps most disturbingly, the Colombian Embassy was sufficiently alarmed by the pressure from the United States to twice remark that it was concerned that proceeding with the compulsory license would put at risk the $450 million committed for President Obama's support for Paz Colombia, the peace initiative working to end the devastating 50 year-long Colombian conflict that has claimed nearly a quarter of a million lives — mostly civilian.

In response, Senators Bernie Sanders (I-VT) and Sherrod Brown (D-OH) wrote to then-USTR Michael Froman, describing the situation and condemning “any efforts to intimidate and discourage Colombia’s government from taking measures to protect the public health in a way that is appropriate, effective, and consistent with the country’s trade and public health obligations.” They pointed out that “compulsory licenses are consistent with Colombia’s International trade obligations and are a legitimate means to ensuring access to medicines.”

Access to medicine experts believe that Novartis is most focused on setting a precedent in the Colombia case, rather than focused on direct financial losses with respect to the drug’s sale in Colombia. The Colombian patent for imatinib is set to expire in 2018. There are an estimated 2,000 Colombian users of imatinib. Factoring the initial 2016 Ministry proposed price cut of 50 percent (to about $7,500 per year), would yield a total difference of about $27 million over two years.

That is not an insubstantial amount of money. But in 2014, Novartis’ total revenue was $53.6 billion, twice as much as Colombia’s public and private healthcare expenditures combined (GDP for reference).

Of course, the favored refrain from pharmaceutical companies — from Mylan’s EpiPen price-gouging CEO to the infamous Martin “Pharma Bro” Shkreli — is that high profits are necessary to fund research on new drugs. However, we know that is not true across the industry. In 2014, Novartis spent nearly 50 percent more on sales and marketing than it did on research and development.

Furthermore, Novartis’s development costs for imatinib were relatively low. And Novartis did not develop imatinib on its own. Imatinib is the product of collaborations and shared funding arrangements between charities, public agencies and Novartis, which benefited from regulatory exemptions and now government-granted monopoly patents to produce the drug that facilitates billions in corporate earnings.

Novartis’ ISDS threat against Colombia is just one more example of why the expansion of corporate power via ISDS is one of the most dangerous components of our broken trade model.

Fortunately, the TPP, which would have drastically expanded ISDS liability by empowering tens of thousands of additional corporations to use the process, was defeated by thousands of diverse organizations representing working people united across borders.

But we must stop all ongoing negotiations that would expand ISDS, such as for a U.S.-China Bilateral Investment Treaty, and replace past trade and investment deals, such as NAFTA and the U.S.-Colombia pact.

The U.S. national consumer, environmental, faith, and labor coalition, Citizens Trade Campaign, lists the removal of ISDS as one of its primary demands for NAFTA replacement.

For more on ISDS, see Public Citizen’s selection of case studies of ISDS attacks against public interest protections here, and summaries of all ISDS cases under U.S. free trade agreements here.

March 15, 2017

On Unhappy Fifth Anniversary of U.S.-Korea Free Trade Agreement, Deficit With Korea Has Doubled as U.S. Exports Fell, Imports Soared

President Trump Appoints a Leading Promoter of Korea Pact as White House Special Assistant for Trade and Goes Silent on Deal After Decrying ‘Job-Killing Trade Deal With South Korea’ on Stump.

WASHINGTON, D.C. –President Donald Trump has been conspicuously silent about the U.S.-Korea Free Trade Agreement (FTA) since taking office, so whether the administration comments on the pact’s March 15 fifth anniversary is being closely watched. Trump spotlighted the “job-killing trade deal with South Korea” in his nomination acceptance speech and on the stump, where he also often noted “this deal doubled our trade deficit with South Korea and destroyed nearly 100,000 American jobs.”

 Trump’s approach to the pact was called into question when he appointed one of the Korea FTA’s most persistent promoters, Andrew Quinn, to be special assistant to the president for international trade, investment and development. When the deal was initially completed in 2007, Quinn, who played a role in FTA negotiations as counselor for economic affairs at the U.S. Embassy in Seoul, declared: “It's a great agreement” that “demonstrated the effectiveness of the model, i.e., a comprehensive high-standard agreement.” When Quinn later served in the Obama White House National Security Council as director for Asian economic affairs from September 2010 to August 2012, he worked on the ratification of the Korea FTA. He most recently served in the Obama administration as the deputy lead negotiator for the Trans-Pacific Partnership.

“Our trade deficit with Korea doubled under this deal, so it’s not surprising Trump spotlighted it as a job-killer during his campaign. But voters who supported him because they thought he’d do something to reverse the damage of this and other deals will be furious if he fails to act, and more so when they learn that the very ‘insiders’ he criticized on the stump are calling the shots,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The agreement, sold by the Obama administration with a “more export, more jobs” slogan, had already resulted in the doubling of the U.S. goods trade deficit with Korea by its fourth year, as U.S. exports declined 10 percent ($4.5 billion) and imports from Korea increased 18 percent ($10.8 billion), resulting in a trade deficit of $31.6 billion relative to one of $15.9 billion in the 12 months before the pact went into effect on March 15, 2012. That deficit increase with Korea came in the context of the overall U.S. trade deficit with the world decreasing by 2 percent. Meanwhile, the U.S. service sector trade surplus with Korea has increased by only $2 billion from 2011 to 2015, a growth rate of 29 percent that is notably 64 percent slower than our services surplus growth over the four years before the FTA went into effect. In the 10 months of available trade data since the FTAs full fourth year, the goods deficit with Korea has totaled $25.5 billion compared with $25.3 billion in the comparable period a year ago. Goods trade data for the full fifth year of the deal will be released May 4 and service sector data in October.

The division among Trump  staff over trade policy was on display in the only Trump administration comment on the Korea FTA, which came in the March 1 President’s Trade Agenda report that reflects the views of Trump’s nominee for U.S. Trade Representative Robert Lighthizer: “Further, the largest trade deal implemented during the Obama Administration – our free trade agreement with South Korea – has coincided with a dramatic increase in our trade deficit with that country. From 2011 (the last full year before the U.S.-Korea FTA went into effect) to 2016, the total value of U.S. goods exported to South Korea fell by $1.2 billion. Meanwhile, U.S. imports of goods from South Korea grew by more than $13 billion. As a result, our trade deficit in goods with South Korea more than doubled. Needless to say, this is not the outcome the American people expected from that agreement. Plainly, the time has come for a major review of how we approach trade agreements. For decades now, the United States has signed one major trade deal after another – and, as shown above, the results have often not lived up to expectations.”

Despite the Korea FTA including more than 10,000 tariff cuts, 80 percent of which began on Day One:

  • The U.S. goods trade deficit with Korea increased 99 percent, or $15.4 billion, in the first four years of the Korea FTA (comparing the year before it took effect to the fourth year data) and in the 10 months of its fifth year is on track to beat the fourth year deficit. Nearly 80 percent of the deficit is in the automotive sector. Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 47 of the 48 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit in the four years before the deal.

  • Since the FTA took effect, S. average monthly exports to Korea have fallen in 10 of the 15 U.S. sectors that export the most to Korea, relative to the year before the FTA. Exports of machinery and computer/electronic products, collectively comprising 27.8 percent of U.S. exports to Korea, have fallen 21.6 and 8.2 percent respectively under the FTA.

  • U.S. exports to Korea of agricultural goods have fallen 19 percent, or $1.4 billion, in the first four years of the Korea FTA despite the administration’s oft-touted point that almost two-thirds of U.S. agricultural exports by value would obtain immediate duty-free entry to Korea under the pact. U.S. agricultural imports from Korea, meanwhile, have grown 34 percent, or $123 million, under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined 22 percent, or $1.5 billion, since the FTA’s implementation. The Obama administration promised that U.S. exports of meat would rise particularly swiftly, thanks to the deal’s tariff reductions on beef, pork and poultry. However, U.S. exports to Korea in each of the three meat sectors have fallen below the long-term growth trend since the Korea FTA took effect. Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $62.5 million in poultry, pork and beef exports to Korea in the first four years of the Korea deal – a loss of more than $5 million in meat exports every month.

    • Despite the promises made by U.S. officials that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade, South Korean banned nearly all imports of American poultry at the beginning of 2015 due to several bird flu outbreaks in Minnesota and Iowa. Comparing the FTA’s fourth year to the year before it went into effect, U.S. poultry producers have faced a 93 percent collapse of exports to Korea – a loss of nearly 100,000 metric tons of poultry exports to Korea. U.S. beef exports are finally nearing pre-FTA levels after declining an average of 11 percent during the first three years of the agreement. U.S. pork exports have also nearly recovered to pre-FTA levels after falling by an average of 16 percent in the first three years of the agreement.

  • U.S. goods exports to Korea dropped 10 percent, or $4.5 billion, under the Korea FTA’s first four years. In the 10 months of data since then, U.S. goods exports to Korea decreased by 1.4 percent or $483 million, relative to the same 10-month period in the previous year.

  • While U.S. goods imports from the world decreased by 6 percent, U.S. goods imports from Korea increased by 18 percent, or $10.8 billion, during the FTA’s first four years. In the 10 months of data since then, U.S. goods imports from the world decreased by 2 percent, while U.S. goods imports from Korea remained at the high levels of the period in the previous year.

Graphskoreafta


The auto sector was among the hardest hit: The U.S. trade deficit with Korea in passenger vehicles grew 66 percent in the pact’s first four years. In the 10 months since then, the U.S. trade deficit in vehicles has increased an additional 2 percent, relative to the same 10-month period in the previous year.
U.S. imports of passenger vehicles from Korea has increased by 69 percent, or by an additional 597,607 vehicles by the fourth year of the Korea FTA in addition to the 862,789 vehicles sold to the United States by Korea before the FTA. This import flood dwarfed the 36,580 increase in U.S. passenger vehicles that the United States exported to Korea by the fourth year of the pact. Even so, expect defenders of the agreement to say U.S. auto exports have grown faster than Korean auto exports or that U.S. auto exports to Korea have tripled – without mentioning that this figure just represents the addition of the 36,580 vehicles from the low pre-FTA sales number of 14,284 U.S. vehicles sold in Korea without mentioning that on balance the United States has suffered a 66 percent expansion of our auto trade deficit with Korea.

March 01, 2017

Bait & Switch: Trump Trade Plans to “Bring American Jobs Back” as Promised in Campaign Notably MIA in Speech

Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch

“How will this speech be received by the voters who sent Trump to the White House? Glaringly MIA was even a vague plan to deliver on the endless campaign promises to bring American jobs back with a new trade policy while highly visible was Trump’s cabinet packed with former Wall Street and other corporate elites including those responsible for past American job offshoring. 

Trump’s silence on trade plans to bring back American jobs and the cabinet packed with former Wall Street and other corporate elites sitting in the front row sure is not the “clear the swamp” administration that voters in Michigan, Wisconsin, Ohio and Pennsylvania were expecting when Trump promised the end of business as usual in Washington.”

BACKGROUND: After campaigning relentlessly on a “get tough on China” trade mantra, one of Trump’s only first-day promises that was not fulfilled was declaring China a currency manipulator. Trump notably dropped any reference to this promise in the speech and also failed to clarify what happened to one of the widely expected first-day executive orders to terminate negotiations for a U.S.-China Bilateral Investment Treaty (BIT.) The treaty replicates key aspects of the Trans-Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA), pacts that Trump loves to bash.

Even Trump’s standard line about renegotiating NAFTA was missing from this speech. The only reference to action on trade was touting his formal burial of the TPP, a deal that was already dead before Trump was elected given it had failed to generate majority congressional support in the ten months after it was signed.

We released a short video that suggests what has happened to Trump’s trade promises: Goldman Sachs. The Wall Street firm Trump loved to bash on the campaign trail now has a weighty presence in the senior ranks of the Trump administration. The firm also happens to be the Wall Street leader lobbying for the China treaty. And it was a grand booster of the TPP. And it supported NAFTA.

A 2016 Freedom of Information Act request revealed Trump’s National Economic Council chair Gary Cohn – previously the No. 2 official at Goldman Sachs – discussing how to move the China BIT and the TPP with Obama U.S. Trade Representative Mike Froman. When ethics experts raised concerns about Cohn's recent stunning $285 million Goldman Sachs exit payment, Cohn said he would recuse himself from any matters related to Goldman Sachs. Does this include the China BIT? Or has Cohn already managed to derail the expected executive order ending negotiations on the China treaty?

Meanwhile, it was Goldman Sachs alum and now Treasury Secretary Steve Mnuchin who last week explained why there’s been no action on China currency, announcing that the administration is not ready to make any judgements on China currency now and that Treasury would undertake a broad review of currency issues using its regular procedures. The next Treasury currency report is due in April. 

The next day, Trump declared that China was the “grand champion at manipulating its currency” and declared when visiting manufacturing CEOs that action would be taken to combat China’s “$500 billion” U.S. trade deficit. Hmm... that vague line did not even make it into the speech.

The China BIT would make it easier to offshore more American jobs to China. It also would give Chinese firms broader rights to purchase U.S. firms, land and other assets and newly expose the U.S. government to demands for compensation from Chinese firms empowered to attack U.S. policies in extra-judicial tribunals. Everything Trump campaigned against...

Joint Session Speech Mystery: Has Goldman Sachs Wing of Administration Derailed Trump’s China Trade and Jobs Plans?

Will Tuesday night’s address to Congress reveal just how President Trump plans to change U.S. trade policy to "bring jobs back to America”? Polling suggests the jobs-trade nexus is one of the issues on which Trump has popular support amid sagging approval ratings.

Given that recently released 2016 trade data shows that our $347 billion goods trade deficit with China represents almost 50 percent of our global goods trade deficit, what happened to the “get tough on China” trade mantra from the campaign? There’s been a lot of administration talk about renegotiating the North American Free Trade Agreement (NAFTA). However, Trump’s promises to bring down the U.S. trade deficit and create more U.S. manufacturing jobs require attention to China trade.

Yet, one of the only first-day promises included in Trump’s Contract with the American Voter that was not fulfilled was declaring China a currency manipulator. The executive order flurry has not included the widely expected termination of negotiations for a U.S.-China Bilateral Investment Treaty (BIT.) The treaty replicates key aspects of the Trans-Pacific Partnership (TPP) and the NAFTA pacts that Trump loves to bash.

The China BIT, started by the Bush administration and almost completed by the Obama administration, would make it easier to offshore more American jobs to China. It also would give Chinese firms broader rights to purchase U.S. firms, land and other assets and newly expose the U.S. government to demands for compensation from Chinese firms empowered to attack U.S. policies in extra-judicial tribunals. Everything Trump says he is against, so what gives?

Maybe Trump will explain his MIA China trade strategy in tomorrow’s speech? We released a short video today that suggests an answer: Goldman Sachs. The Wall Street firm Trump loved to bash on the campaign trail now has a weighty presence in the senior ranks of the Trump administration. The firm also happens to be the Wall Street leader lobbying for the China treaty. Not exactly what those voters in Michigan, Wisconsin, Ohio and Pennsylvania were expecting when Trump promised the end of business as usual in Washington.

A 2016 Freedom of Information Act request revealed Trump’s National Economic Council chair Gary Cohn – previously the No. 2 official at Goldman Sachs – discussing how to move the China BIT and the TPP with Obama U.S. Trade Representative Mike Froman. When ethics experts raised concerns about Cohn's recent stunning $285 million Goldman Sachs exit payment, Cohn said he would recuse himself from any matters related to Goldman Sachs. Does this include the China BIT? Or has Cohn already managed to derail the expected executive order ending negotiations on the China treaty?

Meanwhile, it was Goldman Sachs alum and now Treasury Secretary Steve Mnuchin who last week explained why there’s been no action on China currency: “[W]e have a process within Treasury … and we’re not making any judgments until we continue that process.” Treasury would undertake a broad review of currency issues using its regular procedures, Mnuchin said. The next Treasury currency report is due in April. 

The next day, Trump declared that China was the “grand champion at manipulating its currency” and declared when visiting manufacturing CEOs that action would be taken to combat China’s “$500 billion” U.S. trade deficit. Hmm...

Will Trump’s joint address to Congress clarify who is setting Trump administration China policy and/or what that will mean for Trump’s promises to bring back American manufacturing jobs? If Trump is silent on the U.S.-China investment treaty and currency, does that mean the Goldman Sachs crew already has redirected his campaign pledges for change into more-of-the-same job-killing China trade policy?  A lot of voters will be watching closely, having given Trump the chance to prove his presidency will not be business as usual.

February 21, 2017

Will the Trump Administration Fix the Distortions in U.S. Trade Data?

Analysis From Lori Wallach, Director Public Citizen’s Global Trade Watch

Recent press reports reveal that the Trump administration is exploring changes in how U.S. trade data is reported. Depending on what those changes are, that could be good news, because the current method for reporting bilateral trade flows significantly distorts trade balances to dramatically and deceptively reduce U.S. trade deficits. No doubt that defenders of status quo U.S. trade policies will gin up an attack on any efforts to fix these distortions.

So it is ironic, but not surprising, that the coverage insinuates that the Trump administration is trying to bias the data for political purposes: For years, members of Congress and trade analysts have demanded changes to U.S. trade flow reporting to make it more accurate. Why? Because proponents of past trade agreements have politically exploited the way that the current trade data inaccurately inflates export levels and artificially suppresses trade deficit figures to try to hide past pacts’ damage. 

Namely, the trade data that is reported monthly by the Census Bureau counts “foreign exports,” also known as “re-exports” as if they were U.S.-made goods. This can dramatically and inaccurately inflate export figures and hide trade deficits. According to the official Census Bureau definition, re-exports are goods made abroad, imported into the United States, and then re-exported again without undergoing any alteration in the United States. Re-exports support zero U.S. production jobs.[i] 

To put this into perspective, if one counts as U.S. exports only goods actually produced here, the 2015 U.S. goods trade deficit with Mexico was $109 billion and with Canada $63 billion – a $172 billion North American Free Trade Agreement (NAFTA) goods deficit. However, if one includes the foreign-made re-exported goods as U.S. exports, the NAFTA goods deficit shrinks by more than half - to $76 billion. The Mexico goods deficit falls to $60 billion and the Canadian deficit to $16 billion.

Capture1

Current U.S. Trade Data Methodology Skews Bilateral Trade Balances

If the Trump administration were to institute a new method to report trade data that accurately captures the balance between American-made exports to each country and imports from each country that are consumed in the United States, it would be a significant improvement on the currently available information. And as described below, the way to do this is not difficult as a policy matter. It would merely require tracking U.S. exports on the basis of the country in which they are actually produced.

Currently, each month, the U.S. Census Bureau releases raw data on the “total exports” from the United States and total imports coming in (called “general imports”). This data, as demonstrated by the NAFTA example, distorts bilateral trade balances. For example, this data counts as U.S. exports goods produced in China, stored in a warehouse after being taken off a ship from China in California’s Long Beach port and then later, without alteration, trucked to a destination in northern Mexico. This data also counts the Chinese imports into the United States as part of the U.S.-China trade balance. The result: The U.S. deficit with Mexico would be artificially reduced, and the U.S. deficit with China would be artificially increased. (The Census measure does provide accurate accounting of our trade balance with the world because the re-exports and those imports that get re-exported balance out.)

A more accurate measure for bilateral trade balances come from the U.S. International Trade Commission (ITC). Each month, a few days after the Census data is released, the ITC posts refined data for “domestic exports” that includes only U.S.-produced exports and data for “imports for consumption” that removes imports destined for export processing zones. This ITC data is used in the congressionally mandated trade agreement studies required under Fast Track that are the basis for projections on trade pacts’ effects on economic growth and jobs. This data accurately captures American-made exports. But the import data still can be skewed because some of the imports counted in “imports for consumption” may be re-exported. That is to say that the U.S. International Trade Commission’s current import data is not detailed enough to avoid distorting the U.S. bilateral trade balances with numerous nations on the import side even as it corrects for the false inflation of exports.

If the U.S. government provided data on where all goods exported from the United States were actually produced, then it would be possible to extract from the import data those goods that end up being re-exported. Canada requires that all imports indicate a country of production. So, for instance, if a Korean firm producing televisions in Mexico so as to obtain duty-free access into the U.S. consumer market under NAFTA were to import $2 billion in televisions into the United States, but then $500 million of those goods were re-exported to Canada, the Canadian data would let us know to count only $1.5 billion as U.S. imports for consumption. Expanding on this notion, if the Trump administration were to require that all U.S. exports indicate their country of production, then the import side of the ITC data could be perfected across the board.

As a policy matter, this is a rather painless solution to a trade data problem that currently thwarts  the availability of the accurate data needed to inform U.S. trade policymaking decisions. But proponents of status quo trade policies can be expected to launch a nasty political attack on such an improvement because it would clarify the enormity of the gap between what was promised for pacts such as NAFTA relative to their actual outcomes. Ironically, such an improvement also likely would bring down the U.S.-China trade deficit figures some. 

The Politics Underlying Current U.S. Trade Data

For years, the U.S. Chamber of Commerce has pushed out various cuts of the raw Census data to claim that past trade pacts have not generated significant trade deficits. In 2014, then-U.S. Trade Representative Michael Froman even used a cut of the raw data to claim, absurdly, that the United States no longer had a NAFTA trade deficit.

Interests seeking to maintain current U.S. trade agreements and policies undoubtedly oppose refinements to the current data that would accurately expose the extent of U.S. trade deficits with trade agreement partners. This is especially true with respect to NAFTA countries, because the portion of re-exported versus domestically produced goods relative to total U.S. exports to the NAFTA nations has increased over time.

Capture

These interests have pushed for their own changes to U.S. trade data, including a 2014 proposal for “Factoryless Goods” accounting. This proposal would have counted as a U.S. export an iPhone produced in China that is exported from China to Germany. These interests also raise a series of specious arguments against removing foreign-made exports from U.S. export figures. For instance, they claim that re-exports have some U.S. value-added, just not enough to shift a product into a new tariff category, even though the Census definition of re-export states explicitly that re-exports have zero value added in the United States: Foreign Exports (Re-exports: For statistical purposes: These are exports of foreign-origin goods that have previously entered the United States, Puerto Rico, or the U.S. Virgin Islands for consumption, entry into a CBP bonded warehouse, or a U.S. FTZ, and at the time of exportation, have undergone no change in form or condition or enhancement in value by further manufacturing in the United States, Puerto Rico, the U.S. Virgin Islands, or U.S. FTZs. For the purpose of goods subject to export controls (e.g., U.S. Munitions List (USML) articles) these are shipments of U.S.-origin products from one foreign destination to another.)

When confronted with the accurate data, NAFTA defenders then typically shift to claims that the NAFTA deficit mainly represents trade in oil and other fossil fuels. But the share of the U.S. NAFTA goods trade deficit that is composed of fossil fuels (oil, gas and coal) has declined under NAFTA, from 82 percent in 1993 to 26 percent in 2015, as we have faced a surge of imported manufactured and agricultural goods from NAFTA countries. Even if one were to remove all fossil fuel categories from the balance, the remaining 2015 NAFTA goods trade deficit was $127.3 billion.

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  [i] Call between U.S. Census Bureau staff and Public Citizen staff, Sept. 25, 2014.

February 02, 2017

Trump Missed Deadline for Promised Start of NAFTA Renegotiation in 100 Days, But Whenever Talks Begin, It is the Content, Not The Speed, That Counts

Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch

The Trump administration can rename NAFTA the North American Free and Most Fairest of Them All Trade Agreement, but given that NAFTA is packed with incentives to offshore jobs and special protectionist goodies for various industries, NAFTA must be replaced – not tweaked – to actually deliver better outcomes for working people.

Monthly government data will show whether a NAFTA replacement delivers on the trade deficit reduction and job creation Trump has promised and to move those numbers will require a new deal that raises Mexican wage levels and environmental standards and eliminates NAFTA’s job and investment offshoring incentives and ban on Buy American procurement.

Replacing NAFTA is important, but with China counting for half of the U.S. trade deficit, it is odd that Trump has not announced an end to negotiations almost completed by the Obama administration for a U.S.-China bilateral agreement that includes the job offshoring incentives at the heart of NAFTA or  declared China a currency manipulator on his first day as promised.

It’s ironic that Trump is the beneficiary of the “Fast Track” trade authority narrowly enacted by congressional supporters of NAFTA. By delegating away its constitution trade authority, Congress has empowered Trump to unilaterally launch NAFTA renegotiations or create new bilateral deals with Mexico and Canada; determine the contents, sign and enter into deals before Congress gets a vote; and then write implementing legislation and force congressional consideration in 90 days with amendments forbidden and Senate supermajority rules suspended.

Under the Fast Track rules, Trump needed to have given notice on Monday, Jan. 31, to be able to start NAFTA renegotiations within his first 100 days as promised.

If the 500 official U.S. trade advisers representing corporate interests who have had a privileged role in developing our past trade deals, including NAFTA, remain in place to shape NAFTA renegotiations, the resulting deal not only could be more damaging to working people, but – like the Trans-Pacific Partnership (TPP) – become impossible to enact.

Even with Fast Track, Trump requires House and Senate majorities to enact a NAFTA redo. Most congressional GOP and their corporate allies support the offshoring incentives and other terms that must be eliminated if Trump is to deliver on his deficit reduction and job growth goals. Building a congressional majority requires that a NAFTA replacement exclude terms that would alienate congressional Democrats who for decades have promoted NAFTA alternatives to expand trade without undermining American jobs and wages, access to affordable medicine, food safety or environmental protections. (See Citizens Trade Campaign’s Jan. 13 letter to Trump and U.S. Rep. Rosa DeLauro’s Jan. 3 letter to Trump on what must be in a NAFTA replacement for it to provide broad benefits.)

Many congressional Republicans and the corporations that have rigged past deals view NAFTA renegotiation as a means to revive aspects of the TPP. This includes limits on generic competition that bring down medicine prices for consumers. Including such terms would eliminate Democratic support.

January 23, 2017

President Trump’s Executive Orders Formally Bury TPP’s Corpse, but What About TTIP, TISA, China BIT?

President Trump’s Executive Orders Formally Bury TPP’s Corpse, but What About TTIP, TISA, China BIT?

Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch

Formally withdrawing from the Trans-Pacific Partnership (TPP) will bury the moldering corpse of a deal that couldn’t gain majority support in Congress, but the question is going forward will President Trump’s new trade policies create American jobs and reduce our damaging trade deficit while raising wages and protecting the environment and public health not just here but also in trade partner nations?

If President Trump intends to replace our failed trade policy, a first step must be to end negotiations now underway for more deals based on the damaging NAFTA/TPP model so its notable that today’s announcement did not end talks to establish the Transatlantic Trade and Investment Partnership, the Trade in Services Agreement and the U.S.-China Bilateral Investment Treaty – all of which would replicate and expand the TPP/NAFTA model Trump says he is ending.

President Trump also repeatedly has said he would launch NAFTA renegotiations immediately and withdraw from NAFTA if he cannot make it “a lot better” for working people. NAFTA renegotiation could be an opportunity to create a new trade model that benefits more people, but if done wrong, it could increase job offshoring, push down wages and expand the protections NAFTA provides to the corporate interests that shaped the original deal.

Even with the Fast Track authority Trump inherits, to pass a NAFTA replacement he must ensure its terms enjoy support from most congressional Democrats and a subset of Republicans. Most congressional Republicans and many people Trump has named to senior positions passionately support the very agreements Trump opposes. Most congressional Democrats have opposed deals like TPP and NAFTA and for decades promoted alternatives that expand trade without undermining American jobs and wages, access to affordable medicine, food safety or environmental protections.

NAFTA is packed with incentives for job offshoring and protections for the corporate interests that helped to shape it, so to make NAFTA better for people and the planet will require it to be replaced, not tweaked. To remedy – not worsen – NAFTA’s damage, both the old negotiating process and the contents must be replaced. To put the needs of working people, their communities, the environment and public health over the demands of the special interests that have dominated U.S. trade policymaking, the 500 official U.S. trade advisers representing corporate interests who called the shots on past agreements must be benched.

If corporate elites are allowed to dictate how NAFTA is renegotiated, the deal could become even more damaging to working people and the environment in the three countries. Absent high labor and environmental standards, requirements for more North American content in products could increase U.S. job offshoring. The corporate interests that have rigged past trade deals say NAFTA renegotiation is how they will revive the special protections they achieved in the TPP, for instance limits on competition from generic drugs so pharmaceutical firms can keep medicine prices high.  (See Citizens Trade Campaign’s Jan. 13  letter to Trump and U.S. Rep. Rosa DeLauro’s Jan. 3 letter to Trump on what must be in a NAFTA replacement for it to provide broad benefits.)

January 03, 2017

Choice of Robert Lighthizer as USTR Strengthens Prospects for a New Approach to U.S. Trade Policy

Former Reagan Trade Official and Longtime Critic of Dogmatic “Free-Trade” Republicans Nominated to Join Trump Cabinet Packed With TPP Proponents

WASHINGTON, D.C. — The nomination of Robert Lighthizer to be U.S. Trade Representative signals President-elect Donald Trump’s interest in altering the trade policy approach that has prevailed through Republican and Democratic administrations for the past two decades. Lighthizer has consistently noted that historically Republicans favored trade policies designed to obtain specific national economic goals and criticized the Republican Party’s rigid support over recent decades of “free trade” ideology. His views put him at odds with most of Trump’s other high-level appointees who represent the very perspective on trade that Lighthizer has long critiqued.

“Lighthizer is very knowledgeable about both technical trade policy and the ways of Washington, but what sets him apart among high-level Republican trade experts is that for decades his views seemed to be shaped by the pragmatic outcomes of trade agreements and policies rather than fealty to any particular ideology or theory,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “I don’t know that he would agree with progressive critics of our status quo trade policies about alternative approaches, but he also has had quite a different perspective on trade policy than the Republican congressional leaders and most of Trump’s other cabinet nominees who have supported the TPP and every past trade deal.”

President-elect Donald Trump has filled many top administration posts with proponents of the Trans-Pacific Partnership (TPP), a pact that Trump railed against during his campaign. Trump appointees who publicly advocated for the TPP include Wilbur Ross (Secretary of Commerce), Exxon Mobil CEO Rex Tillerman (Secretary of State), Gov. Terry Branstad (Ambassador to China), Gen. James Mattis (Secretary of Defense) and Goldman Sachs President Gary Cohn (Director of National Economic Council) – not to mention Vice-President-elect Mike Pence.

“Thankfully there was never a congressional majority for the TPP in the 10 months after it was signed so the TPP was dead before the election,” said Wallach. “But even so, most of Trump’s cabinet members will be inclined to grab the shovel from Trump’s hands before he can bury the TPP’s moldering corpse by formally withdrawing the U.S. as a signatory.”

Other prominent TPP supporters nominated to join the Trump administration include:

  • Rick Perry – TPP supporter named Secretary of Energy
  • Ryan Zinke – Supporter of Fast Track for TPP named Secretary of Interior
  • Tom Price – Supporter of Fast Track for TPP named Secretary of Health & Human Services
  • Ben Carson – TPP supporter named Secretary of Housing and Urban Development
  • Elaine Chao – TPP supporter named Secretary of Transportation
  • Mike Pompeo – TPP supporter named CIA Director

December 21, 2016

TPP Would Have Proved Useless in Countering China’s Ambitions

New Report Shows Systematic Failure of Past Trade Pacts Sold with Foreign Policy Claims about China’s Conduct, Improved Labor Rights, and U.S. Global Leadership Now Being Recycled to Warn about TPP’s Demise

WASHINGTON, D.C. – It remains to be seen whether Donald Trump will withdraw the United States’ signature from the Trans-Pacific Partnership (TPP) on his first day in office as promised, but the dire warnings emanating from TPP supporters in response to the pact’s inability to obtain majority support in Congress recycle almost verbatim foreign policy claims that have proved baseless, a new report published today by Public Citizen shows. China’s rise poses real challenges for the United States, but a comprehensive review of foreign policy-related claims made to sell past U.S. trade agreements shows that trade agreements have systematically failed to forestall posited foreign policy threats or deliver promised benefits.

“The economic arguments for the TPP failed, it could not garner majority support in Congress and now its supporters are resurrecting the same old zombie foreign policy arguments in an attempt to stave off its final burial,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

In extensive side-by-side tables, the report reviews four categories of foreign policy arguments used for decades to sell the controversial trade-policy-of-the-moment, from the North American Free Trade Agreement (NAFTA) to China Permanent Normal Trade Relations (PNTR) to the TPP. Congress and the public are warned that an agreement’s implementation is essential to counter China’s ambitions and let the United States write the rules of the road, maintain U.S. global leadership, export U.S. values such as human and labor rights and enhance U.S. national security.

Such claims helped pass previous trade deals that they were employed to sell. As a result, we can examine the actual outcomes of the claims and document that they have proven uniformly false.

“If future U.S. presidents want to pass the trade agreements that they negotiate, then they must deliver deals that provide economic benefits to most Americans,” said Wallach. “Trying to scare up support for a trade deal by raising the same old parade of foreign policy horrors that allegedly will result if is not implemented is not a winning strategy and even more so because these very claims have proved false.”

The research for the report showed the most overlap between TPP claims and those made during the 2000 China PNTR fight. Indeed, a 2000 quote from then-U.S. Senator John Kerry (D-MA) on China PNTR and a 2016 quote from Secretary of State Kerry on the TPP, are almost identical. But implementation of China PNTR did not, in fact, provide a counter pressure to China's authoritarian government, improve human and labor rights, or enhance China’s cooperation on an array of national security challenges. The actual result was just the opposite.

The report also reviews various U.S. trade pacts with Latin American that were also sold as necessary to keep China (or Japan) from dominating the region, politically and economically, and as vital to improving democracy and human rights in trade partner countries. Yet the very foreign policy (and economic) threats that the deals’ passage was promised to forestall, occurred regardless, while the touted improvements in human rights failed to materialize.

“With a robust debate about the TPP’s actual terms, and the rising public awareness of the pact’s real threats, the foreign policy scare tactics failed this time,” Wallach said. “But that has not stopped TPP proponents from repeating them endlessly in response to the TPP’s demise as if somehow that will revive the deal.”

November 15, 2016

TPP RIP

 Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch on the Demise of the Trans-Pacific Partnership in the Lame-Duck Session of Congress

The news that the White House and Republican congressional leaders have given up on passing the Trans-Pacific Partnership (TPP) is welcome. That the TPP would be defeated by Congress if brought to a vote signals that Trojan-horse “trade” agreements that expand corporate power and shrink Americans’ wages are simply no longer politically viable. People power beat the united forces of a U.S. president, the Republican congressional leaders and the entire corporate lobby.

The unremitting push by the Obama administration for the TPP right through this election helped to elect Donald Trump, but Trump has not derailed the TPP – people power united across borders did that. Six years of relentless, strategic campaigning by an international movement of people from the TPP countries united across borders to fight against corporate power is why the TPP is all but dead.  

Thanks to years of campaigning by people across this country, since its February 2016 signing, the TPP could not garner a majority of support in the U.S. House of Representatives. And it was clear that the TPP was in trouble in 2015, when Fast Track authority for the TPP barely squeaked through Congress.

The TPP’s signing was delayed for years by vibrant civil society movements in other TPP nations that pushed their governments to reject TPP terms expanding investor rights, monopolies for pharmaceutical firms, financial deregulation and other threats. That meant time to organize, organize, organize. Over those years, millions of Americans helped to educate and organize their friends, families, and colleagues to demand their representatives opposed the TPP.

That the TPP pushed by the most powerful forces in the world is not being implemented represents the American public’s resounding rejection of  trade policies that not only failed to live up to its proponents’ promises over the past 20 years, but caused real damage to working people and the environment.

The only way forward is to create new rules of the road for globalization that put people and the planet first while harvesting the benefits of expanded trade. And we must roll back the existing “trade” deals and extreme investor-state dispute settlement regime that have caused people and the planet so much damage. The coalition that stopped the TPP is powerful and united and will fight forward to deliver that change. And, we will be ready to take on any attempt to revive the TPP or advance other corporate-friendly trade pacts based on the same failed and outdated model of trade.

For a review of the six-year international campaign against the TPP, please read https://medium.com/@citizenstrade/no-trump-didnt-kill-the-tpp-progressives-did-884b534542d#.175otqc1j

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