About Us

  • 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.

Contact

July 09, 2015

Will Obama Turn a Blind Eye to Malaysia’s Mass Graves in a Cynical Bid to Salvage the Controversial TPP?

Just after the discovery of mass graves for human trafficking victims in Malaysia, the Obama administration is reportedly planning to remove Malaysia from its list of the world’s worst human trafficking offenders.

Why would the Obama administration do such a thing?

Maybe it has something to do with the fact that Malaysia is a negotiating member of the controversial Trans-Pacific Partnership (TPP) and that under U.S. law the TPP cannot be Fast Tracked through Congress if one of the countries involved (i.e. Malaysia) is on the administration’s human trafficking blacklist.

If the Obama administration wants to Fast Track the TPP through Congress with Malaysia included (and without the democratic annoyances of checks, balances, and amendments), it has two options:

  1. Pressure Malaysia to end its deplorable human trafficking abuses
  2. Pretend those abuses do not exist 

In a cynical bid to salvage the unpopular TPP, the Obama administration has reportedly chosen the latter option.  Inside sources report that the administration plans to remove Malaysia from its list of the worst human trafficking offenders, despite the country’s documented deterioration of human trafficking enforcement, in an annual State Department report expected to be released next week. 

Turning a blind eye to Malaysia’s grave human rights violations in effort to rescue the TPP, which would grant Malaysia privileged access to the U.S. market, would be simply shameful.

It would also backfire, instead adding to the controversy surrounding the TPP. If the Obama administration is willing to ignore cages for humans in Malaysia’s people-smuggling camps, why should we believe it would not also ignore TPP member Brunei’s criminalization of homosexuality, TPP member Vietnam’s widespread child labor, or TPP member Peru’s rollback of environmental protections?

If the Obama administration removes Malaysia from the human trafficking blacklist, it will only bolster criticism from human rights, religious, LGBT, women’s, labor and environmental organizations that the TPP’s touted human rights, labor and environmental provisions are mere fig leaves that would fail to actually curb systematic abuses among TPP members.

In its tunnel-vision push for the TPP, the Obama administration has already dismissed widespread concerns about job offshoring, wage stagnation, unsafe food, environmental degradation, inaccessible medicines, Internet restrictions, and financial instability.  Will it now add human trafficking to the list?   We will soon find out. 

June 23, 2015

Despite Fast Track Vote, Americans Know Trade Deals Fail Miserably, Will Oppose Trans-Pacific Partnership

Statement of Robert Weissman, President, Public Citizen

Following elaborate legislative contortions and gimmicks designed to hand multinational corporations their top priority, today the U.S. Senate paved the way for Fast Track legislation that aims to advance the corporate wish list known as the Trans-Pacific Partnership (TPP), as well other trade deals.

Those contortions were necessary because the American people overwhelmingly oppose these deals, notwithstanding an endless barrage of propaganda.

They oppose these deals because they know from personal experience that the NAFTA model fails miserably.

They know that these deals will mean more export of jobs, more downward pressure on wages. They know that these deals will undermine our ability to maintain and adopt strong environmental and consumer protections. They know that these deals are designed to help giant corporations, and not communities.

Today’s action means that Congress will tie its hands to prevent it from exerting positive influence over negotiations of the TPP. It means that the final TPP agreement will very likely include provisions empowering foreign corporations to sue our own government for policies that they claim impinge on their expected future profits. It means that the final TPP will very likely include provisions that will extend Big Pharma monopolies, raising prices for consumers and health systems – and, even in the United States, and especially in the poorer TPP countries, denying people access to needed medical treatment. It means that the final TPP will very likely include provisions undermining our food safety.

What it doesn’t mean is that Congress must pass such a TPP. When the inexcusable and anti-democratic veil of secrecy surrounding the TPP is finally lifted, and the American people see what is actually in the agreement, they are going to force their representatives in Washington to vote that deal down. Members who fail to do so can expect their constituents to hold them accountable. 

June 19, 2015

Hillary Clinton Says No to Fast Track while Bill Clinton Tries to Defend Fast Tracked Deals

As Fast Track for the controversial Trans-Pacific Partnership (TPP) moves to the Senate, where its path is fraught at best, presidential candidate Hillary Clinton has just stated that if she were in the Senate today, she'd probably vote "no" on Fast Track. She adds that she "certainly would not vote for it" if she was not "absolutely confident" that a separate bill to assist workers who lose their jobs to trade (Trade Adjustment Assistance, or TAA) would be enacted.  

Today's Senators should have no such confidence.  Many of them say "no" outright to the notion that it's a fair deal to Fast Track trade pacts that would offshore the jobs of middle-class workers in exchange for a small amount of assistance for some of those laid off workers.  (Know what's better than handing someone some cash after you eliminate their job?  Letting them keep their job.)  

But even those Senators who might be willing to vote yes on Fast Track in exchange for TAA would have to take a huge gamble that TAA would actually become a reality.  If they would vote for Fast Track before TAA passes both houses of Congress, Republicans - many of whom deeply oppose TAA - would have little incentive to help Democrats pass TAA.  Greg Sargent of The Washington Post explains, "But there’s no way to be certain Republicans will deliver on TAA, because many of them don’t really care about worker assistance and they’d already have achieved the Fast Track they want." 

The lack of "absolute confidence" on TAA has already pushed some fence-riding Senate Democrats to make the same calculation as Hillary Clinton and declare that they do not intend to vote for Fast Track

Just the day before the presidential candidate stated her opposition to Fast Track, her husband attempted to defend the legacy of past Fast Tracked trade deals that he helped usher into existence.  In an interview with Jon Stewart on The Daily Show, Bill Clinton got his facts wrong in his defense of the North American Free Trade Agreement (NAFTA) and NAFTA expansion pacts - the unpopular status quo trade model that Fast Track would expand.  (At the same time, Clinton offered a few critiques of provisions in pending trade agreements that ironically came from the NAFTA-style pacts he was defending - see below.) 

Some correcting of the former president's misstatements is in order: 

Clinton implied that our huge NAFTA trade deficit is due primarily to oil: “They [Mexico] were one of our biggest oil suppliers before we were self-sufficient in oil. So we did have a trade deficit there.

The surge in the U.S. trade deficit with NAFTA partners Mexico and Canada was not due to oil, according to U.S. government trade data. Even after removing oil, the U.S. non-oil goods trade deficit with Mexico and Canada went from an average of $2.3 billion in the five years before NAFTA to an average of $43.5 billion in the five years after NAFTA (adjusted for inflation). In 2014, the U.S. non-oil goods trade deficit with NAFTA partners topped $95.7 billion, more than 42 times the pre-NAFTA level.

Clinton stated: "And the analysis of all of our trade agreements with countries with lower per capita incomes than we have shows that on balance the countries that we have trade agreements with, we tend to have balanced trade."

Not according to the government data from the U.S. International Trade Commission. The United States actually had a $177.5 billion combined goods trade deficit with its 20 Free Trade Agreement (FTA) partners in 2014. That FTA trade deficit has increased by about $144 billion, or 427 percent, since the FTAs were implemented. Using Clinton’s comparison to only those FTA partners “with lower per capita incomes than we have” would eliminate Australia and Singapore, making the FTA trade deficit even higher, at $201.3 billion.

Clinton also claimed: "What happened is that in general our trade deficits have been bigger with countries we don’t have trade agreements with.”

It’s unclear what Clinton means by this. If he means the aggregate U.S. trade deficit with our 20 FTA partners is smaller than our total trade deficit with all other countries in the world combined, then yes, that is obviously true, as our 20 FTA partners constitute just a fraction of the global economy. If he means that the United States has a larger trade deficit with individual non-FTA countries than with individual FTA countries, that is only true for China. After China, our two largest goods trade deficits are with NAFTA partners Mexico and Canada.

Indeed, Clinton offered China - the outlier - as proof of his argument, saying, "we have no trade agreement" with China but "we have a humongous deficit" with China. Stewart interjected, "but some would say the larger problem was not NAFTA, but China joining the WTO.” Clinton responded, "Well the larger problem, whether they joined it or not, we had a huge trade deficit before they joined the WTO. And at least when they got into the WTO, they had to agree to rules and if we vigorously enforced the trade deals, we had a forum to resolve it…"

Stewart was right to point out to Clinton that we actually do have a different kind of trade agreement with China, thanks to China's entry into the World Trade Organization (WTO) in 2001, which precipitated a massive increase in the U.S. trade deficit with China.  Since China's WTO entry, the U.S. goods trade deficit with China has increased $237 billion or 211 percent. While the U.S. trade deficit with China grew 90 percent in the five years before China’s WTO entry, it expanded 146 percent in the five years thereafter, notwithstanding Clinton’s claim that the WTO offered a “forum” to force China to comply with certain rules. 

In addition, the former president repeated an Obama administration talking point by implying that the TPP would "not just let China write all the rules for Asia."  Never mind that the TPP rules were written to advance narrow special interests that would undermine the broader U.S. national interest.  Or that China appears to actually like the TPP's rules, as China has expressed interest in joining the pact.  Or that the track record of past U.S. FTAs defies the notion that the establishment of a trade deal would affect China's rising influence. 

Stewart also slipped up at one point in the interview in stating that "NAFTA has been very beneficial, I think, for Mexico." Actually, many economists agree that NAFTA has been a disappointment for Mexico. Mexico’s average annual growth per capita in NAFTA’s first two decades ranked 18th out of the 20 countries of Central and South America, according to the Center for Economic and Policy Research. And NAFTA's agricultural provisions contributed to the loss of livelihood of an estimated 2.5 million Mexican farmers and agricultural workers, which fueled a doubling of immigration from Mexico to the United States in NAFTA's first seven years. 

Despite Bill Clinton's errant defenses of the NAFTA model he helped birth, he also offered a few surprising critiques of provisions that were part and parcel of that model.  For example, he said "we shouldn't have a trade enforcement mechanism where a group we don't know picks the lawyers."  Is this a reference to the controversial investor-state dispute settlement (ISDS) system, included in NAFTA?  The TPP would dramatically expand this system by newly empowering thousands of foreign corporations to bypass domestic courts, go before tribunals of private lawyers that sit outside of any domestic legal system and challenge the laws we rely on for a clean environment, essential services, and healthy communities.  It's a little late for Bill Clinton, whose signature trade pact was the first major ISDS-enforced U.S. deal, to criticize ISDS.  But if he is indeed opposed to its expansion via the TPP, let's hear it.  

Clinton also acknowledged, implicitly, that status quo trade deals have led to the loss of U.S. manufacturing jobs, stating, "But it’s also true that there have been a lot of independent studies which show that we have a net loss of manufacturing jobs at the low end."  Indeed, nearly 5 million U.S. manufacturing jobs – one out of every four – have been lost on net since NAFTA took effect, and more than 57,000 U.S. manufacturing facilities have closed. Again, Clinton is about two decades late in raising this concern. Even so, it's timely, as the TPP would extend NAFTA’s special protections for firms that offshore U.S. jobs, while forcing U.S. workers to directly compete with workers in Vietnam making less than 60 cents an hour.

Clinton then emphasized the recent stagnation of middle class wages, but did not connect this to the status quo trade model that, according to an academic consensus, has contributed to downward pressure on median wages.  A recent National Bureau of Economic Research study confirmed this linkage, concluding that "offshoring to low wage countries and imports [are] both associated with wage declines for US workers."  

Clinton even implied that new trade deals should not be enacted until middle wage stagnation has been fixed, stating, "so we've got to first make sure that our people are going to be alright and that we have a sensible economic policy at home."  Ironically, the enactment of such deals contributed to the downward pressure on wages in the first place.  If the wage gap is actually to be bridged, it will require not only new domestic efforts, but a new trade model.  

Bill Clinton is an unlikely advocate for that model.  Hillary Clinton, if she continues to speak against Fast Track, has a chance to be a better one. 

June 18, 2015

House Punts Fast Track Problem Back to Senate; Path to Approval Unclear

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

Today, the House employed yet another procedural gimmick to punt the Fast Track problem back to the Senate, where its fate remains at best unclear as Americans’ concerns that more of the same trade policy would kill more jobs and push down our wages remain unaddressed.   

Because Republican House members would not support the Trade Adjustment Assistance (TAA) part of the Senate-passed Fast Track package last week, the GOP leadership today had to resort to a Fast Track-only vote, but what exactly that achieves is unclear. Senate Democrats, including those needed to obtain cloture for a stand-alone Fast Track bill, are demanding that the TAA be reinserted into the Fast Track bill or be passed by both chambers before agreeing to support Fast Track.  In addition, key Democratic senators are insisting on the fulfilment by Senate Leader Mitch McConnell of a promised vote to reauthorize the Export-Import bank – which was the condition for the deciding bloc of Senate Democrats to support cloture on Fast Track in the first instance in May. Meanwhile, House GOP lawmakers remain strongly opposed to TAA and Ex-Im reauthorization. As House Democratic Leader Nancy Pelosi stated today, there is no clear path for enactment of TAA. Yet yesterday, White House spokesman Josh Earnest said that President Obama requires both Fast Track and TAA to come to his desk.

That two years of effort by a vast corporate coalition, the White House and GOP leaders – and weeks of procedural gimmicks and deals swapped for yes votes – has resulted in this continuing standoff and no Fast Track enacted spotlights the dim prospects not only for adoption of Fast Track but also for the Trans-Pacific Partnership (TPP).

This weekend, the millions of Americans across the political spectrum actively campaigning against Fast Track will intensify their efforts to ensure the Senate permanently retires the Nixon-era scheme. America needs a new process for negotiating and approving trade agreements if we are to achieve deals that create American jobs and raise our wages.

June 16, 2015

Representative Who “Deeply Regrets” NAFTA Vote Warns Congress Not to Flip-Flop on Fast Track

Today the House of Representatives narrowly passed a procedural rule, inserted into an unrelated legislative package last night, that gives defenders of the unpopular status quo trade model six weeks to try to revive the Fast Track package that was put on life support last Friday. They will not succeed so long as they continue to face the wall of dogged, diverse grassroots pressure that delivered Friday’s landmark fair trade victory.  

Even so, the Obama administration and congressional proponents of more-of-the-same trade deals will try to badger the many members of Congress who voted down the Fast Track package into switching their votes. They will likely reiterate the tired litany of false promises that members of Congress and the U.S. public have heard time and again when being sold unpopular trade pacts.

In a poignant speech before today’s vote, Rep. Alcee Hastings (D-Fla.) warned against trusting such promises. In 1993, Rep. Hastings cast a controversial vote for the North American Free Trade Agreement (NAFTA) – the deal that spawned the status quo trade model that Fast Track would expand.  Today, Hastings stated:

In the 20 plus years that I’ve served in this body, I can think of only three votes which I deeply regret making and one of those was in support of NAFTA. In the years since, I’ve seen, after NAFTA, a decrease in American jobs, a rollback of critical environmental protections, here and in Mexico where I was promised that the environmental circumstances in the maquiladoras would be cleared up – and they were not – and a stagnation of wages that has prevented the financial upward mobility of working class and middle class Americans and has ground poor Americans into poverty beyond belief.

Rep. Hastings made clear that he has learned from NAFTA’s broken promises and urged his colleagues to stand firm by continuing to oppose Fast Track’s expansion of the trade status quo:

If we’re going to create trade policy that is worthy of future generations, then we must ensure that policy strengthens—not weakens—labor rights. It must strengthen—not weaken—environmental protections. It must ensure other countries responsibility to adhere to basic human rights. It must expand and strengthen our middle class, not squeeze hardworking Americans in favor of corporate interests. The legislation included in this rule today is part of a trade package that does nothing to bolster these important priorities.  

If past is precedent, the White House and congressional leadership will also try to make special deals with members of Congress who voted against the Fast Track package on Friday, offering promises of political cover or special goodies – from bridges to import safeguards – if they would be willing to face the wrath of their constituents and flip-flop on Fast Track.  But a review of the last two decades of trade-vote dealmaking reveals that such promises made to extract unpopular trade votes have also been consistently broken, leaving members of Congress exposed to voters’ anger over their decision to defy the opinion and interests of the majority.

Here again, Rep. Hastings’ experience offers a cautionary tale.  In deciding how to vote on NAFTA, Florida representatives like Hastings were concerned that the deal could lead to an influx of underpriced tomatoes from Mexico, displacing Florida’s tomato farmers and the state’s many tomato-related jobs. To extract their votes, the Clinton administration promised Florida representatives that the U.S. government would take measures to safeguard Florida tomato growers if NAFTA led to a surge in tomato imports.

The Clinton administration never fulfilled this promise. Before NAFTA, Florida had a $700 million tomato industry with 250 growers.  Within two years of NAFTA, tomato imports from Mexico soared, Florida’s tomato revenues dropped to $400 million and the state’s tomato industry shrank to just 100 growers.  No meaningful import safeguards were enacted by the Clinton administration, the George W. Bush administration or the Obama administration. Today, imports of tomatoes from Mexico are up 247 percent since NAFTA’s implementation.  Florida’s tomato growers have now filed a lawsuit to obtain the safeguards that they, and Florida’s representatives, were promised 22 years ago.

Rep. Hastings learned the hard way that promises used to extract “yes” votes on unpopular trade deals rarely materialize. His colleagues have the opportunity to learn the easy way – by heeding Rep. Hastings’ warning and maintaining opposition to Fast Track. 

June 15, 2015

Fast Track Down

Originally posted at The Huffington Post

By Lori Wallach, Director, Public Citizen's Global Trade Watch

The Fast Track trade authority package was rejected Friday because two years of effort by a vast corporate coalition, the White House and GOP leaders -- and weeks of deals swapped for yes votes -- could not assuage a majority in the House of Representatives facing constituents' concerns that more of the same trade policy would kill more jobs, push down wages and open a Pandora's box of other damaging consequences.

Proponents of Fast Tracking the almost-completed, controversial Trans-Pacific Partnership (TPP) say they are coming back this week for another try. And the White House was on full tilt this weekend trying to pressure House Democrats to flip their votes.

But the path to enactment of Fast Track remains unclear, even as the corporate coalition, White House and GOP leaders remain hell bent on finding it.

To understand what comes next, it's worth unpacking what exactly happened on Friday and how we got there.

The sum of it was that Byzantine procedural gimmicks designed to overcome what polls show is broad opposition to Fast Track by GOP, Democratic and Independent voters backfired.

Since the Fast Tracked 1994 North American Free Trade Agreement revealed what really was at stake with the arcane Nixon-era procedure, getting any Congress to delegate years of blank-check Fast Track authority has been a very hard sell. Since 1988, only Presidents Ronald Reagan and George W. Bush persuaded Congress to grant the multi-year Fast Track delegation President Barack Obama seeks. In 1998, 171 House Democrats and 71 GOP rejected President Bill Clinton's request. As a result, Congress has only allowed Fast Track to go into effect for five of the past 21 years.

Given past trade pacts have resulted in significant American job loss, the small bloc of Democratic Senators willing to support Fast Track authority insisted the 2015 bill include an extension of Trade Adjustment Assistance (TAA). TAA is a program that provides retraining benefits for workers who lose their jobs to trade that was first enacted during the Kennedy administration. GOP leaders also had to make a promise, already broken, to win over the deciding bloc of Senate Democrats, that votes to reauthorize the Export-Import Bank would be scheduled before it expired at the end of June.

Many GOP Senators and Representatives oppose TAA, which provides glaring evidence of our current trade policy's damage in the form of a casualty list of the millions of Americans losing their jobs to bad trade policy. Major conservative groups, such as the Heritage Foundation, decry it as a welfare program for unions. And both have waged a fierce effort to kill the Ex-Im Bank.

To top it off, the GOP congressional leadership added a $700 million cut to Medicare to offset the cost of the TAA program -- undoubtedly egged on by GOP campaign consultants eager to revive the deadly effective 2012 and 2014 campaign ads against Democrats attacking them for cutting Medicare in the context of an Obamacare pay-for provision. (They expected that the Democrats would vote for TAA and the GOP against, a perfect 2016 election set up.)

And the hard-fought Senate battle was the easy part.

In the face of the expected fewer than 30 Democratic House votes for Fast Track, the GOP leaders had to maximize House GOP votes for the Fast Track-TAA bill passed by the Senate in order to send it to the president's desk for signature. To do this, the GOP House leaders concocted a fantastical procedural gimmick. They used an arcane procedure called "dividing the question" and a "self-executing rule" (seriously, that what it's called).

Those moves temporarily cracked the Senate-passed bill into three pieces to set up separate votes on Fast Track and TAA. Thus, the GOP could vote no on TAA while voting yes on Fast Track. And the self-executing rule mean that if the House passed the rule for consideration of the Fast Track-TAA package, then the Medicare pay-for language in the package would be deemed passed. Then the rule also would put all of the pieces back together -- if both the TAA and Fast Track votes got majorities. And, Fast Track would be enacted.

Apparently, the House GOP leadership believed that Democrats' strong conceptual support for TAA meant that Democrats would deliver the votes to implement the Fast Track almost all oppose, allowing the GOP to vote for Fast Track and against TAA.

Except that only 40 Democrats agreed to play by the GOP's rules. The TAA half of the package went down with 302 no votes and only 126 yesses and headlines worldwide reported Fast Track's derailment. (Only 86 of the 245 House GOP voted for the TAA half of the package.)

No doubt House Democrats would have preferred to be able to support a multi-year extension of TAA, a program that would provide benefits for tens of thousands of American workers each year hurt by past trade deals. But the version of TAA that the GOP had on offer was woefully underfunded, even without taking into account the many additional workers who would lose jobs were the TPP to go into effect. And, it excluded government service workers, farmers, fishers and more. And, it still included a significant cut to Medicare dialysis funding.

But from a wider perspective, the GOP strategy required Democrats to vote for TAA knowing that this would result in the Fast Tracking of a TPP they recognize would result in hundreds of thousands of job losses and downward pressure on all Americans' wages and empower whomever is president for the next six years to Fast Track who knows what additional job-killing trade deals.

As she announced her opposition to TAA, Democratic House Leader Nancy Pelosi summed it up: "Its defeat, sad to say, is the only way that we would be able to slow down the fast track."

And that gets to what comes next. Under the House rules, if the GOP House leaders want to call for a revote on TAA, it must occur by Tuesday night. Or they must pass an extension to extend that option. For a TAA revote to succeed more than 90 Representatives would have to flip to supporting TAA. Passing the TAA half of the bill would then enact Fast Track.

But that seems improbable for the pro-Fast Track GOP, given their own views on TAA to say nothing of the political peril that would cause given the passionate opposition by conservative groups. Plus, there is plenty of ire about how the procedural gimmick imploded.

Because before the Fast Track bill was derailed, the rule enacting the Medicare cuts was narrowly passed on an almost party-line vote. So, instead of putting all of the Democrats on the record for Medicare cuts, the GOP leadership put all but 34 House GOP on the record voting for big Medicare cuts.

Will Democrats flip en masse? Their hard choice on TAA came last week. Painful though it was, even considering the meager TAA program on offer, they decided not to play into the GOP plan to pass Fast Track.

That then leaves Fast Track supporters with various other unappealing options. The House GOP could pass a new rule that allows for a vote just on Fast Track. But given the narrow margin on that part of the package, this approach would only work if all of the 27 Democrats who voted for Fast Track and TAA were willing to become responsible for passing Fast Track without TAA. And they must do so now that Democratic Leader Pelosi has made public her opposition to the Fast Track bill and concerns about the TPP it would railroad into place.

Plus, winning this strategy would require all of the GOP who voted for Fast Track after TAA failed and it was clear the second vote was only symbolic to vote for Fast Track when it counted.

If that approach succeeded, Fast Track still would not be passed. Rather, it would trigger a conference to try to reconcile the different House and Senate bills. And then a conference report would have to be passed by the Senate and House.

Friday's outcome was a testament to the strength and diversity of the remarkable coalition of thousands of organizations that overcame a money-soaked lobbying campaign by multinational corporations and intense arm-twisting by the GOP House leadership and the Obama administration. The movement now demanding a new American trade policy is larger and more diverse than in any preceding trade policy fight. It includes everyone from small business leaders and labor unions to Internet freedom advocates and faith groups to family farmers and environmentalists to consumer advocates and LGBT groups to retirees and civil rights groups to law professors and economists.

The final chapter for Fast Track, which will greatly affect the fate of the TPP, will be written in the coming weeks.

June 12, 2015

Defeat of Fast Track Package Highlights Americans’ Concerns About More of the Same Trade Policy – Senate-Passed Bill NOT Adopted

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

The Fast Track package sent over from the Senate was rejected today by the House because two years of effort by a vast corporate coalition, the White House and GOP leaders – and weeks of procedural gimmicks and deals swapped for yes votes –could not assuage Americans’ concerns that more of the same trade policy would kill more jobs and push down our wages.

Passing trade bills opposed by a majority of Americans does not get easier with delay because the more time people have to understand what’s at stake, the angrier they get and the more they demand that their congressional representatives represent their will.

Welcome to the weekend as the millions of Americans across the political spectrum actively campaigning against Fast Track will intensify their efforts to permanently retire the Nixon-era scheme and replace it with a more inclusive, transparent process that instead of more job-offshoring can deliver trade deals that create American jobs and raise our wages.

Today the allegedly unstoppable momentum of the White House, GOP leadership and corporate coalition pushing Fast Track to grease the path for adoption of the almost-completed, controversial Trans-Pacific Partnership (TPP) deal just hit the immovable object called transpartisan grassroots democracy.

The crazy gimmicks employed to try to overcome what polls show is broad opposition to Fast Track actually backfired. Yesterday, the House GOP leadership put most GOP representatives on record in favor of cutting Medicare by $700 million with a vote on a procedural gimmick. Today, it was Democrats’ ire about a gutted version of a program to assist workers who will be hurt by the trade agreements Fast Track would enable that was the proximate cause of the meltdown. That program was included only to try to provide cover for the two dozen Democrats who would even consider supporting Fast Track at all.

Today’s outcome is a testament to the strength and diversity of the remarkable coalition of thousands of organizations that overcame a money-soaked lobbying campaign by multinational corporations and intense arm-twisting by the GOP House leadership and the Obama administration. The movement now demanding a new American trade policy is larger and more diverse than in any preceding trade policy fight. It includes everyone from small business leaders and labor unions to Internet freedom advocates and faith groups to family farmers and environmentalists to consumer advocates and LGBT groups to retirees and civil rights groups to law professors and economists. 

Liveblogging the Fast Track Fight

The historic fight over Fast Tracking the largest expansion to date of the status quo trade model is underway on the floor of the U.S. House of Representatives. Here we are liveblogging the debate, with real-time evaluations of the veracity of our representatives' arguments for or against Fast Track.

BREAKING: The House has just voted down the Fast Track package, dealing a major blow to the push for more-of-the-same trade deals and a major victory to the diverse coalition pushing for a new trade model. But the fight is not yet over. See here for a statement from Global Trade Watch director Lori Wallach.

Rep. Pascrell: "We want fair deals that help our workers. That's what this is all about."  True: The Trans-Pacific Partnership (TPP) includes special protections for firms that offshore U.S. jobs and would pit U.S. workers against workers in Vietnam making less than 60 cents an hour. 

Rep. Beyer: "We have to do something different -- something smart, honest, brave, bold, and based on the almost unanimous consensus of American economists."  Bogus: Something "different" would suggest something other than expanding the status quo trade model by extending NAFTA's job offshoring incentivesthe labor and environmental standards model of Bush's last four FTAsthe parallel legal system for foreign corporations that has enabled a surge in attacks on environmental and health policies under existing pacts, etc.  And this notion of a "unanimous consensus of American economists" would be news to Paul KrugmanJoseph StiglitzRobert Reich, and other eminent economists who have supported past trade deals but have come out against the TPP. 

Rep. Sanchez: "There is nothing in this that requires other countries to bring their labor laws into compliance before this agreement takes effect."  Correct: We are supposed to take it on faith that Vietnam would halt its systematic labor rights violations before the TPP would grant preferential U.S. access to Vietnamese goods. Vietnam's labor leaders have bluntly rejected that notion, stating "Promises of future reforms by the Vietnamese government should not be trusted. If fast track were passed before the above abuses are actually stopped, the hope of any real reprieve for Vietnam’s oppressed workers would fade." Similar faith was requested for the Colombia FTA, for which a non-binding "Labor Action Plan" was signed. In the four years since, more than 100 Colombian unionists have been assassinated and more than 1,300 other unionists have endured death threats. 

Rep. Tiberi: "We have a trade surplus with the 20 countries that we have a trade agreement with." False: We have a $177.5 billion goods trade deficit with our 20 FTA partners, which has grown 427 percent since those deals took effect. The FTA trade deficit surge owes to soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations. Rep. Tiberi's claim errantly counts foreign-made goods as “U.S. exports.” He includes in "U.S. exports" goods made elsewhere that pass through the United States without alteration before being re-exported abroad, despite that they support zero U.S. production jobs.

Rep. Kaptur: "It's a great deal for Wall Street. It's a great deal for transnational corporations. But for [the] Main Street shrinking middle class and millions more of our workers, it's another punch to the gut." Amen: The TPP includes deregulatory provisions that literally were written under the advisement of Wall Street banks before the financial crisis. It would empower foreign banks and transnational corporations to bypass domestic courts, go before extrajudicial tribunals of private attorneys and demand taxpayer compensation for commonsense health, environmental and financial protections. For the rest of us, the deal would put downward pressure on middle class wages, increasing income inequality and spelling a pay cut for all but the top 10 percent.

Rep. McClintock: "This is not some new power. It just restores the same negotiating process that has served us well since the 1930's."  Nope: Fast Track wasn't created in the 1930's.  It was crafted by Nixon in the 1970's.  And unlike 1970s-era trade agreements that were narrowly focused on cutting tariffs and quotas, today's deals impose binding rules on a sweeping range of non-trade policies, undermining Congress’ authority over patents, copyright, financial regulation, energy policy, food safety, procurement, Internet policy and more. That's why Fast Track for sweeping TPP-style agreements is so controversial and why Congress has only allowed it to go into effect for five of the last 21 years. 

Rep. Velazquez: "New York lost more than 374,000 manufacturing jobs since NAFTA and the World Trade Organization agreements." That's right: And New York is not alone. Across the 50 states, the record of the status quo trade model that the TPP would expand has been lost jobs, lagging exports, increasing trade deficits, and depressed wages. Click here to see how your state has fared under the status quo trade model

Rep. Dold: "Ninety-five percent of the world's consumers are outside of the United States" Irrelevant: Less than 2 percent of those consumers live in TPP countries with consequential tariffs, most of whom live in Vietnam, where wages are too low to afford most U.S. exports.

Rep. Levin: "You put some language into this bill on currency. It's like every other negotiating objective. It's not even Swiss cheese, with lots of holes.  It's the weakest kind of cheese that has no real substance to it...Those negotiating objectives really are not meaningful, they're so vague. And it's the person who negotiates it who judges whether those vague negotiating objectives have been met." Indeed: Cheese metaphors aside, Congress' negotiating objectives in the 2015 Fast Track bill, as in past Fast Track bills, are not enforceable. The bill does not condition a president’s Fast Track privileges on trade negotiators actually meeting Congress’ negotiating objectives. Under past iterations of Fast Track, Democratic and Republican presidents alike have simply ignored Congress' negotiating objectives, including ones regarding currency manipulation. 

Rep. Meehan: "If we're not setting the rules on global trade, China will."  False dichotomy: “We” did not write these rules.  The draft TPP text was crafted in a closed-door process that granted privileged access to more than 500 official U.S. trade advisors, nine out of ten of them explicitly representing corporations.  It is little surprise then that leaked TPP terms include new monopoly patent rights for pharmaceutical companies that would increase healthcare costslimits on efforts to reregulate Wall Street, a deregulation of U.S. gas exports that could increase domestic energy prices, maximalist copyright terms that could thwart innovation and restrict Internet freedom, and new investor protections that incentivize offshoring.  Good luck selling that as advancing U.S. interests. Also, the notion that the establishment – or not – of any specific U.S. trade agreement would affect China’s rising influence is contradicted by the record

Rep. Lewis: "This Congress must be a headlight and not a taillight or history will not be kind to us." On point: History has already not been kind to members of Congress who vote against the majority U.S. public opposition to more-of-the-same trade deals. In recent elections, incumbents who voted for status quo trade deals have been unseated by fair trade candidates who attacked their votes against the majority. 

Rep. Cuellar: "Who are those companies [who are] exporting?  Ninety-three percent of those companies in Texas are small and medium size, so therefore this is how we create good jobs here in the United States."  Misleading: Most exporting firms are small and medium size simply because most firms overall are small and medium size. The more relevant question is what share of small and medium businesses depend on exports for success. In Texas, just one out of ten small and medium businesses export any good to any country, while more than half of the state's large corporations are exporters. Exporting is primarily the domain of large corporations, not small businesses.  Moreover, small businesses have actually seen their exports decline and their export shares shrink under the trade model that the TPP would expand.

Rep. DeLauro: "Fast Track denies public scrutiny. It denies debate in this House. And it relinquishes our congressional authority and does not allow us to amend a piece of legislation that will have such an effect on people's lives in this country...This trade agreement is only going to hurt [workers'] ability to have a job and to increase their wages. If we want to change that, then our job today is to vote down this bill, say no to Trade Adjustment Assistance, and say no to Fast Track."  Mic drop.

June 11, 2015

Why the Founding Fathers Would Oppose Fast Track

Tomorrow members of Congress plan to take a controversial, career-defining vote on Fast Tracking the largest expansion to date of the unpopular status quo trade model.  A majority of the U.S. public, most House Democrats and a sizeable bloc of House Republicans stand in opposition.

The coalition opposing Fast Track for the Trans-Pacific Partnership (TPP) is larger and more diverse than in any preceding trade policy fight, including Internet freedom advocates, family farmers, environmentalists, Main Street businesses, labor unions, feminists, faith groups, consumer advocates, development organizations, LGBT groups, and retirees. The breadth of the opposition reflects the wide scope of broadly-held goals that the sweeping TPP pact would undermine:  middle class jobsWall Street reformfood safetyInternet freedoma clean environment, and affordable healthcare, to name a few. 

But if that weren’t enough for members of Congress still on the fence, a new legal analysis reveals that the TPP may also undermine the U.S. Constitution. 

That’s the conclusion of Alan Morrison, a constitutional law professor and associate dean at George Washington University Law School who has practiced law for 45 years, taught at six law schools including Harvard, and argued 20 Supreme Court cases.

Morrison warns in a letter to Congress that the TPP’s proposed expansion of a controversial parallel legal system for foreign corporations, known as “investor-state dispute settlement” (ISDS), “improperly removes a core judicial function from the federal courts and therefore violates Article III of the Constitution.” 

TPP’s expansion of ISDS would newly empower thousands of foreign corporations to bypass the entire U.S. legal system and challenge U.S. laws before private international tribunals comprised of three attorneys.  

These three individuals would not be constitutionally appointed and salaried U.S. judges, but private lawyers who are paid by the hour.  As Morrison points out, "many of those who serve as arbitrators in one ISDS case represent investors challenging governments in another."  The three ISDS lawyers, though acting like a court, would not be bound by a system of legal precedent.  They would be authorized to rule against U.S. laws and order U.S. taxpayer compensation in decisions that could not be appealed on the merits or reviewed in U.S. courts.

If you think that the Founding Fathers might have frowned on this system, you’re not alone.  The U.S. Constitution states in Article III that U.S. courts, presided over by salaried U.S. judges, have judicial authority over challenges to U.S. laws.  Instead, the TPP would empower an ad-hoc group of three bill-by-the-hour private lawyers operating outside of the U.S. legal system to issue binding decisions on corporate challenges to U.S. laws. 

Morrison concludes, “The Administration owes it to Congress and the American people to explain how the Constitution allows the United States to agree to submit the validity of its federal, state, and local laws to three private arbitrators, with no possibility of review by any U.S. court.”

The TPP’s expansion of this constitutional aberration would threaten the policies that we rely on for a clean environment, stable economy and healthy communities.  Since ISDS tribunals, unlike U.S. judges, are not bound by legal precedent or substantive appeal, they are free to concoct broad governmental obligations to foreign investors and then rule against environmental, financial and health policies. 

Indeed, they are incentivized to do so, since some of the tribunalists, unlike U.S. judges, get paid and picked by those who launch the cases (i.e. foreign investors).  Imagine if the plaintiff (or defendant) in a U.S. court case got to select and pay the judge.  The more that ISDS tribunalists rule in favor of foreign investors and against government policies, the more they boost investors’ interest in launching further ISDS cases and picking them as the highly-paid tribunalists.

It is little surprise then that ISDS tribunalists have repeatedly used creative interpretations of foreign investors’ rights to rule against public interest policies under existing ISDS-enforced pacts.  This includes ISDS rulings against the Czech Republic’s decision not to bail out a bank, a Canadian province’s nondiscriminatory requirement for oil corporations to support local research and development, and a Mexican municipality’s decision not to authorize a waste facility near a nature reserve that is an UNESCO World Heritage Site and home to indigenous communities.  

Pending ISDS cases include a U.S. natural gas firm’s challenge of a Canadian moratorium on fracking, a Swedish energy company’s case against Germany’s phase-out of nuclear power after the Fukushima nuclear disaster, and Philip Morris’ ISDS attacks on anti-smoking policies from Uruguay to Australia.

While ISDS tribunals cannot directly require governments to overturn laws, their imposition of massive penalties on taxpayers can have that effect. Morrison explains: 

If a law is found to be inconsistent with an investor protection provision, it may remain in effect, but other investors could also bring claims seeking U.S. taxpayer compensation. Thus, an adverse arbitral decision under TPP may well result in repeal or amendment of the offending law…Indeed, the mere instigation of an ISDS proceeding has resulted in other governments, including Germany and Canada, reversing specific regulatory decisions as part of compensation packages for investors.

The TPP would dramatically expand the threat posed by this constitutionally-suspect system, as the deal would roughly double U.S. exposure to ISDS attacks against U.S. laws.  The TPP would newly empower more than 1,000 additional corporations in TPP countries, which own more than 9,200 additional subsidiaries in the United States, to launch ISDS cases against the U.S. government. No other U.S. pact has subjected the United States to such an increase in ISDS liability.

What kinds of U.S. laws and regulations would be vulnerable to corporate challenge under this unprecedented expansion of U.S. ISDS liability?  Morrison spells out some examples:

  • E-cigarette regulations: “If Congress decided to regulate [e-cigarettes] after enactment of the TPP, a non-U.S. investor from a TPP country that makes e-cigarettes here could ask an ISDS panel to rule that its investment-based expectations were improperly violated and thus that it is entitled to damages under the minimum standard of treatment provisions.”
  • Water rationing for drought-stricken California: “A similar challenge could be made by a TPP investor who owned farm land in California and objected to an intensification of mandatory water rationing for farms enacted after the TPP goes into effect, even if such rules also applied to U.S. owners of land that would be adversely affected by them.”
  • A $15 minimum wage: “Or the non-U.S. TPP-owner of restaurants in Los Angeles could demand arbitration over a post TPP-enactment of an increase in the minimum wage to $15 an hour, which, he claims, violates his investment-based expectations when he decided to purchase the restaurants.”

Such TPP threats are among the many that have spurred today’s widespread opposition to Fast Track.  After years of mounting evidence that the TPP would threaten middle class stability and commonsense consumer and environmental safeguards, members of Congress have plenty of reasons to vote “no” on Fast Track tomorrow.  But for those who need yet another reason, the TPP’s apparent violation of the U.S. Constitution should suffice.   

June 10, 2015

New Public Citizen Report Documents Systematic Bipartisan Betrayals on ‘Deals’ Made by Presidents, Congressional Leaders in Exchange for Trade Votes

Broken Promises, Lost Elections: Goodies Promised in Exchange for Trade Votes Don’t Materialize, Don’t Shield Representatives From Voters’ Wrath

As the Obama administration and GOP congressional leaders resort to promising special favors in attempt to entice members of Congress to buck majority opinion and support Fast Track, a report released today by Public Citizen reveals that such promises to extract controversial trade votes consistently have been broken, exposing representatives to angry constituents and electoral losses.

Facing bipartisan congressional opposition to Fast Track trade authority and polls showing majority U.S. public opposition, the Obama administration has moved beyond trying to sell Fast Track on its merits and is now offering rides on Air Force One, promises of infrastructure legislation and pledges to help representatives survive the political backlash of a “yes” vote on Fast Track. GOP congressional leaders are promising post-hoc policy fixes to trade laws and more. A comprehensive review of the past two decades of such trade vote deal-making shows that promises of policy changes, goodies for the district and political cover for unpopular trade votes rarely materialize, contributing to electoral upsets for representatives of both parties who trade their votes.

“Members of Congress should know better than to trust an exiting president’s promises of political cover or to rely on vote-yes-now-goodies-later deals for voting ‘yes’ on such a controversial, career-defining issue as Fast Track,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Our research of scores of deals over the past 20 years shows no matter who the president or congressional leadership is, almost all of the promises made in the heat of a trade vote go unfulfilled, and representatives who vote ‘yes’ are repeatedly left in political peril.”

Already the first promise of the 2015 Fast Track battle has been broken. U.S. Sen. Maria Cantwell (D-Wash.) and colleagues cast deciding Senate votes after obtaining commitments that Congress would have votes to reauthorize the Export-Import Bank before its June 30, 2015, sunset. Now GOP leaders have made clear this will not occur. Whether Ex-Im will ever be reauthorized is in doubt.

Members of Congress repeatedly have endured such trade vote-swapping deals gone wrong as pledged import safeguards have not materialized, promised funds for community development or worker assistance have proven illusory, and dreams of new infrastructure projects have remained dreams. Among current members of Congress featured in the report who experienced deals for trade votes gone bad are:

  • U.S. Rep. Robert Aderholt (R-Ala.) and the Empty Sock: Aderholt still awaits changes to the Central America Free Trade Agreement (CAFTA) to protect his district’s now-devastated sock manufacturers.  President George W. Bush promised this in 2005 to obtain Aderholt’s “yes” vote for CAFTA. 
  • U.S. Rep. Sam Farr (D-Calif.) Flower Deal Wilts: Farr voted for the North American Free Trade Agreement (NAFTA) after the Clinton administration promised to safeguard the California cut flower sector from import surges. After four years of ballooning flower imports from Mexico displaced California producers, Farr voted against giving President Clinton Fast Track in 1998.
  • U.S. Rep. Alcee Hastings (D-Fla.) Tomato Wipeout: Hastings and other Florida representatives voted for NAFTA on the basis of the Clinton administration’s promises to protect Florida’s tomato growers from destabilizing surges in tomato imports from Mexico. But the Clinton administration did not honor its pledge when, within two years of NAFTA, tomato imports multiplied, Florida’s tomato revenues dropped more than 40 percent, and the number of Florida tomato growers fell 60 percent.

“Even in the rare case where a promise to ‘fix’ a controversial trade deal has been upheld, the acclaimed tweak has failed to offset or outlast the damage wrought on local communities,” said Ben Beachy, research director of Public Citizen’s Global Trade Watch. “Voters do not tend to remember boasts of finite safeguards or worker assistance funds, while mass layoffs, farm foreclosures and news reports on inequality provide fresh, ongoing reminders of how their member of Congress voted on Fast Track and Fast Tracked deals.”

For some members of Congress, the decision to cast controversial trade votes in exchange for empty promises of political cover has exposed them to such constituent ire as to lead to electoral defeat:

  • Former U.S. Rep. Robin Hayes (R-N.C.) provided the final votes to pass Fast Track in 2002 and CAFTA in 2005, after telling his constituents he would oppose both. He flip-flopped on the basis of promises that failed to prevent thousands of trade-related job losses in his district, many of them at textile factories. In the 2008 election, a former textile worker, Larry Kissel, decisively beat Hayes after hammering him for his trade vote swaps.
  • Former U.S. Rep. Matthew Martinez (D-Calif.) stated support for Fast Track in 1997 as an apparent quid-pro-quo for President Clinton’s promise to approve a highway extension project in his district. Martinez never got the highway, but he did lose his job. In 2000, Martinez, an 18-year incumbent, lost 29 to 62 percent to a primary challenge by Hilda Solis, who ran against his support for Fast Track.

“This report provides a somber warning to members of Congress who may be approached by the Obama administration or GOP congressional leader to vote for Fast Track in exchange for promised new programs or policies to ameliorate feared damage or in exchange for unrelated goodies for the district,” said Wallach. “The trade votes and the damage wrought by bad trade agreements last forever, with voter ire only escalating over time, while our research shows that few deals made for trade votes are met and the few that are often fail to remedy the feared problems.”

Today’s report includes an annex of 92 promises made for trade vote support. Only 17 percent of these promises were kept, even though many were memorialized in the text of trade agreements’ implementing legislation. The overall finding of the report is that if appropriated funds are not locked in an account and if the policy change or amendment to a trade pact is not made before the trade vote, funding and follow-through is not likely to be forthcoming after the vote. Promises to seek future renegotiations of trade agreement provisions or to take action in future negotiations were broken most of the time. Of the past 64 policy promises designed to put a gloss on a contested agreement and give political cover to members of Congress, just seven were kept and 57 broken. Public Citizen also documented 28 pork barrel deals made in exchange for “yes” votes on trade agreements, of which nine were kept and 19 broken. 

May 28, 2015

New Polls Spotlight Damage of Past Trade Deals, Reveal Opposition to TPP Content

You may have seen the headlines about today’s Reuters/Ipsos poll and yesterday’s Pew poll, touted as showing public support for trade deals.  A close look at the polls  reveals that they did not even ask about the Trans-Pacific Partnership (TPP), Fast Track, the Trans-Atlantic Free Trade Agreement (TAFTA), or any other element of the controversial current trade policy agenda.

The polls did confirm, however, what polling has consistently shown: the U.S. public likes the general notion of trade but opposes the documented results of past trade deals and the actual content of pending ones.   

Today’s Reuters/Ipsos poll finds that a majority of the U.S. public “support[s] new trade deals to promote the sale of U.S. goods overseas.”  This is not surprising.  Who would be opposed to trade deals framed as simply boosting sales of U.S. goods?  (Never mind that exports of U.S. goods have actually grown slower, not faster, under existing U.S. trade deals.) 

The poll did not ask whether respondents “support new trade deals that could offshore U.S. manufacturing jobs.”  We do not need to rely on hypotheticals to guess how the U.S. public would respond to this question. Just three weeks ago, another Ipsos poll stated: “International trade agreements increase Americans’ access to foreign-made goods and products but at the risk of American jobs being lost. What would you say is more important...?” 

Eighty-four percent of the U.S. public said that “protecting American manufacturing jobs” is more important than “getting Americans access to more products.” Based on Ipsos' own polling, if today’s Reuters/Ipsos poll had presented not just the claimed upsides of trade deals, but the documented downsides, the results likely would have been quite different. 

The same Ipsos poll from earlier this month also asked, “If the Obama administration supports an international trade agreement that does not specifically prohibit currency manipulation, do you think the United States Congress should support or oppose that trade deal?” 

Seventy-three percent of the U.S. public said that Congress should oppose any trade agreement that does not prohibit currency manipulation.  The TPP, of course, fits that bill.  The Obama administration has repeatedly dismissed Congress' bipartisan, bicameral demand for the TPP to include binding disciplines against currency manipulation.  

Today’s Reuters/Ipsos poll did not address this fact about the TPP.  Indeed, it did not address the TPP at all.  Or Fast Track.  Or TAFTA.  Or anything other than the concept of “trade deals to promote the sale of U.S. goods overseas.”  According to Ipsos’ own polling results, had today’s poll mentioned the actual content of the TPP (e.g. the lack of binding currency manipulation disciplines), the result would have been broad opposition. 

Like the Reuters/Ipsos poll, yesterday’s Pew poll did not ask respondents specifically about the TPP, TAFTA, or Fast Track.  It did ask respondents about the impacts of free trade deals generally, which produced some damning, if paradoxical, results.  While the majority said they thought free trade agreements have been broadly good for the United States, the dominant opinion was also that free trade agreements have hurt the middle class and even the broader U.S. economy:

  • 46% said that free trade agreements “lead to job losses,” while only 17% said they “create jobs”
  • 46% said that free trade agreements “make the wages of American workers” lower, while only 11% said they make wages higher
  • 34% said that free trade agreements actually “slow the economy down” and 25% said they do “not make a difference” for economic growth, while only 31% said they “make the economy grow”
  • 30% said that free trade agreements actually “make the price of products sold in the U.S.” higher and 24% said they do not impact consumer prices, while only 36% said they lower prices
  • Among those earning less than $30,000 a year, 44% said free trade agreements have hurt their financial situation and that of their family, while only 38% said they have helped their financial situation
  • Among those who rated their personal financial situation as “poor,” 55% said free trade agreements have hurt their family’s finances, while only 27% said they have helped their family’s finances

Though Fast Track proponents will no doubt try, it's difficult to spin these results as a resounding endorsement of "free trade agreements" in general, much less the particularly expansive breed of "trade" agreement represented by the TPP and TAFTA.  If anything, the most recent polls show (once again) that the status quo trade model that Fast Track would expand has hurt the middle class. 

May 18, 2015

WTO Orders U.S. to Gut U.S. Consumer Country-of-Origin Meat Labeling Policy, Further Complicating Obama Fast Track Push

Final WTO Ruling Spotlights How Trade Pacts Can Undermine U.S. Consumer, Environmental Policies, Orders Rollback of Popular Consumer Law; Vilsack Says Congress Must Act

Today’s final ruling by the World Trade Organization (WTO) Appellate Body against popular U.S. country-of-origin meat labeling (COOL) policy spotlights how trade agreements can undermine domestic public interest policies, Public Citizen said today. The WTO decision is likely to further fuel opposition to Fast Track authority for controversial “trade” pacts that would expose U.S. consumer and environmental protections to more such challenges. (A list of some of the past public interest policies undermined by trade pacts is below.)

COOL requires labeling of pork and beef sold in the United States to inform consumers the country in which the animals were born, raised and slaughtered.

“The president says ‘we’re making stuff up,’ about trade deals undermining our consumer and environmental policies but today, we have the latest WTO ruling against a popular U.S. consumer policy. Last week, Canadian officials announced that our financial regulations violate trade rules, and earlier this year, the Obama administration, in response to another trade agreement ruling, opened all U.S. roads to Mexico-domiciled trucks that threaten highway safety and the environment," said Lori Wallach, director of Public Citizen’s Global Trade Watch.

In a May 1, 2015, letter, Agriculture Secretary Tom Vilsack informed Congress that it will need to repeal the COOL law or else change it if the final WTO ruling were to go against the United States. In contrast, in his recent speech at Nike, President Barack Obama said, “Critics warn that parts of this deal would undermine American regulation – food safety, worker safety, even financial regulations. They’re making this stuff up. This is just not true. No trade agreement is going to force us to change our laws.”

“Today’s WTO ruling, which effectively orders the U.S. government to stop providing consumers basic information about where their food comes from, offers a clear example of why so many Americans and members of Congress oppose the Fast Tracking of more so-called ‘trade’ pacts that threaten commonsense consumer safeguards,” said Wallach. “The corporations lobbying to Fast Track the TPP must be groaning right now, as this ruling against a popular consumer protection in the name of ‘free trade’ spotlights exactly why there is unprecedented opposition to more of these deals.”

Today’s decision on the final U.S. appeal of a 2012 initial ruling against the COOL policy paves the way for Canada and Mexico, which challenged COOL at the WTO, to impose indefinite trade sanctions against the United States unless or until it weakens or eliminates COOL, which is supported by nine in 10 Americans. Last year, consumer groups wrote to the administration requesting it use the ongoing Trans-Pacific Partnership (TPP) negotiations as leverage to demand that Canada and Mexico drop the case instead of rolling back the policy. But they received no response.

Today, the WTO Appellate Body upheld a 2014 compliance panel ruling, which said that changes made in May 2013 to the original U.S. COOL policy, in an effort to make it comply with a 2012 WTO ruling against the law, were not acceptable. The Appellate Body decided that the modified U.S. COOL policy still constitutes a “technical barrier to trade.” It  decided that the strengthened COOL policy afforded less favorable treatment to cattle and hog imports from Canada and Mexico, despite a 53 percent increase in U.S. imports of cattle from Canada under the modified policy. The Appellate Body upheld the earlier panel ruling that the alleged difference in treatment did not “stem exclusively from legitimate regulatory distinctions.”

Today’s ruling is not subject to further appeal. The decision initiates a WTO process to determine the level of trade sanctions that Canada and Mexico are authorized to impose on the United States as retaliation for COOL.

Today’s ruling follows a string of recent WTO rulings against popular U.S. consumer and environmental policies. In May 2012, the WTO ruled against voluntary “dolphin-safe” tuna labels that, by allowing consumers to choose to buy tuna caught without dolphin-killing fishing practices, have helped to dramatically reduce dolphin deaths.

Changes made last year to comply with the WTO’s decision are now being challenged in WTO compliance proceedings. This comes after the U.S. revoked a long-standing ban on tuna caught using dolphin-deadly nets following an earlier WTO ruling. In January 2015, the Obama administration announced it would allow Mexico-domiciled long haul trucks on all U.S. highways after losing a North American Free Trade Agreement challenge and being threatened with sanctions on more than two billion in U.S. trade flows.Consumer groups warn that the trucks pose significant safety threats, while environmental groups warn that they do not meet U.S. emissions standards.

In response to previous WTO rulings, the United States has rolled back U.S. Clean Air Act regulations on gasoline cleanliness standards successfully challenged by Venezuela and Mexico; Endangered Species Act rules relating to shrimping techniques that kill sea turtles after a successful challenge by Malaysia and other nations; and altered auto fuel efficiency (Corporate Average Fuel Economy) standards that were successfully challenged by the European Union.

The Fast Tracked legislation that implemented the WTO enacted a patent extension sought by pharmaceutical interests that consumer groups had successfully defeated for decades. The Uruguay Round Agreements Act amended the U.S. patent law to provide a 20-year monopoly – replacing the 17-year term in U.S. law and increasing medicine prices by billions by extending the period during which generic competition would be prohibited. The bill also watered down the Federal Meat Inspection Act and the Poultry Products Inspection Act both of which  required only poultry and meat that actually met U.S. safety and inspection standards could be imported and sold here and allowed imports that meet “equivalent” standards with foreign nations certify their own plants for export.

Background

The COOL policy was created when Congress enacted mandatory country-of-origin labeling for meat – supported by 92 percent of the U.S. public in a recent poll – in the 2008 farm bill. This occurred after 50 years of U.S. government experimentation with voluntary labeling and efforts by U.S. consumer groups to institute a mandatory program.

In their successful challenge of COOL at the WTO, Canada and Mexico claimed that the program violated WTO limits on what sorts of product-related “technical regulations” signatory countries are permitted to enact. The initial WTO ruling was issued in November 2011. Canada and Mexico demanded that the United States drop its mandatory labels in favor of a return to a voluntary program or standards set by an international food standards body in which numerous international food companies play a central role. Neither option would offer U.S. consumers the same level of information as the current labels. The United States appealed.

In a June 2012 ruling against COOL, the WTO Appellate Body sided with Mexico and Canada. The U.S. government responded to the final WTO ruling by altering the policy in a way that fixed the problems identified by the WTO tribunal. However, instead of watering down the popular program as Mexico and Canada sought, the U.S. Department of Agriculture responded with a rule change in May 2013 that strengthened the labeling regime. The new policy provided more country-of-origin information to consumers, which satisfied the issues raised in the WTO’s ruling. However, Mexico and Canada then challenged the new U.S. policy. With today’s ruling, the WTO has announced its support for the Mexican and Canadian contention that the U.S. law is still not consistent with the WTO rules.

May 13, 2015

Why Warren Is Right and Obama Is Wrong on Fast Track’s Threat to Wall Street Reform

President Obama seems unaware that his controversial trade agenda could undermine the Wall Street reform agenda of his first administration. 

Fortunately, Senator Elizabeth Warren has been reminding him of this contradiction and the threat it poses to financial stability.  Last week, in a speech about the president's trade agenda, she stated, “Anyone who supports Dodd-Frank [the post-crisis Wall Street reform law] and who believes we need strong rules to prevent the next financial crisis should be very worried.”  

Unfortunately, Obama responded over the weekend by dismissing Senator Warren’s concerns and defending his controversial push to Fast Track through Congress the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Free Trade Agreement (TAFTA).

In an interview, Obama seemed unnerved by the notion that this agenda could “unravel” Wall Street reform.  Indeed, it is unnerving – because it’s true.

Just four days after Obama brushed away Sen. Warren’s concerns as “pure speculation,” Canada's Finance Minister Joe Oliver has declared that the Volcker Rule – a centerpiece of the Dodd Frank Wall Street reform law – violates the North American Free Trade Agreement (NAFTA).  Not only would the TPP replicate many of NAFTA’s pre-crisis, deregulatory rules that threaten financial regulations – it would expand them further.  

“I believe, with strong legal basis, that this [Volcker] rule violates the terms of the NAFTA agreement,” states Oliver.  If our trading partners are already invoking existing U.S. trade pacts to issue clear threats against Wall Street reform, why would we undertake an unprecedented expansion of this trade model’s threat to financial stability via the TPP and TAFTA?   

For the first time, the TPP and TAFTA would empower the world's largest banks, including 19 of the 30 biggest non-U.S. banks, to “sue” the U.S. government before extrajudicial tribunals over U.S. financial regulations. And unlike any past U.S. trade pacts, the TPP would empower foreign banks to challenge new U.S. financial protections on the mere basis that they frustrated the banks' "expectations."

The deals are also slated to include deregulatory provisions that literally were written under the advisement of Wall Street banks before the financial crisis – provisions that would conflict with bans on risky derivatives or policies to prevent banks from becoming “too big to fail.”  Sen. Warren and other Senators warned the administration about these pre-crisis provisions in a letter last December, concluding that the TPP “could make it harder for Congress and regulatory agencies to prevent future financial crises.”

And Senator Warren isn’t the only canary in this mine.  Leading members of the House of Representatives, including House Financial Services Committee ranking member Rep. Maxine Waters, have issued similar warnings about TAFTA’s threats to U.S. financial stability measures. The Americans for Financial Reform – a coalition of more than 200 groups leading the push for Wall Street reform – has repeatedly detailed how TPP and TAFTA provisions conflict with commonsense financial protections.  

Prominent economists like Simon Johnson, former chief economist for the International Monetary Fund, have explicitly backed Warren’s concerns.  And in a speech last year, Federal Reserve governor Daniel Tarullo plainly stated that proposals “to include limitations on prudential requirements in trade agreements would lead us farther away from the aforementioned goal of emphasizing shared financial stability interests, in favor of an approach to prudential matters informed principally by considerations of commercial advantage.”

But, you may be thinking, surely President Obama would not want to roll back Wall Street reform, right?  Fast Track’s threat, unfortunately, is larger than Obama, because Fast Track would outlast Obama.  Fast Track would also give blank-check powers to whoever is president after Obama to pursue additional binding agreements to which U.S. domestic laws, including financial regulations, would have to conform. Senator Warren spotlighted this threat in her response to Obama this week, stating, “If that [next] president wants to negotiate a trade deal that undercuts Dodd Frank, it will be very hard to stop it.” While an attempt to undermine Dodd Frank via normal legislation would require 60 votes in the Senate, a Fast-Tracked trade deal that undermines Dodd Frank could be implemented with a simple majority.

But even if no future trade agreements would be shoved through Fast Track’s back door, the existing trade pacts – TPP and TAFTA – present plenty of cause for concern.  Indeed, the two deals pose greater threats to U.S. financial regulations than any past U.S. trade or investment deals.  That’s largely because, for the first time, they would allow the world’s most powerful banks to use the notorious “investor-state dispute settlement” (ISDS) system – a parallel legal system for multinational firms – to challenge U.S. financial regulations.

Under current U.S. pacts, none of the world’s 30 largest non-U.S. banks may bypass domestic courts, go before extrajudicial tribunals of three private lawyers, and demand taxpayer compensation for U.S. financial policies.  Were the TPP and TAFTA to be enacted, 19 of the world’s 30 largest non-U.S. banks would be so empowered - from the UK’s HSBC (notorious for enabling money laundering by drug cartels) to France’s BNP Paribas (notorious for evading U.S. sanctions). These global banks have many subsidiaries in the United States, any one of which could serve as the basis for an ISDS challenge against U.S. financial regulations if the TPP and TAFTA were to take effect.

One of the largest banks that that would be newly empowered to challenge U.S financial protections is Deutsche Bank, a German megabank that received hundreds of billions of dollars from the U.S. Federal Reserve in exchange for mortgage-backed securities in the aftermath of the financial crisis.  The Association of German Banks, led by Deutsche Bank’s CEO, has already made clear that it has “quite a number of…concerns regarding the on-going implementation of the Dodd-Frank Act (DFA) by relevant US authorities.”

The ISDS threat is not hypothetical – foreign firms have already used ISDS to attack financial measures, such as when a Netherlands investment company demanded hundreds of millions of dollars from the Czech Republic for choosing not to bail out a bank during the country’s banking crisis.  The foreign firm was irked that the bank in which it had a minority share did not receive a government bailout while other banks did.  An ISDS tribunal of three private lawyers ordered the government to pay the firm $236 million.

Fast Track’s threat to U.S. financial regulations is also unprecedented because the TPP, according to U.S. TPP negotiators, would be the first U.S. trade pact to empower foreign banks to launch ISDS cases against U.S. financial regulations on the basis that those regulations violated a special guarantee of a “minimum standard of treatment” for foreign investors.  ISDS tribunals have interpreted this ambiguous obligation as requiring governments to maintain a “stable and predictable regulatory environment” that does not frustrate foreign firms’ “expectations.”  That is, regulations should not significantly change once a foreign investor has invested – even if the government is trying to prevent or mitigate a financial crisis. 

Due to such sweeping interpretations, this vague government obligation has become the basis for three out of every four ISDS cases brought under U.S. pacts in which the government has lost.  Unlike past U.S. trade pacts, the TPP would newly subject U.S. financial regulations to this broad and oft-used obligation.

President Obama did not address these realities when dismissing Senator Warren’s warnings about the threat Fast Track poses to Wall Street reform.  Indeed, he seemed eager to simply call Sen. Warren “absolutely wrong” and move on.  The U.S. public deserves an honest debate, not defensive one-liners, when something as sensitive as financial stability is on the line.  Let’s hope Senator Warren keeps stoking that debate. 

May 07, 2015

Seven Corporations that Could Sponsor Obama’s Controversial Trade Deal (If His Nike Endorsement Falls Flat)

President Obama apparently has a flair for irony. He selected the headquarters of offshoring pioneer Nike as the place to pitch the controversial Trans-Pacific Partnership (TPP) trade deal in a major speech on Friday. As Obama tries to sell a pact that many believe would lead to more U.S. job offshoring and lower wages, why would he honor a firm that has grown and profited not by creating U.S. jobs, but by producing in offshore sweatshops with rock bottom wages and terrible labor conditions?

Less than 1 percent of the 1 million workers who made the products that earned Nike $27.8 billion in revenue in 2014 were U.S. workers. NikeLast year, one-third of Nike’s 13,922 U.S. production workers were cut. Most Nike goods, and all Nike shoes, are produced overseas, by more than 990,000 workers in low-wage countries whose abysmal conditions made Nike a global symbol of sweatshop abuses.

This includes more than 333,000 workers in Nike-supplying factories in TPP nation Vietnam, where the average minimum wage is less than 60 cents per hour and where workers have faced such abuses as supervisors gluing their hands together as a punishment. Instead of requiring Nike to pay its Vietnamese workers more or ending the abuse they endure, the TPP would allow Nike to make even higher profits by importing goods from low-wage Vietnam instead of hiring U.S. workers.

If using an offshoring pioneer to rally support for the beleaguered TPP does not succeed for some reason, here are seven other U.S. corporations that Obama might consider as equally fitting backup options

1.      Philip Morris

Sure, Philip Morris International – the world’s second-largest tobacco corporation – may not be the world’s most-loved corporation, but Obama would find an enthusiastic TPP corporate sponsor in the firm.  Philip Morris has explicitly lobbied for controversial TPP provisions that would Philip Morrisempower multinational corporations to bypass domestic courts, go before extrajudicial tribunals of three private lawyers, and challenge domestic laws that millions of people rely on for a clean environment, a stable economy, and healthy communities. Indeed, Philip Morris is already using this parallel corporate legal system, known as “investor-state dispute settlement,” to attack landmark anti-smoking policies from Australia to Uruguay. The TPP would newly empower thousands of multinational corporations to launch “investor-state” attacks against countries’ health, environmental and financial protections. In one fell swoop, the deal would roughly double U.S. exposure to “investor-state” attacks against U.S. policies.

2.      Goldman Sachs  (and other Wall Street firms)

If Obama’s Nike promo falls flat, maybe he should turn to a Wall Street bank as the next TPP corporate cheerleader. It’s no surprise that Wall Street firms like Goldman Sachs love the TPP.  The deal includes
Wall Stbinding rules, written before the financial crisis under the advisement of the banks themselves, that would require domestic policies to conform to the now-rejected model of deregulation that led to financial ruin. And for the first time, the TPP would empower some of the world’s largest 20 banks to directly challenge new U.S. financial protections before extrajudicial tribunals on the basis that the regulations frustrated the banks' "expectations."

3.      Pfizer  (and other Big Pharma corporations)

Pharmaceutical corporations like Pfizer are likely candidates for further corporate TPP-peddling given that the pharmaceutical industry has lobbied for the TPP more than any other. Small wonder – the deal offers pharmaceutical corporations a buffet of handouts that would allow them to raise medicine prices Pfizerwhile restricting consumers’ access to cheaper generic drugs. One TPP chapter would give pharmaceutical firms expanded monopoly protections that would curb access to essential medicines in TPP countries like Vietnam, where it is projected that 45,000 HIV patients would no longer be able to afford life-saving treatment. Another TPP chapter would establish new restrictions on government efforts to cut medicine costs for taxpayer-funded programs such as Medicare, Medicaid and veterans' health programs. A third TPP chapter would empower foreign pharmaceutical corporations to directly attack domestic patent and drug-pricing laws in extrajudicial tribunals.

4.      ExxonMobil  (and other fracking corporations)

Maybe Obama’s next TPP photo op should be in front of a natural gas fracking drill owned by TPP-supporting ExxonMobil, the world’s largest publicly traded natural gas corporation. Natural gas firms are hopeful about TPP provisions likely to spur a surge in natural gas exports. For the rest of us, that would Frackingmean an expansion of dirty fracking and an increase in electricity costs. Implementing the TPP would require the U.S. Department of Energy to automatically approve natural gas exports to TPP countries, waiving its prerogative to determine whether those exports, and the resulting incentive for more fracking, would be in the public interest. As states like New York ban fracking to protect against health and environmental dangers, the TPP would move in the opposite direction. Indeed, the TPP would open the door to more “investor-state” attacks on anti-fracking protections, like the one Lone Pine Resources has launched against a Canadian fracking moratorium that prevents the firm from fracking under the Saint Lawrence Seaway.

5.      Time Warner  (and other Hollywood corporations)

Hollywood corporations like Time Warner Inc. already have been partnering closely with the Obama administration in stumping for the TPP – recent leaks reveal that the Motion Picture Association of HollywoodAmerica literally has asked the administration to vet the corporate alliance’s pro-TPP statements. The corporations are pining for stringent TPP copyright protections that could threaten Internet freedom by pushing Internet service providers to police everyday content sharing, resulting in blocked or censored websites. Leaked proposals for the deal would even make the common, non-commercial sharing of copyrighted content (e.g. remixed songs, reposted video clips) a prosecutable crime. 

6.      Red Lobster  (and other corporations using imported fish and seafood)

U.S. chain restaurants and agribusinesses that profit from imports of fish and seafood, at the expense of U.S. independent fishers and shrimpers, could also serve as willing backers of Obama’s TPP pitch. The deal would likely reduce or eliminate U.S. tariffs on imports of more than 80 types of fish and seafood Red Lobsterproducts, increasing further the already massive flow of fish and seafood imported into the United States. Even without the TPP, the U.S. Food and Drug Administration (FDA) only physically inspects less than 1 percent of imported fish and seafood for health risks, despite that the Centers for Disease Control and Prevention has found that imported fish are the number one cause of U.S. disease outbreaks from imported food. The TPP would exacerbate this public health threat by enabling more fish and seafood imports from major exporters like Malaysia and Vietnam, where widespread fish and seafood contamination has been documented. For example, the FDA has placed 193 Vietnamese fisheries on a “red list” due to risk of salmonella contamination.

7.      Chinese Corporations in Vietnam

If Obama is willing to use Nike to promote the controversial TPP despite its reliance on low-wage labor in Vietnam, maybe he’d be willing to also solicit TPP endorsements from the Chinese corporations that are setting up shop in Vietnam in hopes of using the TPP to undercut U.S. businesses. The Chinese and Vietnam factoryVietnamese press report that many Chinese textile and apparel firms are now building factories in Vietnam in hopes of taking advantage of the TPP’s planned phase-out of U.S. tariffs on apparel imported from Vietnam. This not only would place U.S. textile producers in direct competition with Chinese-owned firms using low-wage labor in Vietnam, but also would eliminate the jobs of workers in Mexico and Central America who now make the clothes that were made in the United States before the North American Free Trade Agreement and Central America Free Trade Agreement. In addition, the TPP’s gutting of Buy American policies would newly empower Chinese firms operating in Vietnam to undercut U.S. businesses to get contracts for goods bought by the U.S. government, paid for by U.S. taxpayers. For all firms operating in TPP countries like Vietnam, the United States would agree to waive "Buy American" procurement policies that require most federal government procurement contracts to go to U.S. firms, offshoring U.S. tax dollars to create jobs abroad. 

May 05, 2015

Third Year of Korea FTA Data Released, Show Failure of Obama’s ‘More Exports, More Jobs’ Trade Pact Promises, Further Burdening Fast Track Prospects

Trade Deficit With Korea Balloons 104 Percent as Exports Fall and Imports Surge Under Korea Pact Used as TPP Template

Today’s release of U.S. government trade data covering the full first three years of the U.S.-Korea free trade agreement (FTA) reveals that the U.S. goods trade deficit with Korea has more than doubled. In addition, today’s U.S. Census Bureau data show Korea FTA outcomes that are the opposite of the Obama administration’s “more exports, more jobs” promise for that pact, which it is now repeating with respect to the Trans-Pacific Partnership (TPP) as it tries to persuade Congress to delegate Fast Track authority for the TPP.

U.S. goods exports to Korea have dropped 6 percent, or $2.7 billion, under the Korea FTA’s first three years, while goods imports from Korea have surged 19 percent, or $11.3 billion (comparing the deal’s third year to the year before implementation). As a result, the U.S. goods trade deficit with Korea has swelled 104 percent, or more than $14 billion. The trade deficit increase equates to the loss of more than 93,000 American jobs in the first three years of the Korea FTA, counting both exports and imports, according to the trade-jobs ratio that the Obama administration used to project gains from the deal.

“As if the odds for Fast Track were not already long enough, with most House Democrats and many GOP members stating opposition, today’s unveiling of a job-killing trade deficit surge under the Korea FTA puts a few more nails in Fast Track’s coffin,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Who’s going to buy the argument about Fast Track and the TPP creating ‘more exports, more jobs’ when Obama’s only major trade deal, used as the TPP template, was sold under that very slogan and yet has done the opposite?”

In contrast to the decline in U.S. goods exports to Korea in the FTA’s first three years, U.S. goods exports to the world have risen 2 percent during that time, despite the strengthening value of the dollar. And the 104 percent surge in the U.S.-Korea goods trade deficit under the FTA starkly contrasts with the 5 percent decrease in the global U.S. goods trade deficit during the same period.

Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 35 of the 36 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit seen in the three years before the deal. In January 2015, the monthly U.S. goods trade deficit with Korea topped $3 billion – the highest level on record.

May 2015 Korea FTA deficit

The administration has tried to deflect attention from the failure of its Korea FTA by claiming that its poor performance has been caused by economic stagnation in Korea. However, Korea’s economy has grown during each year of the Korea FTA, while U.S. exports to Korea have not.

U.S. exports to Korea are actually even lower than today’s numbers indicate and the U.S.-Korea trade deficit is even higher, when properly counting only made-in-America exports. The exports data in today’s U.S. Census Bureau release include “foreign exports” – goods made abroad, imported into the United States and then re-exported without undergoing any alteration in the United States. Foreign exports support zero U.S. production jobs, and their inclusion artificially inflates U.S. export figures and deflates U.S. trade deficits with FTA partners.

Each month, the U.S. International Trade Commission (USITC) reports the official U.S. government trade data with foreign exports removed, typically within two days after the U.S. Census Bureau releases the raw data. USITC likely will release the Korea trade data without the distortion of foreign exports by Thursday, May 7, at which point the more accurate – and even more negative – record of the Korea FTA will be made available at http://www.citizen.org/documents/Korea-FTA-3-years.pdf

April 29, 2015

Talking Point in Defense of TPP Is 95% Irrelevant

As the fight intensifies against Fast Track for the controversial Trans-Pacific Partnership (TPP) - with new members of Congress and more than 2,000 U.S. groups declaring their opposition - the Obama administration has decided not to switch its talking points, but to state the same ones more loudly. 

The administration seems particularly fond of flogging this one in recent TPP-defending speeches, press releases, and Internet memes: “Almost 95% of the world's consumers are outside America’s borders.”

No one is questioning the veracity of this demographic observation.  The question is what it has to do with the TPP.

Not much, as it turns out. Here's why the "95%" statistic is irrelevant for the TPP: 

  • U.S. products already enjoy tariff-free access to consumers in most TPP countries. The United States already has Free Trade Agreements (FTAs) with six of the 11 TPP negotiating countries, meaning tariffs on U.S. products already have been zeroed out. And in Japan, which comprises 88 percent of the combined gross domestic product of the TPP countries that do not already have a U.S. FTA, the average applied tariff is just 1.2 percent. New Zealand’s average applied tariff is 1.4 percent. Such low barriers are why prominent economists like Paul Krugman have scoffed at the economic significance of the TPP, and why a U.S. government study projects 0.00 percent U.S. economic growth even if all TPP countries eliminated all existing tariffs on all products.
  • In the two TPP countries that actually have sizable populations and average tariffs above a mere 1.5 percent, most people do not earn enough money to purchase many U.S. exports. In Vietnam, the average person earns just $1,740 per year. In Malaysia, which has one third as many consumers as Vietnam, per capita annual income is $10,430. Neither country represents significant purchasing power for exports of U.S.-made products.  
  • Even if the TPP represented significant new market access, TPP-style "trade" deals have not succeeded in helping U.S. firms reach consumers outside our borders. The official U.S. government trade data reveal that U.S. goods exports to our existing FTA partners have grown 20 percent slower than U.S. exports to the rest of the world over the last decade. 

Where did the administration get such a weak talking point?  The Chamber of Commerce.  The corporate alliance has been trumpeting the same 95% statistic for at least the last three years.  It appears that rather than create its own sales pitch for the TPP, the administration decided to borrow one straight from the multinational corporations behind the deal.  

Given that this particular talking point is about 95% irrelevant for the TPP, maybe the administration should ask the deal's corporate backers for a new one. 

April 16, 2015

Hatch Bill Would Revive Controversial 2002 Fast Track Mechanism That Faces Broad Congressional, Public Opposition

Today’s Proposal Replicates Language of Failed 2014 Bill, Would Expand Same Broken Trade Model That Has Led to $912 Billion Trade Deficit, Loss of Millions of Manufacturing Jobs, Attacks on Public Interest Policies 

The trade authority bill introduced today would revive the controversial Fast Track procedures to which nearly all U.S. House of Representatives Democrats and a sizable bloc of House Republicans already have announced opposition.  Most of the text of this bill replicates word-for-word the text of the 2014 Fast Track bill, which itself replicated much of the 2002 Fast Track bill. Public Citizen calls on Congress to again oppose the outdated, anti-democratic Fast Track authority as a first step to replacing decades of “trade” policy that has led to the loss of millions of middle-class jobs and the rollback of critical public interest safeguards.

In the past 21 years, Fast Track authority has been authorized only once by Congress – from 2002 to 2007. In 1998, the U.S. House of Representatives voted down Fast Track for President Bill Clinton, with 71 GOP members joining 171 House Democrats.

Today’s bill explicitly grandfathers in Fast Track coverage for the almost-completed Trans-Pacific Partnership (TPP) and would extend Fast Track procedures for three to six years. The bill would delegate away Congress’ constitutional trade authority, even after the Obama administration dismissed bipartisan and bicameral demands that the TPP include enforceable currency manipulation disciplines. The trade authority proposal would not require negotiators to actually meet Congress’ negotiating objectives in order to obtain the Fast Track privileges, making the bill’s negotiating objectives entirely unenforceable.

“Congress is being asked to delegate away its constitutional trade authority over the TPP, even after the administration ignored bicameral, bipartisan demands about the agreement’s terms, and then also grant blank-check authority to whomever may be the next president for any agreements he or she may pursue,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Rather than putting Congress in the driver’s seat on trade, this bill is just the same old Fast Track that puts Congress in the trunk in handcuffs. I expect that Congress will say no to it.”

Instead of establishing a new “exit ramp,” the bill literally replicates the same impossible conditions from past Fast Track bills that make the “procedural disapproval” mechanism to remove an agreement from Fast Track unusable. A resolution to do so must be approved by both the Senate Finance and the House Ways and Means committees and then be passed by both chambers within 60 days. The bill’s only new feature in this respect is a new “consultation and compliance” procedure that would only be usable after an agreement was already signed and entered into, at which point changes to the pact could be made only if all other negotiating parties agreed to reopen negotiations and then agreed to the changes (likely after extracting further concessions from the United States). That process would require approval by 60 Senators to take a pact off of Fast Track consideration, even though a simple majority “no” vote in the Senate would have the same effect on an agreement. In contrast, the 1988 Fast Track empowered either the House Ways and Means or the Senate Finance committees to vote by simple majority to remove a pact from Fast Track consideration, with no additional floor votes required. And, such a disapproval action was authorized before a president could sign and enter into a trade agreement.

“Chairman Hatch said he would never accept changes that make it possible for Congress to remove Fast Track from an agreement that does not measure up, and he got his way,” said Wallach. “What is being advertised as a new safeguard is not an exit from Fast Track’s confiscation of Congress’ policymaking prerogatives, but new curtains hung over the same brick wall.”

Today’s bill faces long odds for approval. Members of Congress who supported past trade initiatives have been angered by the extreme secrecy of TPP negotiations and the administration’s refusal to include currency disciplines in the pact.

The bill proposed today makes only minor adjustments to the Hatch-Camp-Baucus Fast Track bill that was dead on arrival in the House when it was introduced in 2014. At the time, only eight out of 201 House Democrats supported the bill and House GOP leaders could not count more than 100 members as “yes” votes. Since then, 14 of the 17 current freshman Democrats in the House have signed letters opposing Fast Track despite pressure from the administration. And, in contrast to past Congresses, a sizable bloc of freshmen GOP members has refused to declare support for Fast Track despite a corporate lobby push.

“This bill is a repeat of the Fast Track proposal that died a quick death one year ago,” said Wallach. “The only difference is that that congressional opposition to the very concept of Fast Track authority has grown.”

The bill comes despite broad and growing opposition to Fast Track and the TPP. A 2015 bipartisan poll from the Wall Street Journal and NBC News shows that 75 percent of Americans think that the TPP should be rejected or delayed. In recent weeks, voters in Maryland, Oregon, Washington, Connecticut, Colorado and other states protested against Fast Track, citing the devastating impact past Fast Tracked pacts have had on local jobs, small businesses and farmers. Recent data show that similar trade deals have already pushed the United States to the precipice of a historic $1 trillion trade deficit, contributed to the loss of five million American manufacturing jobs and increased U.S. income inequality. 

Today’s bill, sponsored by U.S. Senate Finance Committee Chair Orrin Hatch (R-Utah), House Ways and Means Chair Paul Ryan (R-Wis.) and Finance Committee Ranking Member Ron Wyden (D-Ore.), failed to attract a single House Democratic sponsor. Today’s bill would:

  • Empower the executive branch to unilaterally select partner countries for a trade pact, determine an agreement’s contents through the negotiating process, and then sign and enter into an agreement – all before Congress voted to approve a trade pact’s contents, regardless of whether a pact met Congress’ negotiating objectives;
  • Authorize the executive branch to write legislation containing any terms the White House decides are “necessary or appropriate” to implement the pact. Such legislation would not be subject to normal congressional committee review and markup, meaning this and future administrations could include in a Fast Tracked trade bill whatever terms it desired;
  • Require votes in both the House and Senate within 90 days, forbidding any amendments and limiting debate to 20 hours, whether or not Congress’ negotiating objectives were met. 

An analysis of today’s bill shows that

  • The Hatch bill includes several negotiating objectives not found in the 2002 Fast Track authority, most of which were also in the 2014 bill. However, the Fast Track process that the legislation would re-establish ensures that these negotiating objectives are entirely unenforceable. Whether or not Congress’ negotiating objectives are met, the president could sign a pact before Congress approves it and obtain a yes or no vote in 90 days. Democratic and GOP presidents alike have historically ignored negotiating objectives included in Fast Track. The 1988 Fast Track used for the North American Free Trade Agreement and the establishment of the World Trade Organization included a negotiating objective on labor standards, but neither pact included such terms. The 2002 Fast Track listed as a priority the establishment of mechanisms to counter currency manipulation, but none of the pacts established under that authority included such terms.
  • Some of the Hatch bill negotiating objectives advertised as “new” are in fact identical to what was in the 2014 bill and were referenced in the 2002 Fast Track. For example, the 2002 Fast Track included currency measures: “seek to establish consultative mechanisms among parties to trade agreements to examine the trade consequences of significant and unanticipated currency movements and to scrutinize whether a foreign government engaged in a pattern of manipulating its currency to promote a competitive advantage in international trade.” (19 USC 3802(c)(12)) The so-called “new” text in the Hatch bill repeats word-for-word what was in the 2014 Fast Track bill: “The principal negotiating objective of the United States with respect to currency practices is that parties to a trade agreement with the United States avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other parties to the agreement, such as through cooperative mechanisms, enforceable rules, reporting, monitoring, transparency, or other means, as appropriate.” Even if Congress had the power to ensure that this negotiating objective was met, the language of this negotiating objective itself does not require enforceable disciplines on currency manipulation to be included in the TPP or other deals obtaining Fast Track treatment. Despite the requests from bipartisan majorities of both houses of Congress that enforceable currency manipulation disciplines be included in the TPP, the Hatch negotiating objective lists “enforceable rules” as just one approach among several non-binding options for the TPP and other Fast Tracked deals. 
  • Provisions that are being touted as improving transparency, by empowering the Office of the U.S. Trade Representative (USTR) to develop standards for staff access to negotiating texts, would in fact provide a statutory basis for the unacceptable practice of requiring congressional staff to have security clearances to view any draft trade pact text and would fail to match even the level of transparency seen during the Bush administration’s trade negotiations. A close read of a new provision requiring USTR to post a trade agreement text on its website 60 days before signing reveals that this timing would be 30 days after the agreement was initialed and the text locked, meaning the text would only become public after it was too late for the public or Congress to demand changes.
  • Today’s bill includes a new negotiating objective related to human rights: “to promote respect for internationally recognized human rights.”  But since the bill does not alter the fundamental Fast Track process, the president still would be able to unilaterally pick countries with serious human rights abuses as trade negotiating partners, initiate negotiations with them, conclude negotiations, and sign and enter into the trade agreement with the governments committing the abuses, with no opportunity for Congress to require the president to do otherwise. 
  • The bill’s terms regarding labor and the environment replicate those of the 2014 Fast Track bill, which in turn memorialize the provisions of the “May 10, 2007” deal that, according to recent government reports, have proven ineffective. While the May 10 provisions went beyond the 2002 Fast Track objectives regarding labor, a U.S. Government Accountability Office report released in November 2014 found broad labor rights violations across five surveyed Free Trade Agreement (FTA) partner countries, regardless of whether or not the FTA included the labor provisions of the May 10 deal.
  • What the bill’s co-sponsors are touting as “strengthen[ing] congressional oversight” is actually the renaming of the 2002 Congressional Oversight Group as the “House Advisory Group on Negotiations” and the “Senate Advisory Group on Negotiations.”  This exact language was also in the 2014 bill.

For additional, in-depth analysis of the Hatch bill provisions, visit www.citizen.org/fast-track-2015.

April 07, 2015

Fact-Checking the Fact-Checker: Washington Post Gets It Wrong on Bogus Trade-Pact Jobs Claims

As the Obama administration seeks to Fast Track the controversial Trans-Pacific Partnership (TPP) through Congress over public and congressional opposition, it has resorted to a familiar tactic – promising job gains from the deal on the basis of unfounded assumptions. We have repeatedly warned against dubious TPP jobs claims by spotlighting the inaccuracy of the administration’s job claims for the last major trade pact – the 2012 Korea “free trade” agreement (FTA). The Korea FTA was used as the U.S. template for the TPP.

The White House promised that the Korea FTA would create 70,000 jobs based on a report issued by the U.S. International Trade Commission that projected an increase in U.S. goods exports and a decrease in the U.S. goods trade deficit with Korea. In contrast, in the first three years of the Korea pact, U.S. goods exports to Korea have fallen while our goods trade deficit with Korea has surged.

We have shown that, plugging the actual U.S. government trade data into the ratio that the administration used to project job gains from the pact, the first three years of the Korea FTA’s outcomes defy the administration’s “more exports, more jobs” slogan for the deal, providing a cautionary tale for the job claims the administration is currently using to sell the TPP.

The Washington Post’s Fact Checker columnist Glenn Kessler has similarly taken on the administration’s TPP job claims, describing them as a baseless fabrication. But in today’s Post, Kessler takes issue with our fact-checking of the administration’s Korea FTA jobs promise.

Kessler seems to think that we are producing our own jobs projection for the Korea FTA, when we are actually fact-checking the administration’s jobs projection – a projection that Kessler acknowledges “would have earned Pinocchios if it had come to our attention at the time.” It is unclear why Kessler is now assigning Pinocchios to us for calling out the administration’s bogus Korea FTA jobs claim, rather than to those who actually made the claim.

In our recent press release on the third anniversary of the Korea FTA, we stated:

The U.S. goods trade deficit with Korea has ballooned an estimated 84 percent, or $12.7 billion, in the first three years of the Korea FTA (comparing the year before the FTA took effect to the projected third full year of implementation)…The surge in the U.S. trade deficit with Korea under the FTA equates to the loss of nearly 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal.

Kessler’s primary critique of this statement appears to be that we did not replicate the administration’s flawed methodology of only counting exports and disregarding imports when debunking the administration’s jobs projection. Such a misleading approach – ignoring half of the trade equation – contradicts standard economics and empirical data showing the job-displacing impacts of imports, which Kessler even acknowledges in his column today.

As an example of the administration’s one-sided trade accounting, the Office of the U.S. Trade Representative’s (USTR) factsheet on the third anniversary of the Korea FTA touted that 21,255 additional vehicles were exported to Korea under the FTA. It made no mention of the 461,408 additional vehicles imported from Korea during the same time period (using the administration’s same cut of the automotive trade data). That is, for every additional vehicle the United States exported to Korea under the FTA, it imported more than 21 additional vehicles from Korea. The net effect has clearly been a loss for U.S. auto workers. It is not only contrary to mainstream economics, but common sense, to only look at exports and ignore imports when assessing trade’s impact on jobs.

Indeed, when Kessler did a Fact Checker column in January debunking the administration’s “concocted” claim that the TPP would create 650,000 U.S. jobs, he stated that the study used as the basis for that claim actually showed that “the net number of new jobs [projected for the TPP] is zero” because the study “found that imports would increase by virtually the same amount as exports.” That is, Kessler presumed that $1 in imports had a job-displacing effect equivalent to the job-supporting effect of $1 in exports, which matches the calculation used in our press release. (For what it’s worth, respected economists estimate the dollar-for-dollar job-displacing effect of imports may be even greater than the job-supporting effect of exports.)

But even if we were to abandon the common-sense approach that Kessler presumed in January, defy standard trade accounting, and only count exports, U.S. goods exports to Korea fell by more than $2 billion in the first three years of the FTA. Were we to replicate the administration’s exports-only approach, then our fact-check of the administration’s Korea FTA promises would need to say something to the effect of:

The estimated $2.6 billion decline in U.S. goods exports to Korea in the FTA’s first three years equates to the loss of 17,400 American jobs, according to the trade-jobs ratio and exports-only methodology that the administration used to promise job gains from the deal. That methodology ignores the impact of imports and the significant increase in the U.S. trade deficit with Korea since the FTA was implemented. Including imports, the surge in the U.S. trade deficit with Korea under the FTA equates to the loss of 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal. 

The takeaway is the same. Any (reasonable) way you slice it, the administration’s job gains promise for the Korea FTA is the opposite of the deal’s outcome thus far. Indeed, over the Korea FTA’s first three years, the actual results have been consistently the opposite of the specific export growth and job gain figures that the Obama administration used to sell the Korea FTA. And that gets back to our main point: rely on similar promises now being made for the TPP to your own peril.

Kessler also takes issue with our time frame, implying that we should have counted the trade data from January and February of 2012 as part of the results of the Korea FTA, despite the fact that the FTA actually took effect on March 15, 2012. Our measurement compares U.S. trade with Korea in the 12 months before the Korea FTA took effect (April 2011 to March 2012) with the third full year of the FTA’s implementation (April 2014 to March 2015).

Kessler dislikes this approach, which he criticizes as “trying to be very precise.” Instead, he states it would be more “appropriate” to compare calendar years. But the selective timeframe for which Kessler advocates would errantly count pre-FTA months as occurring since the FTA, while eliminating the most recent months of actual Korea FTA data.

The Fact Checker column also bizarrely faults us for adjusting for inflation. Typically, trade flow studies are criticized if they fail to perform the standard adjustment for inflation, since this would misleadingly count price increases as export or import increases. Nonetheless, Kessler considers the adjustment for inflation as “an effort to manipulate the data further.” Why?  Because “the price of goods could decrease.” It is precisely because the price of goods could decrease (or increase) that it is important to adjust for inflation. We do so by using a standard inflation adjustment from the U.S. Bureau of Labor Statistics, thereby eliminating the effect of shifts in goods prices. (And, for what it’s worth, if we were trying to “manipulate” the data rather than be scrupulous with it, we would not be the ones controlling for inflation. Failing to adjust for inflation would make the increase in the U.S. goods trade deficit with Korea during the FTA’s first three years appear even larger than it is in real terms, not smaller.)

After deciding to replicate the administration’s usual data distortions of not counting imports, counting non-FTA months as occurring since the FTA, and not adjusting for inflation, Kessler then performs his own assessment of the Korea FTA outcome, claiming that U.S. exports increased by $2.3 billion in the FTA’s first three years.

This claim is in need of a fact check, as we have not been able to replicate it with any cut of the data. If you use the selective timeframe preferred by Kessler (comparing calendar years 2011 and 2014) and skip the inflation adjustment, you get a $750,000 increase in U.S. exports, not a $2.3 billion increase. (And that "increase" owes entirely to price increases - after a standard inflation adjustment, it becomes a real export decline of more than $1 billion.) Even if you misleadingly count foreign-produced goods as “U.S. exports,” as the administration often does, you get a $1 billion increase in exports – still less than half of Kessler’s claim (and still a real decline in U.S. exports merely by properly accounting for inflation).

The only way we see to get a $2.3 billion increase in U.S. exports to Korea is by mistakenly axing an entire year of the FTA and comparing 2014 with 2012 (as if the FTA did not take effect until 2013 – one year later than its actual implementation date). Even with this blunt error, you would still need to use the arbitrary calendar year timeframe, fail to adjust for inflation, count foreign-produced goods as “U.S. exports,” and ignore imports altogether.

Using the accurate FTA time period and excluding foreign-made goods, our total goods exports to Korea actually have fallen since the Korea FTA took effect (whether or not one properly controls for inflation). Rather than acknowledge this aggregate outcome, the Fact Checker column highlights a few specific products as having “shown real gains in the past three years” of the Korea FTA. This is another common  maneuver of USTR: while overall U.S. agricultural exports to Korea increased an estimated zero percent in the FTA’s first three years, for example, USTR focuses on a $78 million gain in cherry exports. The cherry-picking in today’s Fact Checker column, however, includes products, such as apparel, that have actually not seen export gains. U.S. apparel exports to Korea actually have fallen $43 million, or 37 percent, in the Korea FTA’s first three years.

Unfortunately, this exports decline has been more the rule than the exception under the Korea FTA, as overall U.S. goods exports to Korea have fallen. Meanwhile, imports from Korea have risen, and the U.S. trade deficit with Korea has surged. The point that we have repeatedly made stands: the outcome of the FTA thus far is a far cry from the administration’s promise of “more exports, more jobs.” We would do well to keep that failed promise in mind as we now hear its echoes in the administration’s sales pitch for the TPP. 

March 25, 2015

TPP Leak Reveals Extraordinary New Powers for Thousands of Foreign Firms to Challenge U.S. Policies and Demand Taxpayer Compensation

Unveiling of Parallel Legal System for Foreign Corporations Will Fuel TPP Controversy, Further Complicate Obama’s Push for Fast Track

The Trans-Pacific Partnership’s (TPP) Investment Chapter, leaked today, reveals how the pact would make it easier for U.S. firms to offshore American jobs to low-wage countries while newly empowering thousands of foreign firms to seek cash compensation from U.S. taxpayers by challenging U.S. government actions, laws and court rulings before unaccountable foreign tribunals. After five years of secretive TPP negotiations, the text – leaked by WikiLeaks –proves that growing concerns about the controversial “investor-state dispute settlement” (ISDS) system that the TPP would extend are well justified.

Enactment of the leaked chapter would increase U.S. ISDS liability to an unprecedented degree by newly empowering about 9,000 foreign-owned firms from Japan and other TPP nations operating in the United States to launch cases against the government over policies that apply equally to domestic and foreign firms. To date, the United States has faced few ISDS attacks because past ISDS-enforced pacts have almost exclusively been with developing nations whose firms have few investments here.

The leak reveals that the TPP would replicate the ISDS language found in past U.S. agreements under which tribunals have ordered more than $3.6 billion in compensation to foreign investors attacking land use rules; water, energy and timber policies; health, safety and environmental protections; financial stability policies and more. And while the Obama administration has sought to quell growing concerns about the ISDS threat with claims that past pacts’ problems would be remedied in the TPP, the leaked text does not include new safeguards relative to past U.S. ISDS-enforced pacts. Indeed, this version of the text, which shows very few remaining areas of disagreement, eliminates various safeguard proposals that were included in a 2012 leaked TPP Investment Chapter text.

“With the veil of secrecy ripped back, finally everyone can see for themselves that the TPP would give multinational corporations extraordinary new powers that undermine our sovereignty, expose U.S. taxpayers to billions in new liability and privilege foreign firms operating here with special rights not available to U.S. firms under U.S. law,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “This leak is a disaster for the corporate lobbyists and administration officials trying to persuade Congress to delegate Fast Track authority to railroad the TPP through Congress.”

Even before today’s leak, U.S. law professors and those in other TPP nations, the U.S. National Conference of State Legislatures, the Cato Institute and numerous members of Congress and civil society groups have announced opposition to the ISDS system, which would elevate individual foreign firms to the same status as sovereign governments and empower them to privately enforce a public treaty by skirting domestic courts and “suing” governments before extrajudicial tribunals. The tribunals are staffed by private lawyers who are not accountable to any electorate, system of legal precedent or meaningful conflict of interest rules. Their rulings cannot be appealed on the merits. Many ISDS lawyers rotate between roles – serving both as “judges” and suing governments for corporations, creating an inherent conflict of interest.

The TPP’s expansion of the ISDS system would come amid a surge in ISDS cases against public interest policies that has led other countries, such as South Africa and Indonesia, to begin to revoke their ISDS-enforced treaties. While ISDS agreements have existed since the 1960s, just 50 known ISDS cases were launched worldwide in the regime’s first three decades combined. In contrast, foreign investors launched at least 50 ISDS claims each year from 2011 through 2013. Recent cases include Eli Lilly’s attack on Canada’s cost-saving medicine patent system, Philip Morris’ attack on Australia’s public health policies regulating tobacco, Lone Pine’s attack on a fracking moratorium in Canada, Chevron’s attack on an Ecuadorian court ruling ordering payment for mass toxic contamination in the Amazon and Vattenfall’s attack on Germany’s phase-out of nuclear power.

“By definition, only multinational corporations could benefit from this parallel legal system, which empowers them to skirt domestic courts and laws, and go to tribunals staffed by highly paid corporate lawyers, where they grab unlimited payments of our tax dollars because they don’t want to comply with the same laws our domestic firms follow,” Wallach said.

Public Citizen’s analysis of the leaked text is available here

March 13, 2015

Unhappy Third Birthday for Korea FTA Drags Down Obama Push for Fast Track

U.S. Exports Down, Imports from Korea Up and Job-Killing Trade Deficit With Korea Balloons 84 Percent on Third Anniversary of Korea Pact, Which Is TPP Template

Three years after implementation of the U.S.-Korea Free Trade Agreement (FTA), government data reveal that the administration’s promises that the pact would expand U.S. exports and create American jobs proved to be the opposite of the pact’s actual outcomes. The post-Korea FTA decline in U.S. exports to Korea and a new flood of imports from Korea have resulted in a major surge in the U.S. trade deficit with Korea that equates to nearly 85,000 lost U.S. jobs. The abysmal FTA record deals a fresh blow to the administration’s controversial bid to Fast Track the Trans-Pacific Partnership (TPP), for which the Korea FTA served as the U.S. template.

“Three years ago we heard the same ‘more exports, more jobs’ sales pitch for the Korea FTA that the administration is making for the TPP, but the reality is that tens of thousands of U.S. jobs have been lost as exports have fallen and trade deficits have surged,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The only silver lining of the Korea FTA debacle is that it further cripples the administration’s push to Fast Track the TPP, which was literally modeled on the Korea deal, perhaps saving us from more of the same pacts that offshore jobs and push down middle-class wages.”

Contrary to the administration’s promise that the Korea FTA would mean “more exports, more jobs,” U.S. International Trade Commission and U.S. Department of Agriculture data reveal that:

  • The U.S. goods trade deficit with Korea has ballooned an estimated 84 percent, or $12.7 billion, in the first three years of the Korea FTA (comparing the year before the FTA took effect to the projected third full year of implementation). In January 2015, the monthly U.S. goods trade deficit with Korea topped $3 billion – the highest level on record.
  • The surge in the U.S. trade deficit with Korea under the FTA equates to the loss of nearly 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal.
  • U.S. goods exports to Korea have fallen an estimated 5 percent, or $2.2 billion, in the first three years of the Korea FTA. 
  • Had U.S. exports to Korea continued to grow at the rate seen in the decade prior to the Korea FTA’s implementation, U.S. exports to Korea in the FTA’s third year would have been 24 percent, or $9.8 billion, higher than they are actually projected to be.
  • Imports of goods from Korea have risen an estimated 18 percent, or $10.5 billion, in the Korea FTA’s first three years.
  • U.S. exports to Korea of manufactured goods have stagnated under the Korea FTA, growing an estimated zero percent in the first three years of the deal. U.S. manufactured imports from Korea, meanwhile, have grown an estimated 18 percent under the FTA. As a result, the U.S. manufacturing trade deficit with Korea has grown an estimated 44 percent, or $10.1 billion, since the FTA’s implementation.
  • U.S. exports to Korea of agricultural goods have stagnated under the Korea FTA, growing an estimated zero percent in the first three years of the deal – even as U.S. agricultural exports to the world increased 6 percent during the same period. U.S. agricultural imports from Korea, meanwhile, have grown an estimated 28 percent under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined an estimated 1 percent, or $72 million, since the FTA’s implementation.

Given the bleak data, the Office of the U.S. Trade Representative (USTR) may repeat past efforts to try to obscure bad Korea FTA results. Congressional upset about the pacts is fueling opposition to the administration’s push to Fast Track the TPP through Congress. Typical USTR data omissions and distortions regarding the Korea FTA include:

  • The USTR likely will count foreign-produced goods as “U.S. exports,” falsely inflating the export figures that can be reported. It is by using this raw Census Department data versus the corrected official U.S International Trade Commission (USITC) trade data that USTR falsely claims that U.S. exports to Korea have grown and were at a record level in 2014.  Despite congressional demands to stop using the distorted data, USTR continues to report export figures that include “foreign exports,” also known as “re-exports.” These are goods made abroad that pass through the United States before being re-exported to other countries. By U.S. Census Bureau definition, foreign exports undergo zero alteration in the United States, and thus support no U.S. production jobs. Each month, the UCITC removes foreign exports from the raw data gathered by the U.S. Census Bureau. But the USTR regularly uses the uncorrected data, inflating the actual U.S. export figures and deflating U.S. trade deficits with FTA partners like Korea. In the first three years of the Korea FTA, foreign exports to Korea have risen an estimated 13 percent, or $284 million, which the USTR may errantly count as an increase in “U.S. exports.”
  • The USTR might misrepresent the relatively small increase in U.S. exports to Korea of passenger vehicles under the FTA as a large percentage increase, while omitting both that the touted increase amounts to an estimated 23,000 more passenger vehicles exported from a base of fewer than 15,000 and that imports of passenger vehicles from Korea have surged by an estimated 450,000 vehicles – from about 863,000 to more than 1.3 million in the first three years of the FTA. This trick was included in the USTR’s press release on the FTA’s second anniversary. While U.S. automotive exports to Korea have increased an estimated $686 million in the FTA’s first three years, U.S. automotive imports from Korea have ballooned an estimated $6.4 billion. As a result, the U.S. automotive trade deficit with Korea has increased an estimated 36 percent, or $5.7 billion, in the FTA’s first three years.
  • The USTR also may claim, as it did in its press release on the Korea FTA’s second anniversary, that the decline in U.S. exports to Korea under the FTA is due to decreases in exports of fossil fuels and corn. But even after removing fossil fuels and corn products, U.S. exports to Korea still have declined by an estimated $1.4 billion, or 4 percent, in the first three years of the FTA. Product-specific anomalies cannot explain away the broad-based drop in U.S. goods exports to Korea under the FTA.
  • The USTR also may try to dismiss the decline in U.S. exports to Korea under the FTA as due to a weak economy in Korea – another claim made in the USTR’s press release on the FTA’s second anniversary. But the Korean economy has grown each year since the FTA passed, even as U.S. exports to Korea have shrunk. Korea’s gross domestic product in 2014 is projected to be 9 percent higher than in the year before the FTA took effect, suggesting that U.S. exports to Korea should have expanded, with or without the FTA, as a simple product of Korea’s economic growth. Instead, U.S. exports to Korea have fallen an estimated 5 percent in the first three years of the FTA. 

February 10, 2015

2014 Trade Data Deal Further Blows to the Push for Fast Track

2014 Trade Data Reveal Surging U.S. Trade Deficits Under Korea FTA and NAFTA, and a Dramatic Failure to Meet Obama’s Export-Doubling Goal

Today’s release of the corrected 2014 annual trade data from the U.S. International Trade Commission reveal that President Barack Obama’s goal of doubling exports has failed dramatically, with a growing trade deficit with Korea under the U.S.-Korea Free Trade Agreement (FTA) and a burgeoning non-fossil fuel trade deficit with North American Free Trade Agreement (NAFTA) partners. Even as overall U.S. exports increased slightly due to growing U.S. fuel exports, manufacturing exports stagnated, according to projections. The data show that continuing with more-of-the-same trade policies would kill more middle-class jobs, dampen wages and increase income inequality – outcomes contrary to Obama’s “middle-class economics” agenda. The abysmal trade data are likely to reinforce congressional opposition to Obama’s bid to expand the status quo trade model by Fast Tracking the Trans-Pacific Partnership (TPP). 

  • Obama’s Five-Year Export-Doubling Plan Failed, in Part Thanks to His 2011 Korea FTA: The context for Obama’s 2015 State of the Union ask for Fast Track for the TPP is the abysmal failure
    of his 2010 State of the Union trade initiative – a plan to double U.S. exports in five years. The 2014exportgoal2014 data show U.S. goods exports over those five years have increased by just 36 percent, falling more than $660 billion short. U.S. goods exports grew by less than 1 percent in 2014 – the same average rate of the prior two years. (The first two years of stronger export growth represented recovery from the worldwide crash in trade flows after the global financial crisis.) At the paltry 2012-2014 annual export growth rate, which is a fraction of the 4 percent average annual export growth seen in the decade before the Obama administration, Obama’s export-doubling goal would not be reached until 2057 – 43 years behind schedule.
  • U.S. Exports Declined Under the Korea FTA, While Imports and the U.S. Trade Deficit with Korea Soared: Today’s data release also reveals a 14 percent increase in the U.S. goods trade deficit with Korea in 2014, marking the third consecutive year of substantial growth in the U.S. 2014koreatrade deficit with Korea since the 2011 passage of the Korea FTA, which U.S. negotiators used as the template for the TPP. The 2014 U.S. goods trade deficit with Korea topped $26 billion, a 72 percent increase over the trade deficit in 2011 before the FTA took effect. U.S. exports remain lower than the level before the FTA went into effect, as imports have increased 17 percent. Had U.S. exports to Korea continued to grow at the rate seen in the decade before the FTA’s implementation, exports would be about 18 percent, or $7 billion, higher in 2014 than they actually were. The resulting trade deficit increase represents more than 70,000 lost American jobs, according to the ratio the Obama administration used to project gains from the deal. Ironically, 70,000 is the number of jobs the Obama administration promised would be gained from the Korea FTA.
  • Non-Fuel NAFTA Trade Deficit Grows: The 2014 trade data are also projected to show a more than 12 percent, or $10 billion, increase in the non-fossil fuel U.S. goods trade deficit with NAFTA partners Canada and Mexico. The overall U.S. goods trade deficit with NAFTA partners, which also increased in 2014, has ballooned $155 billion, or 565 percent, under 21 years of the pact, reaching $182 billion in 2014.
  • Contrary to the Administration’s TPP Sales Pitch That More FTAs Would Boost U.S. Exports, U.S. Exports to FTA Partners Have Grown More Slowly Than U.S. Exports to the Rest of the World Over the Past Decade. Taking into account the data for 2014, average annual U.S. export growth to all non-FTA partners in the past 10 years outpaced that to FTA partners by 24 percent.
  • The United States Has a Large Trade Deficit with FTA Partners: Overall, the aggregate U.S. trade deficit with all U.S. FTA partners topped $177 billion in 2014, marking a more than $143 billion, or 427 percent, increase in the aggregate U.S. FTA trade deficit since the pacts were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $95 billion, or 11 percent, since 2006 (the median entry date of existing FTAs). Despite this, U.S. Trade Representative (USTR) Michael Froman testified to Congress last month that we have a trade surplus with the group of FTA nations.

Heads Up for Distorted Data…

Given that the record of lagging U.S. exports and surging trade deficits under U.S. FTAs jeopardizes Obama’s prospects for obtaining Fast Track, the administration may try to obscure the results with distorted data. The USTR has taken to lumping foreign-made products in with U.S.-produced exports, which artificially inflates U.S. export figures and deflates U.S. trade deficits with FTA partners.

“Foreign exports,” also known as “re-exports,” are goods made abroad, imported into the United States, and then re-exported without undergoing any alteration in the United States. Foreign exports support zero U.S. production jobs. Each month, the U.S. International Trade Commission (USITC) reports trade data with foreign exports removed, providing the official government data on made-in-America exports. But the USTR likely will choose to use the uncorrected raw data, as it has in the past, that the U.S. Census Bureau released last Thursday, which counts foreign-made goods as U.S. exports. Our figures are based on the corrected data.

By using the distorted data, the USTR may errantly claim an aggregate trade surplus with all U.S. FTA partners, though the actual 2014 U.S. goods trade balance with FTA partners is a more than $177 billion trade deficit. By counting foreign exports as “U.S. exports,” the USTR can artificially eliminate more than two-thirds of this FTA deficit, shrinking it to less than $57 billion. The USTR may misleadingly claim an FTA trade surplus by then adding services trade surpluses with FTA partners, which pale in comparison to the massive FTA trade deficit in goods when properly counting only American-made exports.

The USTR also may repeat its bogus claim that the United States has a trade surplus with its NAFTA partners by errantly including foreign exports as “U.S. exports,” removing fossil fuels and adding services trade data. But even after removing fossil fuels (coal, oil and natural gas) and adding services 2014naftare-exporttrade surpluses, the United States still had a projected NAFTA trade deficit of $50 billion in 2014. Indeed, the fossil fuels share of the NAFTA trade deficit declined in 2014, and U.S. exports of services to NAFTA partners fell, according to projections. The USTR can make its errant claim of a “NAFTA surplus” only by including foreign exports, which artificially reduces the NAFTA goods trade deficit to less than half of its actual size.

The USTR also may boast about an increase in U.S. exports to Korea in 2014, while ignoring the much larger increase in imports from Korea. While U.S. goods exports to Korea in 2014 increased by $2.3 billion, imports from Korea have risen by $5.6 billion, spelling a $3.3 billion increase in the U.S. goods trade deficit with Korea in the third calendar year of the Korea FTA.

Moreover, U.S. exports to Korea have declined since the FTA went into effect and did not return to the pre-FTA level in 2014. Monthly imports from Korea repeatedly broke records in 2014, such as in October when imports from Korea topped $6.3 billion – the highest level on record.

Expect the administration to repeat the same data trick it employed last year with respect to U.S. auto sector exports to Korea. Exports to Korea of U.S.-produced Fords, Chryslers and General Motors vehicles increased by fewer than 3,100 vehicles per year in the first two years of the Korea FTA. But given that exports of “Detroit 3” vehicles before the FTA were also tiny – fewer than 8,200 vehicles per year – the USTR expressed the small increase as a significant percentage gain in a press release. The USTR did not mention that more than 184,000 additional Korean-produced Hyundais and Kias were imported and sold in the United States in each of the Korea FTA’s first two years, in comparison to the two years before the FTA, when Hyundai and Kia imports already topped 1 million vehicles per year.

February 03, 2015

If Pinocchio Were Trying to Sell a Controversial Trade Deal

Four Pinocchios.  That’s the rating, reserved only for the biggest whoppers, that The Washington Post has given to the Obama administration’s most recent assertion of truthiness about the controversial Trans-Pacific Partnership (TPP) - that the deal could boost income and “support 650,000 new jobs” in the U.S. 

How far off was the administration’s claim that the deal could create 650,000 jobs?  By about 650,000 jobs. 

As Glenn Kessler, Washington Post fact-checker, explained, “the correct number is zero (in the long run), not 650,000, according to the very study used to calculate this number.”

That’s right – the study itself, from the Peterson Institute for International Economics, did not produce an estimate of job growth from the TPP.  Indeed, the study used an assumption of full employment, under which projected job gains would be precisely zero. 

The Peterson Institute has been hesitant to project employment impacts of controversial trade pacts since inaccurately predicting that NAFTA would create jobs, on the basis that the U.S. trade surplus with Mexico would rise.  Just two years into NAFTA, the $3 billion trade surplus with Mexico turned into a $26 billion trade deficit.  At that point, one of the study’s authors told The Wall Street Journal, “the lesson for me is to stay away from job forecasting.”

The Obama administration has yet to learn that lesson, apparently.  But how did the administration get a jobs number from a study that did not produce one?  (If this sounds familiar, the Chamber of Commerce pulled this same trick last year.)

The administration took the study’s projection that the TPP might yield a 0.4% increase in aggregate income in 2025 and used a back-of-the-envelope calculation to determine how many jobs could be created if that income went to new jobs instead. But then they claimed that the TPP not only could create these jobs, but simultaneously could create the income gains that they had just exhausted to produce their jobs prediction. 

In short, they double-counted, taking the Peterson Institute’s projection for the TPP’s economic impact and multiplying by two.

It’s hard to blame them – the study’s projection for the deal’s economic impact amounts to less than 40 cents per person per day in 2025 (at present value).  If you were selling the TPP, you’d want to double that too.  (Not that “less than 80 cents per day” is a great motto for a deal likely to make medicines more expensive, offshore jobs, and undermine health, environmental and financial protections.) 

But, you may say, let’s set aside the administration’s fast-and-loose numbers – don’t the Peterson Institute results still mean income gains from the TPP, however meager?  

That depends – do you make more than $88,330 per year?  If not, you’d be more likely to see income losses from the deal - not gains. 

The Peterson study made no attempt to determine the impact that the TPP would have on inequality, despite an academic consensus that trade flows under such deals have exacerbated U.S. income inequality.  So, in a study in 2013, the Center for Economic and Policy Research (CEPR) took the projected TPP gains from the Peterson Institute study and added an analysis of how the TPP would affect income inequality.  Taking the Peterson Institute's income projections as given, CEPR used the empirical evidence on the trade-inequality relationship to show that even with the most conservative estimate of trade's contribution to inequality (that trade is responsible for just 10 percent of the recent rise in inequality), the losses from projected TPP-produced inequality would wipe out the tiny projected gains for the median U.S. worker.  

If one assumes the still-conservative estimate that recent trade flows have been responsible for 15 percent of the rise in inequality, then CEPR calculates that the TPP would mean wage losses for all but the richest 10 percent of U.S. workers.  So if you're making less than $88,330 per year (the current 90th percentile wage), the TPP would mean a pay cut.  

And that’s probably still too kind to the TPP, given that it requires accepting the array of outsized assumptions that the Peterson Institute used to produce its small income gain projection.  Nearly half of the study’s projected income gains come from what the study presumes will be a surge in foreign investment resulting from the TPP. But a raft of studies has produced, at best, contradictory evidence as to whether or not TPP-like investment protections included in past trade and investment agreements have actually had any impact on foreign investment.  Indeed, the most recent studies have concluded that such terms have failed to boost foreign investment.  If the Peterson study reflected this reality, the projected aggregate income gain (which would only reach the pockets of the wealthiest) would be halved.

The study also assumes that the workers who the TPP would displace would be able to rapidly find new jobs and that these new jobs would be just as high-paying as the old jobs, meaning no negative impact on consumer demand.  This runs counter to U.S. government data.  According to the Bureau of Labor Statistics, three out of every five displaced workers in the manufacturing sector (where we could expect significant TPP-induced displacement) were forced to take a lower paying job upon being rehired last year.  For one third, the pay cut was more than 20%.  Why should we assume that the same losses would not befall TPP-displaced manufacturing workers?   

The Peterson study itself projects that during the final years of TPP implementation, about 100,000 U.S. workers would be displaced each year, and that’s only counting those who take jobs in entirely new sectors.  It’s unreasonable to assume that job replacements for all these workers would be immediate, that pay cuts would be nonexistent, and that there would be zero resulting impact on demand.  Back in reality, the hit to consumer demand would depress further the tiny aggregate income gain projected from the deal, spelling even tinier gains for the richest and even steeper income losses for the rest of us. 

So yes, the administration’s claim of 650,000 jobs from the TPP definitely deserves its four Pinocchios.  Or, to borrow a card from the administration, let’s call it eight.  

January 28, 2015

10 Tall Tales on Trade: Fact-Checking Obama’s Top Trade Official

Yesterday was a difficult day for U.S. Trade Representative (USTR) Michael Froman.  He had to go before Congress and explain how the administration’s plan to expand a trade model that has offshored U.S. manufacturing jobs and exacerbated middle class wage stagnation fits with President Obama’s stated “middle class economics” agenda.

Inconveniently for Mr. Froman, it does not.

That did not stop Froman from trying to paint the last two decades of Fast-Tracked, pro-offshoring trade deals – and the administration’s plan for more of the same – as a gift to the middle class. 

The facts he cited to support this depiction actually sounded great.  They just didn’t have the added advantage of being true. 

Here’s a rundown of the top 10 fibs and half-truths that Froman uttered before the Senate Finance Committee and House Ways and Means Committee yesterday in his sales pitch for the administration’s bid to expand the NAFTA “trade” pact model by Fast-Tracking through Congress the controversial Trans-Pacific Partnership (TPP).

1. Fast Track Puts Congress in the Driver’s Seat (of a Runaway Car, without Brakes or a Steering Wheel)

Froman: “[Fast Track] puts Congress in the driver’s seat to define U.S. negotiating objectives and priorities for trade agreements.”

Okay, let’s go with this analogy.  If reviving Fast Track puts Congress in the driver’s seat, it also removes the brakes and steering wheel.  Reviving Fast Track would empower the administration to negotiate and sign a sweeping “trade” pact like the TPP – implicating everything from the cost of medicines to the safety of food to the reform of Wall Street – before Congress had any enforceable say over the deal’s contents, even if they contradicted Congress’ stated negotiating objectives.  Goodbye steering wheel.  Congress’ role would be relegated to an expedited, no-amendments, limited-debate vote on the already-signed deal.  Goodbye brakes. 

Also, if we’re talking about Fast Tracking the TPP, the car is already going 60mph.  As a couple of members of Congress pointed out to Froman, the administration has been negotiating the TPP for more than five years, and Froman himself stated that TPP negotiations are in their endgame.  Even if Froman’s assertion were true that Fast Track allows Congress to define priorities for trade agreements (rather than ensuring that such priorities are not enforceable), it’s a little late for members of Congress to be naming priorities for a deal that has been under negotiation since 2009 and that Froman hopes to close in the coming months.

2. A Trade Surplus with Our FTA Partners (Does Not Appear in Official Government Data)

Froman: “You take all of our FTA partners as a whole, [and] we have a trade surplus. And that trade surplus has grown.”  Froman also claimed that the United States has a trade surplus in manufactured goods with its FTA partners.  And he tried to use red herrings to explain away the surging U.S. trade deficit with Korea under the Korea FTA.

These claims defy official U.S. government data.  Data from the U.S. International Trade Commission show that the United States has a $180 billion U.S. goods trade deficit with all free trade agreement (FTA) partners (in 2013, the latest year on record).  In manufactured goods, the United States has a $51 billion manufacturing trade deficit with all FTA partners.  Froman claimed otherwise, in part, by counting billions of dollars’ worth of "foreign exports" – goods produced abroad that simply pass through the United States without alteration before being “re-exported.”  These goods, by definition, do not support U.S. production jobs.

Contributing to our FTA deficit is the 50 percent surge in the U.S. goods trade deficit with Korea in just the first two years of the Korea FTA, which literally was used as the U.S. template for the TPP. This deficit increase, owing to a drop in exports and rise in imports, spells the loss of more than 50,000 American jobs in the FTA's first two years, according to the ratio used by the administration to claim the pact would create jobs. Froman tried to explain away the ballooning U.S. trade deficit under the Korea FTA as due to decreases in corn and fossil fuel exports.  But even if discounting both corn and fossil fuels, U.S. annual exports to Korea still fell under the FTA, and the annual trade deficit with Korea still soared.  Product-specific anomalies cannot explain away the broad-based downfall of U.S. exports to Korea under the FTA, which afflicted nine of the top 15 U.S. sectors that export to Korea. The disappointing results also cannot be blamed on low growth in Korea since the FTA.  Though Korea's growth rates in the last several years have not been spectacular, the economy has still grown since the FTA (3 percent in 2013), as has consumption (2.2 percent, adjusted for inflation, in 2013). Koreans are buying more goods, just not U.S. goods. 

 

3.  We Wish to Ensure Access to Affordable Medicines in the TPP (but Big Pharma Won’t Let Us)

Froman: “In negotiations, like TPP, we are working to ensure access to affordable life-saving medicines, including in the developing world, and create incentives for the development of new treatment and cures that benefit the world and which create the pipeline for generic drugs.”

These words play politics with people’s lives. They cloak the tragic reality that if the TPP would take effect as USTR has proposed, with leaks showing even greater monopoly protections for pharmaceutical corporations than in prior pacts, people would needlessly die for lack of access to affordable medicines. A new study finds, for example, that the TPP would dramatically reduce the share of Vietnam’s HIV patients who have access to life-saving antiretroviral medicines.  The study reveals that while 68 percent of Vietnam’s eligible HIV patients currently receive treatment, U.S.-proposed monopoly protections for pharmaceutical corporations in the TPP would allow only 30 percent of Vietnam’s HIV patients to access antiretrovirals.  As a result, an estimated 45,000 people with HIV in Vietnam who currently receive antiretroviral treatment would no longer be able to afford the life-saving drugs.

Froman also indicated in the Senate hearing that USTR is pushing to include a special monopoly protection for pharmaceutical firms that contradicts the Obama administration’s own stated objectives for reducing the cost of medicines in the United States. President Obama’s budget proposes to reduce a special monopoly protection for pharmaceutical firms with regard to biologic medicines – drugs used to combat cancer and other diseases that cost approximately 22 times more than conventional medicines.  To lower the exorbitant prices and the resulting burden on programs like Medicare and Medicaid, the Obama administration’s 2015 budget would reduce the period of Big Pharma's monopoly protection for biologics from 12 to seven years. The administration estimates this would save taxpayers more than $4.2 billion over the next decade just for federal programs. However, Froman suggested yesterday that USTR continues to push for the 12 years of corporate protection in the TPP, which would lock into place pharmaceutical firms’ lengthy monopolies here at home while effectively scrapping the administration’s own proposal to save billions in unnecessary healthcare costs.

4. Most Exporters are Small Businesses (that Have Endured Slow and Falling Exports under FTAs)

Froman: “15,600 firms export from Pennsylvania. Almost 90 percent of them are small and medium sized businesses. And the question is whether with these trade agreements we can create more opportunities for these kinds of businesses.”

Implying that exporting is mainly the domain of small businesses because they make up most exporting firms is like implying that the NBA is a league of short people because most NBA players are shorter than 7 feet tall.  The reason small and medium enterprises (defined as 500 employees or less) comprise most U.S. exporting firms is simply because they constitute 99.7 percent of U.S. firms overall (in the same way that those of us below 7 feet constitute more than 99 percent of the U.S. population).  The more relevant question is what share of small and medium firms actually depend on exports for their success. Only 3 percent of U.S. small and medium enterprises export any good to any country. In contrast, 38 percent of large U.S. firms are exporters.  Even if FTAs actually succeeded in boosting exports (which they don’t, per the government data noted below), exporting is primarily the domain of large corporations, not small businesses.

As for whether “with these trade agreements we can create more opportunities” for small firms, the record of past FTAs suggests not. Under the Korea FTA, U.S. small businesses have seen their exports to Korea decline even more sharply than large firms (a 14 percent vs. 3 percent downfall in the first year of the FTA). And small firms’ exports to Mexico and Canada under NAFTA have grown more slowly than their exports to the rest of the world. Small businesses’ exports to all non-NAFTA countries grew over 50 percent more than their exports to Canada and Mexico (74 percent vs. 47 percent) during a 1996-2012 window of data availability. The sluggish export growth owes in part to the fact that small businesses’ exports grew less than half as much as large firms’ exports to NAFTA partners (47 percent vs. 97 percent from 1996-2012).

5. We Try to Be Transparent (with the Corporate Advisors Who Can Access Secret Texts)

Froman: “And to ensure these agreements are balanced, we seek a diversity of voices in America’s trade policy. The Administration has taken unprecedented steps to increase transparency… We have held public hearings soliciting the public’s input on the negotiations and suspended negotiating rounds to host first-of-a-kind stakeholder events so that the public can provide our negotiators with direct feedback on the negotiations.”

“A diversity of voices” is an odd way to describe the more than 500 official trade advisors with privileged access to secretive U.S. trade texts and U.S. trade negotiators.  About nine out of ten of these advisors explicitly represent industry interests. Just 10 of the more than 500 advisors (less than 2 percent) represent environmental, consumer, development, food safety, financial regulation, Internet freedom, or public health organizations.  It’s little wonder that so many of these groups, excluded from setting the content of the TPP, have denounced leaked TPP texts as presenting threats to the public interest.  And as for the claim of “unprecedented steps to increase transparency,” the reality is closer to the opposite. When the Bush administration negotiated the last similarly sweeping trade pact – the Free Trade Area of the Americas – USTR published the negotiating text online for anyone to see amid negotiations. In a step backwards from the degree of transparency exhibited by the Bush administration, the Obama administration has refused repeated calls from members of Congress and civil society organizations to release TPP texts. This secrecy limits the utility of the public hearings and stakeholder events that Froman touts, as it is difficult to opine on a text you are prohibited from seeing.

6. Supporting Manufacturing and Higher Wages (Is a Goal in Spite of Our Trade Policies)

Froman: “In 2015, the Obama Administration will continue to pursue trade policies aimed at supporting the growth of manufacturing and associated high-quality jobs here at home and maintaining American manufacturers’ competitive edge.”

The only objectionable word in this sentence is “continue.” Since NAFTA, we have endured a net loss of nearly 5 million manufacturing jobs – one out of every four – and more than 57,000 manufacturing facilities. While not all of those losses are due to NAFTA, the deal’s inclusion of special protections for firms that relocate abroad certainly contributed to the hemorrhaging of U.S. manufacturing. The U.S. manufactured goods trade balance with Canada and Mexico in NAFTA’s first 20 years changed from a $5 billion surplus in 1993 to a $64.9 billion deficit in 2013. The U.S. Department of Labor has certified (under one narrow program) more than 845,000 specific U.S. workers – many of them in manufacturing – as enduring “trade-related” job losses since NAFTA due to the offshoring of their factories to Mexico or Canada, or import competition from those countries. And under just two years of the Korea FTA, U.S. manufacturing exports to Korea have fallen. Overall, the United States has a $51 billion trade deficit in manufactured goods with its 20 FTA partners. Reviving manufacturing and reviving Fast Track for the NAFTA-expanding TPP are incompatible.

Froman: “At a time when too many workers haven't seen their paychecks grow in much too long, these jobs typically pay up to 18% more on average than non-export related jobs.” 

Froman neglects to mention a key reason that too many workers haven’t seen their paychecks grow: NAFTA-style deals have not only incentivized the offshoring of well-paying U.S. manufacturing jobs, but forced these workers to compete for lower-paid service sector jobs, which has contributed to downward pressure on wages even in non-offshoreable sectors.  According to the U.S. Bureau of Labor Statistics, about three out of every five displaced manufacturing workers who were rehired in 2014 experienced a wage reduction. About one out of every three displaced manufacturing workers took a pay cut of greater than 20 percent. As increasing numbers of American workers, displaced from better-paying jobs by current trade policies, have joined the glut of workers competing for non-offshoreable jobs in retail, hospitality and healthcare, real wages have actually been declining in these growing sectors. A litany of studies has produced an academic consensus that such trade dynamics have contributed to the historic increase in U.S. income inequality – the only debate is the degree to which trade is to blame. The TPP would not only replicate, but actually expand, NAFTA’s extraordinary privileges for firms that relocate abroad and eliminate many of the usual risks that make firms think twice about moving to low-wage countries like Vietnam – a TPP negotiating partner where minimum wages average less than 60 cents an hour, making the country a low-cost offshoring alternative to even China.

7. The TPP Supports an Internet that Is Open (to Lawsuits for Common Online Activity)

Froman: "We will continue to support a free and open Internet that encourages the flow of information across the digital world."

Repetition of this platitude has failed to assuage the concerns of Internet freedom groups that point out that leaked TPP texts do not support Froman’s assurances. In a July 2014 letter, an array of Internet service providers, tech companies, and Internet freedom groups wrote to Froman about leaked TPP copyright terms, some of which resemble provisions in the defeated Stop Online Piracy Act (SOPA), which could “significantly constrain legitimate online activity and innovation.”  Noting the deal’s terms on Internet service provider liability, the groups stated, “We are worried about language that would force service providers throughout the region to monitor and policy their users’ actions on the internet, pass on automated takedown notices, block websites and disconnect Internet users.”

8. Our Exports Have Grown (More Quickly to Non-FTA Countries)

Froman: “Our total exports have grown by nearly 50 percent and contributed nearly one-third of our economic growth since the second quarter of 2009. In 2013, the most recent year on record, American exports reached a record high of $2.3 trillion...” “By opening rapidly expanding markets with millions of new middle-class consumers in parts of the globe like the Asia-Pacific, our trade agreements will help our businesses and workers access overseas markets...”

U.S. goods exports grew by a grand total of 0 percent in 2013.   The year before that, they grew by 2 percent.  As a result, the administration utterly failed to reach President Obama’s stated goal to double U.S. exports from 2009 to 2014. Most of the export growth Froman cites – which is less than half of the administration’s stated objective – came early in Obama’s tenure as a predictable rebound from the global recession that followed the 2007-2008 financial crisis.  At the abysmal export growth rate seen since then, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule.  

Froman ironically uses this export growth drop-off to argue for more-of-the-same trade policy (e.g. the TPP).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  In the first two years of the Korea FTA, U.S. exports to Korea have fallen 5 percent.  Overall, growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  That’s not a solid basis from which to argue, in the name of exports, for yet another FTA. 

And if we’re seeking to export to those countries that are growing the fastest, then the TPP is the wrong trade pact.  Of the TPP countries with which we do not already have an FTA, all but one are actually growing more slowly than the per capita growth rate of the East Asian and Pacific region overall.     

9. Increases in Food Exports (Have Been Swamped by a Surge in Food Imports)

Froman: “In 2013, U.S. farmers and ranchers exported a record $148.7 billion of food and agricultural goods to consumers around the world.”

Yes, U.S. food exports have increased, but not nearly as much as food imports. In 2013, the total volume of U.S. food exports stood just 0.5 percent higher than in 1995, while imports of food into the United States had more than doubled (growing 115 percent since 1995). Existing FTAs have contributed to the imbalanced food trade. The average annual U.S. agricultural deficit with Canada and Mexico under NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. And under the first two years of the Korea FTA, U.S. agricultural exports to Korea plummeted 34 percent. Smaller-scale U.S. family farms have been hardest hit. About 170,000 small U.S. family farms have gone under since NAFTA and NAFTA expansion pacts have taken effect, a 21 percent decrease in the total number.

10. The TPP Takes Heed of NAFTA’s Mistakes (and Builds on Them)

Froman: “I think the President has made clear that as we pursue a new trade policy, we need to learn from the experiences of the past and that’s certainly what we’re doing through TPP and the rest of our agenda. For example, when he was running for President, he said we ought to renegotiate NAFTA. What that meant was to make labor and environment not side issues that weren’t enforceable, but to bring labor and environment in the core of the agreement and make them enforceable just like any other provision of the trade agreement consistent with what Congress and the previous administration worked out in the so-called May 10th agreement.”

When candidate Obama said in 2008 that he would renegotiate NAFTA – a pact that had become broadly unpopular for incentivizing the offshoring of U.S. manufacturing jobs – most people probably didn’t imagine that he meant expanding those offshoring incentives further. But the TPP would extend further NAFTA’s extraordinary privileges for firms that relocate abroad to low-wage countries (like TPP negotiating partner Vietnam).  Most people also probably would not expect “learning from the experiences of the past” to lead to an expansion of the monopoly protections that NAFTA gave to pharmaceutical corporations, thereby reducing the availability of generics and increasing the cost of medicines. But Froman himself stated yesterday that such corporate protections – antithetical to textbook notions of “free trade” – are part of the TPP’s NAFTA-plus provisions.

And though Froman touts the May 10 deal as an improvement over NAFTA for labor rights, a recent government report has shown the May 10 provisions to be ineffective at curbing labor abuses in FTA partner countries. A November 2014 report from the U.S. Government Accountability Office found broad labor rights violations across all five surveyed FTA partner countries, regardless of whether or not the FTA included the labor provisions of the vaunted May 10 deal, including unionist murders in Colombia and impunity for union-busting in Peru.  Several of the TPP negotiating partners are notorious labor rights abusers – four of them were cited in a recent Department of Labor report for using child and/or forced labor. Vietnam, meanwhile, outright bans independent unions. Why would incorporation of the same terms that have failed to curb labor abuses in existing FTAs be expected to end the systematic labor rights abuses of TPP partners? 

And despite the May 10 deal’s environmental provisions, the TPP’s extraordinary investment provisions would empower thousands of foreign firms to bypass domestic courts, go before extrajudicial tribunals, and challenge new domestic environmental protections as "frustrating their expectations." Corporations have already used such foreign investor privileges under existing U.S. FTAs to attack a moratorium on fracking, renewable energy programs, and requirements to clean up oil pollution and industrial toxins.  Tribunals comprised of three private attorneys have already ordered taxpayers to pay hundreds of millions to foreign firms for such safeguards, arguing that they violate sweeping FTA-granted investor privileges that the TPP would expand.  Provisions, such as those in the May 10 deal, that call for countries to enforce their environmental laws sound hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement. 

January 20, 2015

Obama vs. Obama: The State of the Union's Self-Defeating Trade Pitch

In his State of the Union address tonight, President Obama called for job creation, reduced income inequality, more affordable healthcare and better regulation of Wall Street. 

He also called for Fast Tracking the Trans-Pacific Partnership (TPP) – a controversial “trade” deal that would undermine all of the above.

Here's a side-by-side analysis of how Obama's push to Fast Track the TPP contradicts his own State of the Union agenda:

Obama’s Agenda

The TPP’s Counter-Agenda

Income Inequality: “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”

An “economy where only a few of us do spectacularly well” is actually the projected outcome of the TPP. A recent study finds that the TPP would spell a pay cut for all but the richest 10 percent of U.S. workers by exacerbating U.S. income inequality, just as past trade deals have done

Manufacturing revival: “More than half of manufacturing executives have said they’re actively looking at bringing jobs back from China. Let’s give them one more reason to get it done.”

The TPP would give manufacturing firms a reason to offshore jobs to Vietnam, not bring them back from China. The TPP would expand NAFTA’s special protections for firms that offshore American manufacturing, including to Vietnam, where minimum wages are a fraction of those paid in China. Since NAFTA, we have endured a net loss of more than 57,000 U.S. manufacturing facilities and nearly 5 million manufacturing jobs.

American jobs: “So no one knows for certain which industries will generate the jobs of the future. But we do know we want them here in America.”

 

TPP rules would gut the popular Buy American preferences that require government-purchased goods to be made here in America, preventing us from recycling our tax dollars back into our economy to create U.S. jobs.

Exports: “Today, our businesses export more than ever, and exporters tend to pay their workers higher wages.”

Those who wish for more exports should wish for a different trade agenda. U.S. exports to countries that are part of TPP-like deals have actually grown slower than exports to the rest of the world, according to government data. Under the Korea deal that literally served as the template for the TPP, U.S. exports have actually fallen.

Small businesses: “21st century businesses, including small businesses, need to sell more American products overseas.”

Small businesses have endured declining exports and export shares under pacts serving as the model for the TPP. Small businesses suffered a steeper downfall in exports than large firms under the Korea trade pact, and small businesses’ export share has declined under NAFTA.

Economic growth: “Maintaining the conditions for growth and competitiveness. This is where America needs to go.”

An official U.S. government study finds that the economic growth we could expect from the TPP is precisely zero, while economists like Paul Krugman have scoffed at the deal’s economic significance.

Middle class wages: “Of course, nothing helps families make ends meet like higher wages.”

The TPP would put downward pressure on middle class wages, just as NAFTA has, by offshoring the jobs of decently-paid American manufacturing workers and forcing them to compete for lower-paying, non-offshoreable jobs.

Legacy of past trade deals: “Look, I’m the first one to admit that past trade deals haven’t always lived up to the hype, and that’s why we’ve gone after countries that break the rules at our expense.”

Past trade deals have resulted in massive trade deficits and job loss not because the pacts’ rules have been broken, but because of the rules themselves. The TPP would double down on NAFTA’s rules – the opposite of Obama’s promise to renegotiate the unpopular pact – by expanding NAFTA’s offshoring incentives, limits on food safety standards, restrictions on financial regulation and other threats to American workers and consumers.

Affordable medicines: “…middle-class economics means helping working families feel more secure in a world of constant change. That means helping folks afford …health care…”

The TPP would directly contradict Obama’s efforts to reduce U.S. healthcare costs by expanding monopoly patent protections that jack up medicine prices and by imposing restrictions on the U.S. government’s ability to negotiate or mandate lower drug prices for taxpayer-funded programs like Medicare and Medicaid.

Wall Street regulation: “We believed that sensible regulations could prevent another crisis…Today, we have new tools to stop taxpayer-funded bailouts, and a new consumer watchdog to protect us from predatory lending and abusive credit card practices…We can’t put the security of families at risk by…unraveling the new rules on Wall Street…”

Senator Warren has warned that the TPP could help banks unravel the new rules on Wall Street by prohibiting bans on risky financial products and “too big to fail” safeguards while empowering foreign banks to “sue” the U.S. government over new financial regulations.

Internet freedom: “I intend to protect a free and open internet…”

The TPP includes rules that implicate net neutrality and that would require Internet service providers to police our Internet activity – rules similar to those in the Stop Online Piracy Act (SOPA) that was rejected as a threat to Internet freedom.

National interests: “But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and businesses at a disadvantage. Why would we let that happen?”

With the TPP, multinational corporations want to write the rules that would put our workers at a disadvantage and undermine our national interests. TPP rules, written behind closed doors under the advisement of hundreds of official corporate advisers, would provide benefits for firms that offshore American jobs, help pharmaceutical corporations expand monopoly patent protections that drive up medicine prices, give banks new tools to roll back Wall Street regulations, and empower foreign firms to “sue” the U.S. government over health and environmental policies. Why would we let that happen? 

January 15, 2015

Obama’s Legacy: Middle-Class Jobs, Affordable Medicine and Financial Stability, or Fast-Tracked Trade Agreements – But Not Both

New Report ‘Prosperity Undermined’ Fact Checks Administration, Corporate Lobbyists and GOP Leadership With 20 Years of Data on Jobs, Economy

Fast Tracked trade deals have exacerbated the income inequality crisis, pushed good American jobs overseas, driven down U.S. wages, exploded the trade deficit and diminished small businesses’ share of U.S. exports, a new report from Public Citizen’s Global Trade Watch shows. The report, “Prosperity Undermined,”compiles and analyzes 20 years of trade and economic data to show that the arguments again being made in favor of providing the Obama administration with Fast Track trade authority have repeatedly proved false.

President Barack Obama is expected to push Fast Track for the Trans-Pacific Partnership (TPP). The pact, initiated by George W. Bush, literally replicates most of the job-offshoring incentives and wage-crunching terms found in the North American Free Trade Agreement (NAFTA) and would roll back Obama administration achievements on health, financial regulation and more. 

“It’s not surprising that Democrats and Republicans alike are speaking out against Fast Track because it cuts Congress out of shaping trade pacts that most Americans believe cost jobs while empowering the president to sign and enter into secret deals before Congress approves them,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “In their speeches and commentary, the administration, corporate interests and GOP leadership disregard the real, detrimental impacts that previous fast tracked trade deals – which serve as the model for the Trans-Pacific Partnership – have had on America’s middle class over the past 20 years.”

With unprecedented unity among Democratic members of Congress, there will be a handful of Democratic House votes in favor of Fast Track. Last year, seven of 201 House Democrats  supported Fast Track legislation. Meanwhile, a sizable bloc of GOP House members oppose Fast Track, which would grant the president extensive new executive powers and delegate away core congressional constitutional authorities.

The new report shows a 20-year record of massive U.S. trade deficits, American job losses and wage suppression. More specifically, data show that:

  • Trade Deficits Have Exploded: U.S. trade deficits have grown more than 440 percent with Fast Tracked U.S. FTA countries since the pacts were implemented, but declined 16 percent with non-FTA countries during the relevant period. Since Fast Track was used to enact NAFTA and the World Trade Organization, the U.S. goods trade deficit has more than quadrupled, from $216 billion to $870 billion. Small businesses’ share of U.S. exports has declined, while U.S. export growth to countries that are not FTA partners has exceeded U.S. export growth to FTA partners by 30 percent over the past decade.  ‘
  • Good American Jobs Were Destroyed: Nearly 5 million U.S. manufacturing jobs – one in four – were lost since the Fast Tracking of NAFTA and various NAFTA-expansion deals. Since NAFTA, more than 845,000 U.S. workers have been certified under just one narrow U.S. Department of Labor (DOL) program for Americans who have lost their jobs due to imports from Canada and Mexico and offshored factories to those countries.
  • U.S. Wages Have Stagnated, Inequality Soared: Three of every five manufacturing workers who lose jobs to trade and find reemployment take pay cuts, with one in three losing greater than 20 percent, according to DOL data. Overall, U.S. wages have barely increased in real terms since 1974 – the year that Fast Track was first enacted – while American worker productivity has doubled. Since Fast Track’s enactment, the share of national income captured by the richest 10 percent of Americans has shot up 51 percent, while that captured by the richest 1 percent has skyrocketed 146 percent. Study after study has revealed an academic consensus that status quo trade has contributed to today’s unprecedented rise in income inequality.
  • Food Exports Flat, Imports Soared: Under NAFTA and the WTO, U.S. food exports have stagnated while food imports have doubled. The average annual U.S. agricultural deficit with Canada and Mexico under NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. Approximately 170,000 small U.S. family farms have gone under since NAFTA and WTO took effect.
  • Damaging Results of Obama’s “New and Improved” Korea Trade Deal: Since the Obama administration used Fast Track to push a trade agreement with Korea, the U.S. trade deficit with Korea has grown 50 percent – which equates to 50,000 more American jobs lost. The U.S. had a $3 billion monthly trade deficit with Korea in October 2014 – the highest monthly U.S. goods trade deficit with the country on record. After the Korea FTA went into effect, U.S. small businesses’ exports to Korea declined more sharply than large firms’ exports, falling 14 percent.

“Big dollars for big corporations and special interests calling the shots – that’s what the American people hear when only the country’s top corporate lobbyists are shaping America’s trade agreements,” said Wallach. “With such high stakes, we cannot let the Fast Track process lock Congress and the public out of negotiations that will have lasting impacts on the livelihoods, rights and freedoms of American families, workers and businesses.”

Read the report.          

December 11, 2014

At Export Council, Obama Expected to Urge Corporate Interests to Help Him Obtain New Fast Track Powers to Expand the Status Quo U.S. Free Trade Pact Model That Congressional Democrats, Obama’s Base Oppose

At today’s meeting of the President’s Export Council, President Barack Obama is expected to urge yet another audience dominated by the corporate interests that opposed his election to help him obtain broad new Fast Track trade powers. Obama’s Fast Track request faces opposition by most Democratic members of Congress and base organizations as well as a bloc of conservative Republicans.

Obama also is likely to tout the Trans-Pacific Partnership (TPP), a pact that would expand the status quo U.S. trade agreement model that has led to staggering U.S. trade deficits, job loss and downward pressure on wages. When Obama picked up TPP negotiations from former President George W. Bush in 2009, consumer and environmental organizations, unions and congressional Democrats urged him to use the process to implement his 2008 election campaign promises to replace the old U.S. trade model based on the North American Free Trade Agreement (NAFTA). Instead, the administration has sided with the corporate interests that represent the majority of the approximately 600 official U.S. trade advisors and has replicated many of NAFTA’s most damaging provisions in the TPP.

“With the TPP, Obama is doubling down on the old, failed NAFTA trade pact status quo and even expanding on some of the NAFTA provisions that promoted American job offshoring, flooded us with unsafe imported food and increased medicine prices,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Given the TPP terms that would newly empower thousands of foreign firms to attack American health and environmental laws in foreign tribunals, incentivize even more U.S. job offshoring and ban the use of Buy American and Buy Local preferences, most Americans would be better off with no deal than what is in store with the TPP.”

Obama’s efforts to obtain Fast Track in the 113th Congress were rebuffed, as almost all House Democrats and a bloc of House GOP members indicated opposition.

Obama’s efforts to push more-of-the-same trade policies have been sidelined by the dismal outcomes of his 2011 U.S.-Korea FTA: The trade deficit with Korea in the first two years of the pact. In fact, the record shows that U.S. export growth with U.S. Free Trade Agreement (FTA) partners lags behind the rate of export growth with non-FTA nations. In addition, the aggregate U.S. trade deficit with the group of 20 countries with which the U.S. has FTAs has increased more than fivefold since the FTAs took effect, due in part to a massive NAFTA trade deficit.

December 09, 2014

Outside of TPP Negotiations, Protestors Declare "No Fast Track Ever!"

One

As negotiators gather in Washington, D.C. this week for closed-door meetings on the Trans-Pacific Partnership (TPP), hundreds of activists from labor, environmental, consumer, human rights, public health, Internet freedom, faith and family farm activists joined concerned citizens to loudly make their voices heard outside of the secretive negotiations on Monday.  (Meanwhile, a select group of official trade “advisors,” largely representing corporations, enjoys unprecedented access to the TPP negotiators meeting behind closed doors).

The rallying cry from the activists, who gathered in front of the United States Trade Representative’s office, was loud and clear: "No Fast Track now, No Fast Track ever!  The TPP is a lost endeavor!"  

Fast Track was a controversial maneuver that allowed past presidents to railroad through Congress unpopular deals like the North American Free Trade Agreement (NAFTA).  Corporations have called for Fast Track to be revived to empower the Obama administration to unilaterally negotiate and sign the TPP before Congress gets an expedited vote, with no amendments allowed and debate strictly limited.

Fast Track faces widespread opposition in the U.S. Congress and among the U.S. public.  Though a Fast Track bill was tabled about one year ago, it has gone nowhere due to massive opposition from most Democrats and a sizeable bloc of Republicans.  This past September, nearly 600 organizations sent a letter opposing Fast Track to Chair Ron Wyden.  A poll earlier this year found that 62 percent of U.S. voters oppose Fast Tracking the TPP.  

Civil society and lawmakers have good reason to reject corporations' push to Fast Track the TPP. Although it’s impossible to know the full scope of the secret deal, leaks have confirmed some of the worst speculations: the TPP would empower corporations to offshore jobs, increase the price of medicines, weaken environmental standards, and chill domestic interest laws by "suing" the government for public interest policies that frustrate their "expectations." 

Given the stakes, the energy of the rally was high.  Protestors circled the building carrying signs and chanting the death knell of Fast Track and TPP: “Fast Track is a sneak attack -- we’re taking our democracy back! Good paying jobs are what we need, but TPP spells corporate greed!"

If you weren't able to make it to the rally, you can still make your voice heard by writing to your member of Congress to urge them to voice their opposition to Fast Tracking the TPP.

Tppprotest

December 04, 2014

Obama Laments Inequality, Calls for Another Inequality-Spurring Trade Deal

Yesterday President Obama, speaking to a room full of corporate executives, tried to downplay the contribution of corporate-pushed trade deals to the historic rise in U.S. income inequality.  

Obama knew his audience -- corporate representatives eager to expand the status quo trade model by Fast Tracking through Congress the controversial Trans-Pacific Partnership (TPP) are probably keen to deny that this model has been exacerbating inequality.  

But such denial defies a consensus position among economists that recent trade flows have indeed contributed to today's yawning gap between rich and poor -- the only debate is how big of a role status quo trade has played.  

It also defies U.S. public opinion -- in a recent Pew poll, a mere 17 percent of the U.S. public thought that trade has boosted U.S. wages, while 45 percent, across the political spectrum, saw trade as contributing to falling wages for U.S. workers.

Obama acknowledged yesterday that TPP proponents will have a tough time arguing that this time is different -- that reviving Fast Track authority in attempt to push through Congress another more-of-the-same trade pact would not fuel further inequality growth. Fast Track was the Nixon-created maneuver that allowed the executive branch to railroad through Congress controversial, inequality-spurring pacts like the North American Free Trade Agreement (NAFTA) by negotiating and signing the pacts before Congress got an expedited, no-amendments, limited-debate vote.  A study by the Center for Economic and Policy Research finds that were the TPP to be Fast Tracked through Congress, all but the wealthiest among us would lose more to inequality increases than we would gain in cheaper goods, spelling a pay cut for 90 percent of U.S. workers.

Recognizing the unpopularity of Fast Track and the TPP, Obama told the business executives: “There are folks in my own party and in my own constituency that have legitimate complaints about some of the trend lines of inequality, but are barking up the wrong tree when it comes to opposing TPP, and I’m going to have to make that argument.”

Having to make that argument is not an enviable position -- it requires explaining away decades of evidence that Fast-Tracked deals have fostered greater U.S. income inequality.  Here's a sampling of that evidence:

U.S. Wages Stagnate, Despite Doubled Worker Productivity

  • Trade agreement investor privileges promote offshoring of production from the United States to low-wage nations. Today’s “trade” agreements contain various investor privileges that reduce many of the risks and costs previously associated with relocating production from developed countries to low-wage developing countries. Thus, many imports now entering the United States come from companies originally located in the United States and other wealthy countries that have moved production to low-wage countries. For instance, nearly half of China’s exports are now produced by foreign enterprises, not Chinese firms. Underlying this trend is what the Horizon Project called the “growing divergence between the national interests of the United States and the interests of many U.S. multinational corporations which, if given their druthers, seem tempted to offshore almost everything but consumption.” American workers effectively are now competing in a globalized labor market where some poor nations’ workers earn less than 10 cents per hour.
  • Manufacturing workers displaced by trade have taken significant pay cuts. The United States has lost millions of manufacturing jobs during the Fast Track era, but overall unemployment has been largely stable (excluding recessions) as new low-paying service sector jobs have been created. Proponents of status quo trade raise the quantity of jobs to claim that Fast Tracked deals have not hurt U.S. workers. But what they do not mention is that the quality of jobs available, and the wages most U.S. workers can earn, have been degraded. According to the U.S. Bureau of Labor Statistics, about three out of every five displaced manufacturing workers who were rehired in 2014 experienced a wage reduction. About one out of every three displaced manufacturing workers took a pay cut of greater than 20 percent. For the average manufacturing worker earning more than $47,000 per year, this meant an annual loss of at least $10,000.
  • Trade policy holds back wages even of jobs that can’t be offshored. Economists have known for more than 70 years that all workers with similar skill levels – not just manufacturing workers – will face downward wage pressure when U.S. trade policy creates a selective form of “free trade” in goods that non-professional workers produce. When workers in manufacturing are displaced and seek new jobs, they add to the supply of U.S. workers available for non-offshorable, non-professional jobs in hospitality, retail, health care and more. As increasing numbers of American workers, displaced from better-paying jobs by current trade policies, have joined the glut of workers competing for these non-offshorable jobs, real wages have actually been declining in these growing sectors
  • The bargaining power of American workers has been eroded by threats of offshoring. In the past, American workers represented by unions were able to bargain for their fair share of economic gains generated by productivity increases. But the investor protections in today’s trade agreements, by facilitating the offshoring of production, alter the power dynamic between workers and their employers. For instance, a study for the North American Commission on Labor Cooperation – the body established in the labor side agreement of NAFTA – showed that after passage of NAFTA, as many as 62 percent of U.S. union drives faced employer threats to relocate abroad, and the factory shut-down rate following successful union certifications tripled.
  • Even accounting for Americans’ access to cheaper imported goods, the current trade model’s downward pressure on wages outweighs those gains, making most Americans net losers.  Trade theory states that while those specific workers who lose their jobs due to imports may suffer, the vast majority of us gain from trade “liberalization” because we can buy cheaper imported goods. But when the non-partisan Center for Economic and Policy Research (CEPR) applied the actual data to the trade theory, they discovered that when you compare the lower prices of cheaper goods to the income lost from low-wage competition under current policies, the trade-related losses in wages hitting the vast majority of American workers outweigh the gains in cheaper goods from trade. U.S. workers without college degrees (63 percent of the workforce) have lost an amount equal to 12.2 percent of their wages, even after accounting for the benefits of cheaper goods. That means a net loss of more than $3,400 per year for a worker earning the median annual wage of $28,000.

Income Inequality Increases in America

  • The inequality between rich and poor in America has jumped to levels not seen since the robber baron era. The richest 10 percent of Americans are now taking more than half of the economic pie, while the top 1 percent is taking more than one fifth. Wealthy individuals’ share of national income was stable for the first several decades after World War II, but shot up 51 percent for the richest 10 percent and 146 percent for the richest 1 percent between 1974 and 2012 – the Fast Track era. Is there a connection to trade policy?
  • Longstanding economic theory states that trade will increase income inequality in developed countries. In the 1990s a spate of economic studies put the theory to the test, resulting in an academic consensus that trade flows had indeed contributed to rising U.S. income inequality. The pro-“free trade” Peterson Institute for International Economics (PIIE), for example, found that nearly 40 percent of the increase in U.S. wage inequality was attributable to U.S. trade flows. In 2013, when the Economic Policy Institute (EPI) updated an oft-cited 1990s model estimate of trade’s impact on U.S. income inequality, it found that using the model’s own conservative assumptions, one third of the increase in U.S. income inequality from 1973 to 2011 – the Fast Track era – was due to trade with low-wage countries. The role of trade escalated rapidly from 1995 to 2011 – a period marked by a series of Fast-Tracked “free trade” deals – EPI found that 93 percent of the rise in income inequality during this period resulted from trade flows. Expressed in dollar terms, EPI estimates that trade’s inequality-exacerbating impact spelled a $1,761 loss in wages in 2011 for the average full-time U.S. worker without a college degree.
  • Changes in technology or education levels do not fully account for American wage pressures. Some have argued that advances in computer technology explain why less technologically-literate American workers have been left behind, asserting that more education – rather than a different trade policy – is how America will prosper in the future. While more education and skills are desirable for many reasons, these goals alone will not solve the problems of growing inequality. First, as documented in a Federal Reserve Bank paper, inequality started rising as systematic U.S. trade deficits emerged, in the early Fast Track period, far before most workers reported using computers on the job. Second, college-educated workers have seen their wage growth stagnate, even in technologically sophisticated fields like engineering. Thus, addressing trade policy, not only better educating American workers, will be an essential part of tackling rising income inequality.

November 21, 2014

Activists Worldwide Rally Against the TPP

While leaders from the 12 countries negotiating the controversial Trans-Pacific Partnership (TPP) agreement met around the margins of the Asia-Pacific Economic Cooperation (APEC) summit in China to discuss the agreement, activists and civil society from across the globe decided to stage some events of their own.

Throughout the week, rallies, creative actions, meetings, and town halls were planned in a number of countries to draw attention to the secret deal that threatens to limit domestic policies that promote food safety, access to medicine, internet freedom, and environmental protection. The deal would also empower corporations to sue governments in extrajudicial foreign tribunals, challenging public interest laws that they claim frustrate their expectations. (And that’s just what we know based on leaked texts, because the negotiations are taking place entirely in secret).

 

Fasttrackpetitiondelivery
 Over 700,000 petitions against Fast Track are delivered to U.S. Congress

In the United States, a broad coalition of labor unions, environmental, consumer, faith, online, and other groups assembled on Capitol Hill to deliver 713,674 petition signatures opposing “Fast Track,” the Nixon-era procedure that would empower President Obama to sign the deal before Congress is able to vote on it. Corporations are trying to revive Fast Track to railroad the TPP through Congress, as it would greatly limit lawmakers’ oversight over the content of the agreement by only allowing 20 hours of debate and forcing an up or down vote (with no opportunity for amendments).

The groups also launched an online campaign resulting in thousands of calls and hundreds of thousands of e-mails to Members of Congress urging them to vote “No” on Fast Track. Across the country, 20 rallies and town halls brought the anti-Fast Track message to lawmakers’ home districts.

Nztppaprotest
  Thousands protest against the TPP in New Zealand

More than 10,000 New Zealanders took to the streets in 17 locations to protest the TPP, gaining national news attention and social media buzz, and pushing the #TPPANoWay hashtag to number 2 worldwide. Protesters were joined by lawmakers from a number of political parties, including leaders from the Green Party and Labour Party. Participants rallied against the secrecy of the negotiating process and TPP's inclusion of the controversial Investor-State Dispute Settlement (ISDS) mechanism, among other issues.

Meanwhile in Japan, 50 activists staged an action outside of Prime Minster Shinzō Abe’s official residence in opposition to the TPP. More than 100 individuals representing farmers, labor groups, consumer organizations, medical advocates, lawyers, and university professors met with Japanese lawmakers to discuss concerns related to the TPP.

A number of flash mobs were organized around Australia. Opposition to the TPP was heard in Sydney, Canberra, Perth, Hobart, Adelaide, and Melbourne. A few days later, concerns about the TPP were represented during G-20 educational forums and protests which attracted thousands.

AustraliaTPPProtests
    Australian protestors rally against the TPP in Perth, Hobart, and Sydney

While negotiators and corporate advisors are hiding their agenda in confidential documents, activists worldwide are spreading their concerns on the Internet, Twitter, Facebook, and e-mail blasts. While leaders and trade ministers are meeting behind closed doors in undisclosed locations, thousands of citizens are responding by gathering on the streets, in libraries, town halls, and their lawmakers’ offices.

The message of citizens across the globe is clear: we are not willing to accept a "trade" deal negotiated in secret in the interest of corporations and at the expense of our rights to safety, democracy, and health.  

November 18, 2014

A Letter to Fair Trade Activists: While They Play Poker, Let’s Play Chess

Is President Obama really going to sell us out on trade? Did Sen. McConnell have a full or half smile in the last press conference where he talked about Fast Track? Is Rep. Boehner really going to have a showdown with President Obama over immigration and how will that impact Fast Track? What about the news stories stating that TPP will be signed next month? Oh, and how do the XL pipeline and deal with China on carbon emissions factor in?

Comrades, don’t let the results of the elections, and the political posturing that’s happened since, drive you crazy, distract you, or cause you to lose hope. We have a path to victory! Democrats lost control of the Senate, but we did not lose control over our campaign to stop corporate-driven, job-offshoring, democracy-stifling “free trade” agreements by stopping President Obama from getting Fast Track trade authority. In fact, we have a chance to bury Fast Track once and for all.

Don’t mistake my resolve and optimism as a suggestion that our victory is inevitable. Nothing can be further from the truth. We’re going to have to dig deep and fight harder than we ever have. There’s a giant corporate lobby fighting for Fast Track because they want the Trans-Pacific Partnership (TPP) more than they’ve wanted any other trade deal. All their hopes and dreams for a global race to the bottom are wrapped up in the TPP. I live in Washington, D.C. and see the lobbying firsthand. Our opponents are out in full force. But over the past two years I’ve seen a bigger force. I’ve seen the power of us.

Truth be told, President Obama could have had Fast Track a long time ago. But we’ve been on the case day in and day out and we’ve stopped Fast Track thus far. This past Saturday, November 15, marked the one year anniversary of the game-changing letter to President Obama that Reps. Rosa DeLauro and George Miller released in which 151 Democratic members of the House of Representatives stated that, “…we will oppose ‘Fast Track’ Trade Promotion Authority or any other mechanism delegating Congress’ constitutional authority over trade policy that continues to exclude us from having a meaningful role in the formative stages of trade agreements and throughout negotiating and approval processes.” And just three days prior, on November 12 a block of Republican members of the House of Representatives sent their own letters voicing their opposition to Fast Track to President Obama. Can you believe that it’s already been a year?! Our work together has been extraordinary, truly. We’ve been steady and consistent and we surely can’t stop and won’t stop now.

While the President and some congressional leaders sit in backrooms on Capitol Hill playing poker with the lives of over 800 million people across the world, let’s play chess. The fight to stop Fast Track has always been and will continue to be won or lost in the U.S. House of Representatives. Learning about the history of Fast Track will give you insightful perspective. Above all, don’t let the opposition distract us from our strategic path to victory. The corporate lobby is hard at work spinning a narrative of the inevitability of Fast Track because Republicans gained control of the Senate. That’s simply not reflective of reality. They’re trying to psych us out. In fact, here’s what Lori Wallach thinks:

“…a close look at the interplay of the actual politics and policy on Fast Track and the TPP show that the GOP election sweep may, counterintuitively, actually not promote the corporate trade agenda.”

Our strategy must remain sharp and vision focused on stopping Fast Track in this current Lame Duck session of Congress and in 2015 by demanding that our representatives vote NO on Fast Track. House, House, House!

Over the past few years, I’ve had the pleasure and honor of working with activists from all over the country. I’ve been lucky to reconnect with folks who were a part of the historic Battle in Seattle and Free Trade Area of the Americas (FTAA) protests. Wow, we’ve been at this a long time! But back to my point, the World Trade Organization protests in Seattle in 1999 and the FTAA protests in Miami in 2003 remind us that we indeed do have the power to shut these “free trade” agreements down! But here’s the thing, we don’t need another Seattle to stop the TPP and Trans-Atlantic Free Trade Agreement (TAFTA). All we have to do is stop Fast Track. That’s our greatest contribution to the international campaign to stop the TPP and TAFTA. So, keep up the great work!

Gather your comrades, build your resources, stay focused on the House of Representatives and steel yourself for the fight of a lifetime. Stopping Fast Track and the Trans-Pacific Partnership is so much more than a victory for fair trade. Stopping Fast Track now is about putting business-as-usual to rest and building a space for us to shape the future and world we all want to live in. Almost every issue that we care about (good-paying jobs, food safety, access to affordable medicines, environmental protections, Internet freedom, democracy, workers’ rights and much more) will be significantly negatively impacted if Congress gives President Obama the authority to ram TPP through congress and down the throats of people across the world.

Ring the alarm, my friends! It’s time and this time is ours. Stay strong. Keep focused. Stop Fast Track!

In solidarity,

Alisa

P.S. Help spread the word! Share this great new video about the dangers of the TPP and tell everyone you know about www.ExposeTheTPP.org. It’s up to us!

November 05, 2014

What the 2014 Election Results Mean for Trade Policy

Fast Track’s Chances Diminished by GOP Senate Sweep; Obama Flexibility on Japan Agriculture Market Access in TPP Reduced; Bipartisan Campaigning Against Status Quo Trade Policy Heightens Public Awareness

The GOP takeover of the U.S. Senate probably reduces the chances that President Barack Obama gets Fast Track at all before his presidency is over or that a deal is completed on the Trans-Pacific Partnership (TPP). There has been a major corporate PR campaign to push the opposite narrative. However, a close look at the interplay of the actual politics and policy on Fast Track and the TPP show that the GOP election sweep may, counterintuitively, actually not promote the corporate trade agenda.

Fast Track: The issue is not who is Senate Majority leader. The fight over trade authority is always won or lost in the U.S. House of Representatives. Recall that second-term Democratic President Bill Clinton lost a bid for Fast Track in 1998 in the GOP-controlled House with 171 Democrats and 71 GOP members voting “no.” (Clinton had Fast Track for only two of his eight years. Indeed, in the past two decades, the only president to obtain Fast Track was President George W. Bush, and winning that five-year grant required a two-year effort at the start of Bush’s first term and a lot of political capital, after which Fast Track passed by one vote in a GOP-controlled House in 2002.)

The reason that the GOP controlling the Senate could make Fast Track’s passage less likely is related to who will now be writing a trade authority bill. The old Fast Track trade authority mechanism faces a significant bloc of GOP House opposition and virtually no House Democratic support. Outgoing Senate Finance Committee Chairman Ron Wyden (D-Ore.) had undertaken an inclusive process to get input to write his own version of trade authority, which he dubbed Smart Track. That process and its outcome could have broken the bipartisan House opposition to the old Fast Track system.

But neither incoming Finance Committee Chair Orrin Hatch (R-Utah) nor the likely GOP Ways and Means Committee leader supports major changes to the old Fast Track authority delegation process. Indeed, the Camp-Baucus-Hatch bill to establish trade authority was finally introduced in January 2014 only because GOP Finance and Ways and Means leaders opposed even modest changes to the actual authority delegation process from the 2002 bill. Changes to the actual terms delegating congressional authorities are also opposed by the business lobby. Nor do Hatch or the Ways and Means GOP leaders have the inclination or the relationships to widen the base of support for a bill.

But altering the way in which Congress’ authority is delegated, to provide Congress with a more fulsome role throughout the process and with more accountability over negotiators, is necessary to build bipartisan House support for a new delegation of trade authority. Updates to negotiating objectives or the level of transparency required cannot overcome the issues at the core of the House allergy to Fast Track.

A significant bloc of House GOP does not want to delegate more power to Obama, especially as the GOP has been attacking him as the “imperial president” who grabs legislative authority for his own. Tea party activists oppose Fast Track per se and anything that empowers Obama, which leaves GOP lawmakers who support Fast Track exposed to the dreaded tea party primary threat. To make political matter worse, House GOP lawmakers know that even if the GOP votes were available to pass Fast Track on a party line vote, almost no Democrats will vote to give their own president such authority, so any fallout from future trade pacts would be owned solely by the GOP.

As a policy matter, many GOP conservatives think the lump sum delegation of various authorities granted to Congress in the Constitution busts vital checks and balances. (It empowers a president to “diplomatically legislate” by negotiating binding non-trade terms to which U.S. law must be conformed; to sign and enter into a trade pact before Congress approves it; to write legislation not subject to committee mark-up and force a vote on it within 90 days of submission; and to pre-set the rules for floor consideration.)

That is why, when Senate Majority Leader Harry Reid (D-Nev.) indicated no floor time would be provided for Fast Track this year, the Camp-Baucus-Hatch Fast Track bill (introduced Jan. 9, 2014) was already dead on arrival in the House:

  • There were literally only a handful of House Democrats who supported the bill: eight out of 201 members. And three of those eight conditioned their “yes” votes on the bill also extending Trade Adjustment Assistance (TAA), which Hatch viscerally opposes.  
  • The House GOP leadership could not count more than 100 members as “yes” votes on the Camp-Baucus-Hatch bill. They had a bloc of members with solid “no” votes – some of whom signed letters against Fast Track in 2013 – and a large bloc who could not commit to vote “yes.” That is why the House GOP leadership never marked up the Camp-Baucus-Hatch bill or moved it toward a floor vote. And that is why House Speaker John Boehner (R-Ohio) said in May he needed to see 50 firm Democrat votes before he would move the bill.

Reid’s announcement in January certainly made it more certain that the Camp-Baucus-Hatch Fast Track bill would not be moving. But even without Reid’s opposition, Boehner could never find the 50 Democrats he needed to make up for the GOP members he could not count as “yes” votes on the Camp-Baucus-Hatch bill.

And, the House election results do not appear to fix Boehner’s math problem. To fully assess what the new House makeup means for Fast Track, the dust will have to settle on the results to see whether it is a wash, slightly harder for Fast Track to pass (e.g., if a number of Fast Track-opposing tea party GOP candidates replaced GOP members who were for Fast Track) or slightly easier (e.g., if a lot of “Wall Street” GOP candidates replaced no-on-Fast-Track Democrats.)

One more way in which GOP control of the Senate complicates the path for trade authority: Hatch also hates TAA while Wyden supported expanding it. Adding TAA to the old Fast Track process does not add new Democratic support, but not having TAA could result in literally no House Democratic support. For instance, the House’s leading Democratic Fast Track boosters, U.S. Reps. Ron Kind (D-Wis.) and Gregory Meeks (D-N.Y.) – among the eight House Democrats who supported the Camp-Baucus-Hatch Fast Track bill – said absent a TAA extension, they would not support it.

Thus, not having Wyden as Senate Finance Committee chairman actually decreases the chances that Obama will ever get a delegation of trade authority. But that would not be such a shocker anyway. Since Congress woke up to what Fast Track really means with the Fast-Tracked passage of the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) almost 20 years ago, Congress has allowed Fast Track to be in effect for only five of the 20 years.

TPP: The election results may also complicate Obama’s goal of signing a Trans-Pacific Partnership (TPP) deal. As the TPP misses yet another do-or-die deadline – this time a November date announced by Obama in June that was related to the imminent Asia-Pacific Economic Partnership (APEC) meeting – to get a deal, any deal, the administration might be ready to step back from its position regarding Japan and agriculture market access in the TPP. Except, the demand that the TPP include the zeroing of all agricultural tariff comes mainly from the Republicans, as does the call to throw Japan out of the TPP talks unless Japan concedes to this demand.

Both Parties Competed to Highlight Rejection of Unfair Trade in Competitive Races, Heightening Public Awareness and Further Complicating Obama’s Bid for Fast Track: Analysis of the most-watched races of the 2014 elections reveals bipartisan competition to align campaign positions with the American public’s opposition to current U.S. trade policies and the job offshoring they cause. A raft of ads spotlighting the damage caused by status quo trade policies has heightened constituents’ anger about damaging trade deals and the expectation that their newly elected representatives will reject the administration’s attempt to Fast Track more of the same deals.

Some of 2014’s most high-profile races featured both candidates competing to portray themselves as the greater opponent of unfair trade. Republican challengers sought to outdo the fair-trade voting records of Democratic incumbents by proclaiming their own rejection of existing Free Trade Agreements (FTAs), while the incumbents touted their votes against the FTAs and their opposition to Fast Track.

Incumbents who could not themselves claim a fair trade record still campaigned with the trade frame by attacking their opponents on offshoring, voicing opposition to tax policies that incentivize offshoring or citing instances of being “tough on China.” Even Senate Minority Leader Mitch McConnell (R-Ky.), with a 100 percent record of supporting unfair trade deals, was obliged to create and air an ad claiming he “fought against unfair foreign trade” after multiple ads attacked him for supporting damaging trade deals and costing American jobs.

Closely watched races in which both candidates vied to portray themselves as a stronger opponent of unfair trade included:

  • Minnesota’s 8th Congressional District – Nolan vs. Mills: In the closely fought race for Minnesota’s eighth district seat – one of the most competitive races in this election cycle – incumbent U.S. Rep. Rick Nolan (D-Minn.) turned around a likely GOP pick-up after vying with Republican Stewart Mills to declare greater opposition to status quo trade. This race spotlights the difficulty Obama’s quest for Fast Track authority will face in the next Congress, as conservative GOP members campaigned against the trade status quo and thus will be expected by their voters to stop more-of-the-same trade policies. In one ad, Mills tried to convert popular rejection of existing FTAs into rejection of incumbents, blaming “politicians like Rick” for “trade deals that reward outsourcers, while killing Minnesota jobs.” Nolan, who was not in office during the votes for any existing FTAs, touted his own opposition to unfair deals. Nolan’s campaign website stated that he “has fought against ‘fast-tracking’ the ongoing TPP trade negotiations, and will continue to stand up for fair trade.” Nolan was one of 151 House Democrats to sign a letter last year against Fast Tracking the TPP. Voters opted for Nolan, who trumped Mills.
  • U.S. Senate in Michigan – Peters vs. Land: In the competitive Michigan U.S. Senate race between U.S. Rep. Gary Peters (D-Mich.) and Terri Lynn Land (R), both candidates competed to make known their opposition to unpopular trade deals. Competing against Peters’ 100 percent record of opposition to FTAs, Land sought to flaunt her own anti-FTA position, stating in an ad, “My plan will save Michigan jobs by ending unfair foreign trade deals and developing new agreements that open up markets for Michigan exports.” Michigan has lost more than 250,000 manufacturing jobs (about one out of every three) since NAFTA was enacted. Peters’ campaign website touted his own fair trade record, stating, “He has stood up for Michigan manufacturers and opposed any new trade deal that does not require our foreign trading partners play by the same rules as American companies.” In the end, Peters beat Land handily although the race had long been deemed a tossup.
  • U.S. Senate in Kentucky – McConnell vs. Grimes: Trade loomed large in this headline-grabbing race between McConnell and his Democratic challenger Alison Lundergan Grimes. The Senate Majority PAC launched an ad that showed video footage of McConnell expressing support for NAFTA, and stated, “Mitch McConnell’s been tragically wrong about foreign trade deals. They’ve cost America over half a million jobs.” Another Senate Majority PAC ad criticized McConnell for “pushing foreign trade deals that send Kentucky jobs to new homes far away.” As his numbers plummeted in the early fall, McConnell’s campaign ultimately was forced to respond by adopting the same frame used against him, claiming in an ad that McConnell “fought against unfair foreign trade,” despite having cast 20 out of 20 votes in favor of unfair trade since 1991. McConnell beat Grimes after running against his own voting record. 

October 17, 2014

A Trade Storm Is Brewing

At the beginning of the year, we warned you about the upcoming trade tsunami. Well hold on to your hats everyone, because another “trade” storm is heading our way.

Trans-Pacific Partnership (TPP) negotiators are meeting in Australia this month and are aiming to finish the massive 12-country “trade” agreement.

Despite mounting evidence that the TPP should not be completed — including the leak of another part of the top-secret text earlier this week — President Barack Obama wants the TPP done by November 11. That is when he will be meeting with other TPP-country heads of state in China at the Asia-Pacific Economic Conference.

With the TPP’s threats to food safety, Internet freedom, affordable medicine prices, financial regulations, anti-fracking policies, and more, it’s hard to overstate the damage this deal would have on our everyday lives.

But the TPP isn’t the only threat we currently face. We are also up against the TPP’s equally ugly step-sisters: TAFTA and TISA. And Obama wants to revive the undemocratic, Nixon-era Fast Track trade authority that would railroad all three pacts through Congress.

The Trans-Atlantic Free Trade Agreement (TAFTA) is not yet as far along as the TPP, but TAFTA negotiations recently took place in Washington, D.C., and more are set for a few weeks from now in Brussels. The largest U.S. and EU corporations have been pushing for TAFTA since the 1990s. Their goal is to use the agreement to weaken the strongest food safety and GMO labeling rules, consumer privacy protections, hazardous chemicals restrictions and more on either side of the Atlantic. They call this “harmonizing” regulations across the Atlantic. But really it would mean imposing a lowest common denominator of consumer and environmental safeguards.

The Trade in Services Agreement (TISA) is a proposed deal among the United States and more than 20 other countries that would limit countries’ regulation of the service sector. At stake is a roll back of the improved financial regulations created after the global financial crisis; limits on energy, transportation other policies needed to combat the climate crisis; and privatization of public services — from water utilities and government healthcare programs to aspects of public education.

TPP, TAFTA and TISA represent the next generation of corporate-driven “trade” deals. Ramming these dangerous deals through Congress is also Obama’s impetus to push for Fast Track. Fast Track gives Congress’ constitutional authority over trade to the president, allowing him to sign a trade deal before Congress votes on it and then railroad the deal through Congress in 90 days with limited debate and no amendments. Obama opposed Fast Track as a candidate. But now he is seeking to revive this dangerous procedural gimmick.

Because of your great work, we’ve managed to fend off Fast Track so far. This time last year, the U.S. House of Representatives released a flurry of letters showing opposition to Fast Track from most Democrats, and a wide swath of Republicans. This is something the other side was not expecting, and they were shocked. We won that round, but Obama and the corporate lobby are getting ready for the final push.

Because Fast Track is so unpopular in the House, Speaker John Boehner has a devious plan to force the bill through Congress in the “lame duck” session after the November elections. We need to make sure our “ducks” are in a row before that.

Some members of Congress are working on a replacement for Fast Track. U.S. Sen. Ron Wyden (D-Ore.) says he will create what he calls “Smart Track.” It is not yet clear if this will be the real Fast Track replacement we so desperately need, or just another Fast Track in disguise.

Sen. Wyden will want to be ready to introduce his Smart Track bill right as the new Congress starts in January 2015. This means we have only a couple of months left to make sure his replacement guarantees Congress a steering wheel and an emergency brake for runaway “trade” deals.

With all these deadlines drawing near, it’s clear that a knock-down, drag-out fight is imminent. But we will be ready. The TPP missed deadlines for completion in 2011, 2012, and 2013 — if we keep up the pressure, we can add 2014 to that list as well. That’s why there will be a TPP/TAFTA/TISA international week of action Nov 8-14 — more details coming soon!

June 18, 2014

Nixon Hatched Fast Track, Not FDR

By Lori Wallach, director of Public Citizen’s Global Trade Watch and author of The Rise and Fall of Fast Track Trade Authority

Amidst the distorted trade data and counterfactual foreign policy claims, U.S. Trade Representative Michael Froman offered up a bit of revisionist U.S. trade policy history on Monday that must have left the folks listening to his Council on Foreign Relations speech scratching their heads.

No, FDR did not create Fast Track trade authority. And, JFK did not celebrate its renewal.

Invoking those Democratic icons is an interesting strategy, given that a sizable bloc of House GOP members oppose giving President Obama Fast Track.  The extraordinary authority, which Congress has refused to delegate for 15 of the past 20 years, let a president negotiate and sign a “trade” pact before Congress approved it and guaranteed a no-amendments vote in 90 days regardless of whether the pact met Congress’ objectives.

But maybe the target audience was House Democrats, given that only seven of the Democratic representatives have announced support for legislation introduced  early this year to revive the old Fast Track mechanism.

In his speech, Froman noted the 80th anniversary of the Reciprocal Trade Agreement Act (RTAA) of 1934 and declared that the trade authority it established was an antecedent of Fast Track, and that it was used by the Roosevelt administration, renewed 11 times by 1962 and toasted by President Kennedy.

House Ways and Means Committee Chairman Dave Camp echoed Froman’s insinuations about   Fast Track: “every president, until now, has partnered with Congress to have this powerful tool to negotiate the best possible trade deals for America.” The talking point is also favored by the Business Roundtable and other corporate groups of the Trade Benefits America Coalition: “Trade Promotion Authority is a partnership between the President and Congress…Since the 1930's, such authority has been critical to the opening of new markets…”

Except, in fact, Fast Track was first hatched by Richard Nixon, not FDR. And it only went into effect in the 1970s, not the 1930s.

Due to its unpopularity, Fast Track was only in effect for five of the last 20 years. But that hasn’t stopped U.S. trade growth. Fast Track was only used on 16 of the hundreds of U.S. trade and commercial pacts that have gone into effect since the 1970s. Trade-expansion-focused President Clinton only had Fast Track for two of his eight years in office, after the House voted down his request for the extraordinary authority in 1998. Yet, Clinton’s administration completed more than 200 trade and commercial agreements with diverse countries.

And, that gets us to the TPA sleight of hand. The “TPA” that was established in the Reciprocal Trade Agreement Act of 1934 is “Tariff Proclamation Authority.” It has allowed presidents to declare cuts to tariffs – border taxes on goods – within parameters set by Congress. And yes, presidents have had that authority since the 1930s, including Fast-Trackless Clinton.

In contrast, Fast Track – for which “TPA” was not coincidentally chosen as the preferred rebranding – may be Nixon’s most under-appreciated power grab. For the first time in 200 years of U.S. history, Fast Track empowered the executive branch to “diplomatically legislate” changes to non-trade U.S. domestic policy via “trade” negotiations. Until Fast Track, Congress used five different forms of trade authority over the course of the nation’s history to direct executive branch trade negotiators. None of them granted executive authority beyond tariffs.

In contrast, Fast Track turned “trade” pacts into backdoor means for executive branch officials to set policy on an array of matters otherwise under Congress’ or state legislatures’ constitutional authority: patent and copyright laws; immigration policies; food and product safety standards; financial, health and energy service sector rules; and even government procurement terms. U.S. domestic law must be altered to conform to such “trade” pact terms. Failure to do so can result in indefinite trade sanctions against U.S. exports.

For all the focus on Fast Track’s end-game legislative luge-run of a guaranteed no-amendments, limited-debate vote in 90 days, it was the invasion of Congress’ core policymaking prerogatives that has made Fast Track so toxic. Under Fast Track, the executive branch could ignore – and did so under both Democratic and Republican presidents – Congress’ “trade” pact negotiating objectives and still get the expedited approval processes for whatever it negotiated and signed. That’s why the talking point now being passed around that somehow Fast Track is a means for Congress to exercise its constitutional authority is just silly. 

A member of Congress can love free trade and seek new trade agreements and still find unacceptable the concentration of power in the executive branch that is at the core of the Fast Track form of trade authority. The expansive scope of the Trans-Pacific Partnership (TPP) agreement now under negotiation spotlights this reality. Of its 29 chapters, only five pertain to traditional trade matters. Most of the rest of the TPP chapters would set policies on subjects otherwise under the authority of Congress and state legislatures, which would be binding on the United States and not subject to amendment absent approval by all signatory countries.

It is not surprising that the prospects for reestablishment of the expansive old Fast Track delegation of Congress’ constitutional trade and legislative authorities are remote. And that is the case whether or not it is conflated with the old TPA, the new TPA or falsely associated with any beloved president.

The real question is whether the old Fast Track process will be replaced by a new trade authority mechanism that is appropriate for the reality of today’s expansive international commercial negotiations. A modern approach would require an expanded role for Congress from start to finish and much more accountability over executive branch negotiators. 

April 21, 2014

Administration Desperate to Announce Breakthrough on TPP in Japan, But Congress not Buying Economic or Foreign Policy Sales Pitch and Won’t Give Obama Fast Track

Public Citizen Publishes Updated List of TPP Issues That Require Resolution for a Deal to Be Made; List Largely Unchanged Since 2/14 Singapore TPP Ministerial

A major goal of President Barack Obama’s Asia trip is to revive the Trans-Pacific Partnership (TPP) after four years of negotiations have resulted in talks deadlocked over scores of issues and growing U.S. congressional and public opposition. 

Whether or not any real deal is made, a “breakthrough” almost certainly will be announced because the U.S-Japan summit is viewed as a do-or-die moment to inject momentum into the TPP process. Familiarity with kabuki theatre may be useful in interpreting the summit outcomes on TPP.

Obama arrives in Asia without trade authority and with TPP partners Japan and Malaysia aware that the U.S Congress, which has exclusive constitutional authority over trade policy, is increasingly skeptical about the TPP. January 2014 legislation to enact Fast Track authority was dead on arrival in the U.S. House of Representatives. Already in late 2013, 180 House members had announced they would never authorize the Fast Track process again; more announced opposition when the bill was submitted.

The prospect that Obama cannot deliver on whatever “compromises” he may make was heightened by a congressional sign-on letter circulating last week calling for Japan to be thrown out of TPP negotiations unless it agreed to eliminate its agricultural tariffs and major U.S. agribusiness interests calling for the same.

But at the same time, there is enormous pressure for Obama and Prime Minister Shinzo Abe to announce a breakthrough. Months of non-stop U.S-Japan bilateral TPP negotiations and ministerial-level meetings have failed to overcome sensitive agricultural and auto market access issues. Without knowing what market access gains they may achieve in return, other TPP nations have been loath to consider high-stakes tradeoffs relating to U.S. demands in TPP to extend medicine patents, limit financial regulations,  discipline state-owned enterprises, enforce labor and environmental standards, limit financial regulation.  

A checklist of these unresolved issues is included at the bottom of this memo. Despite the unprecedented secrecy surrounding the TPP negotiations, leaks of TPP documents are fueling opposition in many TPP countries as the pact’s prospective threats are revealed.  As a result, the other TPP nation governments face considerable domestic political liability for acceding to various U.S. TPP demands.

Finally, as the economic sales pitch for the TPP has faced increasing incredulity in Congress, TPP proponents have shifted to the foreign policy arguments-of-last-report used to sell flagging trade deals. The president’s Asia trip is the best possible platform to make arguments that distract from the TPP’s merits and shift the focus to broad brush narratives that connect to congressional and public anxieties about a rising China.

A report released last week by Public Citizen reveals that nearly identical foreign policy arguments have consistently proven baseless when used to sell trade deals over the past two decades. The report reviews foreign policy claims made to promote the TPP, ranging from the absurd to the counterfactual, to those that repeatedly have been disproved by the actual outcomes of similar claims made for past pacts. Repeatedly, Congress has approved trade deals based on dire predictions that failure to do so would mean diminished U.S. power,  the takeover of important markets by competitors or foreign instability, only to find that many of those predictions came true in spite of, and sometimes even because of, pacts’ enactment.

Among the report’s findings, echoed last week in a call with members of Congress and Asia policy expert Clyde Prestowitz:

  • Past free trade agreements (FTAs) failed to counter the rising economic influence of China (or Japan): From 2000 to 2011, U.S. FTAs with eight Latin American countries were sold as bulwarks against foreign economic influence in the hemisphere. The U.S. pacts were implemented and China’s exports to Latin America soared more than 1,280 percent, from $10.5 billion to more than $145 billion, while the U.S. saw only modest export growth. The U.S.-produced share of Latin America’s imported goods fell 36 percent, while China’s share increased 575 percent. Similarly, under the North American Free Trade Agreement’s (NAFTA) first 20 years, the U.S.-produced share of Mexico’s imported goods dropped from almost 70 percent to less than 50 percent, while China’s share rose more than 2,600 percent. Similarly, after hysterical claims that Japan would seize U.S. market share in Latin America by signing its own free trade agreements unless the United States approved NAFTA and other FTAs, such Japanese FTAs were signed anyway.
  • The TPP will not “contain” or isolate China: U.S. officials have repeatedly welcomed China as a prospective TPP member. How can the TPP isolate China if China can become a member? Administration officials note that China could join only if it agreed to the TPP’s rules, but those rules would give Chinese products duty-free access to the U.S. market and new foreign investor rights and privileges that would enhance China’s relative economic might within the United States. This may explain China’s statements of increased interest in joining the TPP. The TPP will not empower Pacific allies to act as a bulwark against Chinese influence, given that many of those nations see China as a partner. The report cites officials from TPP countries stating that if the TPP were to become a China-containment tool, they would no longer participate in TPP negotiations. 
  • The TPP is not a vehicle to impose “our” rules vs. China imposing “theirs”: The TPP’s actual terms undercut the false, but conveniently scary, dichotomy posed as a choice between using TPP to impose “our” rules internationally or living with rules set by China. This argument presumes the TPP to represent “our” rules, but in fact many of the TPP’s terms reflect the narrow special interests of the 600 official U.S. corporate trade advisors that have shaped them. TPP investment rules would promote more U.S. job offshoring and further gut the U.S. manufacturing base that is essential for our national security and domestic infrastructure. TPP procurement rules would ban Buy American policies that reinvest our tax dollars to create economic growth and jobs at home. TPP service sector rules would raise our energy prices and undermine our energy independence and financial stability. TPP drug and copyright terms would raise health care costs and thwart innovation. The study summarizes a recent U.S. Department of Defense report that concludes that U.S. deindustrialization poses a threat to national security and our nation’s economic wellbeing.

TPP deal vs. kabuki checklist - to actually have a TPP deal, these issues must be resolved:

Continue reading "Administration Desperate to Announce Breakthrough on TPP in Japan, But Congress not Buying Economic or Foreign Policy Sales Pitch and Won’t Give Obama Fast Track" »

April 02, 2014

Data Debunk for USTR Froman’s Thursday Committee Hearing

In recent weeks, U.S. Trade Representative Michael Froman has begun making outlandish claims about past U.S. trade agreements. These claims are not supported by the official  U.S. government trade data. The Office of the U.S. Trade Representative’s (USTR) recent assertions that the North American Free Trade Agreement (NAFTA) has led to a U.S. trade surplus with Mexico and Canada and that the U.S.-Korea Free Trade Agreement (FTA) has increased U.S. manufacturing exports to Korea have been met with incredulity. These pacts’ recent anniversaries have spotlighted how the trade pact model on which the Trans-Pacific Partnership (TPP) is premised has led to massive trade deficits.

The premise that NAFTA would improve our trade balance was the basis for NAFTA proponents’ promises that the pact would create U.S. jobs. Many of the same government and industry sources made the same claims to sell the 2011 U.S.-Korea FTA. These pacts’ dismal outcomes – slow or even negative export growth, rising imports and burgeoning trade deficits – are intensifying congressional opposition to Fast Track authority for the TPP.

Rather than altering the trade agreement model to avoid repeating these outcomes, USTR appears intent on trying to change the data. To generate the outlandish claims about NAFTA and the Korea FTA, USTR employs a smorgasbord of data tricks to look out for in Froman’s testimony Thursday before the House Ways and Means Committee:

USTR’s Biggest Distortion: Counting Foreign-Made “Transshipped” Products as U.S. Exports

USTR’s primary data distortion is the decision not to use the official U.S. government trade data provided by the U.S. International Trade Commission (USITC).[i] Instead, USTR cites data that include what are called “re-exports.” These are goods made abroad that are simply shipped through the United States en route to a final destination. (The USTR figures would include as U.S. exports goods taken off a truck from Canada in California’s Port of Long Beach then shipped to their final destination in Korea, or goods shipped from China, unloaded in a California port and trucked to Mexico.) Each month, USITC removes re-exports, which do not support U.S. production jobs, from the raw data gathered by the Census Bureau.[ii] But USTR uses the uncorrected data, inflating the actual U.S. export figures.

  • Using the official USITC data, U.S. export growth to countries with which we do not have FTAs has been 30 percent faster than to our FTA partners over the past decade.[iii]
  • The USITC data show U.S. average monthly goods exports to Korea are down 11 percent, imports from Korea have increased and the U.S. average monthly trade deficit with Korea has swelled 47 percent since the enactment of the Korea FTA.[iv] The total U.S. trade deficit with Korea under the FTA’s second year is projected to be $8.6 billion higher than in the year before the deal.[v]  Using the administration’s current export-to-job ratio, this drop in net exports represents the loss of more than 46,000 U.S. jobs.[vi] However since the FTA, foreign-made re-exports passing through the United States en route to Korea are up 13 percent on a monthly average basis.[vii] By counting these foreign goods as U.S. exports, USTR artificially diminishes the dramatic drop in actual U.S. exports to Korea, and errantly claims gains in some sectors.
  • Using the USITC data, the 2013 U.S. goods trade balance with NAFTA nations was a deficit of $177 billion. The combined U.S. goods and services deficit with Mexico and Canada rose (in real, inflation-adjusted terms) from $9.7 billion in 1993 to $139.3 billion in 2012 (the year of comparison used by USTR).[viii] This NAFTA deficit increase of $129.5 billion, or 1,330 percent, represents hundreds of thousands of lost U.S. jobs.[ix]  But adding re-exports has had an increasingly distortionary effect on the true NAFTA deficit, allowing NAFTA proponents to make the 2013 NAFTA goods deficit of $177 billion look less than half as large. By incorporating re-exports, USTR claims in recent press materials: “U.S. total goods and private services trade balance with Canada countries (sic) shifted from a deficit of $2.9 billion in 1993 to roughly balance in 2012 (surplus of $37 million).” But after removing re-exports and adjusting for inflation, the actual total U.S. goods and services trade deficit with Canada increased from $16.9 billion in 1993 to $49.1 billion in 2012. That’s a deficit increase of $32.2 billion, or 191 percent. Similarly, USTR claims: “U.S. total goods and private services trade balance with Mexico countries shifted from a surplus of $4.6 billion in 1993 to a deficit of $49.4 billion in 2012.” But after removing re-exports and adjusting for inflation, the actual total U.S. goods and services trade deficit with Mexico changed from a $7.2 billion surplus in 1993 to a $90.1 billion deficit in 2012. That’s a $97.3 billion decline in the U.S. goods and services trade balance with Mexico.

We Still Have Big Deficits Without Fossil Fuels (And Corn Doesn’t Explain Korea Export Crash)

Despite USTR’s claim that our NAFTA deficit is all about fuel imports, the share of the U.S. NAFTA goods trade deficit that is comprised of petroleum, petroleum products and natural gas has declined under NAFTA, from 77 percent in 1993 to 53 percent in 2013, as we have faced a surge of imported manufactured and agricultural goods.[x] Even if one removes all of these “oil” categories from the balance, the remaining 2013 NAFTA goods trade deficit was $82.9 billion. The combined NAFTA goods and services deficit in 2012 minus oil was $38.3 billion. 

Similarly, with respect to the Korea FTA, USTR claims“[O]ur trade balance has been affected by decreases in corn and fossil fuel exports, changes that are due to the U.S. drought in 2012 and change in Korea’s energy mix.”[xi] But even discounting both corn and fossil fuels, U.S. monthly exports to Korea still fell under the FTA, and the monthly trade deficit with Korea still ballooned.[xii] USTR claims that corn and fossil fuels explain the entirety of the export downfall largely by using an ill-suited 2011 versus 2013 timeframe that omits 10 months of available data and relies on a less relevant pre-FTA baseline. Usage of this less accurate timeframe produces a greater drop in corn and fossil fuel exports, and a smaller decline in exports of all other goods, than has actually occurred under the FTA when comparing the year immediately preceding the FTA with the full set of available post-FTA data. It is not surprising that the dismal FTA record remains without these products, given that of the 15 U.S. sectors that export the most to Korea, 11 of them have experienced export declines under the FTA.[xiii] No product-specific anomalies can explain away what has been a broad-based downfall of U.S. exports to Korea since the pact went into effect.

Not Adjusting for Inflation Counts Increased Prices as an Increase in U.S. Exports

USTR also inflates U.S. exports to Korea by failing to adjust for price inflation. For instance, in its recent Korea FTA news release, USTR claims: “In the two years that this landmark agreement has been in effect … exports of U.S. manufactured goods to Korea have increased … Made-in-America manufactured goods still grew their sales in Korea by 3 percent.”[xiv] Simply adjusting for inflation alone completely erases USTR’s claim of growth in exports of U.S. manufactured goods to Korea under the FTA. That is, even if one includes the distortion of re-exports and uses USTR’s timeframe, U.S. exports to Korea of manufactured goods fell slightly under the FTA after properly accounting for price increases.[xv] If one removes the re-exports (i.e., uses the official USITC data) and looks at the actual months that the FTA has been in effect, U.S. monthly exports to Korea of manufactured goods have fallen 5 percent on average relative to the year before the deal took effect. The United States has lost an average of more than $150 million each month in manufactured goods exports to Korea under the FTA. Manufacturing sectors that provide critical shares of U.S. exports to Korea, such as machinery and computers/electronics, have experienced steep export declines under the FTA (11 percent and 12 percent respectively). In contrast, of the four critical manufacturing sectors that have seen increases in average monthly exports to Korea under the FTA, none has experienced an increase of greater than 2 percent.[xvi]

Cherry-Picking Small-Dollar Winning Sectors, Omitting Major Losers to Distract from Net Losses

In its Korea FTA press release, USTR claims: “U.S. exports of a wide range of agricultural products have seen significant gains. … There were also dramatic increases in U.S. exports of key agricultural products that benefit from reduced tariffs under KORUS, including dairy, wine, beer, soybean oil, fruits and nuts, among many others.”[xvii] But the losses in U.S. meat exports to Korea under the pact alone nearly cancel out the combined export gains for all agricultural sectors that USTR touts as winners (a monthly average loss of $20.1 million in meat exports versus a combined $24.7 million monthly average gain in exports of dairy, wine, beer, soybean oil, fruits and nuts).[xviii]Average monthly exports of all U.S. agricultural products to Korea have fallen 41 percent under the FTA in comparison to the year before the deal. Ignoring this overall result, USTR singles out fruit as a winning agricultural sector under the FTA. But U.S. monthly average exports to Korea of all fruits have increased by just $312,120 under the FTA. This 1 percent increase could hardly be described as “dramatic.” USTR also highlights wine, but U.S. monthly average exports of wine to Korea have increased by just $370,378 under the FTA.[xix] The amount of wine sold in an average six minutes in the United States is worth more ($402,415) than the gain in U.S. wine exports to Korea in an average month under the Korea FTA.[xx]

Such paltry gains pale in comparison to the more than $20 million lost on average under each month of the FTA in U.S. exports to Korea of meat – one of the sectors that the administration promised would be among the biggest beneficiaries of the Korea deal.[xxi] Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $442 million in poultry, pork and beef exports to Korea in the first 22 months of the FTA.[xxii]Since the FTA, U.S. average monthly exports of poultry to Korea have fallen 39 percent below the pre-FTA monthly average. U.S. poultry exports to Korea have been lower than the pre-FTA monthly level in every single month since the FTA’s implementation. U.S. average monthly exports of pork to Korea since the FTA have fallen 34 percent below the pre-FTA monthly average, and U.S. average monthly exports of beef to Korea have fallen 6 percent below the pre-FTA monthly average.[xxiii]

Omissions and Data Tricks to Hide Massive Auto Sector Deficit Growth Under the Korea FTA

The USTR data on U.S. automotive trade with Korea under the FTA is based on a series of tricks. USTR claims: “Since the Korea agreement went into effect, U.S. exports to Korea are up for our manufactured goods, including autos … overall U.S. passenger vehicle exports to Korea increased 80 percent compared to 2011, and sales of ‘Detroit 3’ vehicles are up 40 percent.”[xxiv] In fact, exports to Korea of U.S.-produced Fords, Chryslers and General Motors vehicles increased by just 3,400 vehicles from 2011 to 2013.[xxv]  But given that pre-FTA exports of “Detroit 3” vehicles was also tiny – 8,252 vehicles – USTR can express the small increase of 3,400 cars as a “40 percent” gain. Meanwhile, 125,000 more Korean-produced Hyundais and Kias were imported and sold in the United States in 2013 (after the FTA) than in 2011 (before the FTA), when Hyundai and Kia imports already topped 1.1 million vehicles.[xxvi]

And USTR’s claim of an “80 percent” rise in passenger vehicle exports, in addition to being inflated by increases in re-exports and prices, omits the export of auto parts, which constitute the majority of the value of U.S. automotive exports to Korea. U.S. average monthly exports of auto parts to Korea have fallen 12 percent under the FTA, offsetting much of the rise in passenger vehicle exports.[xxvii] After including auto parts, excluding foreign-made re-exports, using the more FTA-relevant timeframe and adjusting for inflation, U.S. average monthly automotive exports to Korea have increased by only 12 percent under the FTA, while average monthly automotive imports from Korea have risen by 19 percent.

The disparity is even starker in dollar terms: While U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, average monthly automotive imports from Korea have soared by $263 million under the deal. The tiny gains in U.S. exports have been swamped by a surge in auto imports from Korea that the administration promised would not occur because of its additional FTA auto sector measure negotiated in 2011. In January 2014, monthly automotive imports from Korea topped $2 billion for the first time on record. The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea.[xxviii]

Using a Selective Time Frame to Measure the Outcomes of the Korea FTA

Rather than compare the post-Korea-FTA period to the 12 months prior to the FTA’s implementation (i.e., April 2011 through March 2012), USTR uses calendar year 2011 as a baseline. This means that USTR omits data from the three months immediately prior to the FTA’s 2012 implementation (January through March 2012) and replaces it with data from the same three months in 2011. This difference matters, since U.S. exports to Korea in the first three months of 2011 were 9 percent lower than in the first three months of 2012, giving USTR a lower baseline of comparison that makes the downfall in U.S. exports look less severe than if using the three most recent pre-FTA months.[xxix] In addition, USTR uses only calendar year 2013 to assess the FTA’s record, omitting 10 months of available post-FTA data (April through December 2012 and January 2014). While a comparison between 2011 and 2013 could serve as a second-best approximation in the absence of more precise data, the more FTA-relevant monthly data is readily available.

 


[i] USITC data can be found at U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb.” Available at: http://dataweb.usitc.gov/.

[ii] Census Bureau data can be found at U.S. Census Bureau, “U.S. International Trade Data,” U.S. Department of Commerce. Available at: http://www.census.gov/foreign-trade/data/.

[iii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed February 11, 2014. Available at: http://dataweb.usitc.gov/. The statistic is a comparison of the average annual growth rate of the combined inflation-adjusted exports of all non-FTA partner countries versus that of all FTA partner countries from 2004 through 2013 (adjustments have been made to account for the changes in these two categories as  non-FTA partners have become FTA partners). All data in this memo is inflation-adjusted according to the CPI-U-RS index of the U.S. Bureau of Labor Statistics (which provides indices up through 2012) and the online inflation calculator of the U.S. Bureau of Labor of Statistics (which provides an approximate index for 2013). U.S. Bureau of Labor Statistics, “Consumer Price Index Research Series Using Current Methods (CPI-U-RS),” U.S. Department of Labor, updated March 29, 2013. Available at: http://www.bls.gov/cpi/cpiursai1978_2012.pdf.  U.S. Bureau of Labor Statistics, “CPI Inflation Calculator,” U.S. Department of Labor, accessed March 10, 2014. Available at: http://www.bls.gov/data/inflation_calculator.htm.

[iv] In this paragraph and throughout, figures concerning average monthly trade levels with Korea compare data from the year before the FTA’s implementation and from the 22 post-implementation months for which data are available. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[v] The projection for export losses under the FTA’s first two years assumes that trends during the FTA’s first 22 months continue for the remaining two months for which data are not yet available. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[vi] Michael Froman, “2014 Trade Policy Agenda and 2013 Annual Report of the President of the United States on the Trade Agreements Program,” Office of the U.S. Trade Representative, March 2014, at 2. Available at: http://www.ustr.gov/sites/default/files/2014%20Trade%20Policy%20Agenda%20and%202013%20Annual%20Report.pdf.    

[vii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[viii] Goods trade data in this bullet point come from U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed February 20, 2014. Available at: http://dataweb.usitc.gov. Services trade data in this bullet point come from U.S. Bureau of Economic Analysis, “International Data: Table 12: U.S. International Transactions, by Area,” accessed February 20, 2014. Available at: http://www.bea.gov/iTable/iTable.cfm?ReqID=6&step=1#reqid=6&step=1&isuri=1.

[ix] See Robert Scott, “Heading South: U.S.-Mexico trade and job displacement after NAFTA,” Economic Policy Institute, May 3, 2011. Available at: http://www.epi.org/publication/heading_south_u-s-mexico_trade_and_job_displacement_after_nafta1/.

[x] Trade in petroleum, petroleum products and natural gas is defined as NAICS 2111 and 3241 for data since 1997 – when NAICS replaced the SIC classification system – and SIC 131, 291, 295, and 299 for data before 1997.

[xi] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xii] Corn is defined as NAICS 111150 and fossil fuels are defined as NAICS 211111, 211112, 212112 and 212113. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xiii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xiv] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xv] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xvi] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xvii] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xviii] “Meat” includes beef (defined as SITC 011), pork (defined as SITC 0122, 0161 and 0175) and poultry (defined as SITC 0123 and 0174). Dairy is defined as NAICS 2111511, 311512, 311513, 311514 and 311520. Wine is defined as NAICS 312130. Beer is defined as NAICS 312120. Soybean oil is defined as NAICS 311222 and 311224. Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Nuts are defined as NAICS 111335 and 111992. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 21, 2014.  Available at: http://dataweb.usitc.gov/.

[xix] Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Wine is defined as NAICS 312130. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xx] The statistic is based on an estimated $34.6 billion in wine sales in the United States in 2012, adjusted for inflation. The Wine Institute, “2012 California and U.S. Wine Sales,” 2013, accessed March 21, 2014. Available at: https://www.wineinstitute.org/resources/statistics/article697.

[xxi] “Meat” includes beef (defined as SITC 011), pork (defined as SITC 0122, 0161 and 0175) and poultry (defined as SITC 0123 and 0174). Dairy is defined as NAICS 2111511, 311512, 311513, 311514 and 311520. Wine is defined as NAICS 312130. Beer is defined as NAICS 312120. Soybean oil is defined as NAICS 311222 and 311224. Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Nuts are defined as NAICS 111335 and 111992. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 21, 2014.  Available at: http://dataweb.usitc.gov/.

[xxii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxiii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxiv] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xxv] Korea Automobile Importers & Distributors Association, “New Registration,” 2014, accessed March 10, 2014. Available at: http://www.kaida.co.kr/en/statistics/NewRegistList.do.

[xxvi] Timothy Cain, “Hyundai-Kia Sales Figures,” GoodCarBadCar.net, 2014, accessed March 10, 2014. Available at: http://www.goodcarbadcar.net/2012/10/hyundai-kia-group-sales-figures.html.

[xxvii] Passenger vehicles are defined as code 300 and 301 in the one-digit End Use classification system, while auto parts are defined as 302. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxviii] Total automotive exports and imports are defined as code 3 in the one-digit End Use classification system. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxix] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

March 12, 2014

On 2nd Anniversary of Korea FTA, U.S. Exports Down, Imports Up and Trade Deficit Balloons, Fueling Congressional TPP Skepticism

Export Decline Hits U.S. Farmers and Auto Workers Particularly Hard, Dismal Outcomes of Pact Used as TPP Template Will Bolster Opposition to Obama Bid for Fast Track Authority

Two years after the implementation of the U.S.-Korea Free Trade Agreement (FTA), government data reveal that the Obama administration’s promises that the pact would expand U.S. exports and create U.S. jobs are exactly opposite of the actual outcomes: a downfall in U.S. exports to Korea, rising imports and a surge in the U.S. trade deficit with Korea. Using the administration’s export-to-job ratio, the estimated drop in net U.S. exports to Korea in the FTA’s first two years represents the loss of more than 46,600 U.S. jobs.

The damaging Korea FTA record, detailed in a new Public Citizen report, undermines the administration’s attempt to use the same failed export growth promises to sell an already skeptical Congress on Fast Track authority for the Trans-Pacific Partnership (TPP), a sweeping deal for which the Korea FTA was the template.

Contrary to the administration’s promise that the Korea FTA would mean “more exports, more jobs”:

  • U.S. goods exports to Korea have fallen below the pre-FTA average monthly level for 21 out of 22 months since the deal took effect.  See graph below.
  • The United States has lost an average of $385 million each month in exports to Korea, given an 11 percent decline in the average monthly export level in comparison to the year before the deal.
  • The United States lost an estimated, cumulative $9.2 billion in exports to Korea under the FTA’s first two years, compared with the exports that would have been achieved at the pre-FTA level.
  • Average monthly exports of U.S. agricultural products to Korea have fallen 41 percent.
  • The average monthly U.S. automotive trade deficit with Korea has grown 19 percent.

The U.S. exports downfall is particularly concerning given that Korea’s overall imports from all countries increased by 2 percent over the past two years (from 2011 to 2013).

PC Korea FTA Graph 1

The average monthly trade deficit with Korea has ballooned 47 percent in comparison to the year before the deal. As U.S. exports to Korea have declined under the FTA, average monthly imports from Korea have risen four percent. The total U.S. trade deficit with Korea under the FTA’s just-completed second year is projected to be $8.6 billion higher than in the year before the deal, assuming that trends during the FTA’s first 22 months continue for the remaining two months for which data is not yet available.

Meanwhile, U.S. services exports to Korea have slowed under the FTA. While U.S. services exports to Korea increased at an average quarterly rate of 3 percent in the year before the FTA took effect, the average quarterly growth rate has fallen to 2.3 percent since the deal’s enactment – a 24 percent drop.

“Most Americans won’t be surprised that another NAFTA-style deal is causing damage, but it’s stunning that the administration thinks the public and Congress won’t notice if it recycles the promises used to sell the Korea pact – now proven empty – to push a Trans-Pacific deal that is literally based on the Korea FTA text,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The new evidence of the Korea FTA’s damaging record is certain to make it even more difficult for the Obama administration to get Congress to delegate its constitutional trade authority via Fast Track for the TPP.”

The decline in U.S. exports under the Korea FTA contributed to an overall zero percent growth in U.S. exports in 2013, rendering virtually impossible Obama’s stated goal to double exports by the end of 2014. At the export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054. While the Korea pact is the only U.S. FTA that has led to an actual decline in U.S exports, the overall growth of U.S. exports to nations that are not FTA partners has exceeded combined U.S. export growth to U.S. FTA partners by 30 percent over the past decade.

“The data simply do not support the Obama administration’s tired pitch that more FTAs will bring more exports,” said Wallach. “Faced with falling exports and rising, job-displacing deficits under existing FTAs, the administration needs to find a new model, not to repackage an old one that patently failed.”

The Korea FTA has produced very few winners; since the FTA took effect, U.S. average monthly exports to Korea have fallen in 11 of the 15 sectors that export the most to Korea, relative to the year before the FTA (see graph below). And while losing sectors have faced relatively steep export declines (e.g. a 12 percent drop in computer and electronics exports, a 30 percent drop in mineral and ore exports), none of the winning sectors has experienced an average monthly export increase of greater than two percent. Ironically, many sectors that the administration promised would be the biggest beneficiaries of the Korea FTA have been some of the deal’s largest losers.

PC Korea FTA Graph 2
AGRICULTURE: While the administration argued for passage of the FTA in 2011 by claiming, “The U.S.-Korea trade agreement creates new opportunities for U.S. farmers, ranchers and food processors seeking to export to Korea’s 49 million consumers,” average monthly exports of U.S. agricultural products to Korea have fallen 41 percent under the FTA.

  • U.S. average monthly poultry exports to Korea have fallen 39 percent.
  • U.S. average monthly pork exports to Korea have fallen 34 percent.
  • U.S. average monthly beef exports to Korea have fallen 6 percent.

Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $442 million in poultry, pork and beef exports to Korea in the first 22 months of the Korea deal – a loss of more than $20 million in meat exports every month.

AUTOS AND AUTO PARTS: The administration also promised the Korea FTA would bring “more job-creating export opportunities in a more open and fair Korean market for America’s auto companies and auto workers,” while a special safeguard would “ensure… that the American industry does not suffer from harmful surges in Korean auto imports due to this agreement.” The U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, but the average monthly automotive imports from Korea have soared by $263 million under the deal – a 19 percent increase. So while U.S. auto exports have risen very modestly under the FTA, those tiny gains have been swamped by a surge in auto imports from Korea that the administration promised would not occur under the FTA.

  • In January 2014, monthly auto imports from Korea topped $2 billion for the first time on record.
  • About 125,000 more Korean-produced Hyundais and Kias were imported and sold in the United States in 2013 (after the FTA) than in 2011 (before the FTA).
  • Sales of U.S.-produced Fords, Chryslers and Cadillacs in Korea increased by just 3,400 vehicles.

The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea. The Obama administration has sought to distract from this dismal result by touting the percentage increase in U.S. auto sales to Korea. This allows the sale of a small number of cars beyond the small pre-FTA base of sales to appear to be a significant gain when in fact it is not.

Read the new Public Citizen report on the Korea FTA record.

March 04, 2014

The 2014 Trade Agenda: What Hole? Keep Digging.

The President’s 2014 Trade Policy Agenda, released today by the Office of the U.S. Trade Representative (USTR), violates the first law of holes: when you are in one, stop digging. Instead, it sticks to the first rule of PR, when the data is against you (e.g. when export growth under last year's trade agenda amounted to zero percent), distract. 

In the face of large U.S. trade deficits with Free Trade Agreement (FTA) partners, the report declines to count imports and counts exports when convenient. It tries to camouflage the damaging track record of past deals (“forget about the hole”) to sell to the U.S. Congress and public yet another round of FTAs (“just keep digging”). 

The report states that the administration is “working with Congress” to gain Fast Track authority to enact two sweeping and controversial new FTAs – the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA). It neglects to mention that, having seen the hole created by past Fast Tracked FTAs, members of Congress have stated in overwhelming, bipartisan fashion that they have no interest in handing the administration another shovel labeled “Fast Track.”

Much of the 2014 agenda is a copy and paste of the 2013 agenda, reiterating USTR’s stock set of talking points, such as the tired, counterfactual promise that a more-of-the-same trade policy will boost exports. In 2013, this is how USTR put it: “The Obama Administration’s trade policy helps U.S. exporters gain access to billions of customers beyond our borders to support economic growth in the United States and in markets worldwide.” This year they invert the sentence: “We seek to…strengthen our economy by…negotiating high standard agreements that help U.S. exporters gain access to billions of customers beyond our borders.”

But repetition does not make the argument any truer. Under the array of FTAs that have served as a template for the Obama administration’s trade policy agenda, U.S. exports grew by a grand total of 0% last year. The year before that, they grew by 2%.  At the abysmal export growth rate seen in the last two years, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule. (The authors of this year’s Trade Policy Agenda opt not to highlight the ill-fated goal.)  

Also omitted is the inconvenient fact that the overall growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  

Even more glaring is the report's lack of any mention of how exports to Korea have fared under the Korea FTA, which has its second anniversary in less than two weeks, despite detailing export performance to other countries. Under the Korea FTA, which served as the administration’s opening offer for the TPP negotiations, U.S. goods exports to Korea have fallen below the average monthly level seen before the FTA for 20 out of 21 months. Rather than deal with this reality, the report tries to hide it.

The data simply do not support the oft-parroted pitch that more-of-the-same FTAs are the ticket to boosting exports. 

But data is not the report’s strong suit. In defending existing deals like the North American Free Trade Agreement (NAFTA) and the Korea FTA so as to advocate for expanding on their model via the TPP and TAFTA, the report simply ignores the deals' track records. For example, on manufacturing, the report states: “to support the growth of advanced manufacturing and associated high-quality jobs here at home, in 2014 the Obama Administration will continue to pursue trade policies aimed at keeping American manufacturers competitive with their global peers.”

But official government data show that our manufacturing trade deficits have increased dramatically under the very trade policies that the administration vows to “continue to pursue.” Last year, we had a $52.4 billion manufacturing trade deficit with our 20 FTA partners. In 1993, before NAFTA was implemented and before 18 of these 20 countries had an FTA with the United States, we had a $30.1 billion manufacturing trade surplus with these same trade partners.  In the intervening 20 years, during which the United States implemented FTAs with all of these countries, the U.S. manufacturing trade balance with these trade partners fell by $82.6 billion. According to the administration’s own figures, that amounts to a loss of more than 446,000 U.S. jobs in manufacturing alone.

When directly addressing NAFTA, the report chooses to ignore one half of the trade flow equation and focus only on exports. It fails to mention that imports from Mexico and Canada under NAFTA have swamped exports, causing the NAFTA trade deficit to soar 556 percent, reaching $177 billion last year.

And while the report claims that “the agricultural sector has been a bright spot for exports,” that has not been the case under recent FTAs. The average annual U.S. agricultural deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million last year, almost three times the pre-NAFTA level. Over the last decade, U.S. food exports to Mexico and Canada actually fell slightly while U.S. food imports from Mexico and Canada more than doubled.

Food exports have fared even worse under the Korea FTA – in the first year of the deal, U.S. beef, pork, and poultry exports to Korea fell by 8 percent, 24 percent, and 41 percent respectively. 

While ignoring the sluggish exports and deep deficits occurring under existing FTAs (“what hole?”), the 2014 Trade Policy Agenda advocates for the TPP by claiming it would deliver where its predecessors have failed. The report states, “TPP will expand U.S. trade with dynamic economies throughout the rapidly growing Asia-Pacific region.” 

Even if one ignores the disappointing export legacy of the deals serving as the TPP’s template, this sales pitch comes across as hollow. The United States already has FTAs with six of the 11 TPP negotiating countries, for which increased market access is largely not up for negotiation. Of the remaining five TPP countries, Japan is the only major economy, and its growth rate last year was a tepid one percent – hardly the sought-after “dynamism.” The remaining four countries include Vietnam (with an annual per capita income of $1,550), Malaysia (with an annual per capita income of $9,820), New Zealand (with a population the size of metro D.C.), and Brunei (with a population the size of Huntsville, Alabama). Are these the markets on which the administration’s history-defying promise of TPP-led export growth hinge? 

Members of Congress aren’t buying it. Most House Democrats and a sizeable bloc of House Republicans have said no to Fast Tracking the TPP. House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid have also voiced their opposition. So has 62% of the U.S. voting public. Their message to the administration is simple: we’re in a hole. Stop asking for shovels. Find a ladder. 

February 25, 2014

TPP Talks Fizzle Again under Broad Opposition

Another high-level Trans-Pacific Partnership (TPP) meeting has fizzled with no deal.  The talks have missed a succession of deadlines due to opposition from negotiating countries to corporate-backed U.S. demands that would increase the cost of medicines, restrict financial stability measures, and empower corporations to challenge health and environmental safeguards.  Back at home, the administration's attempt to Fast Track the TPP through Congress suffers from overwhelming congressional and public opposition.  

Facing international and domestic resistance, and having already missed deadlines to seal a deal last October and December, TPP trade ministers refrained from naming another deadline after finishing negotiations in Singapore today, stating only that they hope for a deal "as soon as possible."   

Below are statements from members of Congress, Public Citizen, and the Teamsters on the reasons behind the mounting opposition to the beleaguered attempt to Fast Track the TPP. 

.

Statement of Reps. Louise Slaughter (D-NY), Rosa DeLauro (D-CT) and George Miller (D-CA) 

“To borrow terminology being used by the negotiators in Singapore, there is a “considerable gap” between what is being proposed in the TPP and what the American people and their elected representatives in Congress will allow. Members of Congress were elected to create and protect jobs – not send them overseas by fast-tracking another flawed trade agreement. Twenty years and a million lost jobs after NAFTA, members of Congress and their constituents are skeptical of another trade agreement negotiated in secret that threatens American manufacturing jobs. Recent polling shows that three out of five Americans oppose granting the administration fast-track authority to push through new trade deals.”                                                                         

.                                                             

 Statement of Rep. Charles Rangel (D-NY) 

Congressman Charles B. Rangel, Ranking Member of the Ways and Means Subcommittee on Trade, issued the following statement in response to the Camp, Baucus, Hatch Trade Promotion Authority (TPA) proposal:  "The Trade Promotion Authority Bill introduced by Senators Baucus and Hatch and Representative Camp falls far short of adequately replacing the failed 2002 TPA model.  In 2007, I worked to develop the "May 10 Agreement" which included the negotiating objectives of labor, environmental and access to medicine provisions. This was not included in the Baucus, Hatch, and Camp proposal.  I will not support their proposal.  As the Ranking Member on the Ways and Means Trade Subcommittee, I have expressed my concerns to the Administration and directly to the U. S. Trade Representative Ambassador Michael Froman regarding the outstanding issues, which include labor rights, environmental protections, access to medicines in developing Countries, currency manipulation, food safety measures, Japan's agriculture and automotive sector, and state owned enterprises, to name just a few.  Globalization has intensified dramatically; its impact on American businesses and workers has been profound and major new issues have proliferated.  We must develop legislation that addresses these issues, and the proposed TPA  clearly fails to do this."   

.

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

“The spotlight on the Japan-U.S. market access deadlock is obscuring the broader reality that deep divides remain on many TPP chapters while opposition to TPP and Fast Track authority is growing steadily in the U.S. Congress and public.

Other TPP countries remain opposed to outrageous U.S. demands on behalf of corporate interests to extend medicine patents and other terms that would raise medicine costs, ban the use of capital controls and other financial safeguards, limit Internet freedom and expand the scope of the investor-state extrajudicial tribunal system where domestic public interest laws can be attacked by foreign firms. If such terms were included, it would further increase U.S. public and congressional opposition to TPP.

U.S. proposals for enforceable labor and environmental standards and disciplines on state owned enterprise face continuing opposition from other TPP nations, but the absence of such terms would make U.S. congressional approval of the TPP improbable.

U.S. negotiators have not even raised the demand from 60 U.S. Senators and 230 Representatives that TPP must include enforceable disciplines against currency manipulation, yet a TPP without this will be dead on arrival in Congress whether or not there is Fast Track.”

.

 Statement of James P. Hoffa, General President of the International Brotherhood of Teamsters

Latest TPP News Is Nothing to Celebrate for U.S. Workers 

Any Agreements Struck Won’t Help Save American Jobs, Reduce Trade Deficits

The following is a statement from Teamsters General President James P. Hoffa on the ministerial declaration made today in the wake of the latest Trans-Pacific Partnership (TPP) meetings concluding in Singapore:

“While negotiators want to tout minor progress made during these latest TPP negotiations, the fact is it’s really just Groundhog Day,” Hoffa said. “We’ve heard this story before, and none of it will help create more Americans jobs, stop currency manipulation or keep our food and environment safe. Workers would be no better off from the TPP today than they would’ve been yesterday.

“If negotiators are actually close to closing the deal on TPP, now would be a good time to release the full text of the agreement to the media and the public,” he continued. “It’s time to lay this deal on the table so all can see it.”

February 21, 2014

Administration Desperate to Announce Deal at TPP Ministerial, But What Is a Real Deal?

What Is a Real TPP Deal Versus Kabuki Aimed at Reviving Obama’s Fast Track Push and Framing His Asia Visit?  Public Citizen Publishes Checklist of Outstanding TPP Issues That Require Resolution for a Deal to Be Made

Familiarity with kabuki theatre may be useful in interpreting the outcomes of the  high-level Trans-Pacific Partnership (TPP) meeting that starts Feb. 22 in Singapore as U.S. officials push for an announcement of a “deal” with the hope of reviving the administration’s quest for Fast Track trade authority and setting the stage for President Barack Obama’s April 2014 Asia trip, Public Citizen said today.

“There is a sense that whether or not any real deal is finalized, there may be an announcement of one, if only to portray the talks as not unraveling despite growing opposition to the TPP in some of the countries involved,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “An announcement also could be a ploy to try to pressure Congress on trade authority and maximize President Obama’s leverage when he visits Japan.”

A bilateral U.S-Japan ministerial meeting last weekend failed to break a deadlock on sensitive agricultural and auto market access issues. Other TPP nations are loath to consider tradeoffs relating to U.S. demands on medicine patents, copyright, state-owned enterprises, financial regulation and other issues on which they face considerable domestic political liability without knowing what market access gains they may achieve in return. A TPP ministerial slated for January was postponed because of the market access deadlock.

“People who follow the TPP closely are baffled about why this meeting is happening,” said Wallach. “Either it is an attempt to improve the optics surrounding the beleaguered talks by announcing some deal, whether or not one is done, or they are afraid that already having postponed this ministers’ meeting once, canceling it would signal that the talks were unraveling.”

Deal vs. kabuki checklist: To actually have a TPP deal, these issues must be resolved:

  • Disciplines Against Currency Manipulation

A TPP without binding currency provisions could be dead on arrival in Congress. The other TPP nations know this but still oppose such terms. While 230 members of the U.S. House of Representatives and 60 U.S. senators have written to Obama demanding currency manipulation disciplines in the TPP, U.S. negotiators haven’t initiated negotiations on this, much less secured terms. Among others, U.S. Sen. Lindsey Graham (R-S.C.), a prominent supporter of past pacts, announced he would oppose the TPP if it does not include enforceable currency disciplines.

  • Enforceable Labor and Environmental Standards

As a January text leak revealed, all other TPP nations oppose many TPP Environment Chapter terms that the United States demands. This includes obligations that, if nations fail to enforce certain environmental agreements that they have signed, they will face TPP enforcement and trade sanctions. Other U.S. bottom lines that face unified opposition are a ban on trade in illegally harvested timber and endangered species, with violations subject to trade sanctions, and enforceable disciplines on fisheries subsidies. Among the TPP countries are those that have led unwavering opposition to disciplines on fishery subsidies, including in the context of the World Trade Organization. More broadly, the other countries have to date rejected the U.S. demand that both the environment and labor chapters be enforceable and subject to the same dispute resolution system as other TPP chapters. These are terms that Congress forced President George W. Bush to include in his pacts. If the Obama administration rolls back the labor and environmental terms included in Bush-signed agreements, it will lose almost all Democratic congressional support for the TPP. In addition, if the labor standards were enforceable, it remains unresolved how the TPP could include Vietnam, one of four countries cited by the Department of Labor for using both child and forced labor in apparel production.

Continue reading "Administration Desperate to Announce Deal at TPP Ministerial, But What Is a Real Deal?" »

February 19, 2014

Fact-checking Froman: The Top 10 Myths Used by Obama’s Top Trade Official

U.S. Trade Representative Michael Froman tried in a speech yesterday to defend the Obama administration’s beleaguered trade policy agenda: the controversial Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA) pacts and an unpopular push to Fast Track those sweeping deals through Congress.  The list of those publicly opposing the Fast Track push includes most House Democrats, a sizeable bloc of House Republicans, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid, and 62% of the U.S. voting public

In attempt to justify the administration’s polemical pacts, Froman resorted to some statements of dubious veracity, ranging from half-truths to outright mistruths.  To set the record straight, here are the top 10 Froman fables, followed by inconvenient facts that undercut his assertions and help explain the widespread opposition to TPP, TAFTA, and Fast Track.

1. Access to affordable medicines

  • Froman:  “[In TPP] we’re working to find better ways to foster affordable access to medicines…” 

2. Income inequality

  • Froman:  “Our trade policy is a major lever for encouraging investment here at home in manufacturing, agriculture and services, creating more high-paying jobs and combating wage stagnation and income inequality.”
  • Fact:  First, study after study has shown no correlation between a country’s willingness to sign on to TPP-style pacts and its ability to attract foreign investment, casting doubt on Froman’s promise of a job-creating investment influx.  But more importantly, Froman opted to ignore a big part of why U.S. workers are currently enduring such acute levels of “wage stagnation and income inequality.”  He did not mention the academic consensus that status quo U.S. trade policy, which the TPP would expand, has contributed significantly to the historic rise in U.S. income inequality.  The only debate has been the extent of trade’s inequality-exacerbating impact.  A recent study estimates that trade flows have been responsible for more than 90% of the rise in income inequality occurring since 1995, a period characterized by trade pacts that have incentivized the offshoring of decently-paid U.S. jobs and forced U.S. workers to compete with poorly-paid workers abroad.  How can the TPP, a proposed expansion of the trade policies that have exacerbated inequality, now be expected to ameliorate inequality? 

3. Internet freedom

  • Froman:  “I’ve heard some critics suggest that TPP is in some way related to SOPA [the Stop Online Piracy Act].  Don’t believe it.  It just isn’t true….”
  • Fact:  Froman’s attempt to assuage fears of a TPP-provided backdoor to SOPA-like limits on Internet freedom would be more convincing if a) he offered details beyond “it just isn’t true,” or b) if his statement didn’t directly contradict leaked TPP texts.  A November leak of the draft TPP intellectual property chapter revealed, for example, that the U.S. is proposing draconian copyright liability rules for Internet service providers that, like SOPA, threaten to curtail Internet users’ free speech.  Indeed, while nearly all other TPP countries have agreed to a proposed provision to limit Internet service providers’ liability, the United States is one of two countries to oppose such flexibility.

4. Corporate trade advisors

  • Froman:  “Our cleared advisors do include representatives from the private sector… [but] they [also] include representatives from every major labor union, public health groups…environmental groups…as well as development NGOs...” 
  • Froman:  “I’m pleased to announce that we are upgrading our advisory system to provide a new forum for experts on issues like public health, development and consumer safety.  A new Public Interest Trade Advisory Committee, or PTAC, will join the Labor Advisory Committee and the Trade and Environment Policy Advisory Committees to provide cross-cutting platforms for input in the negotiations.”
  • Fact:  Froman’s announcement of a new “public interest” committee – a response to the outcry over the vast imbalance of this corporate-dominated advisory system – offers too little, too late. Amid a slew of advisory committees exclusively devoted to narrow industry interests, the “public interest” now gets a single committee?  And how much influence will this committee have in changing the many core TPP provisions that threaten the public interest, now that the administration hopes to conclude TPP negotiations, which have been going on for four years, in the coming months?  Proposed as a TPP afterthought, this new committee comes across as window-dressing, not a genuine restructuring of a system that gives corporations insider access to an otherwise closed trade negotiation process.

5. Fast Track

  • Froman:  Fast Track is “the mechanism by which Congress has worked with every administration since 1974 to define its marching orders on what to negotiate…”  We can use Fast Track to “require[] future administrations to require labor, environmental and innovation and access to medicines [standards]…”
  • Fact:  Under Fast Track, Congress has not given the administration “marching orders” so much as marching suggestions.  Though Congress inserted non-binding “negotiating objectives” for U.S. pacts into past Fast Track bills – a model replicated in the unpopular current legislation to revive Fast Track for the TPP and TAFTA – Democratic and GOP presidents alike have historically ignored negotiating objectives included in Fast Track.  For example, Froman stated that Fast Track could be used to require particular labor standards.  But while the 1988 Fast Track used for the North American Free Trade Agreement (NAFTA) and the establishment of the World Trade Organization (WTO) included a negotiating objective on labor standards, neither pact included such terms.  The history shows that Fast-Tracked pacts that ignore Congress’ priorities can still be signed by the president (locking in the agreements’ contents) before being sent to Congress for an expedited, ex-post vote in which amendments are prohibited and debate is restricted. 

6. Currency manipulation

  • Froman:  In response to a question of whether currency manipulation is being addressed in the TPP: “We take the issue of exchange rates or currency manipulation very seriously as a matter of policy…”
  • Fact:  U.S. TPP negotiators have not even initiated negotiations on the inclusion of binding disciplines on currency manipulation, much less secured other countries’ commitment to those disciplines.  The U.S. inaction on currency in the TPP contrasts with letters signed by 230 Representatives (a majority) and 60 Senators (a supermajority) demanding the inclusion of currency manipulation disciplines in the TPP.  Unless U.S. negotiators take currency manipulation more “seriously,” the TPP may be dead on arrival in the U.S. Congress. 

7. Labor rights

  • Froman:  “In TPP we’re seeking to include disciplines requiring adherence to fundamental labor rights, including the right to organize and to collectively bargain, protections from child and forced labor and employment discrimination.” 
  • Fact:  The TPP includes Vietnam, a country that bans independent unions.  And Vietnam was recently red-listed by the Department of Labor as one of just four countries that use both child labor and forced labor in apparel production.  While Froman acknowledged such “serious challenges,” he did not explain how they would be resolved.  Is Vietnam going to change its fundamental labor laws so as to allow independent unions?  Is the government going to revamp its enforcement mechanisms so as to eliminate the country’s widespread child and forced labor?  Barring such sweeping changes, will the U.S. still sign on to a TPP that includes Vietnam?  

8. Environmental protection

  • Froman:  “We’re asking our trading partners to commit to effectively enforce environmental laws…”
  • Fact:  While Froman touted several provisions in the draft TPP environment chapter as requiring enforcement of domestic environmental laws, he didn’t mention the draft TPP investment chapter that would empower foreign corporations to directly challenge those laws before international tribunals if they felt the laws undermined their expected future profits.  Corporations have been increasingly using these extreme “investor-state” provisions under existing U.S. “free trade” agreements (FTAs) to attack domestic environmental policies, including a moratorium on fracking, renewable energy programs, and requirements to clean up oil pollution and industrial toxins.  Tribunals comprised of three private attorneys have already ordered taxpayers to pay hundreds of millions to foreign firms for such safeguards, arguing that they violate sweeping FTA-granted investor privileges.  Froman’s call for countries to enforce their environmental laws sounds hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement.

9. TPP secrecy

  • Froman:  “Let me make one thing absolutely clear: any member of Congress can see the negotiating text anytime they request it.”
  • Fact:  For three full years negotiations, members of Congress were not able to see the bracketed negotiating text of the TPP, a deal that would rewrite broad swaths of domestic U.S. policies.  Only after mounting outcry among members of Congress and the public about this astounding degree of secrecy did the administration begin sharing the negotiating text with members of Congress last June.  Even so, the administration still only provides TPP text access under restrictive terms for many members of Congress, such as requiring that technical staff not be present and forbidding the member of Congress from taking detailed notes or keeping a copy of the text.  Meanwhile, the U.S. public remains shut out, with the Obama administration refusing to make public any part of the TPP negotiating text.  Such secrecy falls short of the standard of transparency exhibited by the Bush administration, which published online the full negotiating text of the last similarly sweeping U.S. pact (the Free Trade Area of the Americas). 

10. Exports under FTAs

  • Froman:  “Under President Obama, U.S. exports have increased by 50%...”  “Today the post-crisis surge in exports we experienced over the last few years is beginning to recede.  And that’s why we’re working to open markets in the Asia-Pacific and in Europe...”
  • Fact:  U.S. exports grew by a grand total of 0% last year under the current “trade” pact model.   The year before that, they grew by 2%.  Most of the export growth Froman cites came early in Obama’s tenure as a predictable rebound from the global recession that followed the 2007-2008 financial crisis.  At the abysmal export growth rate seen since then, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule.  Froman ironically uses this export growth drop-off to argue for more-of-the-same trade policy (e.g. the TPP and TAFTA).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  Indeed, the overall growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  That’s not a solid basis from which to argue, in the name of exports, for yet another FTA. 

February 18, 2014

New York Times: Obama's TPP-Promoting Mexico Visit Is "Politically Fraught"

A New York Times story today on Obama's trip to Mexico tomorrow underscores a point we made last week: Obama's visit with the leaders of Mexico and Canada shines a spotlight on NAFTA's 20-year legacy of damage, casting a long shadow on Obama's unpopular attempt to Fast Track through Congress the Trans-Pacific Partnership (TPP), a sweeping pact built on the NAFTA model.  The Times reports:

The whirlwind visit...will offer Mr. Obama a chance to reassure his counterparts about his capacity to deliver at a time when he faces significant hurdles at home. Senator Harry Reid of Nevada and Representative Nancy Pelosi of California, the Democratic leaders in Congress, oppose legislation giving him authority similar to that of his predecessors to negotiate trade deals.

That ill-favored legislation is an attempt to revive Fast Track, the Nixon-era maneuver that empowered the executive branch to unilaterally negotiate and sign sweeping "trade" deals, locking in the contents before Congress got an expedited, no-amendments, limited-debate vote.  In addition to Pelosi and Reid, most House Democrats, a bloc of House Republicans, and about two out of three U.S. voters oppose the administration's current push to renew Fast Track so as to skid the controversial TPP through Congress. 

Among the reasons for the broad opposition to a Fast-Tracked TPP is the 20-year legacy of NAFTA.  For many people throughout North America, NAFTA's damage has been tangible: job losses, wage stagnation, displaced livelihoods, unsafe food, and exposure to toxins.  The Times cited our comprehensive report, released last week, that details the empirical record of NAFTA's damaging first twenty years: 

But even two decades after Nafta, debate still rages about its merits or drawbacks. Ms. Wallach’s group released a report last week compiling government data to argue that not only did Nafta’s promised benefits not materialize, but that many of the results were the opposite of what was promised, citing lost jobs, slower manufacturing and large trade deficits.

It is the lived experience of NAFTA, not an abstract ideology, that has prompted 53 percent of the U.S. public to say that we should “do whatever is necessary” to “renegotiate” or “leave” NAFTA.  Seeing such opposition, Obama promised to renegotiate NAFTA as a presidential candidate in 2008.  His current push to Fast Track the TPP represents a stunning flip-flop that threatens to replicate the very NAFTA-style damage that Obama criticized on the campaign trail.  Incredibly, Obama administration officials are now trying to sell the TPP as honoring Obama's renegotiation promise -- an Orwellian move that our own Lori Wallach has been quick to counter.  The Times reports: 

Michael B. Froman, the president’s trade representative, tried to reassure Democrats on Tuesday that the administration would be sensitive to their concerns about workplace and environmental standards in putting together the new trade pact, the Trans-Pacific Partnership, or TPP. He noted that as a candidate, Mr. Obama promised to renegotiate the North American Free Trade Agreement, known as Nafta.

“And that’s exactly what we’re doing in TPP, upgrading our trading relationships not only with Mexico and Canada but with nine other countries as well,” Mr. Froman said in a speech at the Center for American Progress, a liberal research group in Washington.

That assertion drew scorn from critics. “I don’t think that expanding on the Nafta model and extending it to nine more nations was what the unions, environmental groups or Democratic Party activists had in mind when Obama said he would renegotiate Nafta,” said Lori Wallach, a trade expert at Public Citizen, a liberal advocacy group.

The administration's TPP sales pitch is unlikely to convince the broad majority of the U.S. public that wants to renegotiate NAFTA and halt a NAFTA-expanding TPP.  If NAFTA's two-decade legacy of tumult and hardship makes it politically impossible to Fast Track through Congress the TPP, it would constitute a unique benefit of an otherwise damaging deal.

February 13, 2014

Obama Mexico Visit Spotlights 20-Year Legacy of Job Loss from NAFTA, the Pact on Which Obama’s TPP Is Modeled

New Public Citizen Report Catalogs the Negative NAFTA Outcomes That Are Fueling Opposition to Obama Push to Fast Track TPP

The 20-year record of job loss and trade deficits from the North American Free Trade Agreement (NAFTA) is haunting President Barack Obama’s efforts to obtain special trade authority to fast track the Trans-Pacific Partnership (TPP), said Public Citizen as it released a new report that comprehensively documents NAFTA’s outcomes. Next week’s presidential trip to Mexico for a long-scheduled “Three Amigos” U.S.-Mexico-Canada summit will raise public attention to NAFTA, on which the TPP is modeled, which is not good news for Obama’s push for the TPP and Fast Track.

Numerous polls show that opposition to NAFTA is among few issues that unite Americans across partisan and regional divides. Public ire about NAFTA’s legacy of job loss and policymakers’ concerns about two decades of huge NAFTA trade deficits have plagued the administration’s efforts to obtain Fast Track trade authority for the TPP. The TPP would expand the NAFTA model to more nations, including ultra-low-wage Vietnam. In the U.S. House of Representatives, most Democrats and a bloc of GOP have indicated opposition to Fast Track, as has Senate Majority Leader Harry Reid (D-Nev.).

Public Citizen’s new report, "NAFTA’s 20-Year Legacy and the Fate of the Trans-Pacific Partnership", compiles government data on NAFTA outcomes to detail the empirical record underlying the public and policymaker sentiment. It also shows that warnings issued by NAFTA boosters that a failure to pass NAFTA would result in foreign policy crises – rising Mexican migration and a neighboring nation devolving into a troubled narco-state – actually came to fruition in part because of NAFTA provisions that destroyed millions of rural Mexican livelihoods.

“Outside of corporate boardrooms and D.C. think tanks, Americans view NAFTA as a symbol of job loss and a cancer on the middle class,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “If you are a president battling to overcome bipartisan congressional skepticism about giving you special trade authority to fast track a massive 12-nation NAFTA expansion, it is really not helpful to be visiting Mexico for a summit of NAFTA-nation leaders.”

The Public Citizen report shows that not only did projections and promises made by NAFTA proponents not materialize, but many results are exactly the opposite. Such outcomes include a staggering $177 billion U.S. trade deficit with NAFTA partners Mexico and Canada, one million net U.S. jobs lost in NAFTA’s first decade alone, slower U.S. manufacturing and services export growth to Mexico and Canada, a doubling of immigration from Mexico, larger agricultural trade deficits with Mexico and Canada, and more than $360 million paid to corporations after “investor-state” tribunal attacks on, and rollbacks of, domestic public interest policies.

“The data have disproved the promises of more jobs and better wages, so bizarrely now NAFTA defenders argue the pact was a success because it expanded the volume of U.S. trade with the two countries without mentioning that this resulted in a 556 percent increase in our trade deficit with those countries, with a flood of new NAFTA imports wiping out hundreds of thousands of American jobs,” said Wallach.

The study tracks specific promises made by U.S. corporations like Chrysler, GE and Caterpillar to create specific numbers of American jobs if NAFTA was approved, and reveals government data showing that instead, they fired U.S. workers and moved operations to Mexico.

“The White House and the corporate lobby sold NAFTA with promises of export growth and job creation, but the actual data show the projections were at best wrong,” said Wallach. “The gulf between the gains promised for NAFTA and the damage that ensued means that the public and policymakers are not buying the same sales pitch now being made for theTPP and Fast Track.”

The report also documents how post-NAFTA trade and investment trends have contributed to middle-class pay cuts, which in turn contributed to growing income inequality; how since NAFTA, U.S. trade deficit growth with Mexico and Canada has been 50 percent higher than with countries not party to a U.S. Free Trade Agreement, and how U.S. manufacturing and services exports to Canada and Mexico have grown at less than half the pre-NAFTA rate.

Among the study’s findings:

  • Rather than creating in any year the 200,000 net jobs per year promised by former President Bill Clinton on the basis of Peterson Institute for International Economics projections, job loss from NAFTA began rapidly:
    • American manufacturing jobs were lost as U.S. firms used NAFTA’s foreign investor privileges to relocate production to Mexico, and as a new flood of NAFTA imports swamped gains in exports, creating a massive new trade deficit that equated to an estimated net loss of one million U.S. jobs by 2004. A small pre-NAFTA U.S. trade surplus of $2.5 billion with Mexico turned into a huge new deficit, and a pre-NAFTA $29.6 billion deficit with Canada exploded. The 2013 NAFTA deficit was $177 billion, representing a more than six-fold increase in the NAFTA deficit.
    • More than 845,000 specific U.S. workers, most in the manufacturing sector, have been certified for Trade Adjustment Assistance (TAA) since NAFTA because they lost their jobs due to offshoring to, or imports from, Canada and Mexico.The TAA program is narrow, covering only a subset of jobs lost at manufacturing facilities, and is difficult to qualify for. Thus, the TAA numbers significantly undercount NAFTA job loss. A TAA database searchable by congressional district, sector and more is available here.
    • According to the U.S. Bureau of Labor Statistics, two out of every three displaced manufacturing workers who were rehired in 2012 experienced a wage reduction, most of them taking a pay cut of greater than 20 percent.  
    • As increasing numbers of workers displaced from manufacturing jobs have joined those competing for non-offshorable, low-skill jobs in sectors such as hospitality and food service, real wages have also fallen in these sectors under NAFTA. The resulting downward pressure on middle-class wages has fueled recent growth in income inequality.
  • Scores of environmental and health laws have been challenged in foreign tribunals through NAFTA’s controversial investor-state dispute resolution system. More than $360 million in compensation to investors has been extracted from NAFTA governments via “investor-state” tribunal challenges against toxics bans, land-use rules, water and forestry policies, and more. More than $12.4 billion is pending in such NAFTA claims, including challenges of medicine patent policies, a fracking moratorium and a renewable energy program.
  • The average annual U.S. agricultural trade deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. U.S. beef imports from Mexico and Canada, for example, have risen 133 percent. Over the past decade,  total U.S. food exports to Mexico and Canada have actually fallen slightly while U.S. food imports from Mexico and Canada have more than doubled. This stands in stark contrast to projections that NAFTA would allow U.S. farmers to export their way to newfound wealth and farm income stability. Despite a 239 percent rise in food imports from Canada and Mexico under NAFTA, the average nominal U.S. price of food in the United States has jumped 67 percent since NAFTA.
  • The reductions in consumer goods prices that have materialized have not been sufficient to offset the losses to wages under NAFTA; U.S. workers without college degrees (63 percent of the workforce) likely have lost a net amount equal to 12.2 percent of their wages even after accounting for gains from cheaper goods.This net loss means a loss of more than $3,300 per year for a worker earning the median annual wage of $27,500.
  • The export of subsidized U.S. corn did increase under NAFTA’s first decade, destroying the livelihoods of more than one million Mexican campesino farmers and about 1.4 million additional Mexican workers whose livelihoods depended on agriculture. The desperate migration of those displaced from Mexico’s rural economy pushed down wages in Mexico’s border maquiladora factory zone and contributed to a doubling of Mexican immigration to the United States following NAFTA’s implementation.
  • Facing displacement, rising prices and stagnant wages, more than half the Mexican population, and more than 60 percent of the rural population, still falls below the poverty line, despite the promises that NAFTA would bring broad prosperity to Mexicans. Real wages in Mexico have fallen significantly below pre-NAFTA levels as price increases for basic consumer goods have exceeded wage increases. A minimum wage earner in Mexico today can buy 38 percent fewer consumer goods than on the day that NAFTA took effect. Despite promises that NAFTA would benefit Mexican consumers by granting access to cheaper imported products, the cost of basic consumer goods in Mexico has risen to seven times the pre-NAFTA level, while the minimum wage stands at only four times the pre-NAFTA level. Though the price paid to Mexican farmers for corn plummeted after NAFTA, the deregulated retail price of tortillas – Mexico’s staple food – shot up 279 percent in the pact’s first 10 years.

“Given NAFTA’s damaging outcomes, few of the corporations or think tanks that sold it as a boon for all of us in the 1990s like to talk about it, but the reality is that their promises failed, the opposite occurred and millions of people were severely harmed and now this legacy is derailing President Obama’s misguided push to expand NAFTA through the TPP,” said Wallach.

February 10, 2014

2013 Trade Data: USITC Corrections of Last Week’s Census Data Show Why Obama’s TPP, Fast Track Quest Is in Trouble

This weekend’s U.S. International Trade Commission (USITC) release of corrected 2013 year-end trade data goes a long way in explaining broad congressional and public opposition to the Obama administration’s trade agenda, which is premised on expanding to additional nations a model of trade pacts that the data show are failing most Americans. The data (graphs below) show:

A stunning decline in U.S. exports to Korea, a rise in imports from Korea, and a widening of the U.S. trade deficit under the Korea Free Trade Agreement (FTA).

  • In 20 out of 21 months since the Korea FTA took effect, U.S. goods exports to Korea have fallen below the average monthly level in the year before the deal.
  • U.S. average monthly exports to Korea since the FTA are 12 percent lower than the pre-FTA monthly average, while monthly imports from Korea are up 3 percent.
  • The monthly trade deficit with Korea has ballooned 49 percent compared to the pre-FTA level. These losses amount to tens of thousands of lost U.S. jobs.

Zero growth in U.S. goods exports relative to 2012, placing the United States decades behind in Obama’s stated goal to double exports in five years.

  • Total U.S. goods exports in 2013 actually dropped slightly from 2012 after adjusting for inflation, revealing a negative 0.1 percent growth rate.
  • The data show there is no chance to meet President Obama’s stated goal to double 2009’s exports by the end of this year. At the paltry 1 percent annual export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054, 40 years behind schedule.

A staggering U.S. trade deficit with Canada and Mexico after 20 years of the North American Free Trade Agreement (NAFTA).

  • The 2013 U.S. goods trade deficit with Mexico and Canada was $177 billion - a nearly seven-fold increase above the pre-NAFTA level, when the United States enjoyed a small trade surplus with Mexico and a modest deficit with Canada.
  • Even worse for U.S. workers, the non-oil NAFTA deficit has multiplied more than 13-fold, costing hundreds of thousands of U.S. jobs. Indeed, the share of the combined U.S. trade deficit with Mexico and Canada that is comprised of oil has declined since NAFTA.

Today’s USITC data correct last week’s Census Bureau trade data to remove re-exports – goods made elsewhere that pass through U.S. ports en route to final destinations. The corrected data only heaps further doubt on Obama’s prospects for getting Fast Track trade authority, now publicly opposed by most House Democrats, a sizeable bloc of House Republicans, and Senate Majority Leader Harry Reid. Obama has asked for Fast Track to push through Congress the Trans-Pacific Partnership (TPP), a controversial deal modeled on the Korea FTA and NAFTA.

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

“Many in Congress and the public oppose NAFTA-on-steroids “trade” agreements like the TPP and Fast Track authority to expedite them because past trade deals have proved to be so damaging. Just like today for TPP, in the past we were sold on glorious projections of these deals’ benefits but the actual data show an ever-larger drop in U.S. exports to Korea since that pact and a growing trade deficit, a massive NAFTA trade deficit and overall zero growth for U.S. goods exports relative to last year despite implementation of more-of-the-same trade deals. The White House and the corporate lobby are trying to sell Congress the TPP and Fast Track with the same old promises about export growth and job creation, but today’s data show that under Obama’s only past major trade deal with Korea on which TPP is modeled, U.S. exports dropped dramatically, imports soared and the U.S. lost more jobs to a trade agreement.”

Korea 2013.

Obama Exports 2013.

NAFTA 2013

January 30, 2014

Obama’s Free-Trade Conundrum

On Wednesday the New York Times published an op-ed by David Bonior, the House Democratic whip during the 1993 vote on NAFTA, on President Obama's stated support for Fast Tracking the NAFTA-style Trans-Pacific Partnership (TPP) through Congress.  Here are a few pertinent excerpts:

...Mr. Obama’s desire for fast-track authority on the T.P.P. and other agreements clashes with another priority in his [State of the Union] speech: reducing income inequality.

This month is the 20th anniversary of the North American Free Trade Agreement, which significantly eliminated tariffs and other trade barriers across the continent and has been used as a model for the T.P.P. Anyone looking for evidence on what this new agreement will do to income inequality in America needs to consider Nafta’s 20-year record.

While many analysts focus on the number of jobs lost from Nafta and similar pacts — and some estimates say upward of a million — the most significant effect has been a fundamental change in the composition of jobs available to the 63 percent of American workers without a college degree.

...

The Labor Department’s Trade Adjustment Assistance program...reads like a funeral program for the middle class. More than 845,000 workers have been certified under this one narrow and hard-to-qualify-for program as having lost their jobs because of offshoring of factories to, and growing imports from, Mexico and Canada since Nafta.

The result is downward pressure on middle-class wages as manufacturing workers are forced to compete with imports made by poorly paid workers abroad. According to the Bureau of Labor Statistics, nearly two out of every three displaced manufacturing workers who were rehired in 2012 saw wage reductions, most losing more than 20 percent.

The shift in employment from high-paying manufacturing jobs to low-paying service jobs has contributed to overall wage stagnation. The average American wage has grown less than 1 percent annually in real terms since Nafta, even as productivity grew three times faster.

But the decline in the wages of workers who lost a job to Nafta is only part of the story. They joined the glut of workers competing for low-skill jobs that cannot be done offshore in industries like hospitality and food service, forcing down real wages in these sectors as well.

And, for America’s remaining manufacturing workers, Nafta put downward pressure on wages by enabling employers to threaten to move jobs offshore during wage bargaining. A 1997 Cornell University study ordered by the Nafta Commission for Labor Cooperation found that as many as 62 percent of union drives faced employer threats to relocate abroad, and the factory shutdown rate following successful union certifications tripled after Nafta.

...

The Nafta data poses a significant challenge for President Obama. As he said on Tuesday, he wants to battle the plague of income inequality and he wants to expand the Nafta model with T.P.P. But he cannot have it both ways.

January 28, 2014

Obama Downplays Trade Authority, Trans-Pacific Partnership: Fleeting Mention Doesn’t Even Reference Recently Introduced Camp-Baucus Fast Track Bill

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

“Corporate interests were fiercely lobbying for President Obama to dedicate serious time in this State of the Union speech to pushing Fast Track and the Trans-Pacific Partnership in order to try to overcome broad congressional and public opposition to both, but instead he made only a passing reference that largely repeated his past statements.

With almost no House Democratic support for Fast Track, a bloc of GOP “no” votes and public opposition making congressional phones ring off the hook, high-profile treatment of the issue was considered necessary to revive any prospect that Fast Track could be passed in this Congress.

“Opposition has been growing to the massive Trans-Pacific Partnership deal. Implementing this  NAFTA-on-steroids deal would undermine Obama’s efforts to battle income inequality. It would be like drilling a hole in a boat just as you are trying to seal the cracks that are letting the water in.”

Background: President Obama’s references to trade in tonight’s speech were similar to his 2013 SOTU trade mentions: “To boost American exports, support American jobs and level the playing field in the growing markets of Asia, we intend to complete negotiations on a Trans-Pacific Partnership.  And tonight, I’m announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.” Tonight’s speech also replayed   the administration’s standard statement on Fast Track, for instance in the  2013 Annual Trade Policy Agenda: “To facilitate the conclusion, approval, and implementation of market-opening negotiating efforts, we will also work with Congress on Trade Promotion Authority. Such authority will guide current and future negotiations, and will thus support a jobs-focused trade agenda moving forward.”

letter released Monday by more than 550 Democratic base organizations and a news conference today by Tea Party leaders against Fast Track reiterates the breadth of grassroots opposition. The letter included organizations such as MoveOn, SEIU, AFSCME and the American Federation of Teachers, that have not been involved in past “trade” fights and who are strong Obama supporters.

Past trade pacts’ role in fueling the growth of U.S. income inequality is animating new entrants into the Fast Track debate. Over the weekend, former Clinton Labor Secretary Robert Reich called for opposition to Fast Track and the TPP.  The failure of Obama’s past SOTU trade promises is feeding skepticism. In his 2011 SOTU, Obama promised the pact would expand U.S. exports to Korea.  In the pact’s first year, exports dropped 10 percent, imports soared and the U.S. trade deficit with Korea grew 37 percent, equating to a net loss of approximately 40,000 more U.S. jobs.

Democratic and GOP presidents have struggled to persuade Congress to provide Fast Track authority, which Congress has authorized for only five years (2002-07) of the past 20. In late 2013, 151 House Democrats signed a letter opposing Fast Track. Two weeks ago, when U.S. Rep. Dave Camp (R-Mich.) and U.S. Sens. Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) introduced legislation to establish Fast Track, 17 Senate Democrats sentletters opposing the bill, which did not  have a single House Democratic sponsor. Two groups of GOP representatives have also sent letters opposing Fast Track.

Studies Reveal Consensus: Trade Flows during “Free Trade” Era Have Exacerbated U.S. Income Inequality

Recent Studies: Trade’s Contribution to Inequality Has Increased since the 1990s and Is Likely to Increase Further

Tonight President Obama is expected to address two linked subjects in his State of the Union address: the historic rise in U.S. income inequality and a trade policy agenda that threatens to exacerbate inequality. As we've repeatedly pointed out, Obama cannot have it both ways: he cannot propose to close the yawning income gap while pushing to Fast Track through Congress a controversial Trans-Pacific Partnership (TPP) "free trade" deal that would widen the gap. The TPP would expand the status quo "free trade" model that study after study has found to be an increasingly significant contributor to U.S. income inequality.

As unfair trade deals have been Fast Tracked into law, U.S. income inequality has jumped to levels not seen since the robber baron era. Today, the richest 10 percent of the U.S. is taking over half of the economic pie, while the top 1 percent is taking more than one fifth. Wealthy individuals’ share of national income was stable for the first several decades after World War II. But that share has shot up 51 percent for the richest 10 percent and 146 percent for the richest 1 percent since the passage of Fast Track in 1974, a time period characterized by a series of unfair trade deals. The income share of the richest 10 percent escalated particularly abruptly after the 1994 enactment of the North American Free Trade Agreement (NAFTA), as indicated in the graph below.

Trade and Income Inequality
Since 1941 standard economic theory has held that trade liberalization will contribute to greater income inequality in developed countries like the United States. In the early 1990s, as U.S. income inequality soared amid the enactment of U.S. “free trade” deals, a spate of economic studies put the theory to the test, aiming to determine the relative contribution of trade flows to the rise in U.S. income inequality. The result was an academic consensus that trade flows had, in fact, contributed to rising U.S. income inequality. The only debate was the extent of the blame to be placed on trade, with most studies estimating that between 10 and 40 percent of the rise in inequality during the 1980s and early 1990s stemmed from trade flows.

More recent studies have concluded that trade’s role in exacerbating U.S. income inequality has likely grown since the 1990s, as U.S. imports from lower-wage countries, and U.S. job offshoring to those countries, have grown dramatically, impacting an increasing swath of middle-class jobs. Further, an array of studies now project future increases in the offshoring of U.S. jobs, suggesting that even under current U.S. trade policy, trade flows will soon be responsible for an even greater share of rising U.S income inequality. Attempts to Fast Track through Congress controversial deals like the TPP, which would incentivize further offshoring, would only exacerbate the historically high degree of U.S. income inequality.

+++

Recent studies examining trade’s current and projected future contribution to U.S. income inequality:

 

Rising Income Inequality: Technology, or Trade and Financial Globalization?

Florence Jaumotte, Subir Lall, and Chris Papageorgiou;  International Monetary Fund;  September 30, 2009

The International Monetary Fund authors find that the rise in income inequality from 1981-2003 in 20 developed countries, including the United States, is primarily attributable to trade and financial globalization trends. They conclude that globalization’s contribution to inequality has outweighed the role of technological advancement: “Among developed countries…the adverse impact of globalization is somewhat larger than that of technological progress” (p. 19).

 

Trade and Wages, Reconsidered

Paul Krugman;  The Brookings Institution;  Spring 2008

In a Brookings Institution study, Nobel-winning economist Paul Krugman finds that trade flows likely now account for an even greater degree of U.S. income inequality than that found in a series of studies from the early 1990s, which had already concluded that trade liberalization had a negative, but modest, impact on income inequality in developed countries like the United States. In particular, Krugman notes that U.S. manufacturing imports from low-wage developing countries have grown dramatically in the last two decades, suggesting that the role of trade flows in spurring U.S. income inequality growth is “considerably larger” than before (p. 106).  Krugman concludes, “…there has been a dramatic increase in manufactured imports from developing countries since the early 1990s. And it is probably true that this increase has been a force for greater inequality in the United States and other developed countries” (p. 134).

 

Globalization, American Wages, and Inequality: Past, Present, and Future

Josh Bivens;  Economic Policy Institute;  September 6, 2007

In this study Josh Bivens of the Economic Policy Institute updates an early-1990s model estimate of the impact of trade flows on U.S. income inequality and finds that, using the model’s own conservative assumptions, the degree of U.S. income inequality attributable to trade with lower-wage countries increased more than 40 percent from 1995 to 2006. In addition, Bivens cites an array of recent economic studies that project that the offshoring of U.S. jobs will increase under current trade policy, suggesting a substantial rise in the impact of trade flows on U.S. income inequality. For example, Princeton economist and former Council of Economic Advisors member Alan Blinder estimates that about one in every four U.S. jobs, including higher-paying service-sector jobs, could be offshored in the foreseeable future. While such studies differ in the projected extent of future U.S. job offshoreability, all imply an increase in the impact of trade flows on U.S. income inequality. Bivens finds that the range of projections for increased offshoring suggest a further 72 to 262 percent increase in U.S. income inequality attributable to trade with lower-wage countries, compared to the level seen in 2006. Bivens concludes, “The potential level of redistribution caused by offshoring is vast, and, so should be the policy response” (p. 8).

January 27, 2014

On Eve of State of the Union Address, Powerful Message from Obama’s Base about Fast Track for the Trans-Pacific Partnership: Don’t Even Think About It

Prepare for a State of the Union oddity: Democratic members of Congress sitting in silence while Republicans rise to cheer President Obama’s call for Congress to grant him new powers.

A letter released today signed by a stunning array of more than 550 Democratic base organizations reiterates the perverse situation. Despite widespread opposition from congressional Democrats, Obama is expected to call on Congress to delegate Fast Track authority to him. The extraordinary trade authority, which Congress has refused to grant for 15 of the past 20 years, would suspend normal congressional procedures for consideration of the controversial Trans-Pacific Partnership (TPP), which Obama hopes to sign soon.  

Today’s letter is signed by a veritable who’s who of the organizations that worked their tails off to elect Obama and/or who provide his policy initiatives the support to pass: from MoveOn and CREDO to the AFL-CIO, SEIU, AFSCME, UAW, Teamsters, Carpenters, United Steelworkers, American Federation of Teachers, and the Communications Workers of America to the Sierra Club, 350.org, and Greenpeace to the National Farmers Union, National Consumers League, Public Citizen and TransAfrica – and the policy shops of the Presbyterians, Methodists, Episcopalians and numerous Catholic orders. The letter is notable for the number of signatory organizations that have not been involved in past “trade” fights.

This gets to the major policy collision that only adds to the incongruity of the political situation: the TPP would worsen income inequality. Yup, the main theme of Obama’s SOTU has been widely advertised to be his battle against growing American income inequality. But economists of all stripes agree that U.S. trade policy has been a major contributor to growing inequality. A study by the Peterson Institute for International Economics, which supports the TPP, has estimated that as much as 39 percent of the observed growth in U.S. wage inequality is attributable to trade trends.

The latest – and stunning – addition to that chorus: Clinton Labor Secretary Robert Reich, who yesterday urged his massive Facebook following to battle Fast Track and TPP, which he called NAFTA-on-steroids.  “[T]his massive deal [TPP] would further erode the jobs and wages of working and middle-class Americans while delivering its biggest gains to corporate executives and shareholders.” 

Today’s letter, organized by the Citizens Trade Campaign, shows the political muscle behind the campaign to make sure TPP is not Fast Tracked: “After decades of devastating job loss, attacks on environmental and health laws and floods of unsafe imported food under our past trade agreements, America must chart a new course on trade policy. To accomplish this, a new form of trade authority is needed that ensures Congress and the public play a much more meaningful role in determining the contents of U.S. trade agreements...”

And, don’t expect ALL of the GOP to stand and cheer Fast Track. Already several dozen Republican House members have announced their opposition to new Fast Track powers for Obama. A conservative grassroots campaign is gearing up against Fast Track and TPP. 

What could unite the A-Z of the Democratic base and conservative grassroots activists? Um, could be the 20 devastating years of NAFTA damage experienced by American workers and communities across the political spectrum. Fast Tracking NAFTA-on-steroids is a hard sell after NAFTA fueled an explosion of the U.S. trade deficit with Mexico and Canada to $181 billion by 2012, resulting in a net American loss of one million jobs. And it is not news that NAFTA increased income inequality by transforming the composition of jobs available to the 63 percent of American workers without college degrees from higher wage manufacturing to low-wage service sector.

And, then there is the inconvenient mess of Obama’s only major trade deal to date, the U.S.-Korea Free Trade Agreement. That deal was premised on the same NAFTA model as TPP. In his 2011 SOTU, Obama promised the pact would expand U.S. exports to Korea.  In the pact’s first year, exports dropped ten percent, imports soared and the U.S. trade deficit with Korea grew 37 percent, equating to a net loss of approximately 40,000 more U.S. jobs.

Will President Obama choose to mount what will need to be a massive campaign to overcome widespread opposition to Fast Track authority for the Trans-Pacific Partnership? And probably fail even so?

Or, will he choose to focus his efforts on reducing income inequality for millions of Americans?

It remains to be seen what his legacy will be. But one thing is clear: President Obama can’t have it both ways.

January 24, 2014

Obama's State of the Union Dilemma: Pushing Fast Track for TPP Would Increase Income Inequality

Article by Lori Wallach, director of Public Citizen's Global Trade Watch, published in The Huffington Post on January 24, 2013

In his upcoming State of the Union speech, President Barack Obama is expected to prioritize what is emerging as his legacy issue: combatting America's growing wealth inequality. Expect him to promote policies to create new middle-class jobs, especially in manufacturing, and counter the erosion of wages now undermining workers economy-wide.

But in the speech, Obama is also expected to highlight several major trade initiatives, including his priority Trans-Pacific Partnership (TPP) deal, a massive pact with 11 Asian and Latin American nations that Obama hopes to sign quickly. The business lobby is at full tilt pushing Obama to use the SOTU to call on Congress to pass Fast Track trade authority for the TPP.

The thing is that economists of all stripes agree that U.S. trade policy has been one of the major contributors to growing U.S. income inequality.

There really is no disagreement about that -- the only debate is about the degree of the effect. A study published by the Peterson Institute for International Economics -- an early supporter of the North American Free Trade Agreement (NAFTA) on which TPP is modeled -- estimated that as much as 39 percent of the observed growth in U.S. wage inequality is attributable to trade trends. Other studies have posited greater and lesser contributions.

The TPP would replicate and expand to additional countries the trade agreement model established in the NAFTA. Twenty years of evidence of NAFTA's contribution to U.S. income inequality has become a major problem for Obama's push to get Congress to provide Fast Track authority for the massive TPP deal, described as NAFTA on steroids.

Not a single House Democrat would sponsor the legislation submitted two weeks ago to establish Fast Track. Last week, 17 Senate Democrats made their feelings known in letters to Majority Leader Harry Reid (D-Nev.). And last November, 151 House Democrats signed a letter saying they oppose Fast Track, arguing that lawmakers have been cut out of negotiations.

Congressional opposition to more-of-the-same trade deals has intensified as Obama's past SOTU trade promises have fallen flat. In contrast to Obama's 2011 SOTU promise that his only major past trade deal, the U.S.-Korea Free Trade Agreement, would boost exports, in the agreement's first year, U.S. exports to Korea fell 10 percent, imports from Korea rose and the U.S. trade deficit with Korea exploded by 37 percent. This equates to a net loss of approximately 40,000 U.S. jobs.

The drop in exports to Korea added to last year's sluggish overall two percent U.S. export growth rate. Given current trends, the U.S. will not achieve the president's export-doubling plan until 2032 -- 18 years behind the 2014 deadline Obama set in his 2010 State of the Union speech.

This follows on the recent 20th anniversary of NAFTA, which fueled an explosion of the U.S. trade deficit with Mexico and Canada to $181 billion by 2012, resulting in a net American loss of one million jobs. (The net job loss figure is derived from the U.S. government methodology employed to calculate the employment effects of trade flows.)

U.S. government data show that the average annual growth of our trade deficit has been 45 percent higher with Mexico and Canada than with countries that are not party to a NAFTA-style pact. U.S. manufacturing exports have grown at less than half the rate to Mexico and Canada since NAFTA than in the years before it. Before NAFTA, the U.S. had a small trade surplus with Mexico and a modest deficit with Canada.

While many focus on the number of U.S. jobs lost from NAFTA and similar pacts, the most significant effect has been a fundamental alteration in the composition of jobs available to the 63 percent of American workers without a college degree. And this has had a direct impact on income inequality.

Trade pact investment rules remove many of the risks otherwise associated with sending jobs offshore to where labor costs are drastically cheaper. The United States has lost millions of manufacturing jobs during the 20 years of NAFTA and decade-plus since Congress approved China's entry to the World Trade Organization. As a result, the wages most U.S. workers can earn have been severely degraded even as overall unemployment has been largely stable (excluding the Great Recession) as new low-paying service sector jobs have been created.

According to the U.S. Bureau of Labor Statistics, two of every three displaced manufacturing workers who were rehired in 2012 experienced a wage reduction, most of them more than 20 percent. The list compiled by the Department of Labor's Trade Adjustment Assistance program of more than 845,000 specific American jobs lost to NAFTA and similar pacts reads like the funeral program for the middle class.

The implications for growing income inequality are broad. It is not only those American workers who lost a job to NAFTA or China trade who face downward wage pressure; as increasing numbers of workers displaced from manufacturing jobs joined the glut of workers competing for non-offshorable, low-skill jobs in sectors such as food service and retail, real wages have fallen in these growing sectors as well.

The U.S. government data is striking: The shift in employment from high-paying manufacturing jobs to low-paying service jobs has contributed to overall wage stagnation. The average U.S. wage has grown less than one percent annually in real terms since NAFTA was enacted even as worker productivity has risen more than three times. Since the January 1, 1994, implementation of NAFTA, the share of national income collected by the richest 10 percent has risen by 24 percent, while the top 1 percent's share has shot up by 58 percent.

Offshoring of American jobs is rapidly moving up the skills ladder, expanding the income inequality effect. Alan S. Blinder, a former Federal Reserve vice chair, Princeton economist and NAFTA supporter, says that one out of every four American jobs could be offshored in the foreseeable future. A study he co-authored found that the most offshorable industry is finance and insurance, not manufacturing. According to Binder's study, American workers with a four-year college degree and an annual salary above $75,000 are among those most vulnerable to having their jobs offshored.

The grandfather of modern free trade economics, Paul Samuelson, published a startling 2004 academic paper in the Journal of Economic Perspectives that shows mathematically how the offshoring of higher-paid jobs to low-wage countries can cause U.S. workers to lose more from reduced wages than they gain from cheaper imported goods. Trade theory states that while those specific workers who lose their jobs due to imports may suffer, the vast majority of us gain from trade "liberalization" because we can buy cheaper imported goods. Except, as job offshoring has moved up the wage level, this is no longer necessarily true.

When the Center for Economic and Policy Research applied the actual data to the trade theory, they discovered that when one compares the lower prices of cheaper goods to the income lost from low-wage competition under our current policy, the trade-related losses in wages hitting the vast majority of American workers outweigh the gains in cheaper priced goods from trade. U.S. workers without college degrees (the vast majority) lost an amount equal to 12.2 percent of their wages, so for a worker earning $25,000 a year, the loss would be more than $3,000 per year.

The 20-year record of NAFTA shows that deals like the Trans-Pacific Partnership would contribute to income inequality as more middle-class jobs are lost. Either Obama can prioritize a battle against income inequality or he can push more NAFTA-style trade agreements and the trade authority to railroad them through Congress, but he cannot do both.

More information is available at http://www.citizen.org/fast-track.

January 22, 2014

“Like Gravity” Fast Track Trade Sinks Jobs and Wages

This is a reposting of a blog post written by Mary Bottari for the Center for Media and Democracy's PR Watch on January 21.

Rep. Dave Camp (R- MI) and Sen. Max Baucus (D-MT) have introduced "Fast Track" legislation in Congress. It's been 15 years since a U.S. president sought Fast Track authority, which strips Congress of its Constitutional authority to have a meaningful role in U.S. trade policy. If the Fast Track bill passes, the Trans-Pacific Partnership (TPP), a trade deal involving 11 Pacific Rim countries could be completed and signed before it is sent to Congress for a vote. Then the far-reaching trade deal will be railroaded through with no amendments and only 20 hours of debate.

The original Fast Track was cooked up by Nixon, served up again by Clinton to pass the NAFTA and WTO agreements, and stirred up again in 2000 to jam China free trade through Congress. That all worked out well, didn't it? The United States lost 5.7 million manufacturing jobs in the NAFTA/WTO era, and our trade deficit with China is now one of the largest in history.

Today, President Obama is seeking Fast Track to get the TPP and the 27-nation Transatlantic Trade and Investment Partnership (TTIP) through Congress. His road is a rocky one. His trade team could not convince a single Democrat to author the bill in the House, and with hundreds of groups across the political spectrum -- from progressive environmental and consumer groups to various Tea Party patriots -- lined up against it, it's possible Fast Track can be defeated.

"When Will We Start to Measure the Results?"

The long, controversial history of fast tracked trade agreements hardly came up in the first Senate hearing on the Baucus-Camp bill on January 16.

Chairman Baucus, the only Democrat to author the legislation in either house, rambled on about the fact that 95 percent of the world's consumers live outside the United States. According to Baucus, we need more trade deals to reach those consumers. But he forgot to mention that the United States is already part of the WTO trade pacts on goods and services encompassing some 159 member countries, so our products already have privileged access around the globe.

This line of argument was also supported by the ever-present Honeywell CEO David Cote, last seen pushing Social Security and Medicare cuts on behalf of the Business Roundtable and the "Fix the Debt" gang. Cote dubbed Fast Track "a key enabler for trade agreements," invoking the wrong kind of chuckle.

Larry Cohen, President of the Communication Workers of America, injected a refreshing dose of reality to the proceedings. Cutting through blather about "leveling the playing field," Cohen looked Baucus in the eye and demanded answers to a few pointed questions.

After 20 years of NAFTA, Cohen demanded, when are we going to start to actually measure the results? "No other nation has trade deficits like ours," said Cohen. Since 1993, the year before NAFTA, our trade deficit in goods was $132 billion or 1.9 percent of GDP. By 2012, our trade deficit ballooned to $741 billion or 4.6 percent of GDP, Cohen detailed in his written testimony.

When, asked Cohen, will we start to document the net effect of these trade deals on employment? "What has happened to our jobs, our communities, the North Philadelphia that I grew up in? The Cleveland that I can picture now? The devastation throughout those communities, no replacement for those jobs," said Cohen. The Economic Policy Institute estimates that between 1998 and 2012, the United States lost one third of its manufacturing base largely due to growing U.S. trade deficits.

When, asked Cohen, will we document the effect of trade on pay and standards of living? "I can tell you story after story where CEOs say to me -- it's gravity, we have to move the jobs or you have to cut the pay," says Cohen. When U.S. workers are put in competition with workers like those in Vietnam making 28 cents an hour, U.S. wages have no where to go but down. Cohen pointed out that average weekly take home pay for an American worker today is $637 compared to $731 40 years ago.

The Senators shifted uncomfortably in their seats, but had no answers for the CWA chief, who pushed to bring thousands of call center jobs back to the United States. Telecom firms, however, demanded that the salaries "be competitive" with those of overseas workers.

Congress Is Targeting the Wrong Deficit

Just days before, Senate Republicans shot down unemployment benefits for 1.3 million Americans, because, to the Republican caucus, nothing matters more than the United States federal account deficit.

But many economists say Washington has the calculus backwards -- they are targeting the wrong deficit. As Dean Baker and Jared Bernstein explain in the New York Times, Washington's obsession with lowering the budget deficit by slashing spending and supports for the economy will only lead to slower growth, whereas "reducing the trade deficit would have the opposite effect. Not only that, but by increasing growth and getting more people back to work in higher-than-average value-added jobs, a lower trade deficit would itself help to reduce the budget deficit." EPI projects that reducing the trade deficit could generate a "manufacturing-based recovery" for the United States.

The two trade agreements in the works right now, the TPP and the TTIP, will only add to our job-killing trade deficit.

Corporate Courts Facilitate Attacks on Consumer, Health, and Environmental Protections

Senator Sherrod Brown (D-OH) turned the conversation at the Fast Track hearing in a completely new direction by asking David Cote if he thought trade agreements should be used to attack consumer and environmental laws democratically enacted around the globe. Brown referenced the so-called "investor-state" provisions that have been included in U.S. trade agreements that allow corporations to directly sue governments for cash damages outside of domestic court systems and in friendly trade tribunals if they believe consumer, health, or environmental regulations harm their products.

Brown pointed to a new case in Australia, where U.S. firm Phillip Morris is suing Australia over a new plain packaging rule for cigarettes designed to reduce cigarette smoking among teens and other new users. Phillip Morris battled the rule in Australian courts and lost, so is taking it to a corporate-friendly trade tribunal. The rulings of these tribunals are binding, and there is no appeal.

Cote, who is no doubt perfectly aware of the perverse system and its history of successful attacks on a range of public interest laws (detailed by Public Citizen here), used the "I am not a lawyer" dodge.

The list of these investor attacks is growing. U.S. pharmaceutical firm Eli Lilly is attacking Canada's system for approving generic drugs under NAFTA, and a U.S. fracking firm is attacking Quebec's moratorium on fracking as a "trade barrier."

Wikileaks Takes on Trade

The range of public interest policies implicated in the trade agreements is enormous. TPP "includes chapters on patents, copyright, financial regulation, energy policy, procurement, food safety and more -- it would constrain the policies on these matters that Congress and state legislatures could maintain or establish," says Public Citizen.

As if that wasn't enough, the TPP's draft environment chapter, published by Wikileaks last week, would undermine protections for oceans, forests, and wildlife. "If the environment chapter is finalized as written in this leaked document, President Obama's environmental trade record would be worse that George W. Bush's," said Michael Brune, executive director of the Sierra Club.

This is Wikileaks' first foray into trade, but it makes consummate sense. Not only are the agreements being negotiated behind closed doors with classified input from 600 U.S. corporate advisors, but the issues on the table include internet freedom and access to medicines around the globe.

The draft intellectual property chapter obtained by Wikileaks "would trample over individual rights and free expression, as well as ride roughshod over the intellectual and creative commons," says Julian Assange. "If you read, write, publish, think, listen, dance, sing or invent; if you farm or consume food; if you're ill now or might one day be ill, the TPP has you in its crosshairs," he told Politico. The U.S. government's pro-PhRMA position "will severely restrict access to affordable medicines for millions of people," says Doctors Without Borders.

Another World Is Possible

The last time the United States used Fast Track to pass a trade agreement, it was with South Korea. Senator Baucus and crew trotted out all the same talking points about how our exports would boom. But it was our trade deficit that boomed, increasing by $5.5 billion or 46 percent since 2012.

With the U.S. recovery staggering and with the wide range of issues caught up in the trade negotiation, it is no wonder that a coalition of those opposing free trade agreements is growing more diverse and powerful every day.

Fast Track will not pass without a sustained effort by the President himself. Yet, when his top trade representative did not bother to show up at the Senate hearing last week, Obama left everyone wondering if he had the appetite for the fight or if another world was possible.

January 16, 2014

U.S. Trade Representative Dodges Senate Fast Track Hearing

The US Trade Representative (USTR) declined an invitation to testify at the Senate Finance Committee opening hearing on the controversial “Fast Track” legislation – leaving an Ohio Republican, Sen. Rob Portman, in the position of representing the White House by reading from an Administration press release.

Several committee members said they were puzzled and disappointed that USTR Michael Froman passed on an opportunity to convince some skeptical lawmakers they need to establish Fast Track authority for President Barack Obama’s priority Trans-Pacific Partnership (TPP) agreement.

“I wish they were here,” said Portman, a member of the committee and a former US trade representative under President George W. Bush.  “It’s important.”

Sen. Orrin Hatch of Utah, the ranking Republican on the committee, said renewing Fast Track for Obama is "not an issue where the president can lead from behind."

The hearing was a crucial early test for Obama’s ability to obtain Fast Track authority and complete the Trans-Pacific Partnership, priorities on his second-term wish list.  But it comes in the shadow of the 20th anniversary of NAFTA – a sweeping free trade agreement that took effect Jan. 1, 1994, and which many experts cite as a factor in the widening gap between rich and poor in the United States.  

The Trans-Pacific Partnership is like NAFTA on steroids. And that is one reason for the noticeable divide between the president and members of his own party in Congress – many of whom have been openly skeptical of TPP and have already announced opposition to Fast Track. This week, a group of Democratic senators sent a letter to leader Reid opposing the Camp-Baucus bill. This follows on five Finance Committee members coming out against Fast Track last week and 160 House Democrats signaling opposition at the end of last year.

The rarely-used Nixon-era procedure would allow Obama to sign the TPP before Congress votes to approve it with a guarantee that the White House could write expansive legislation to implement the pact that would not subject to committee or floor amendment and get House and Senate votes on such legislation in 90 days with only 20 hours of debate allowed.  

Meanwhile, with not a single House Democrat sponsoring the Fast Track bill, the GOP House leadership has insisted that the White House present a list of 50 House Democratic votes for the bill before a vote will be scheduled. Some Republicans are urging the president to do some arm-twisting for a bill embraced by the Chamber of Commerce but rejected by labor unions and progressive groups, mindful of the damage NAFTA has done.

One of the few things economists agree on is that our current trade policy is a major contributing factor to growing U.S. income inequality. Obama is expected to dedicate much of his State of the Union address to plans for battling income inequality while he is also pushing for Congress to Fast Track the TPP, which would expand the NAFTA model to more nations.

A study published by the Peterson Institute for International Economics estimated that as much as 39 percent of the observed growth in U.S. wage inequality is attributable to trade trends. Since the January 1, 1994, implementation of NAFTA, the share of national income collected by the richest 10 percent has risen by 24 percent, while the top 1 percent’s share has shot up by 58 percent.

Communication Workers of America President Larry Cohen said the US was negotiating with countries that have no interest in fair wages for their workers. If TPP is approved, “American workers will compete against workers in Vietnam who are earning 75 cents an hour” and who are rioting for better wages, Cohen said.   If Americans complain, he said, the Vietnamese government has a simple answer, he added: “They say, ‘We’re a communist country.  We don’t need higher labor standards.’”

Senator Sherrod Brown raised concerns about the proposed TPP provisions that would allow foreign corporations to attack U.S. law before foreign tribunals to demand compensation from the U.S. Treasury for our laws that undermine their expected future profits. He discussed the challenge that Philip Morris brought before a trade agreement investor tribunal against the government of Australia for its policies protecting the public from the health problems of tobacco.

Witnesses supportive of Fast Track included David Cote, CEO of Honeywell, Inc., Jim Allen, president of the New York Apple Growers Association, andElena M. Stegemann, of NuStep, a small business that manufactures high-tech exercise machines. 

Uninvited participants included the protestors that Committee Chairman Senator Max Baucus threatened to remove unless they put down their signs. One accused Senator Baucus -- Obama’s nominee to be ambassador to China -- of being a “Benedict Arnold” who was ceding Congress’ constitutional trade authorities through Fast Track.  Other signs read, “Fast Track: Race to the Bottom,” “TPP: How Low Can Wages Go?”

Recent Posts

Subscribe