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

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June 14, 2016

Don’t Believe the Hype: Agricultural Exports Lag under Trade Deals, Belying Empty Promises Recycled for the TPP

AG1

Time and again, U.S. farmers and ranchers have been promised that controversial “free trade” agreements (FTAs) would provide a path to economic success by boosting exports. Time and again, these promises have been broken. Data from the U.S. Department of Agriculture reveal that U.S. agricultural exports have lagged, agricultural imports have surged and family farms have disappeared under existing FTAs. Undeterred by its own data, USDA has repeated the standard FTA sales pitch with a factsheet claiming that the Trans-Pacific Partnership (TPP), which would expand the status quo trade model, would “support expansion of U.S. agricultural exports, increase farm income, generate more rural economic activity, and promote job growth.”[1] That promise contradicts the actual outcomes of the FTAs that serve as the TPP’s blueprint.

Agricultural exports stagnate under most recent FTA: Before the 2011 passage of the Korea FTA – which U.S. negotiators used as the template for the TPP – U.S. Secretary of Agriculture Tom Vilsack stated, “we believe a ratified U.S. Free Trade Agreement [with Korea] will expand agricultural exports by what we believe to be $1.8 billion.”[2] In reality, exports of all U.S. agricultural products to Korea fell $1.3 billion, or 19 percent, from the year before the FTA took effect to its recently-completed fourth year of implementation. During that same period, total U.S. agricultural exports to the world have only declined by 9 percent. Even if comparing the average agricultural export level in the three years before the FTA took effect (including 2009, when global trade declined due to the worldwide recession) with the average level in the more recent three FTA years, U.S. agricultural exports to Korea have declined by $36 million, or 1 percent. U.S. agricultural exports to the world during that period have risen 9 percent.[3]

AG2

Agricultural trade surplus turns into a trade deficit under NAFTA: the U.S. agricultural trade balance with NAFTA partners has fallen from a $2.5 billion trade surplus in the year before NAFTA to a $4.2 billion trade deficit in 2015 – the largest NAFTA agricultural trade deficit to date. Even if one includes agricultural trade over the preceding several years, when agricultural export values were inflated by anomalously high international food prices, the average U.S. agricultural trade balance with NAFTA countries over the last five years still fell 94 percent below the average balance in the five years before NAFTA.

AG3

Agricultural exports to FTA partners lag behind: USDA data show that U.S. food exports to FTA partners have trailed behind food exports to the rest of the world in recent years, despite the claim in USDA’s TPP factsheet that “in countries where the United States has free trade agreements, our exports of food and agricultural products have grown significantly.”[4] The volume of U.S. food exports to non-FTA countries rebounded quickly after the 2009 drop in global trade following the financial crisis. But U.S. food exports to FTA partners remained below the 2008 level until 2014. Even then, U.S. food exports to FTA partners were just 1 percent higher than in 2008, while U.S. food exports to the rest of the world stood 10 percent above the 2008 level.
AG4

FTA partners account for most U.S. agricultural imports, relatively few agricultural exports: The USDA factsheet makes no mention of agricultural imports that undercut business for U.S. farmers. Most U.S. food imports come from FTA countries, while most U.S. food exports are not sold in FTA countries. This counterintuitive outcome is the opposite of what FTA proponents have promised U.S. farmers and ranchers. In 2015, the 20 U.S. FTA partners were the source of 72 percent of all U.S. food imports, but were the destination of just 38 percent of all U.S. food exports (measuring by volume).
AG5

Agricultural trade balance suffers under FTAs:
Due to stagnant U.S. food exports to FTA countries and a surge in food imports from those countries, the U.S. food trade balance (by volume) with FTA countries has fallen 11 percent since 2011, the year before the most recent FTAs took effect. In contrast, the U.S. food trade surplus with the rest of the world has risen 8 percent since 2011.

AG6

Small U.S. farms disappear during FTA era: Smaller-scale U.S. family farms have been hardest hit by rising agricultural imports and declining agricultural trade balances under FTAs. Since NAFTA and NAFTA expansion pacts have taken effect, one out of every 10 small U.S. farms has disappeared. By 2015, nearly 198,000 small U.S. farms had been lost.[5]

Most of the agricultural products that USDA highlights in its factsheets as prospective winners under the TPP have actually been losers under the FTA model that the TPP would expand:

  • Apples: U.S. exports to Korea of apples have fallen 8 percent in the first four years of the Korea FTA.[6]
  • Beef: U.S. beef exports to Korea have stagnated under the Korea FTA, falling below the historical growth trend and defying the administration’s promises that beef exports to Korea would grow even more than in the past.[7] Even without an FTA, U.S. beef exports would be expected to grow as a product of Korea’s population and economic growth. Instead, they have flatlined. AG7

  • Corn: U.S. exports to Korea of corn have plummeted 57 percent under the Korea FTA’s first four years – a loss of more than 3.6 million metric tons of corn exports each year.
  • Dairy Products: U.S. exports to Korea of milk, cream and whey have plummeted 88 percent in the first four years of the Korea FTA – a loss of more than 2.6 million liters of dairy exports each year.
  • Distilled Spirits: U.S. exports of distilled spirits to U.S. FTA partners have declined 13 percent (10.4 million liters) while growing 42 percent (49.8 million liters) to the rest of the world since 2011 (the year before the most recent FTAs took effect).
  • Feeds and Fodder:S. exports of feeds and fodder to U.S. FTA partners have fallen 6 percent (more than 410,000 metric tons) while growing 44 percent (more than 4.8 million metric tons) to the rest of the world since 2011 (the year before the most recent FTAs took effect).
  • Hides and Skins: S. exports to Korea of hides and skins have dropped 27 percent under the first four years of the Korea FTA.
  • Potatoes: S. net exports of potatoes to Canada and Mexico have fallen 521,000 metric tons under 22 years of NAFTA.
  • Poultry: S. exports to Korea of poultry have plummeted 35 percent under the first four years of the Korea FTA – a loss of more than 25,300 metric tons of poultry exports each year.
  • Soybeans and Soybean Products: S. exports of soybeans and soybean products to U.S. FTA partners have grown 21 percent while growing 46 percent to the rest of the world since 2011 (the year before the most recent FTAs took effect).
  • Vegetables: S. exports of vegetables to U.S. FTA partners have fallen 36 percent (more than 23,000 kiloliters) while growing 451 percent (more than 8,937 kiloliters) to the rest of the world since 2011 (the year before the most recent FTAs took effect).
  • Wine: S. net exports of wine to Canada and Mexico have fallen more than 28,000 kiloliters under 22 years of NAFTA. And while FTA proponents have claimed wine as a winner under the Korea FTA, U.S. exports to Korea of wine have fallen 6 percent under the Korea FTA’s first four years – a loss of nearly 239 metric kiloliters of wine exports each year.

ENDNOTES

[1] U.S. Department of Agriculture, “The Trans-Pacific Partnership: Benefits for U.S. Agriculture,” USDA factsheet, February 2015. Available at: http://www.fas.usda.gov/sites/default/files/2015-03/tpp_agriculture_fact_sheet.pdf.

[2] U.S. Department of Agriculture, “Agriculture Secretary Tom Vilsack Highlights Benefits of the U.S.-Korea Trade Agreement for U.S. Agriculture,” USDA press conference, March 8, 2011. Available at: http://www.usda.gov/wps/portal/usda/usdamobile?contentidonly=true&contentid=2011/03/0108.xml

[3] The source of all agricultural trade data in this document, unless otherwise specified, is: Foreign Agricultural Service, “Global Agricultural Trade System,” U.S. Department of Agriculture, accessed May 12, 2015. Available at: http://apps.fas.usda.gov/gats/default.aspx. FATUS classifications used for all data. All data not stated in dollar amounts is measured in volume. (Volume is preferred for products to eliminate the effect of price shifts, but value is used for some aggregations of products with different volume-based units of measurement to avoid agglomeration problems.) All dollar values have been inflation-adjusted and are expressed in 2015 dollars according to the CPI-U-RS series of the Bureau of Labor Statistics.

[4] “Food” includes FATUS classifications: dairy products, fruits & preparations, grains & feeds, livestock & meats, oilseeds & products, other horticultural products, planting seeds, poultry & products, sugar & tropical products, tree nuts & preparations, and vegetables & preparations.

[5] National Agricultural Statistics Service, “Quick Stats,” U.S. Department of Agriculture, accessed March 5, 2015. Available at: http://quickstats.nass.usda.gov/.

[6] All data on agricultural trade under the Korea FTA compare the average annual export level in the four years before the FTA took effect and in the four years after the FTA took effect (April 2008 through March 2012 vs. April 2012 through March 2016).

[7] U.S. beef exports to Korea rose 3,967 metric tons if comparing the year before implementation and the FTA’s fourth year, or rose 63,729 metric tons if comparing the four year averages before and after the FTA.

June 07, 2016

Slaughter: The Flawed TPP Agreement Would Shift the Balance of Power Toward Foreign Corporations

This is a guest post by Representative Louise Slaughter (NY-25)

The American people are increasingly realizing the perils of the pending Trans-Pacific Partnership (TPP) agreement between the U.S. and eleven other countries. After decades of NAFTA-style deals costing millions of jobs and devastating entire industries, workers across America are speaking out against this dramatic expansion of failed trade policy. But because of a little-known provision tucked into this deal, the TPP would actually stack the deck even further against our workers and innovative companies across the country.

As the representative for Rochester, New York, I have never seen a trade agreement that benefited the American manufacturer or American worker. There are hundreds of reasons why the TPP would be a particularly bad deal for our country. It would force our workers into unfair competition with countries like Vietnam, where the minimum wage is less than 65 cents an hour, and it has no effective provisions to address foreign currency manipulation – the single-most pressing trade issue facing U.S. manufacturers. For American families, the TPP would open the door to a flood of unsafe food imports and threaten to raise prices for vital drugs.  It would encourage environmentally destructive practices and do nothing to address climate change. This deal would also represent a dramatic step in the wrong direction by tying the U.S. to countries that do not value the rights of women.

But worse still is that the TPP would pave the way for an unprecedented attack on our nation’s sovereign right to protect the health and welfare of our people, all in the name of corporate profits. This process, called investor-state dispute settlement (ISDS), would allow multinational corporations to challenge U.S. laws they don’t like outside of the standard judicial system. This could leave laws on everything from requiring stringent drinking water standards to raising a state’s minimum wage in the hands of three unelected and unaccountable arbitrators. It’s blatantly undemocratic, and would represent a major victory for foreign corporations.

There are only a handful of these arbitrators in the world, and some are even allowed to go back and forth between serving as a judge and doing the bidding of corporations by bringing cases against governments. This dynamic is ripe for conflicts of interest and would be seen as unethical in almost any legal system.

Since our previous trade agreements have largely been with less developed countries that have little investment in the U.S., these types of cases used to be rare. But in recent years, more and more corporations have learned to exploit the system and ISDS cases have become more common. In the first 30 years since this ISDS became a reality, just 50 of these types of cases were launched. But from 2011 to 2013, corporations brought 50 cases every year. These cases brought by foreign corporations have attacked our policies governing everything from climate to energy to labor safeguards.

This growth could skyrocket even further if the TPP becomes a reality and adds the likes of Japan and Australia as sources of potential challenges. Although supporters of this misguided trade deal like to point out that the U.S., unlike many other countries, has never lost a ISDS case, it would be foolish to bet the farm on this record as the incentives for corporate profit continue to grow.

If we were to lose a case, the damages would be astronomical, since there is no limit on the amount of taxpayer dollars that a foreign corporation could ask for from our government. This process allows a winning company to ask for its expected lost profits calculated in perpetuity. The U.S. doesn’t have to lose a case to be impacted by this process – even if the United States ultimately prevailed in a case, we could be forced to spend millions in the process. In fact, millions in taxpayer funding have already been spent defending our laws against ISDS challenges.

America has the best workers and most innovative companies in the world, and we can compete and win in the global economy if given a fair and level playing field. Unfortunately, the TPP and the ISDS system in particular would shift the balance of power toward foreign corporations and exacerbate the weaknesses of past trade deals. It’s just the latest reason why we should walk away from this flawed trade agreement and finally implement policies that truly protect American jobs and American workers.  

May 12, 2016

With Trade Commission TPP Review Due Next Week, New Study Shows Past Pacts’ Actual Outcomes Were Opposite of Agency’s Rosy Projections

Administration Expected to Tout Imminent USITC Study in New Push for TPP Passage Despite Agency’s Systematic Failure to Accurately Assess NAFTA, China and Korea Pacts

WASHINGTON, D.C. – The reliability or usefulness of an imminent government assessment of the Trans-Pacific Partnership (TPP) was called into question by a study released today that shows that past U.S. International Trade Commission (USITC) projections of trade agreements’ benefits were systematically contradicted by the pacts’ actual outcomes.

The new study reviews USITC trade balance, job and economic sector projections in the statutorily required reports for the three most economically significant trade pacts prior to the TPP and finds the government study on each pact proved dramatically inaccurate – not only in degree, but in direction.

“Past government studies have systematically projected positive outcomes that were contradicted by the actual results, which is why members of Congress requested, without success, that the agency alter its approach to assessing the TPP,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The USITC predicted improved trade balances, gains for specific sectors and more benefits from the 1993 North American Free Trade Agreement (NAFTA) and 2007 U.S.-Korea Free Trade Agreement (FTA) in reports on those pacts. The agency projected only a small deficit increase from China’s 1999 World Trade Organization (WTO) entry deal and the granting to China of Permanent Normal Trade Relations status.

Instead, the U.S. trade deficits with the trade partners increased dramatically and, as detailed in the text of the new study, manufacturing industries from autos to steel and farm sectors such as beef that were projected to “win” saw major losses. A government program to help Americans who lose jobs to trade certified 845,000 NAFTA jobs losses alone and econometric studies concluded that millions of jobs were lost from the China deal, in contrast to gains projected by the USITC reports.

Table

The new report also reviews how the USITC’s use of a computable general equilibrium (CGE) model leads to projections entirely unrelated to actual outcomes by simply assuming away the very results that have often occurred under past pacts: long-term job loss, trade deficit increases and currency devaluations.

Under the model, the USITC collects information on current exports, imports, gross domestic product (GDP), tariff rates, investment flows and more. It creates equations to calculate how trade flows would change if a pact’s terms were fully implemented. The model looks to an endpoint, not the process of getting there. It does not consider whether there may be increases in trade deficits along the way, or whether other nations may not fully implement or enforce a pact’s terms. Rather it projects a final outcome assuming full implementation. Running this simulation generates data on potential changes in exports and imports. By design, it assumes the trade balance does not change and that employment levels remain consistent – that workers who lose jobs simply obtain new jobs in other sectors where wages are presumed to increase.

A growing body of academic criticism of the CGE model employed by the USITC has focused on the numerous assumptions researchers make, including what economic factors are included and excluded, and what included factors are assumed to remain constant. For instance, implicit in the assumption that the trade balance does not change is the assumption of flexible exchange rates. But in reality, currency manipulation is a significant problem among some of the TPP countries. The U.S. Department of Treasury just recently included TPP nation Japan on its new Monitoring List in its semi-annual report on “Foreign Exchange Policies of Major Trading Partners of the United States.”

The assumptions baked into the model can contribute to gaps between projections about import and export levels and actual outcomes. Also, given that the results of the trade flow simulations are then used to project broader outcomes (such as on U.S. economic growth), assumptions piled on assumption can cause results that are incorrect, not only in degree, but in direction.

Different assumptions can result in diametrically opposed outcomes, as demonstrated by the recent Peterson Institute for International Economics and Tufts University studies on the TPP. The Peterson Institute used a CGE model with assumptions similar to those employed by the USITC in past studies and found the TPP would result in a modest increase in U.S. GDP, but not impact overall U.S. employment. Using an economic model that allows for the possibility of less than full employment and rising income inequality, called the United Nations Global Policy Model, Tufts University economists concluded that the TPP would reduce U.S. growth rates and lead to 448,000 American jobs lost.

The Tufts findings spotlight just how drastically the assumptions baked into a model affect the outcomes; the Tufts economists actually employed the Peterson Institute trade flow simulation data. They plugged the Peterson findings on import and export levels at full TPP implementation derived from one set of unrealistic assumptions into a model that applies more realistic assumptions about how trade flow changes affect growth and employment – and got the opposite results on growth and jobs.

Finally, the output of any model also is greatly affected by the data put into it. Issues to watch for in this regard for the USITC’s TPP study include:

  • How will the USITC TPP study treat “non-tariff barriers” (NTB)? What an international bank may consider an NTB may be what a policymaker or consumer considers an important safeguard to avoid costly financial crises. But recent trade pact projection studies have included guesstimates of gains resulting from the elimination of NTBs.
  • Will the USITC TPP study consider how TPP investment rules could affect decisions about where to invest in production and whether the TPP will alter foreign direct investment trends?
  • How will the USITC TPP study assess intellectual property provisions, given that longer monopolies may increase some U.S. firms’ profitability but also may cost governments and consumers more for medicines and access to information?

Under the Fast Track authority passed last year, the USITC is required to release a report projecting the economic effects of the TPP no later than May 18, 2016.

 

 

May 04, 2016

New Data Reveal That Obama’s Korea Trade Pact on Which the TPP Was Modeled Resulted in Doubling of Trade Deficit

Likely to Fuel Bipartisan Trade Revolt in Presidential and Congressional Campaigns as White House Gears up Push for Congressional Passage of TPP

WASHINGTON, D.C. – As the Obama administration intensifies its efforts to persuade Congress to pass the Trans-Pacific Partnership (TPP), new U.S. government data released today reveal an “inconvenient truth” about the Korea Free Trade Agreement (FTA) that served as the template for the TPP. The new data covering the first four years of the pact reveal that the U.S. goods trade deficit with Korea has more than doubled. This 115 percent deficit increase with Korea comes in the context of the overall U.S. trade deficit with the world decreasing slightly. 

The increase in the U.S. trade deficit with Korea equates to the loss of more than 106,000 American jobs in the first four years of the Korea FTA, counting both exports and imports, according to the trade-jobs ratio that the Obama administration used to promise job gains from the deal.

The Census Bureau data showing the outcomes of the Korea pact are the opposite of the Obama administration’s 2011 “more exports, more jobs” promises for the deal. The administration is now employing similar claims to try to sell the TPP to Congress and the American public as bipartisan opposition to more-of-the-same trade policies surges and presidential and congressional candidates spotlight the problems with the TPP and the failure of U.S. trade policies.

“President Obama has stepped up his efforts to do a hard sell on the TPP, but much of the TPP text was literally cut and pasted from the Korea agreement, so to see what a disaster the Korea deal has been is a stark warning,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “President Obama has repeatedly asked that the TPP not be judged against his predecessors’ failed trade deals, but now we can see the disastrous results from President Obama’s signature trade package, which helps to explain why in this election cycle Americans are on the warpath against our trade policies.” 

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

  • The U.S. goods trade deficit with Korea has increased 115 percent, or $16 billion, in the first four years of the Korea FTA (comparing the year before it took effect to the fourth year data).
  • Since the FTA took effect, U.S. average monthly exports to Korea have fallen in 11 of the 15 U.S. sectors that export the most to Korea, relative to the year before the FTA. Exports of machinery and computer/electronic products, collectively comprising 28.6 percent of U.S. exports to Korea, have fallen 22.6 and 6.6 percent respectively under the FTA.
  • The 115 percent surge in the U.S.-Korea goods trade deficit in the first four years of the FTA starkly contrasts with the 5 percent decrease in the global U.S. goods trade deficit during the same period.
  • While U.S. goods imports from the world have decreased by 6 percent, U.S. goods imports from Korea have increased by 19 percent, or $11.5 billion, during the FTA’s first four years.
  • U.S. goods exports to Korea have dropped 9 percent, or $4.4 billion, under the Korea FTA’s first four years.
  • U.S. exports to Korea of agricultural goods have fallen 19 percent, or $1.4 billion, in the first four years of the Korea FTA despite the administration’s oft-touted point that almost two-thirds of U.S. agricultural exports by value would obtain immediate duty-free entry to Korea under the pact. U.S. agricultural imports from Korea, meanwhile, have grown 34 percent, or $123 million, under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined 22 percent, or $1.5 billion, since the FTA’s implementation. The Obama administration promised that U.S. exports of meat would rise particularly swiftly, thanks to the deal’s tariff reductions on beef, pork and poultry. However, U.S. exports to Korea in each of the three meat sectors have fallen below the long-term growth trend since the Korea FTA took effect. Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $62.5 million in poultry, pork and beef exports to Korea in the first four years of the Korea deal – a loss of more than $5 million in meat exports every month
    • Despite the promises made by U.S. officials that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade, South Korean banned nearly all imports of American poultry at the beginning of 2015 due to several bird flu outbreaks in Minnesota and Iowa. Comparing the FTA’s fourth year to the year before it went into effect, U.S. poultry producers have faced a 93 percent collapse of exports to Korea – a loss of nearly 100,000 metric tons of poultry exports to Korea. U.S. beef exports are finally nearing pre-FTA levels after declining an average of 11 percent during the first three years of the agreement. U.S. pork exports have also nearly recovered to pre-FTA levels after falling by an average of 16 percent in the first three years of the agreement
  • Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 47 of the 48 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit in the four years before the deal.

The Office of the U.S. Trade Representative (USTR) has tried to obscure the bleak Korea FTA results, as congressional ire about the pact is fueling opposition to the TPP. The USTR’s standard data omissions and distortions include:

  • The USTR tries to dismiss the decline in U.S. exports to Korea under the FTA as due to a weak economy in Korea. 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 2015 was 11 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 9 percent in the first four years of the FTA.
  • The USTR selects a few products that have gained exports to emphasize, while omitting the low value of such exports and the net trade deficit increase of 115 percent.

 

April 18, 2016

Audit of Administration’s ‘Tax Cuts’ Claim for TPP Reveals Cooked Numbers and Misdirects

The Obama administration’s claim that the Trans-Pacific Partnership (TPP) will deliver “tax cuts for 18,000 Made in America products” is wrong, a new Public Citizen analysis shows. The new Public Citizen report also addresses the real question from which the administration’s redirect to an impressive-sounding number distracts: Would cutting even 18,000 tariff lines necessarily equate to more U.S. exports, jobs or growth?

“The administration owes the public and Congress an explanation of how it cooked up what obviously is a false ‘TPP tax cut’ number, but more broadly touting a large number of tariff lines cuts misdirects attention from the real question of whether the TPP will create more American jobs or cause damage,” said Lori Wallach, direct of Public Citizen’s Global Trade Watch.

The disconnect between tariff lines cut and economic gains is spotlighted by the U.S.-Korea Free Trade Agreement (FTA), which cut nearly 10,000 tariff lines. Yet, in its first three years, U.S. goods exports to Korea dropped 7 percent and the U.S. deficit with Korea surged 90 percent.

Public Citizen’s new analysis reveals that:

  • The claim about 18,000 tax cuts on Made in America goods is obviously wrong.
  • In 2014, the United States exported items relating to a total of 8,687 tariff categories to all of the 11 TPP countries. Even assuming tariffs remained in each category of products, and many already are duty-free, the TPP clearly would not deliver “tax cuts” for 18,000 U.S. products. (The administration says the 18,000 figure refers only to cuts with just the five TPP nations that do not have a U.S. trade deal and to these nations we sent exports in only 7,289 categories.)
  • That the administration’s 18,000 figure represents double, triple or quadruple counting also is revealed by reviewing Brunei, Japan, Malaysia, New Zealand and Vietnam’s TPP tariff schedules. None list more than 10,000 tariff categories with many lines duty-free absent a TPP.
  • Whether tariff cuts translate into more U.S. exports or jobs relies on whether we make or TPP nations demand the relevant goods. For 5,830 of 7,289 categories (80 percent) in which the United States exported anything to the relevant TPP countries, sales were less than $5 million. A quarter had sales of less than $100,000. In only 21 of 7289 lines did we export more than $500 million and some of these already are duty free.
  • 1,225 of the tariff reductions in the products we do sell to the five TPP nations without U.S. FTAs won’t be realized for a decade or more. This includes goods we produce in volume, like beef, which will still face a 20 percent tariff in Japan in the tenth year after the TPP would go into effect.
  • The six TPP partners with which the United States already has FTAs collectively account for more than 80 percent of the trade counted in the oft-touted statistic that the TPP covers 40 percent of world trade. Thus, tariffs on U.S. goods going to Australia, Canada, Chile, Mexico, Peru and Singapore already are gone or are being eliminated. So while TPP countries may account for 40 percent of world trade, the TPP would cut tariffs on only 20 percent of that 40 percent share.
  • Among the items the United States simply do not export are those relating to species that the administration claims the TPP’s Environmental Chapter will help conserve. Yet perversely, the list of tariff cuts that the administration counts as a benefit of the TPP includes Malaysia’s shark fin tariff, Vietnam’s whale meat tariff and Japan’s ivory tariff. 
  • Even setting aside the problem of currency manipulation, cuts translate into more market access only when tariffs are significant enough to make U.S. products uncompetitive. Japan comprises fully 88 percent of the combined gross domestic product of the TPP countries that do not already have a U.S. FTA, but Japan’s average applied tariff weighted by product import shares is now only 1.2 percent. Indeed, the tariff levels in the remaining five TPP are generally low.
  • The raw number of tariff lines countries agree to cut also does not tell us much about a pact’s effect on consumer prices. The TPP includes tariff cuts on the shoes Nike produces in Vietnam to sell here, but currently shoes that retail for more than $100 cost about $10 to make. The tariff is charged on the cost, thus even a major percentage cut does not equate to much money. And, whether a firm like Nike will reduce prices or simply gain more profit on an item imported for sale here is determined by what consumers are willing to pay for the product.
  • While firms importing goods into the United States will determine whether to pass savings related to U.S. tariff cuts on to consumers, the TPP’s reduction or elimination of tariffs does necessarily reduce U.S. Treasury revenue. According to President Barack Obama’s proposed 2017 budget, the TPP would cost the United States about $28 billion in lost tariff revenue over the next 10 years. (The calculation is based on the assumption that the TPP takes effect in 2017.)

The administration’s “TPP Guide to 18,000 Tax Cuts” document oddly highlights goods that TPP nations simply do not buy in volume from anyone. Consider the 34 percent “tax” cut by Vietnam on Alaskan caviar. In 2014, Vietnam’s per capita GDP was about $2,000 and about $150,000 worth of caviar was imported by Vietnam from anywhere. Or Vietnam’s 5 percent tariff on skis from Colorado. Vietnam imported only about $50,000 in skis in total. Other highlights: Vietnam and Japan will eliminate their tariffs on silkworm cocoons, Brunei will cut its tariff on ski boots and Vietnam will eliminate its tariff on camels.

March 28, 2016

Talking Points: Response to 3/15/16 Peterson Institute Pro-TPP Paper

Below is a briefing note called, “Assuming Away Unemployment and Trade Deficits from the TPP” from the team at Tufts University that debunked the original Peterson Institute for International Economics (PIIE) TPP study which this latest missive, “Adjustment & Income Distribution Impacts of the TPP” by PIIE’s Robert Lawrence and Tyler Moran, is premised. The key points are:

  • Of course Lawrence and Moran find that TPP’s benefits far exceed the adjustment costs: They use the findings of the PIEE TPP study (Petri-Plummer) derived from a model that does not allow for permanent job loss or increased trade deficits and assumes no increased income inequality. Those assumptions, which contradict the outcomes of each past major U.S. trade pact, mean TPP wage and employment losses are just temporary “adjustment costs” on the way back to full employment. If that were not sufficient to distort the new study’s findings, the authors also pile on more outlandish assumptions to minimize the number of workers likely to be affected and the impact on their wages.
  • With larger trade deficits and permanent job loss excluded by assumption, Lawrence and Moran then start discounting how many Americans would be hit even by temporary job displacement from the TPP by presenting three scenarios. 
    • They start with 1.69 million U.S. workers possibly displaced over ten years of the TPP.
    • They drastically reduce that total to 278,000 (mainly in manufacturing), by invoking another layer of assumption based on the underlying full-employment assumption: Rising demand will generate new jobs and thus limit job loss.
    • Then they reduce that to 238,000 workers by excluding workers who voluntarily leave manufacturing jobs, so the TPP can’t be blamed for those losses.
  • They then apply a formula to estimate the temporary adjustment costs (essentially lost wages) from those “displaced.” They compare these to Petri and Plummer’s reported U.S. TPP gains of $131 billion. Recall that these gains are based on the outlandish assumptions baked into the model. Another study that allowed for job loss and increased trade deficits found the TPP would result in net losses for the United States.
  • Lawrence and Moran’s resulting cost-benefit calculation does not report the costs, just the ratios, for the three scenarios. The authors report that for their “most realistic” scenario (#3), the one with the fewest displaced jobs, the benefits are 18 times the costs over the 10-year “adjustment period” (2017-26).
    • Then, they add in three “post-adjustment years” 2027-2030 and the ratio skyrockets to 115:1. Why? Presumably because with the full-employment assumption all displaced workers are, by then, happily employed in their new post-TPP jobs.
  • Finally, the authors also make the unfounded assumption that U.S. wages will increase at the same rate as productivity, though that has not happened for thirty years. This assumption automatically raises most workers’ incomes in their analysis. They also claim the assumed income gains will be much the same for each quintile of U.S. income distribution, with the bottom quintile seeing an increase 0.007 of a percentage point higher than the top. Technically, that’s mildly progressive. But consider it in terms of absolute gains: The bottom 40 percent sees just $8 billion in income gains, while the top quintile would get $48 billion. (i.e., more in absolute terms than the bottom 80 percent combined.)
  • The resulting cost-benefit calculations are misleading not only because the costs are assumed away, but also because the benefits are overstated. This latest paper takes the earlier Petri and Plummer estimates at face value, with all their flawed growth-boosting assumptions (such as a surge in foreign investment and most growth gains from non-trade measures). Plus, the gains are simply asserted to be large, when even the Petri-Plummer estimates of gains are incredibly small, just 0.5 percent of GDP for the United States in 2030, i.e., a paltry 0.029 percent per year on average over 15 years. How small is that? Even with all of the unrealistic assumptions, for the bottom 40 percent of U.S. income distribution, the gains amount to just $62 per person, in 15 years.

THE FULL BRIEFING NOTE FROM THE TUFTS TEAM CAN BE FOUND HERE: http://triplecrisis.com/assuming-away-unemployment-and-trade-deficits-from-the-tpp/

 

March 03, 2016

President’s Annual March Trade Agenda

Administration Continues to Use Debunked Talking Points to Sell TPP

The Obama administration released the 2016 Trade Policy Agenda today as the Trans-Pacific Partnership (TPP) faces increasing bipartisan opposition in the U.S. House and Senate. However, instead of addressing the growing chorus of concerns in the 2016 trade agenda, the administration continues to push debunked talking points to the American people in hopes of selling the controversial agreement.

Public Citizen has already debunked most of talking points included in the 2016 trade agenda report:

Debunked talking point: More than 18,000 tax cuts on Made-in-America exports.

  • Reality: The Obama administration is trying to shift focus to an impressive-sounding number with its mantra about TPP delivering “18,000 tax cuts for Made in America exports.” But that is just the raw number of tariff lines cut by the five TPP nations with which the United States does not already have free trade agreements (FTAs). The United States only sold goods to those nations in less than 7,500 of the 18,000 categories. Indeed, the United States exports no goods to any nation under some of the touted 18,000 tariff lines.

 

Gtwchart
 

 

Debunked talking point: The President’s trade agenda is focused on supporting U.S. jobs and raising wages.

 Debunked Talking Point: Putting more money in middle class pockets.

  • Reality: A recent study finds the TPP would spell a pay cut for all but the richest 10 percent of Americans by exacerbating income inequality, as past trade deals have done. That would contradict Obama’s 2015 State of the Union inequality reduction goal. Macroeconomic theory predicts if Americans face more competition from workers in Vietnam who make less than 65 cents/hour, wages will be pushed down. Sixty percent of manufacturing workers losing jobs to trade who find reemployment face pay cuts, with one in three losing more than 20 percent, per U.S. DoL data. There is academic consensus that trade has contributed to the major rise in inequality.

Debunked talking point: The TPP is preserving our environment.

Debunked talking pointThe TPP is promoting our values.

  • Reality: While the Obama administration is celebrated for its defense of gay equality after dust-binning the “Don’t Ask, Don’t Tell” policy and joining those announcing that the Defense of Marriage Act was unconstitutional, it decided to allow Brunei to remain in the TPP even after the country announced that it would begin stoning to death gays and single mothers under new sharia-based laws. This has led to LGBTQ groups joining the TPP opposition.

Debunked talking point: The TPP is promoting the U.S. auto industry.

  • Reality: The TPP would threaten the president’s successful rescue of the U.S. auto industry and thousands of U.S. jobs. It would allow vehicles comprised mainly of Chinese and other non-TPP country parts and labor to gain duty free access. This would gut the rules of origin established in NAFTA that condition duty free access on 62.5 percent of value being from NAFTA countries. Ford has supported all past U.S. trade deals, but opposes the TPP.

Debunked talking point: 98 percent of U.S. exporters are small or medium-sized enterprises (SMEs).

  • Reality: SMEs comprise most U.S. exporting firms simply because they constitute 99.7 percent of U.S. firms overall. However, only 3 percent of U.S. SMEs export any good to any country. In contrast, 38 percent of large U.S. firms are exporters. The relatively few small businesses that do actually export have seen even more disappointing export performance under FTAs than large firms have seen. U.S. small businesses have seen their exports to Korea decline even more sharply than large firms under the Korea FTA (a 14 percent versus 3 percent decrease), while small firms’ exports to Mexico and Canada under NAFTA have grown less than half as much as large firms’ exports. Indeed, small firms’ exports to all non-NAFTA countries have exceeded by more than 50 percent the growth of their exports to NAFTA partners.

 

February 24, 2016

Debunking the Administration’s TPP = 18,000 Tax Cuts on U.S. Exports Talking Point

U.S. Sold Nothing in More than 10,600 of Those Categories...

Without compelling jobs or economic growth data to sell the Trans-Pacific Partnership (TPP), the Obama administration is trying to shift focus to an impressive-sounding number with its mantra about TPP delivering “18,000 tax cuts for Made in America exports.”

But that is just the raw number of tariff lines cut by the five TPP nations with which the United States does not already have free trade agreements. The United States only sold goods to those nations in less than 7,500 of the 18,000 categories. Indeed, the United States exports no goods to any nation under some of the touted 18,000 tariff lines.

The 18,000 figure is a misdirect. The relevant question is not the number of tariff cuts other countries listed but whether the TPP would lead to net U.S. job creation, higher wages, an improved trade balance and higher U.S. growth rates.

  • The United States exported nothing for more than half of the 18,000 categories to the five relevant nations – Japan, Malaysia, Vietnam, New Zealand and Brunei – in 2014, the last year for which annual data is available. U.S. exporters already have “tax cuts” for their goods under previous trade deals with the other six TPP nations, including Canada and Mexico – our second and third largest trade partners.
  • For the nearly 7,500 categories of goods out of the 18,000 for which we sold anything to the five nations without previous FTAs, almost 50 percent of the categories had sales under $500,000. And the TPP is not likely to transform that reality. Brunei (annual GDP $17.1 billion) is a tiny market. New Zealand (annual GDP $200 billion – smaller than San Diego) and Vietnam (annual GDP $186.2 billion – close to that of Denver) are not big markets. And, consumer demand is limited by Vietnam’s extremely low $2,052 per capita income. Malaysia’s per capital income is one fifth of that in the United States and its GDP is $338.1 billion, about the size of Atlanta. Japan is a huge market. But, with the exception of some agricultural goods, tariffs have not been the main barriers to U.S. exports to Japan. (GDP data from the World Bank)
  • Almost 2,000 of the tariff reductions in the categories of products the United States does sell won’t be realized for over a decade. This includes some of those, such as beef and pork to Japan, where tariff cuts could make a difference. But because the TPP does not have enforceable disciplines against currency manipulation, by the time these cuts finally go into effect they could effectively have been erased if Japan devalues the yen.

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  • The administration’s “TPP Guide to 18,000 Tax Cuts” document bizarrely highlights goods TPP nations simply do not buy in volume from anyone. Consider the 34 percent “tax” cut by low-income Vietnam on Alaskan caviar. About $150,000 worth of caviar was imported by Vietnam from anywhere. Or Vietnam’s 5 percent tariff cut on skis. Vietnam only imported about $50,000 in skis in total.
  • Many of the tax cuts the administration has touted include those that the administration claims the TPP’s weak environmental chapter would conserve. Among the 18,000 tax cuts are Malaysia’s shark fin tariffs, Vietnam’s whale meat tariffs and Japan’s ivory tariffs.

Indeed, the “tax cut” list is packed with gems. Christmas ornaments and pork for Muslim nations Malaysia and Brunei. Silkworm cocoons for Vietnam and Japan. Ski boots for Brunei. Camels for Vietnam.

February 17, 2016

Remarks at the National Press Club Panel on the Proposed Inclusion of ISDS in the TPP

Delivered by Lise Johnson, Head: Investment Law and Policy, Columbia Center on Sustainable Investment, at the National Press Club in Washington DC on February 11, 2016

With the TPP, we are currently at a crucial crossroads. We either take this time to thoroughly evaluate ISDS and its costs and benefits, which, I believe, would take us in a new and more thoughtful direction, or we simply move forward with the TPP, entrenching and expanding a failed experiment in economic policy.

I refer to ISDS as an experiment because, although it is commonly noted that there are 3,000 investment treaties around the world and, therefore, that the ISDS mechanism is nothing new, the first investment treaty with ISDS was actually not concluded until the late 1960s. Investment treaties with ISDS were not widely negotiated until the 1990s, and ISDS claims only really emerged in earnest in the late 1990s and early 2000s. Thus, we really only have roughly 15 years of experience with this mechanism. ISDS is still a new area of law. An experiment.

I note that ISDS is a failed experiment because it does not appear to have achieved three of the commonly stated objectives of the mechanism. It has not led to increased investment flows, nor to a set of predictable international legal rights for investors, nor to an increase in the rule of law in host countries.

If the TPP were concluded with ISDS, we would not only be entrenching this failed experiment, but significantly expanding it. Currently, the US only has an investment treaty with one major capital exporting state, Canada, meaning that only a relatively small share of foreign direct investment in the US – roughly 10% -- is currently protected by a treaty with ISDS. With the TPP, the percentage of covered investment will more than double; and if we continue the trend in the TTIP as well, the amount of covered FDI in the US will rise significantly to approximately 70%, and along with it, the US’s exposure to costly litigation and liability.

Now, the US has said that the experiment has not cost the Government anything, frequently highlighting the point that it has yet to lose an ISDS case. But there are a few reasons why I don’t think we should count on the past to predict the future:

  • As I noted, the US’s exposure has been fairly limited; this will change with the TPP;
  • Second, in the cases the US has defended, the US has had near misses in which even the government officials working on the case thought the Government would lose; one explanation given for why arbitrators have been reluctant to rule against the US is that, if the US were to lose, it would back away from the system to the ultimate detriment of the arbitrators and counsel who make their living from ISDS cases. Thus, at least while the future of ISDS felt uncertain, it has been in the best interest of arbitrators to take it easy on the US.
  • Third, recent decisions reflect the significant delegation of authority under ISDS to arbitrators to interpret and apply the treaty, without any meaningful review or opportunity to appeal the arbitrators’ decisions. The tribunal in a recent case against the US, for example, stated that although all three NAFTA states unanimously agreed that the treaty meant “X”, it didn’t consider itself bound to that interpretation and proceeded to disregard it. This shows that there is no guarantee that tribunals will interpret treaty provisions in a way that is consistent with the US’s understanding of what treaty obligations mean.2
  • Fourth, the US has lost on key issues that have resulted in an expansion of exposure to future claims and damages.3

Moreover, irrespective of data on wins and losses, the system of ISDS itself is fundamentally flawed in that it creates a privileged and powerful system of protections for foreign investors that is inconsistent with, and erodes, the power of domestic law and institutions.

The USTR has defended ISDS against such charges by saying that the standards of protection investors receive under it mirror, but do not go beyond, the protections provided under domestic law and that therefore ISDS does not represent any change or threat to domestic law as we know it.4 But there are two key problems with the USTR’s assertion. One is that it is not correct that investment treaties do not provide foreign investors any greater rights than are provided under domestic law. We’ve done significant research comparing the protections provided under domestic law with those provided under investment treaties, and conclude that the protections provided under investment treaties in fact give foreign investors greater rights than they or anyone else have under domestic law.5 In fact, this seems to be why TransCanada, which is suing the US government as a result of the denial of the Keystone permit, is pursuing its major claim for $15 billion through the NAFTA as opposed to through domestic litigation.

But, even accepting the USTR’s argument that the substantive standards in investment treaties simply mirror substantive standards provided under US domestic law still does not address some of the significant concerns about ISDS. In this context, it is important to recall that ISDS allows investors to challenge actions of officials at any level of government – local, state, and federal, and conduct by any branch – executive, legislative and judicial. The fact that a measure is entirely consistent with domestic law is no defense or shield against liability.

What ISDS does is give private arbitrators the power to decide cases that, at their core, are merely questions of domestic constitutional and administrative law dressed up as treaty claims. Instead of recourse through local, state or federal domestic institutions, investors are able to take their claims to a panel of party-appointed international arbitrators and ask them to determine the bounds of proper administrative, legislative, and judicial conduct.

One might ask: what does it matter if we permit foreign investors to bring their claims against the government before international arbitrators as opposed to before domestic courts if the substantive standards of protection are the same? The answer is that it matters a great deal.

  • One, there is no route for a meaningful appeal. Even if a tribunal gets the law or facts wrong, its decision will likely stand;
  • Two, the decision makers in ISDS are free of the requirements of independence, impartiality, and high ethical standards that are mandatory for US judges;
  • Three, in domestic litigation, if a court issues a decision that is inconsistent with legislative intent, the legislature can pass a law correcting that decision; the legislature, however, has no power to undo or otherwise override an ISDS decision;
  • Four, the procedural rules and remedies are significantly different depending on whether an investor brings its claims through ISDS or through domestic courts, with meaningful impacts on the government’s potential exposure to claims and liability; and
  • Five, even if the law looks the similar, it is not the same. So, for example, although the TPP incorporates what superficially looks like the US’s test on regulatory expropriations, tribunals are not in any way bound to apply that test in the same manner as US courts.

Fundamentally, supranational adjudication—where the decisions of a supranational body can penetrate deep into a domestic society—is rare and raises a host of complex legal and policy questions. Much more consideration of these issues is important before we inadvertently dilute constitutional protections, weaken the judicial branch, and outsource our domestic legal system to a system of private arbitration that is isolated from essential checks and balances. This is not to say that supranational adjudication has no place in the American legal system, but rather that ISDS is an extreme, discriminatory and unnecessary version that will have undue negative effects on our domestic law and institutions.

  1. Data from the Bureau of Economic Analysis.
  2. See Lise Johnson, “New Weaknesses: Despite a major win, arbitration decisions in 2014 increase the US’s future exposure to litigation and liability,” (CCSI 2015), at p. 8, available at http://ccsi.columbia.edu/files/2013/12/9.-Johnson-New-Weaknesses-US-roundup.pdf
  3. See cases discussed Id.
  4. USTR, Fact Sheet: “Investor-State Dispute Settlement (ISDS),” (March 2015), https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2015/march/investorstate-dispute-settlement-isds (“These investment rules mirror rights and protections in the United States and are designed to provide no greater substantive rights to foreign investors than are afforded under the Constitution and U.S. law”).
  5. See, e.g., Johnson and Volkov, “Investor-State Contracts, Host-State ‘Commitments,’ and the Myth of Stability in International Law,” 24 American Review of International Arbitration 361 (2013); Lise Johnson, Lisa Sachs, and Jeffrey Sachs, “Investor-State Dispute Settlement, Public Interest, and U.S. Domestic Law,” (May 2015), available at http://ccsi.columbia.edu/files/2015/05/Investor-State-Dispute-Settlement-PublicInterest-and-U.S.-Domestic-Law-FINAL-May-19-8.pdf

February 04, 2016

On World Cancer Day, Cancer Patients Arrested at PhRMA Headquarters to Warn of ‘Death Sentence’ Imposed by Trans-Pacific Partnership Expansion of Medicine Monopolies

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WASHINGTON, D.C. – On World Cancer Day, two cancer patients – supported by health professionals and public health advocates – were arrested as they engaged in civil disobedience to dramatize their life-and-death concerns about the expansion of medicine monopolies pushed by brand-name pharmaceutical companies in the Trans-Pacific Partnership (TPP).

Zahara Heckscher, a 51-year old mother and author from Washington, D.C., who has been in treatment for aggressive breast cancer for seven years, and Hannah Lyon, a 29-year old from California who is in treatment for aggressive cervical cancer, linked arms and refused to leave the lobby of the office building that houses PhRMA, the trade association that has pushed for extreme monopolies in the TPP, while dozens of supporters chanted outside. 

They loudly shouted that the TPP would be a “death sentence” for many cancer patients by keeping life-saving cancer medicines out of reach due to exorbitant monopoly pricing. They shouted until they were arrested by the D.C. police and charged with unlawful entry.

For royalty-free video and photos of Hecksher’s and Lyon’s arrest: https://www.dropbox.com/sh/68eadvlygp3z85i/AABY6Pq1drD9v4WLXoq4-N4ca?dl=0

 “The TPP will effectively take some patients backwards in time to the dark ages of cancer treatment. It will prevent too many people with cancer – and other life threatening illnesses – from accessing the new treatments they need to stay alive,” said Heckscher, explaining why she felt compelled to risk arrest protesting the TPP at PhRMA today. “One of my current medicines would cost me $118,000 per year if I were not in a clinical trial. PhRMA pushed for provisions in the TPP that, if passed, would lock in policies in the U.S. that keep medicine prices obscenely high.”

Lyon echoed Heckscher’s concerns. “I have never spoken in public or engaged in civil disobedience before, but I know at a deeply personal level the life and death stakes for many cancer patients if the TPP is approved,” she said. “Cancer patients do not have the luxury to wait five or eight years for access to affordable medicines while PhRMA establishes extended monopolies to continue to reap outrageous profits. I want Congress to pay attention to the concerns of patients who need affordable medicine instead of catering to PhRMA lobbyists, and reject the TPP.”

Before risking arrest, Heckscher and Lyon were joined in a news conference and demonstration at PhRMA headquarters by other cancer patients, survivors, health professionals and public health advocates, wearing scrubs and surgical masks and holding signs that read “On World Cancer Day, Cancer Patients Say No TPP Death Sentence” and “Shame on PhRMA! No TPP Death Sentence.” Advocates held oversized pill bottles with giant price tags and chanted.

For royalty-free photos of the protest: https://www.dropbox.com/sh/4ad5p5m0qa2yv5t/AAADolARAKk6UE1uFhUmdOzha?dl=0

Robert Weissman, president of Public Citizen, put the struggle against the TPP ‘death sentence’ in a broader context: “Pharmaceutical industry greed has reached heights never seen before. The price of medicines has nothing to do with the cost of making them – and virtually nothing to do with the cost of research and development. Big Pharma companies are price gouging simply because they can. Drug prices are so high because there’s no competition, and because Big Pharma spent more than $1.2 billion on lobbying over the past five years and it employs an army of more than 1,400 registered lobbyists to keep it that way. As part of a comprehensive strategy to reform our broken system, we must fight Big Pharma’s scheme to win still more expanded monopoly protections through the TPP – an effort not just to impose high prices on other countries, but to block our reform agenda and maintain super-high prices in the United States indefinitely.”

Alison Case, a physician with the American Medical Student Association, gave a prospective from health professionals: “The TPP sets a dangerous precedent for our future patients by threatening access to medicines and public health. The provisions on intellectual property, including provisions regarding life-saving biologics used to treat cancer, were designed with heavy industry input in a completely non-transparent way,” she said. “This will only further an environment of high drug costs and frustratingly difficult struggles for patients who need them.”

Hilary McQuie, director of U.S. government policy at HealthGap, noted that the TPP provisions could delay efforts to end the AIDS epidemic. “We now have over 15 million people worldwide getting HIV treatment, and if we keep increasing resources to test and treat at this rate, we will end the AIDS epidemic by 2030. The only way this has been possible was through hard-won struggles to allow for massive generic imports by low and middle income countries. If in place a decade ago, the TPP’s provisions would have prevented member countries the ability to develop the very HIV treatment programs that millions are dependent on today.”

For more information on the TPP and access to medicines, see:

January 28, 2016

A review of the actual text of the Peterson Institute for International Economics’ (PIIE) Trans-Pacific Partnership (TPP) study update that was recently released – versus the slanted press coverage – shows:

  • The study’s methodology relies on absurd assumptions.
  • Even so, the claimed gains for the U.S. are small.
  • The study identifies significant downsides for the United States, including more than 500,000 U.S. jobs lost in the pact’s first 10 years.

Despite the administration’s rosy framing, even the PIIE’s pro-TPP study predicts lackluster results for U.S. economic growth as well as U.S. job losses.

Income gains from the TPP, as predicted by PIIE, are VERY small – a TOTAL of one-half of one percent by 2030 – i.e. a rounding error of under 0.036 percent per year. That is to say, the gain in U.S. growth with the TPP at the end of 15 years sums up to 0.5 percent. TPP proponents use the gross number to be able to tout “billions” in gains because in context to projected U.S. economic growth without the TPP, the so-called TPP gain is miniscule.

  • The sum total of projected U.S. economic gains approximately equals the amount that Americans will spend on St. Patrick’s Days, over-the-counter teeth whiteners and tattoos by the time the TPP’s benefits are supposed to materialize.
  • Notes CEPR’s Dean Baker: “The study’s projection of a cumulative gain to GDP of 0.5 percent by 2030 implies an increase in the annual growth rate of 0.036 percentage points. This means that if the economy was projected to grow by 2.2 percent a year in a baseline scenario, it will instead grow at a 2.236 percent rate with the TPP, assuming the Peterson Institute projections prove correct. The projections imply that, as a result of the TPP, the country will be as rich on January 1, 2030 as it would otherwise be on April 1, 2030.

The Obama administration was called out by the Wall Street Journal for trying to distort this paltry gain, which they are touting because the only official U.S. government study undertaken by the U.S. Department of Agriculture shows that the TPP would have no economic benefits for the U.S. economy.

  • The USDA study concluded that even if all tariffs were slashed to zero (which did not happen) the TPP would increase U.S. GDP by 0.00 percent in 2025. You read that right – 0 percent. It doesn’t get any lower than that.

The meager projected TPP gain in the U.S. economy comes even despite the study’s use of a model that assumes no job loss or rise in inequality, two of the issues of greatest concern to many TPP opponents. 

  • Yet even using a methodology that assumes full employment, buried in the fine print of the Peterson Institute’s study is a prediction that 53,700 U.S. jobs PER YEAR will be displaced in the TPP’s first ten years. That is, the total job loss projected by the study, despite its rosy assumptions, is more than 537,000 lost jobs in the pact's first decade.

Another recent economic modeling study concluded that 450,000 American jobs would be lost under the TPP.

  • The TPP includes rules that will make it easier to offshore more American jobs to low wage countries.

Using an economic model that allows for the possibility of less than full employment and rising income inequality, Tufts University economists found that the TPP would result in a net loss of income in the United States and significant job loss.

  • There is academic consensus that trade has contributed to the major rise in inequality. A recent study finds the TPP would spell a pay cut for all but the richest 10 percent of Americans by exacerbating income inequality, as past trade deals have done.
  • Macroeconomic theory predicts if Americans face more competition from workers in Vietnam who make less than 65 cents/hour, wages will be pushed down.
  • Sixty percent of manufacturing workers losing jobs to trade who find reemployment face pay cuts, with one in three losing more than 20 percent, per U.S. Department of Labor data.

January 12, 2016

Administration’s TPP Honey SOTU Guest: Falsely Sweet Story Exemplifies TPP Sales Job

Small businesses are the backbone of the American economy. Obama SOTU guest Ronna Rice and her company Rice’s Lucky Clover Honey should be congratulated on their success. Tomorrow the President will no doubt talk about how the TPP will help her sell more honey. Yet like much of the White House TPP sale job, the nice narrative is not supported by the facts. Here’s why you shouldn’t swallow this falsely sweet example:

  • U.S. honey exports to eight of the 11 other TPP nations (Australia, Brunei, Chile, Canada, Malaysia, Mexico, Peru, Singapore) already are duty free without the TPP! So, why is Ms. Rice and her firm being pitched as benefitting from the TPP?
  • Vietnam has a 10% tariff that goes away on day one of a TPP, but they won’t be importing our honey: Vietnam is the United States’ second largest source of honey imports. (We import a lot of honey from Vietnam.)
  • Malaysia is our sixth largest import source, which is curious given the country has fewer than 60 commercial bee operations. (Answer: Malaysia is implicated in the China honey transshipment scam. There’s a large U.S. anti-dumping order against Chinese honey now.) 
  • As far as how Ms. Rice and Rice’s Lucky Clover Honey will be affected, both Vietnam and Malaysia newly would get duty-free access into the U.S. market on day one of a TPP rather than have to pay our current 1.9 cent per kilo tariff on their imports. Like usual, the administration only hypes inflated export claims, but fails to consider imports or the net effect of a trade pact.
  • Rice’s Lucky Clover Honey focusses mainly on the U.S. market ... That is typical for U.S. small businesses. Exporting is mainly the realm of big business. 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. The White House line about small businesses being the largest number of U.S. exporting firms is just a reflection of the fact that 99.7 percent of U.S. businesses meet the “less than 500 employees” definition of SMEs. 
  • So what is the ostensible upside for Ms. Rice and her firm?? Tiny New Zealand’s 10% tariff goes away day one of a TPP ... Its population is the same as the Boston metro area, but its purchasing power is lower. So, NZ is not the prize. 
  • So … it boils down to Japan. There’s a 25.5% tariff on honey in Japan now, which goes to zero in year eight of the TPP. BUT, even though the United States sells quite a bit of honey in Japan now, China flattens us in Japan with respect to relative market share.

The real TPP story for Lucky Clover honey is not so sweet. For the years until the Japan-Korea-China FTA goes into effect, would the TPP tariff cut increase the U.S. share of Japan’s imported honey market relative to China? And more critically, would any such exports gains in Japan even make up for the increased imports of duty-free Vietnam and Malaysia honey into the United States under the TPP – more import competition in the firm’s main market? 

ICYMI: Trans-Pacific Partnership (TPP) Facts and Figures for SOTU Prep

President Barack Obama is expected to prioritize the Trans-Pacific Partnership (TPP) in his State of the Union address. The TPP text was finally released in November after seven years of secretive talks during which this Washington Post infographic shows 500 U.S. trade advisors representing corporate interests had special access. Congress, the public and press were shut out. Now everyone can read the controversial deal that could undermine many landmark achievements of Obama’s presidency and thus his legacy on jobs and economic recovery, climate, healthcare access, gay equality, financial reform, the U.S. auto industry rescue and more. Only six of the TPP’s 30 chapters deal with traditional trade matters. As this recent New Yorker piece describes, the rest require limits on food, financial and other regulations, provide drug firms new monopolies and expand the contentious investor-state dispute settlement system.

Zero U.S. Economic Growth from TPP:

The Department of Agriculture issued the administration’s only major study on TPP’s economic impact and found it would result in 0.00% increased U.S. growth if all tariffs on all products were eliminated, which did not occur. The United States already has free trade deals in place with Canada, Mexico, Peru, Australia, Chile, and Singapore, which collectively represent over 80 percent of the trade counted in the oft-touted line about the TPP covering 40 percent of world trade. Even the major pro-TPP study found that in 2025 U.S. growth rates only would be .4 percent higher with TPP in effect - even using a model that assumed full employment and no increased income inequality. Yet, since the 1940s, standard economic theory has held that trade liberalization is likely to increase inequality in developed countries like the United States.

Increased Income Inequality:

A recent study finds the TPP would spell a pay cut for all but the richest 10 percent of Americans by exacerbating income inequality, as past trade deals have done. That would contradict Obama’s 2015 SOTU inequality reduction goal. Macroeconomic theory predicts if Americans face more competition from workers in Vietnam who make less than 65 cents/hour, wages will be pushed down. Sixty percent of manufacturing workers losing jobs to trade who find reemployment face pay cuts, with one in three losing more than 20 percent, per U.S. DoL data. There is academic consensus trade has contributed to the major rise in inequality.

American Jobs at Risk:

The TPP includes rules that make it cheaper and less risky to offshore U.S. jobs to low wage nations. The pro-free trade Cato Institute calls these investor protections a subsidy on offshoring. The administration stopped claiming the TPP would create jobs after a four Pinocchio rating by the Washington Post fact checker. Since the North American Free Trade Agreement (NAFTA), more than 57,000 U.S. manufacturing facilities have closed and five million U.S. manufacturing jobs–one in four–were lost with more than 875,000 U.S. workers certified under just one narrow U.S. Department of Labor program.

Export Claims:

Obama’s most recent free trade agreement (FTA) served as the TPP’s template and also was sold as a way to create “more exports, more jobs.” Three years into the U.S.-Korea Free FTA, the U.S. goods trade deficit with Korea was up more than 90 percent as exports fell 7 percent and imports surged. The United States ran a $177.5 billion goods trade deficit, with its 20 FTA partners in 2014, the last year data is available. The growth rate of exports FTA partners has been 20 percent lower than U.S. exports to the rest of the world the last decade. In his 2010 SOTU, Obama said he would double exports in five years. But given our paltry annual export growth rate, the export-doubling goal would not be reached until 2057 – 43 years behind schedule.

The TPP=18,000 Tax Cuts Red Herring:

In the face of the Korea FTA’s flop, the administration has tried to shift focus to a “tax cut” narrative to sell the TPP with a mantra about 18,000 tax cuts for U.S. exported goods. But last year, the U.S. only exported goods in less than half of the 18,000 tariff categories. By using the raw number of tariff lines cut with respect to the five nations with which we do not already have FTAs (Japan, Malaysia, Vietnam, New Zealand and Brunei), the administration distracts from the real question: does 18,000 tariff cuts equate to more U.S. exports or jobs? For the nearly 7,500 categories of goods out of the claimed 18,000 for which we did sell anything, almost 50 percent had sales under $500,000. Many items we simply do not sell, including those that the administration claims the TPP’s weak environmental chapter will help conserve. Among the 18,000 tax cuts are Malaysia’s shark fin tariffs, Vietnam’s whale meat tariffs, and Japan’s ivory tariffs. The administration’s “TPP Guide to 18,000 Tax Cuts” document also bizarrely highlights goods TPP nations simply do not buy in volume from anyone. Consider the 34 percent “tax” cut by Vietnam on Alaskan caviar. In 2014, Vietnam’s per capita GDP was about $2,000 and about $150,000 worth of caviar was imported by Vietnam from anywhere. Or Vietnam’s 5 percent tariff on skis from Colorado. Vietnam only imported about $50,000 in skis in total. Other highlights: Vietnam and Japan will eliminate their tariffs on silkworm cocoons, Brunei will cut its tariff on ski boots, and Vietnam will eliminate its tariff on camels. Almost 2,000 of the tariff reductions in the products we do sell won’t be realized for over a decade or more, including beef and pork to Japan.

China Claims in TPP Sales Pitch -Foreign Policy Arguments Mimic False Claims Made for Past Pacts:

Whenever the economic case for a trade deal falls flat, presidents try to change the subject to the putative foreign policy imperatives, as Obama has done. The notion that TPP is a bulwark against China is absurd, if only because China has been invited to join. Administration officials say China can only join only if it agrees to TPP rules. But those rules would give Chinese products duty-free U.S. access, and the new TPP foreign investor rights would enhance China’s relative economic might within the United States. This may explain China’s statements of increased interest in joining the TPP. While U.S. concerns about the implications of China’s rising economic power and influence are legitimate, the notion that the establishment – or not – of any specific U.S. trade agreement would control this process is contradicted by the record. We were warned that unless NAFTA and free trade deals with eight Latin American nations were enacted, China would write the rules and grab our trade in the hemisphere. NAFTA went into effect and in its first 20 years, the U.S. share of goods imported to Mexico dropped from 70 percent to under 50 percent while China’s share rose more than 2,600 percent. After U.S. FTAs with eight other Latin American nations were enacted, 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. share of Latin America’s imported goods fell 36 percent while China’s share increased 575 percent since the various U.S. FTAs were enacted.

TPP Is Not About the U.S. Writing the Rules Versus China Doing So - TPP’s Rules Are Those Demanded by its 500 Official Corporate Trade Advisors:

Trying to paint TPP as a way for America to write the rules in Asia so that China does not is a misdirect. TPP is not about establishing “American” rules in Asia. It’s about imposing rules that are favored by the 500 official U.S. corporate trade advisors who had a privileged role in developing the TPP. The TPP rules promote more U.S. job offshoring and would further gut the U.S. manufacturing base, even as a recent Department of Defense report warned that U.S. deindustrialization poses a threat to national security. TPP would ban the application of Buy America procurement preferences with respect to all firms operating in TPP countries. Instead of reinvesting our tax dollars at home to build a strong national infrastructure and create economic growth and jobs at home, TPP would require us to give firms from the TPP nations, including Chinese state-owned-enterprise firms operating in Vietnam, equal access to U.S. government contracts. TPP also would raise our energy prices and undermine our energy independence given we could no longer halt liquid natural gas exports to TPP nations, including major LNG purchaser Japan. TPP’s expanded patent and copyright monopolies would raise American health care costs and thwart innovation. And, even if you believe that TPP actually is about writing rules aimed at affecting China, who in their right mind believes that China would actually abide by those rules or that the U.S. would enforce them effectively? Fifteen years after China joined the WTO, we’re still waiting for China to comply with the commitments they made. And, we are still waiting for any U.S. administration to broadly and effectively enforce U.S. rights.

The TPP Rolls Back National Security Language Included in Past Pacts:

The TPP eliminates language included in past U.S. trade pacts that explicitly authorized the United States to take action to protect its own national security interests regardless of whether any such action or policy violated trade pact rules and to do so without facing trade sanctions. And, while other TPP nations safeguarded their domestic national security review processes for foreign investors, the United States did not take an exception to TPP rules that grant foreign investors new rights to acquire land, firms, natural resource concessions, infrastructure or other investments and operate them. Thus, even if the Committee on Foreign Investment in the United States (CFIUS) opposed on national security grounds a U.S. acquisition by a firm also operating in a TPP country, if that investment was stopped the foreign firm could drag the U.S. government before an extrajudicial investor-state tribunal and demand taxpayer compensation.

The TPP Versus President Obama’s Legacy – Environment and Climate:

The environmental groups that have celebrated Obama’s achievements with the global climate treaty and his decision to the stop the XL Pipeline call the TPP an act of “climate denial.” The pact would roll back the environmental standards that President George W. Bush was pressured into including in his trade deals. Indeed, in a recent Newsweek oped, the Cato Institute celebrated the TPP’s watered down environmental terms. Environmental groups listed on the White House website as supporting the deal, including NRDC and Defenders of Wildlife, in fact came out in opposition after seeing the final text.

The TPP Versus President Obama’s Legacy – Healthcare Costs:

The TPP would directly contradict Obama efforts to reduce U.S. healthcare costs by expanding monopoly patent protections for big drug firms, as Doctors Without Borders notes. This allows drug firms to stop competition and raise medicine prices. As seniors groups note, the TPP would also empowering large drug firms to meddle in U.S. government reimbursement decisions for taxpayer-funded programs like Medicare and Medicaid.

The TPP Versus President Obama’s Legacy – American Auto Sector Rescue:

The TPP would threaten the president’s successful rescue of the U.S. auto industry and thousands of U.S. jobs. It would allow vehicles comprised mainly of Chinese and other non-TPP country parts and labor to gain duty free access. This would gut the rules of origin established in NAFTA that condition duty free access on 62.5 percent of value being from NAFTA countries. Ford has supported all past U.S. trade deals, but opposes the TPP.

The TPP Versus President Obama’s Legacy – Gay Rights:

While the Obama administration is celebrated for its defense of gay equality after dust-binned the “Don’t Ask, Don’t Tell” policy and joining those announcing that the Defense of Marriage Act was unconstitutional, it decided to allow Brunei to remain in the TPP even after the country announced that it would begin stoning to death gays and single mothers under new sharia-based laws. This has led to LGBTQ groups joining the TPP opposition.

The TPP Versus President Obama’s Legacy – Financial Reform:

The TPP could help banks unravel the new rules Obama achieved 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. For the first time, the TPP would expand the controversial investor-state dispute system (ISDS) to allow challenges of U.S. financial policies using the claim underlying most successful ISDS attacks.

Claims about Small Business Gains Contradicted by Record:

The administration claims that small business will be the greatest beneficiaries of the TPP. But 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. But 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 data noted above), exporting is primarily the domain of large corporations, not small businesses. As for whether as the administration claims “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). 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). 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. 

 

 

December 08, 2015

Lori Wallach on HuffPo: “WTO Orders Sanctions Unless US Cuts Consumer Labels, Disproving Obama TPP Claims”

 

“Yesterday's World Trade Organization (WTO) ruling against the country-of-origin meat labels (COOL) that Americans rely on to make informed choices about their food provides a glaring example of how trade agreements can undermine U.S. public interest policies. The WTO authorized over $1 billion annually in trade sanctions against the United States unless and until the popular consumer policy is weakened or eliminated.

The ruling is a nightmare for the Obama administration's uphill battle to build support for the controversial Trans-Pacific Partnership (TPP)."

 

Read the entire piece at the Huffington Post to find out how the WTO’s ruling spells trouble for the TPP.

November 20, 2015

Initial Analysis of Key TPP Chapters

Here’s a helpful document that provides basic analysis of the contents and implications of many of the key TPP chapters. It was compiled by trade experts from labor and public interest organizations.

http://www.citizen.org/documents/analysis-tpp-text-november-2015.pdf

November 19, 2015

New Analysis of TPP Investment Chapter: U.S. Laws Face Expanded Threats from Foreign Investors

Public Citizen's Global Trade Watch has gone carefully through the 50-plus pages of the very troubling investment chapter of the Trans-Pacific Partnership (TPP) deal –-as well as the lengthy country-specific annexes. We found that the final text is worse than we thought, with almost every remaining undecided issue left in the March 2015 leaked draft resolved by eliminating various reform proposals.

The TPP would VASTLY expand both the number of foreign investors that could use ISDS to attack U.S. policies (more than 9200 new firms, which would double the current U.S. ISDS exposure), and it would expand the kinds of ISDS cases that could be brought. Instead of reforms to scale back ISDS, for the first time the TPP would allow ISDS attacks against financial regulations investors say undermine their “reasonable expectations” and hurt their expected profits.  And TPP would be the first U.S. trade pact that would allow drug firms to demand cash compensation for claimed violations of World Trade Organization rules on creation, limitation or revocation of intellectual property rights.

Meanwhile, the reforms to the ISDS process that the administration has been advertising did not materialize. There are no new conflict interest rules. There is no appeals mechanism. There is no cap on tribunal costs or discretion about how much governments can be ordered to pay the investor. The ONLY improvement in the text from a public interest perspective is a partial carve out of tobacco control policies from ISDS attack, and that clause in part highlights how no other public health or environmental policies are similarly safeguarded. 

Please read the analysis here: http://www.citizen.org/documents/analysis-tpp-investment-chapter-november-2015.pdf

November 18, 2015

TPP Financial Stability Threats Unveiled: It’s Worse than We Thought

Public Citizen’s Global Trade Watch has carefully analyzed the Financial Services Chapter of the recently released Trans-Pacific Partnership. One story that has not been told about the TPP is how this  first U.S. trade agreement negotiated since the global financial crisis  would impose the same model of financial deregulation that is widely understood to have fueled the crisis.

For the first time in any U.S. trade agreement, the TPP empowers some of the world’s largest financial firms to challenge U.S. financial regulatory policies in extrajudicial investor-state dispute settlement (ISDS) tribunals using the broadest “minimum standard of treatment” claim.

And, the TPP would be the first U.S. pact to empower some of the world’s largest financial firms to launch ISDS claims against U.S. financial policies. Now none of the world’s 30 largest banks may bypass domestic courts, go before extrajudicial investor-state tribunals of three private lawyers, and demand taxpayer compensation for U.S. financial policies. Among the top banks in TPP countries that could newly do so: Mitsubishi UFJ, Mizuho, ANZ, Commonwealth Australia, West Pac, National Australia Bank, Bank of Tokyo, Sumutomo, Royal Bank of Canada.

Despite the pivotal role that new financial products, such as toxic derivatives, played in the financial crisis, the TPP would require all TPP countries to allow new financial products and services to enter their economies if permitted in any other TPP countries.

Meanwhile, the provision USTR calls a “prudential filter” would not shut down investor attacks on financial policies. Rather, it would provide for 120 day consultation after which the case could proceed unless the government of the suing investor agreed to shut down the case.

This analysis provides interested parties with a guided walk-through of the chapter and related annexes.

Please read out analysis here: http://www.citizen.org/documents/analysis-tpp-financial-services-chapter-november-2015.pdf

 

September 30, 2015

Cancer Patient Demanding to See TPP "Death Sentence Clause" Arrested at Ministerial Negotiations

ZAHARA 3

Today in Atlanta, cancer patient Zahara Heckscher was arrested after disrupting negotiations for the Trans-Pacific Partnership (TPP) in a protest aimed at maintaining access to affordable cancer medicines in the 12 countries affected by the trade treaty.

Heckscher, in a t-shirt reading "I HAVE CANCER. I CAN'T WAIT 8 YEARS," and holding an IV pole that read "TPP: Don' t Cut My IV,” refused to leave the Westin Hotel, the site of the negotiations between U.S. Trade Representative Michael Froman and the other TPP trade ministers. She demanded that they show her the secret TPP text to verify for herself and other people living with cancer around the globe that the TPP would not include a "death sentence clause," the text of the US proposal to extend de facto monopolies on biological medicines by up to 8 years.

Heckscher, a seven-year breast cancer survivor, calls herself a cancer thriver. She has been treated by biologicals including trastuzumab (Hercepin) and pertuzumab (Perjeta). She is currently undergoing chemotherapy as part of a clinical trial, and continues on denosumab (Xgeva) treatment as well.

According to Heckscher, "For thousands of women to die unnecessary of breast cancer because of the TPP is a horrible, cruel, premeditated, and avoidable catastrophe. The provisions being decided by TPP ministers today could allow drug monopolies on biologics for 8 years.  Some of these medicines cost up to tens of thousands, even hundreds of thousands of dollars a year."

"When you have breast cancer today, you can’t wait 8 years or 7 years or 6 years for a treatment to become available or affordable. When you have cancer, even a one-year delay in affordable medicine can be a death sentence. That is why we call this proposed provision of the TPP a 'death sentence clause.' If it passes, thousands of women like me will die waiting."

 Video:
https://youtu.be/ENpMpf2TMhg
https://youtu.be/3CO_hU6Wz5g
https://youtu.be/pO6hr32Yr-8

Photos:
https://www.flickr.com/photos/136535834@N02/

August 21, 2015

Transitions at Eyes on Trade

This blog post is a farewell of sorts.  After three years, today is my last day at Public Citizen.  In a couple weeks, I’ll be continuing to push for a more just trade model over at Sierra Club’s climate and trade program as senior policy advisor. Eyes on Trade, of course, will still be here in the good hands of my colleagues at Global Trade Watch. 

It has been a treat to have this space to amplify the call of many for a new trade model, document the damage wrought by our existing trade deals abroad and at home, fact-check dubious economic projections and predictable spin jobs for pending trade deals, spotlight the threats those deals pose to our health/environment/economy/democracy, and witness the growth of the largest, most diverse coalition ever to oppose an expansion of the trade status quo.  

I started working on trade when I realized that three lawyers in an investor-state tribunal could trump basic tenets of democracy and rule against health and environmental protections for which many of us have fought.  When I saw how a particular model of trade has contributed to the growing gulf between the rich and the rest of us.  When I realized that multinational corporations could obtain special protections that restrict consumers' access to life-saving medicines and still get away with calling it "free trade."  

Of course, one need not work on trade to know about trade.  It is little wonder that majorities of Republicans, Democrats and independents alike oppose the status quo trade pact model.  More than two decades of NAFTA, the WTO and NAFTA expansion pacts have contributed to surging U.S. trade deficits, widespread job loss, a flood of agricultural imports, downward pressure on middle-class wages and unprecedented levels of income inequality.  Behind the aggregate data lie shuttered factories, lost livelihoods and struggling communities.

These outcomes directly contradict the rosy promises made by corporate interests to sell these controversial deals to a skeptical U.S. Congress and public.  They also contradict President Obama’s stated economic agenda to revive U.S. manufacturing, boost middle-class wages and tackle inequality – an agenda that the TPP would undermine.  The Obama administration’s push for yet another NAFTA expansion deal casts a blind eye to the damaging legacy of the current trade model.

With opinion polls showing that the U.S. public is painfully aware of this legacy, the administration’s TPP push faces stiff opposition in the halls of Congress and the court of public opinion.  Turning a blind eye to the lived realities of the status quo trade model is unlikely to prove a winning strategy. 

And with that, at the risk of making this my shortest blog post to date (a perhaps not difficult feat), I bid you adieu.  It has been an honor to work with Public Citizen, and to work alongside many of you in pushing for a fair trade policy.  I look forward to continuing to do so from my new post. 

July 31, 2015

Yet Another ‘Final’ TPP Ministerial and Again No Deal; Not Surprising Given Growing Controversy Over TPP Threats Here and in Other Nations

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

Today’s fourth “final” TPP ministerial without a deal means the clock has run on possible U.S. congressional votes in 2015. No deal means the TPP is thrown into the political maelstrom of the U.S. presidential cycle and with opposition building in many countries there are reduced chances that a deal will ever be reached on a pact that U.S. Trade Representative Michael Froman declared to be in its “end game” in 2013 but that has become ever more controversial since.

It’s good news for people and the planet that no deal was done at this final do-or-die meeting given the TPP’s threats to jobs, wages, safe food, affordable medicines and more. Only the beleaguered negotiators and most of the 600 official U.S. trade advisors representing corporate interests wanted this deal, which recent polling shows is unpopular in most of the countries involved.

This ministerial was viewed as a do-or-die moment to inject momentum into the TPP process, so this Maui meltdown in part reflects how controversial the TPP is in many of the involved nations and how little latitude governments feel to make concessions to get a deal.

The intense U.S. national political battle over trade authority was just a preview of the massive opposition the TPP would face once members of Congress and the public see the specific TPP terms that threaten their interests. Given the damaging impacts that some TPP proposals could have for many people, it’s not surprising that the same set of issues including investor-state dispute resolution and medicine patents as well as market access issues like sugar, dairy, and rules-of-origin on manufactured goods like autos remain deadlocked given they will determine whether a final pact is politically viable in various TPP countries.

Many of the 28 House Democrats who supported Fast Track authority for Obama explicitly said that their support for the TPP relied on certain goals being met, including strong, enforceable labor and environmental standards, and no rolling back of past patent rule reforms relating to access to medicines – terms meeting the “May 2007” standard that elements of the TPP do not meet. 

July 28, 2015

CAFTA’s Decade of Empty Promises Haunts the TPP

Ten years ago, after a flurry of backroom deal-making, Congress passed the Central America Free Trade Agreement (CAFTA).  In the dead of night.  By a single vote.  

Exactly one decade later, today trade ministers are gathering in Hawaii to try to conclude deadline-missing negotiations on the Trans-Pacific Partnership (TPP) – a sweeping deal that would expand the CAFTA model of trade across the Pacific.

In attempt to quell the controversy surrounding the TPP, the administration is recycling the same lofty promises that were used to push for passage of CAFTA: the deal would safeguard public health, spur economic prosperity at home and abroad, and protect workers, consumers, and the environment.

After 10 years of CAFTA, the emptiness of such promises is on full display. Today in Central America, life-saving medicines are more expensive due to monopoly protections that CAFTA gave to pharmaceutical corporations – protections that are slated for expansion in the TPP.  And the headlines from several CAFTA countries do not report economic prosperity, but economic instability, drug violence and forced migration.  Meanwhile, CAFTA’s labor provisions have failed to halt the assassination of dozens of Central American union workers who were trying to end unmitigated labor abuses like wage theft.  In contrast, the pact’s foreign investor privileges, which the TPP would expand, have succeeded in empowering multinational corporations to challenge domestic laws, including consumer and environmental protections.

Worse than repeating the mistakes of the past, the TPP would repeat the mistakes of CAFTA’s present.

Making life-saving medicines unaffordable

During the debate over CAFTA, health experts warned that by handing pharmaceutical firms greater monopoly protections, the deal would restrict Central Americans’ access to more affordable generic versions of life-saving drugs.

Unfortunately, they were right.  Take, for example, Kaletra, a drug used to fight HIV/AIDS.  Under CAFTA rules, Kaletra has enjoyed monopoly protections in Guatemala, making generic versions unavailable, for the entire first decade of CAFTA.  Without a generic alternative, Guatemala’s public health system pays about $130 per bottle of Kaletra.  In contrast, the generic version of Kaletra costs less than $20 per bottle, according to the Pan American Health Organization reference price.  For Guatemala’s taxpayers, paying more than six times the generic price for Kaletra under CAFTA means less money to build schools or bridges.  For Guatemala’s HIV/AIDS patients, it can mean the difference between life and death.

Like CAFTA, the TPP is slated to include extreme monopoly protections for pharmaceutical corporations.  Indeed, the deal even omits limited provisions to protect access to affordable medicines that were included the most recent U.S. free trade agreements.  That’s why Doctors without Borders has described the TPP as not only worse than CAFTA in restricting access to medicines, but “the most damaging trade agreement ever for global health.” 

Turning a blind eye to labor abuses

One decade ago, the Office of the U.S. Trade Representative sold CAFTA as the “best ever trade agreement on labor,” boasting “world class” labor provisions.  Those provisions failed to prevent the murder of 68 Guatemalan unionists over the course of seven years without a single arrest.  In 2008, the AFL-CIO and Guatemalan unions filed an official complaint under CAFTA’s labor provisions, calling for an end to the rampant anti-union violence, wage theft, and other abuses.  It was not until six years and dozens of unionist murders later that the U.S. government moved to arbitration on the case.  Today Guatemala’s union workers still endure frequent attacks with near-total impunity.

CAFTA’s labor provisions have proven similarly ineffective in the Dominican Republic, where sugar cane workers endure 12-hour workdays in hazardous conditions without receiving legally-required overtime pay.  A Spanish priest who filed an official CAFTA complaint in attempt to rectify the abuses was informed by U.S. Department of Labor officials, “Nothing is going to happen on account of not complying.”  Indeed, nothing has happened.  Despite CAFTA’s “world class” labor provisions, the Dominican Republic’s underpaid cane workers continue laboring in squalid conditions.

Why has CAFTA, like U.S. trade agreements before and since, failed to curb widespread labor abuses?   Kim Elliot, a member of the Department of Labor’s National Advisory Committee on Labor Provisions of U.S. Free Trade Agreements, recently offered this blunt explanation: the labor provisions of U.S. trade deals “are in there because they’re necessary to get deals through Congress.”  She added, “It’s really all about politics and not about how to raise labor standards in these countries.”

Now, in attempt to get the TPP through Congress, the Office of the U.S. Trade Representative is parroting the same promise it made for CAFTA, claiming that the deal would include “the highest-ever labor commitments.”  While the TPP’s labor provisions have been described as more “enforceable” than those in CAFTA, this is nothing new.  The last four U.S. Free Trade Agreements (FTAs) already included such “enforceable” terms, but still failed to end on-the-ground offenses, according to a 2014 U.S. government report.  Colombia’s unionists have faced dozens of assassinations and hundreds of death threats despite the Colombia FTA’s inclusion of TPP-like labor provisions.  And last year Peru explicitly rolled back occupational health and safety protections for workers despite the Peru FTA’s “enforceable” labor provisions.  Neither country has faced penalties under the FTAs.  It’s unclear why the TPP’s replication of such unsuccessful labor provisions should be expected to curb the systematic labor abuses in TPP countries like Vietnam, which bans independent unions, uses forced labor, and, by the Vietnamese government’s own estimate, has more than 1.75 million child laborers.

Empowering corporate attacks on consumer and environmental protections

In contrast to CAFTA’s unenforceable “protections” for workers, the deal granted highly enforceable privileges to foreign corporations.  This includes empowering them to bypass domestic courts and challenge domestic consumer and environmental protections before extrajudicial tribunals via “investor-state dispute settlement” (ISDS).

Corporations have not held back in using this controversial parallel legal system to challenge pro-consumer policies, including government efforts to keep electricity affordable.  In 2010 a U.S. energy company with an indirect, minority stake in Guatemala’s electric utility used ISDS to challenge Guatemala’s decision to lower electricity rates for consumers.  The next day, the company sold off its minority share.  A three-person ISDS tribunal generously decided to treat the firm as a protected “investor” in Guatemala and ordered the government to pay the corporation more than $32 million.  In another energy-related CAFTA case, a U.S. financial firm challenged the Dominican Republic’s decision not to raise electricity rates amid a nationwide energy crisis.  The government decided to pay the firm to drop the case in a $26.5 million settlement, reasoning that it was cheaper than continuing to pay legal fees.

CAFTA countries also face an increasing array of ISDS cases against environmental protections.  A U.S. mining company, for example, has launched a claim against the Dominican Republic for delaying and then denying environmental approval for an aggregate materials mine that the government deemed a threat to nearby water sources.  Other U.S. investors in the Dominican Republic have threatened to launch a CAFTA claim against the government for denying environmental approval for their plans to expand a gated resort.

The TPP would dramatically expand the controversial ISDS system, newly empowering more than 28,000 additional foreign-owned firms to ask private tribunals to order taxpayer compensation for commonsense environmental and consumer protections.

Fueling economic instability

Ten years ago, CAFTA proponents promised the deal would bring economic prosperity to Central America, making it “the best immigration, anti-gang, and anti-drug policy at our disposal.”  Today, CAFTA countries Honduras, El Salvador, and Guatemala are plagued by drug-related gang violence and forced migration.  While the causes are many, “economic stagnation” has fed the crisis, according to the U.S. State Department.  CAFTA clearly failed to deliver on its promise of economic growth for the region.

Worse still, CAFTA has contributed to the region’s economic instability.  Before the razor-thin passage of CAFTA, development organizations warned that the deal could lead to the displacement of the family farmers that constitute a significant portion of Central America’s workforce, by forcing them to directly compete with highly-subsidized U.S. agribusiness.  Indeed, agricultural imports from the United States in Honduras, El Salvador, and Guatemala have doubled since the deal went into effect, while the countries’ agricultural trade balance with the United States has dropped, spelling farmer displacement. 

And despite promises that CAFTA would make up for rural job loss by creating new jobs in apparel factories, apparel exports to the United States from Honduras, El Salvador, and Guatemala have actually fallen $1.6 billion, or 21 percent, since the year before CAFTA took effect.  Not only has the promise of new factories disappeared – so have existing factories.  

If the TPP were to take effect, the apparel jobs of Central America would be expected to decline even quicker, contributing to further economic instability.  That’s because the TPP includes Vietnam, a major apparel exporter where independent unions are banned and where the minimum wage averages less than 60 cents an hour – a fraction of the minimum wages in Central America (or even in China).  Central America is already losing the race to the bottom.  It will only fall further behind if the TPP makes Vietnam the newest low-wage competitor. 

The promise-defying track record of CAFTA need not be repeated.  When the TPP negotiators meeting today in a resort hotel in Hawaii finish this round of negotiations, we are likely to hear a familiar litany of promises about how the TPP would benefit consumers, workers, and the environment.  With those promises punctured by a decade of CAFTA’s stark realities, we have a unique opportunity to say “enough is enough.” 

July 27, 2015

Obama Administration’s Cynical Bid to Salvage the TPP by Turning a Blind Eye to Malaysia’s Trafficked Persons’ Mass Graves Will Only Fuel Criticism of the Pact

In a cynical bid to salvage the already-controversial Trans-Pacific Partnership (TPP), the Obama administration today removed Malaysia from a list of the world’s most flagrant violators of basic human trafficking norms – two months after the discovery of mass graves for human trafficking victims in Malaysia, Public Citizen said.

In its annual Trafficking in Persons Report released today, the U.S. Department of State ignored TPP member Malaysia’s documented deterioration of human trafficking enforcement and upgraded the country’s human trafficking compliance status. Members of Congress,religious groups and leading U.S. and Malaysian human rights organizations have rightly lambasted the decision as an indefensible maneuver to avoid a U.S. law that prohibits Fast Tracking the TPP as long as a country  on the blacklist, like Malaysia, is a party to the pact.

“The administration knows that the TPP will have trouble in Congress, but turning a blind eye to Malaysia’s grave human rights violations in order to include Malaysia in the pact because it’s one of the few TPP countries we don’t already have a trade deal with and keeping the TPP on Fast Track so Congress’ oversight is limited is shameful,” said Alisa Simmons, deputy director of Public Citizen’s Global Trade Watch.

The maneuver also will backfire, instead adding to the controversy surrounding the TPP.

“If the Obama administration is willing to ignore people-smuggling camps in Malaysia, 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?” Simmons said.

Today’s manipulation of Malaysia’s human trafficking record will only bolster criticism from human rightsreligiousLGBTwomen’slaborand environmental organizations that the TPP’s touted human rights, labor and environmental provisions are mere fig leaves that would fail to actually curb widespread abuses among TPP members.

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 25, 2015

State Department Lambasts Human Rights Violations in TPP Nations Vietnam and Brunei, Further Complicating Push for Controversial Pact

New Report Cites Political Prisoners, Criminalization of Homosexuality, Mistreatment of Women, Child Labor Among Abuses of TPP Negotiating Parties

The U.S. Department of State’s revelations about grave human rights abuses in Vietnam and Brunei add new hurdles for the Obama administration’s push for the already controversial Trans-Pacific Partnership (TPP), Public Citizen said today. The revelations came in the department’s annual human rights report, released today.

The report details jailing of political dissidents and anti-union repression in Vietnam, as well as Brunei’s enactment of a sharia-based penal code that punishes homosexuals and single mothers, who could be stoned to death once the code is fully implemented later this year. Vietnam and Brunei are two of the 12 nations negotiating the TPP.

Democrats and Republicans in Congress have criticized the TPP’s inclusion of countries notorious for human rights violations. Recent congressional letters have spotlighted Vietnam and Brunei as inappropriate trade pact partners given the severe human rights issues in those nations spotlighted by past State Department reports.

“Having the State Department report grave human rights conditions in several TPP countries even when they are under the spotlight of ongoing negotiations fuels members of Congress’ ire about this already unpopular pact,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

In today’s report, the U.S. Department of State spotlights Brunei’s enactment in May 2014 of a new penal code that criminalizes homosexual and extramarital relations. When Brunei’s code is fully implemented, these and other “crimes” are slated to be punishable by flogging, dismemberment and death by stoning.

With respect to Vietnam, the report spotlights “arbitrary or unlawful killings,” “continued [efforts] to suppress political speech through arbitrary arrest, short-term detentions without charge, and politically motivated convictions,” and restrictions on press freedom due to government censorship and “pervasive self-censorship due to the threat of dismissal and possible arrest.” It also focuses on Vietnam’s continuing repression of basic labor rights, including a ban on independent unions, use of forced labor and widespread child labor. The report notes that the Vietnamese government itself has estimated that there are 1.75 million child laborers in Vietnam.

Despite Congress’ passage of Fast Track this week, the push to gain congressional approval for the TPP becomes more politically fraught as 2016 draws nearer, with presidential contenders from both parties recently adding their voices to the widespread criticism of the pact. The human rights violations unveiled in today’s U.S. Department of State report will only fuel broader opposition to the pact among members of Congress, the public and presidential candidates. 

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 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 15, 2015

Cato and Public Citizen: No parallel legal system for foreign corporations

Here's something you won't see every day: an op-ed jointly written by analysts at Public Citizen and the Cato Institute.  Often divided on issues of trade policy, we find common ground in opposing the proposed expansion, via the Trans-Pacific Partnership, of a shadow legal system for foreign corporations.  Read about it in today's The Hill.  Here's an excerpt:

Special courts for foreign investors

By Simon Lester and Ben Beachy

On the precipice of the biggest congressional trade debate in decades, a once-arcane investment provision has become a lightning rod of controversy in the intensifying battle over whether Congress should revive Trade Promotion Authority (TPA), also known as “fast track,” for the Trans-Pacific Partnership (TPP). Sen. Elizabeth Warren (D-Mass.) calls this provision a system of “rigged, pseudo-courts.” The Republican leadership of the House Ways and Means Committee defends it as “a vital part of any trade agreement.”

But this is not your standard partisan congressional battle. Inside Congress and out, criticism and support for this parallel legal system, known as investor-state dispute settlement (ISDS), crosses the political spectrum. Analysts with the Cato Institute and Public Citizen usually stand on opposing sides of trade policy issues, but we find common ground in opposing this system of special privileges for foreign firms.

The TPP would extend this controversial system, found in some existing trade pacts and investment treaties, to new countries and tens of thousands of new companies. Under ISDS, “foreign investors” – mostly transnational corporations – have the ability to bypass U.S. courts and challenge U.S. government action and inaction before international tribunals authorized to order U.S. taxpayer compensation to the firms.

Pacts with ISDS are often promoted as simply prohibiting discrimination against foreign firms. In reality, they go well beyond non-discrimination, and create amorphous government obligations that have given rise to corporate lawsuits against a wide array of policies with relevance across the political spectrum. Foreign corporations have used this system to challenge policies ranging from the phase-out of nuclear power to the roll-back of renewable energy subsidies. Nearly all government actions and inactions are subject to challenge, covering local, state, and federal measures taken by courts, legislators and regulators.

Take, for example, the recent U.S. Supreme Court rulings that companies cannot patent human genes or obtain abstract software patents favored by patent trolls. Foreign holders of those patents could use ISDS to claim that these decisions interfere with their patent rights and ask an international tribunal to order compensation from the U.S. government...

Click here for the full op-ed from The Hill

April 10, 2015

50 Reasons We Cannot Afford the TPP

How would your state be impacted by the Trans-Pacific Partnership (TPP) – a controversial “free trade” agreement (FTA) being negotiated behind closed doors with 11 Pacific Rim countries? 

Click here for a state-by-state guide to the specific outcomes of the status quo “trade” model that the TPP would expand.  Get the latest government data on how many jobs have been lost in your state to unfair trade, how much inequality has risen, how many family farms have disappeared, and how large your state’s trade deficit with FTA countries has grown. 

The TPP would extend the North American Free Trade Agreement (NAFTA) model that has contributed to massive U.S. trade deficits and job loss, downward pressure on middle class wages, unprecedented levels of inequality, lagging exports, new floods of agricultural imports, and the loss of family farms.

These impacts have been felt across all 50 U.S. states.  Here is a sampling of the outcomes:

  • North Carolina: North Carolina has lost more than 369,000 manufacturing jobs – nearly half – since NAFTA and NAFTA expansion pacts have taken effect.  More than 212,000 specific North Carolina jobs have been certified under just one narrow Department of Labor program as lost to offshoring or imports since NAFTA.
  • Delaware: Delaware’s total goods exports to all U.S. FTA partners have actually fallen 27 percent while its exports to non-FTA nations have grown 34 percent in the last five years. 
  • California: In the last five years, California’s $403 million NAFTA agricultural trade surplus became a $187 million trade deficit – a more than $590 million drop. In contrast, California’s agricultural trade surplus with the rest of the world increased by $3 billion, or 79 percent, during the same time period.  The disparity owes to the fact that California’s exports of agricultural products to NAFTA partners Mexico and Canada grew just 27 percent, or $693 million, in the last five years, while its agricultural exports to the rest of the world grew 70 percent, or $4.3 billion. Meanwhile, California’s agricultural imports from NAFTA partners during this period surged $1.3 billion – more than the increase in agricultural imports from all other countries combined.
  • Michigan: Michigan’s trade deficit with all U.S. FTA partners is nearly five times larger than its deficit with the rest of the world. Michigan’s FTA deficit has grown more than three times as much as its non-FTA deficit in the last five years. Today, Michigan’s trade deficit with FTA partners comprises 83 percent of the state’s total trade deficit.
  • Louisiana: Before the Korea FTA – the U.S. template for the TPP – the United States had balanced trade with Korea in the top 10 products that Louisiana exports to Korea – including everything from metal to agricultural products. Under two years of the FTA, that balance became a $9 billion annual trade deficit. 
  • New York: The TPP and the Trans-Atlantic Free Trade Agreement (TAFTA) would empower 3,067 foreign corporations doing business in New York to bypass domestic courts, go before extrajudicial tribunals, and challenge New York and U.S. health, environmental and other public interest policies that they claim undermine new foreign investor rights not available to domestic firms under U.S. law.
  • Texas: U.S. farmers were promised that the Korea FTA would boost U.S. agricultural exports to Korea. But U.S. exports to Korea fell in eight of Texas’ top 10 agricultural export products, from cotton to wheat to meat in the first two years of the Korea FTA.  Meanwhile, U.S. exports to Korea of beef, pork and poultry – all top agricultural exports for Texas – declined 18, 15, and 42 percent, respectively (measuring by volume).
  • Nevada: The richest 10 percent of Nevadans are now capturing more than half of all income in the state – a degree of inequality not seen in the 100 years for which records exist.  Study after study has produced an academic consensus that status quo trade has contributed to today’s unprecedented rise in income inequality.  
  • Minnesota: Small-scale U.S. family farms have been hardest hit by rising agricultural imports and declining agricultural trade balances under FTAs.  Since NAFTA took effect, 15,500 of Minnesota’s smaller-scale farms (24 percent) have disappeared.

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 26, 2015

Forthcoming TPP Sales Pitch So Predictable, We Decided to Predict It

In the coming days, the U.S. Trade Representative (USTR) will release its annual report on the Obama administration’s trade policy agenda.  We know that you can’t wait to see what it will say. 

Good news.  You don’t have to.  Below we present the world’s first look at the report’s contents. 

How do we know in advance what the annual trade report will say?  No, we don’t have a mole at USTR (though if any of our USTR readers would like to volunteer…). 

We have a pretty good idea of the report’s contents, given that these reports tend to recycle the same old sales pitches that the administration has been disseminating ad nauseam (figuratively and, sometimes, literally). 

Since the status quo trade platitudes have become predictable, we thought we might as well predict them. 

So, you heard it here first – below are some of the administration's standard TPP-related talking points likely to be rehashed in USTR’s forthcoming report, followed by an explanation of why they do not bear repeating:

95 percent of the world’s consumers live outside our borders.

[But our trade pacts have not helped us reach them.]

Yes, this statistic shows a basic understanding of geography and population.  But it shows little else.  The official government trade data reveal that past trade deals have not been successful in helping U.S. firms reach consumers who live abroad.  In fact, U.S. goods exports to our “free trade” agreement (FTA) partners have grown 20 percent slower than U.S. exports to the rest of the world over the last decade.

The TPP would grant U.S. firms greater access to the world's fastest-growing region.

[But the relevant TPP countries have been growing one-fourth as fast as that region.]

The United States already has FTAs with six of the 11 TPP negotiating partners.  The combined GDP of the other five countries (the ones that could offer “greater access”) has been growing at a paltry 1 percent annually over the last decade – one fourth of the growth rate of the Asia-Pacific region overall.  Yes, the region has been growing quickly.  That just happens not to be relevant to the TPP. 

Exporters tend to pay their workers higher wages.

[But jobs displaced by imports pay even higher.]

What this talking point fails to mention is that jobs lost to imports under unfair trade deals tend to pay even higher wages than jobs in exporting industries, according to new data unveiled by the Economic Policy Institute (EPI).  If a manufacturing worker making $1,020 per week loses her job to imports under a raw trade deal and gets re-hired in an exporting firm where she gets paid less than $870 per week (the actual numbers from EPI’s analysis), it’s probably small consolation that she could be making even less in a non-traded sector like restaurants.  But that is the very argument – that exporting industries pay more than non-traded industries – that the administration has been using to push for the TPP’s expansion of the trade status quo.

Their pitch omits the fact that far more jobs have been lost in the higher-paying import-competing industries than have been gained in exporting sectors under existing trade deals, judging by the burgeoning U.S. trade deficit with FTA partners, which has grown 427 percent since the deals took effect. It also does not mention that most trade-displaced workers do not actually get rehired in exporting industries, but in non-traded sectors, spelling an even bigger pay cut than the example given above.

China wants to write the rules for commerce in Asia. Instead, we should write the rules.

[We didn’t write the TPP’s rules – multinational corporations did. The TPP would hurt our national interests while failing, like past FTAs, to affect China’s influence.]

Ah yes, the boogeyman tactic.  When the economic sales pitch for a controversial new FTA falters on the existing FTA record of lost jobs, lower wages and increased trade deficits, FTA proponents frequently resort to raising the specter that without the controversial pact, the influence of a foreign opponent will rise further.  But 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.  Proponents of the North American Free Trade Agreement (NAFTA) and NAFTA expansion pacts similarly warned that those deals were necessary to prevent rising foreign influence in Latin America.  But in the first 20 years of NAFTA, the share of Mexico’s imported goods coming from China increased from 1 to 16 percent, while the U.S. share dropped from 69 percent to 49 percent.  And from 2000 to 2011, a period in which U.S. FTAs with eight Latin American countries took effect, the share of Latin America’s imported goods coming from China increased from 1 percent to 7 percent, while the U.S. share fell from 25 percent to 16 percent.  Why should we believe the recycled pitch that another FTA would keep China’s economic influence in check?  

And the attempt to paint the TPP as a battle between “our rules” and China’s rules is absurd.  “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 costs, limits 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. 

The TPP is a 21st-century agreement with strong labor and environmental standards.

[Government reports show that those standards have proven ineffective.]

The vaunted inclusion in the TPP of labor and environmental provisions that were hatched in a May 10, 2007 deal is nothing new. These provisions have been included in existing FTAs, but have proven ineffective. The George W. Bush administration, for example, included "May 10" terms in the FTA with Colombia, where anti-union violence and repression remain rampant. Indeed, a U.S. Government Accountability Office report released in November 2014 found broad labor rights violations across five surveyed FTA partner countries, regardless of whether or not the FTA included the “May 10” labor provisions. As for environmental standards, the TPP would empower foreign corporations (e.g. oil/gas companies) to demand taxpayer compensation before extrajudicial tribunals for new environmental protections in TPP countries (e.g. rejection of a proposed controversial pipeline). 

And despite recent claims to the contrary, the evidence shows no correlation between an FTA’s inclusion of the “May 10” standards and its trade balance impact. Though the Korea FTA, the U.S. template for the TPP, included the “May 10” standards, the U.S. trade deficit with Korea has grown more than 70 percent in the three years since the deal’s passage. According to the administration’s trade-jobs ratio, that equates to the loss of more than 70,000 U.S. jobs – the same number of jobs that the administration promised would be gained under the deal. 

98 percent of U.S. exporters are small or medium-sized enterprises (SMEs).

[The few small businesses that export have endured slow and falling exports under FTAs.]

Only 3 percent of U.S. SMEs 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 government data show they do not, exporting is primarily the domain of large corporations, not small businesses.

The relatively few small businesses that do actually export have endured even more disappointing export performance under FTAs than large firms have experienced.  U.S. small businesses have watched their exports to Korea decline even more sharply than large firms under the Korea FTA (a 14 percent vs. 3 percent decrease).  And small firms’ exports to Mexico and Canada under NAFTA have grown less than half as much as large firms’ exports. Indeed, small firms’ exports to all non-NAFTA countries has exceeded by more than 50 percent the growth of their exports to NAFTA partners.

February 23, 2015

Exports Lag 20%, Trade Deficits Surge 427% under "Free Trade" Deals

A recent parade of reports from corporate lobbies and think tanks has played a familiar but discordant refrain, alleging that more of the same "free trade" agreements (FTAs) would boost U.S. exports and reduce the U.S. trade deficits that displace U.S. jobs.  It sounds nice.  But this tired promise is simply not supported by the data.  

According to the official government trade data from the U.S. International Trade Commission, the aggregate U.S. goods trade deficit with FTA partners is more than five times as high as before the deals went into effect, while the aggregate trade deficit with non-FTA countries has actually fallen. The key differences are soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations.

Why do we keep hearing arguments that more of the same will produce different results?  Well, if you (or your corporate backers) wanted to Fast Track through Congress the controversial Trans-Pacific Partnership (TPP), which would expand the status quo FTA model, you might also find it convenient to parrot the standard FTA sales pitch of higher exports and lower trade deficits.  In doing so, you would need to ignore these facts:

  • Growth of U.S. goods exports to FTA partners has been 20% lower than U.S. export growth to the rest of the world over the last decade (annual average growth of 5.3 percent to non-FTA nations vs. 4.3 percent to FTA nations from 2004 to 2014). 
  • The aggregate U.S. goods trade deficit with FTA partners has increased by about $144 billion, or 427 percent, since the FTAs were implemented. In contrast, the aggregate trade deficit with all non-FTA countries has decreased by about $95 billion, or 11 percent, since 2006 (the median entry date of existing FTAs). See the chart below. Using the Obama administration’s net exports-to-jobs ratio, the FTA trade deficit surge implies the loss of about 780,000 U.S. jobs.
  • The North American Free Trade Agreement (NAFTA) contributed the most to the widening FTA deficit – under NAFTA, the U.S. trade deficit with Canada has ballooned and a U.S. trade surplus with Mexico has turned into a nearly $100 billion deficit.
  • More recent deals have produced similar results. Since the 2011 passage of the Korea FTA, the U.S. template for the TPP, the U.S. trade deficit with Korea has already surged 72 percent.

FTA deficits

“Higher Standards” Have Failed to Alter FTA Legacy of Ballooning Trade Deficits

Some proponents of status quo trade have claimed that post-NAFTA FTAs have included higher standards and thus have yielded trade balance improvements. But the Korea FTA included the higher labor and environmental standards of the May 10, 2007 deal, and still the U.S. trade deficit with Korea has grown over 70 percent in the three years since the deal’s passage. Meanwhile, most post-NAFTA FTAs that have resulted in (small) trade balance improvements did not contain the “May 10” standards. The evidence shows no correlation between an FTA’s inclusion of “May 10” standards and its trade balance impact. Reducing the massive U.S. trade deficit will require a more fundamental rethink of the core status quo trade pact model extending from NAFTA through the Korea FTA, not more of the same.

Corporate FTA Boosters Omit Imports, Use Errant Methods to Claim Higher Exports under FTAs

Members of Congress will invariably be shown data by defenders of our status quo trade policy that appear to indicate that FTAs have generated an export boom. Indeed, to promote congressional support for new NAFTA-style FTAs, the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) have funded an entire body of research designed to create the appearance that the existing pacts have both boosted exports and reversed trade deficits with FTA partner countries. This work relies on several methodological tricks that fail basic standards of accuracy:

  • Ignoring imports: U.S. Chamber of Commerce studies regularly omit mention of soaring imports under FTAs, instead focusing only on exports. But any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under FTAs.
  • Counting “foreign exports”: NAM has errantly claimed that the United States has a manufacturing surplus with FTA nations by counting foreign-made goods as “U.S. exports.” NAM’s data include “foreign exports” – goods made elsewhere that pass through the United States without alteration before being re-exported abroad. Foreign exports support zero U.S. production jobs and their inclusion distorts FTAs’ impacts on workers.
  • Omitting major FTAs: The U.S. Chamber of Commerce has repeatedly claimed that U.S. export growth is higher to FTA nations that to non-FTA nations by simply omitting FTAs that do not support their claim. One U.S. Chamber of Commerce study omitted all FTAs implemented before 2003 to estimate export growth. This excluded major FTAs like NAFTA that comprised more than 83 percent of all U.S. FTA exports. Given NAFTA’s leading role in the 427 percent aggregate FTA deficit surge, its omission vastly skews the findings.
  • Failing to correct for inflation: U.S. Chamber of Commerce studies that have claimed high FTA export growth have not adjusted the data for inflation, thus errantly counting price increases as export gains.
  • Comparing apples and oranges: The U.S. Chamber of Commerce has claimed higher U.S. exports under FTAs by using two completely different methods to calculate the growth of U.S. exports to FTA partners (an unweighted average) versus non-FTA partners (a weighted average). This inconsistency creates the false impression of higher export growth to FTA partners by giving equal weight to FTA countries that are vastly different in importance to U.S. exports (e.g. Canada, where U.S. exports exceed $260 billion, and Bahrain, where they do not reach $1 billion), despite accounting for such critical differences for non-FTA countries.

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? 

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