Rethinking Trade - Season 1 Episode 21: China Phase 2

Donald Trump has made a big deal out of his “big deal” with China. But the first phase of this plan, with trade rules that actually encourage U.S. companies to outsource jobs to China alongside agreements by the Chinese government to increase purchases of U.S. goods, has pretty much flopped.

The second phase, meant to contain stronger labor protections and other rules that would’ve actually made a difference here and in China, never happened. That’s a real problem, because U.S. trade policy with China has enormous implications for working people both in the U.S. and in China, where labor conditions remain bleak.

On this episode we break down Trump’s China trade deal and how it became yet another one of his broken promises to working people.

Transcribed by Garrett O’Brien

Ryan:

Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert Lori Wallach.

Lori, back at the beginning of the year, Trump was making a big deal out of what he called his “Phase 1 trade deal with China.” He made perhaps a bigger deal out of what would follow, Phase 2. But Phase 2 is pretty much MIA right now. Let’s talk a bit about this deal and maybe you can help us figure what the hell happened to Phase 2.

Lori:

So, China trade has obviously been a big deal in the last couple of years. And there are two different things going on. There are the tariffs that were put in place to try to counteract China’s subsidies and their misalignment of their currencies. All of which are basically ways in which China, the government working very closely with companies, some of the companies are owned by the government or military, figures out ways to make sure that goods sent to the US actually are priced at below what they really cost to make. Meanwhile, they come up with ways to make sure that goods that went from the US to China become too expensive to be competitive. This boils down to what some people call “trade cheating” and there are lots of different ways to go about it. So, those tariffs that got put in place under regular old trade law, domestic law, and called Section 301 of the Trade Act and that basically allows tariffs to be put in place to counter the subsidies another country is using. So, to some degree doing that domestically was leverage ostensibly to then set up a negotiation to get China to change the underlying policies that create those subsidies that rewire those counterbalancing tariffs to make the goods when they come here fair. So, overtime, basically what happened is they were not paying every time the goods came here it just became too expensive for Chinese foods to come here so China stops sending goods here. That’s when you can negotiate usually to change the policy in this instance though the Phase 1 deal instead of dealing with the things that ostensibly those tariffs were supposed to be countering like slave labor and forced labor and cheating on currency values to make the Chinese currency artificially lower so the products are cheaper than they really are or good old government subsidies paying companies. No of that stuff was actually covered in Phase 1. Instead, Phase 1 actually had stuff in it that makes it easier to offshore US jobs and invest in China. So, Phase 1 had things like Wall Street has new rights to invest in China, in new sectors. How is it a good idea to make it easier for dollars to go to China to create jobs there? Or Phase 1 had China agreeing to stricter protections of intellectual property rules which seem counterintuitive in the sense that the US is a good place to invest because basic rights and the rule of law operates here. So somehow making it easier for companies to be able to have their cutting-edge designs and technologies protected if they're made in China it is still not clear about why that is a good thing for US workers. It all boils down to its not. So, Phase 1 was what China was willing to do and that was in part because it was in China’s interest. It’s a thing that can help China get more money to invest in monopolizing what it sees as industries of the future and they have a plan for that called China 2025. So Phase 1 didn’t really get a lot of love in congress from Democrats and certainly didn’t get anything from unions because it basically was against the interest of workers so then we heard well that’s all that China agreed to do. There is no doubt they were doing it without us telling them that we wanted them to, it’s in their interest. So Phase 2 was supposed to be the real stuff, the hard stuff, labor rights and keeping out forced labor goods made by Uighurs and dealing with the currency manipulations that make it very hard for US exports to get into China and get their goods dumped here and very importantly there was supposed to be disciplines on subsidies. That’s the stuff that would’ve made a difference on working people here and that never happened and now it looks like it never will.

Ryan:

Speaking of things never happening, before we get too much into Phase 2, I wanted to go back to Phase 1 real quick. How much of Phase 1 actually happened? What did and didn’t happen in that window? And, you know, is that something that was just sold to the public or were there real things going on in the background there?

Lori:

So, there were two levels to Phase 1. One was things China ostensibly was going to do to change their policies. And a bunch of those things were things China wanted to do anyway. They were going to make it easier for US dollar investment to happen in China because they wanted the money to make more jobs in China. China was going to say that they were going to protect intellectual property better because they wanted US companies to relocate their production there and bring their technology there. So, those were policy shifts China was making whether they get enforced is a different matter. The sort of meat and potatoes part of phase1 was supposed to be agreements by the Chinese government to purchase specific amounts of more US goods and that in itself was really kind of bullshit because having one time purchase agreement of “I will buy more stuff over the next two years” in no way phases out China trade problems. That’s just useful for Trump to say, “Oh look I got China to buy some stuff before the election.” But even as narrow as that was as an idea, those sales haven’t happened. So, there were specific requirements to buy more US agricultural exports that is maybe at 30% of the level of what should be necessary to meet that commitment. There were promises to buy more US liquid natural gas. Separate from the environmental disaster that plan is, that has not come to fruition. So, the meat and potatoes part basically ended up with some potato peels and a couple of bones. It was not as narrow as that would have been. The “We’re selling a lot of stuff” outcome that they promised. And the policy stuff was stuff China was already doing bit it’s against our interest. It promotes outsourcing so that the whole current picture of the so-called Phase 1 has come to pass.

Ryan:

And that would be a good time to bring up the question of the day, which is where is Phase 2? Does it exist or is it just another one of Trump’s broken promises to American workers?

Lori:

There is no Phase 2 China trade negotiation. There will not be a Phase 2 China trade deal. I mean for one thing, there is only a limited amount of time before the end of this president’s term, I can’t presuppose the outcome of the election but looking at the state of the relationship between the US and China there are not even conversations about the preceptive second phase deal but also there is, I would say, it is more likely that Donald Trump is going to get us back into the Paris Climate Treaty than there is going to be a Phase 2 deal under the Trump administration with China. Which is to say fat chance.

Ryan:

So, it sounds like Phase 2 is probably not happening. Does that matter? what is the significance of it not happening?

Lori:

You bet it matters! That was all the stuff that was supposed to help US workers and US small businesses. So, Phase 1 was, you know, what the big banks wanted, what the biotech companies wanted, what Pharma wanted. Phase 2 was all the stuff that was supposed to make a difference to try to stop the flood of subsidies imported Chinese goods that are wiping out US production but also you know ostensibly how investment decisions are made has to do with where companies think that they can export from and what the import competition is going to be. So, if you don’t actually fix those actual underlying structural issues in China you either have to fix those or you have to figure out how to actually just stop some of that Chinese stuff from coming in if it’s going to be unfairly subsidized. And Phase 2 was all of that. It was all the stuff that really mattered. It is really only the tariffs that are keeping us from having an ever bigger Chinese deficit and if you don’t fix the underlying problems you’re not going to actually create the kind of trade relationship between the US and China that would actually put people first.

Ryan:

And we’ve said this many times on the show but we do need a new progressive approach to China that centers labor, human, and environmental rights above the multinational corporation and authoritarian government collusion that we have now. After November we’re gonna have to carve that path regardless of who wins. In closing, maybe you could give a snapshot of what they could look like and what kind of policy changes it might entail.

Lori:

So, the good news is that there are now 30% tariffs on $350 billion worth of Chinese goods as the background. And that is a Section 301 tariff and it was painful to get there a lot of people could argue with the way in which it was done but the reality is that it’s the new normal and that creates a lot of leverage. That leverage basically has shifted the trade deficit with China. So, it hasn’t fixed the trade problem, but it has brought down the bilateral deficit. So not the trade is shifting to other countries, so you need a broader trade policy that deals with the same issues: cheating on currency, subsidies, in other countries. But I would say that with respect to China, there are two things to think of going forward especially because you have that leverage from those tariffs. One are there any ways that the US and China actually can negotiate on some rules that are kind of the Phase 2 menu of fixes? I’m skeptical about it but it’s worth trying and the way to try it is to put up the leverage. And we’ve got that leverage from those tariffs. But we might be the biggest import market but we’re not the only import market. So, we need other partners in Europe, in Japan, in Canada, in Australia et cetera to join us in shutting down the markets available to China if it continues  its current practices. The reason why our tariff regime has helped bring down the bilateral deficit but hasn’t helped change China's practices is because the current practice can continue and there are still other places where goods made in that cheating way can continue to go. So yes, there is negotiation strategy but also there has to be a recognition that to some degree unless the pain level gets a lot higher for the Chinese government, maintaining their status quo is something they are going to not change unless given from their perspective would be painful but the pain of not doing so gets a lot higher. So, then you get to what the hell do we do. And we have a lot of capacity domestically that has not been used. So for instance, with respect to labor rights and human rights, under existing law right now we could be shutting down imports from for instance we could have under existing law we could have a ban on imports of all goods connected to the Uighur slave labor camps and to goods suspected to be made by people in forced labor in China. And you basically could as a president put that in place under existing authority congress is delegated by statute. Or for instance, we could right now ban Chinese firms from listing on the US stock markets effectively do that by requiring to actually provide all the information that US firms must provide about who owns the firms and what the investment status is all things that a lot of the government owned or People’s Liberation Army military-owned firms will not make public. So that basically we aren’t having our stock market fuel investment that is unfair and that is against US workers. With respect to specific sectors of the economy, we also have a lot of laws that let us put countervailing measures against what is effectively subsidizing goods by dumping toxins and undermining environmental standards. So not only can you just keep stuff out for a human and labor rights violation, but you can basically sanction countries for importing goods that either violate multilateral environmental agreements or are like subsidized by a matter of dumping their toxics and polluting. So, these are all tools that a new president has that the old president has had and not used and those tools using domestic law are going to have to be an important part of dealing with China. And finally, we need to actually, through existing domestic law or imposed domestic law, deal with the currency issues. So right now China is holding onto so many US dollars in their reserve that even if they are not actively intervening in currency markets to bring down the value of their currency they are bringing down the value of the US dollar to a place where our exports aren’t competitive. So this all sounds quite wonky and confusing and down in the weeds, the cut to the chase on this whole question is we have international tools, we have domestic tools. A lot of what is going to happen is going to happen domestically and there are going to be a lot of bumps in the road along the way that folks are just going to have to hitch up their  seatbelts and go for the ride.

Ryan:

Rethinking trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit Rethinktrade.org as well as tradewatch.org to educate yourself and find out how you can get involved in work we are doing in the fight for fairer and more equitable trade policies.

 

Print Friendly and PDF

Rethinking Trade - Season 1 Episode 20: Fast Track

The most damaging U.S. trade agreements were hatched using the same process: “Fast Track.” Fast Track empowers the executive branch to unilaterally select partner countries for trade deals, decide their contents, and negotiate and sign them – all before Congress gets to vote on the matter. 

Meanwhile, hundreds of official U.S. trade advisors representing corporate interests have special access to texts and negotiators. Under Fast Track, when Congress finally has a say, it is limited to a “yes” or “no” vote with limited debate and amendments forbidden. 

The result? Wide swathes of U.S. law and policy entirely unrelated to trade get rewritten with the public and Congress locked out, and the U.S. is locked into corporate-rigged agreements with trade sanctions imposed on us if Big Pharma does not get special protections, food imports that do not meet U.S. safety standards are prohibited or foreign investors do not get better treatment when they offshore investment. 

But there’s good news: Fast Track only exists if Congress grants it. And the last grant ends on July 1st, 2021. That means soon, we will have a chance to create a new process with the public and congress playings the lead role in the formative stages of trade deals with more accountability over trade negotiations.

Transcribed by Garrett O’Brien

Ryan: Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert Lori Wallach.

Lori, all of the most damaging trade deals of recent years have happened under a system called fast track. Fast track allows the executive branch to unilaterally select partner countries for trade deals, decide the agreement's contents, and then negotiate and sign them all before Congress gets to vote on the matter. You literally wrote the book on fast track, or rather the book exposing and opposing it. Can you tell us what fast track is exactly, and why it is such a big deal for those looking to transform our current corporate-rigged trade policies?

Lori: So, Fast Track Trade Authority is kind of the root of all evil of how we’ve gotten into this disaster of corporate rigged trade agreements. So, I want to take a step way back to the founding of the country. The United States was created in part because of a trade war. Which is to say the Boston Tea Party everyone learns about in grade school involved tariffs, taxes on imports on tea and other goods imposed by the King of England against the colonies because he wanted to raise money to finance his war with France, imposed in way that really messed with people’s lives and they went “that was the last straw” – they wanted a rebellion. And when the Founders wrote the Constitution they were steeped, pun intended, in that example. So they gave exclusive constitutional authority over trade to the United States Congress, with the logic that this was the body closest to the people and they didn’t want the same scenario as with the king, the president, being able to unilaterally impose terms of trade that were not in the national interest or moreover favored some foreign entanglement over what would be good for workers and businesses and consumers in the country. And so, Article 1 (8) of the U.S. Constitution is one of the starkest, most clean checks and balances. It makes clear that Congress has exclusive authority over tariff levels but also setting the terms of commerce between the nations. And separately the Constitution gives the Executive branch exclusive authority to negotiate with foreign sovereigns. So, to negotiate a trade agreement, Congress sets the terms and then the Executive branch is supposed to go out and negotiate it. And in the history of the country there were different ways that those authorities were coordinated, typically Congress calling the shots and the Executive branch doing the negotiations. 

Enter Richard Nixon. Now here’s a shocker, he wanted to consolidate more power in his control. So, he proposed a new trade authority that would consolidate, really, Congress’ trade authority but moreover piece of Congress’ core function, legislating, under the president’s right to proclaim changes to U.S. laws after setting terms in negotiations with foreign countries in the context of trade. 

Now if this sounds like a form of, if you will, diplomatic legislating, where Congress gets put in a deep freeze and one president and his or her trade negotiators are suddenly both setting the terms of international commerce and rewriting wide swathes of U.S. law – BINGO! That’s exactly what it is. Now, ultimately Congress said ‘no it's not constitutional to simply have the president dictating changes to US law; and the deal they settled on, on which Congress got the short end of the stick, was the Fast Track Authority which for the first time in the history of the country allowed U.S. trade negotiators new authorities to start writing in trade agreements policies and things like procurement and product safety standards and worker safety standards and food standards. And then in 1988, Ronald Reagan took what was Nixon’s initial incursion into diplomatic legislating and made it a deregulation corporate power tool by expanding the areas that trade negotiators could set rules binding on the US Congress and all the state legislatures to also service sector regulations, everything from education and healthcare to energy and transport, intellectual property so what length of patents for big pharma or whether textbooks copyrights would make education more expensive. And effectively, suddenly, our trade agreements went from being about trade, thanks to Fast Track, into being kind of slow-motion coup d'états.

Ryan: Under the Fast Track system, when a trade deal is created, just remind us again, Congress literally doesn’t have a say in it until it comes to the floor for a vote and even then they can’t edit it, correct?

Lori: So, the way Tast Track works is hard to even fathom. Effectively when Congress passes fast track, they have set a five-year or ten-year term where they have created effectively a Fast Track factory, and in that factory, they hand the keys over... as soon as that legislation is in place a president can unilaterally, number one, pick any country to negotiate with and Congress has no say, Congress can think it’s a really bad idea to have that country as a trade partner, too bad so sad you’ve thrown away any control. Number two, the Executive branch gets some negotiating objectives that are general but are like, taped up on the wall of the Fast Track factory, “here’s how it’s supposed to go” but there’s no accountability. So, the Executive branch, the president, can negotiate whatever terms it wants. Number 3, it can sign and enter into the agreement before Congress has any vote either on what country or what terms. Then number 4, and this is a shocker, the Executive branch writes legislation that is going to Congress. It is the only legislation the Executive branch writes. It is exempted from having to go to congressional committees for normal what is called a markup and it’s in review as that piece of legislation goes right into a hopper to go right to a vote. And then number five, the rules for consideration of this legislation written by the Executive branch that Congress has not had any say on what would rewrite wide swathes of US law to implement an international executive agreement to which the U.S. is bound and would face trade sanctions if they violate. That vote is preset as yes or no with no amendments, 20 hours of debate only allowed and that’s even in the Senate so there’s no filibuster, there’s no normal process. It’s a legislative luge run at the end for an agreement on the front-end Congress has had no role in for legislation that has, and can, rewrite wide swathes of legislation that has nothing to do with trade. If this hadn’t been the system that was used to pass more than a dozen really unhelpful agreements people wouldn’t believe it was possible or constitutional.

Ryan: Maybe you could talk about some of the specific historic examples and also like the Fast Track has been on your radar for a long time so maybe talk about some of the moments in which people have confronted the fast track system and tried to get rid of it.

Lori: So, here’s the good news: this is also looking forward to the fact that, yay, Fast Track in its current Fast Track factory closes its doors on July 1st 2021 there was a delegation that was passed  for six years in 2015. So, there have been long gaps as more and more members of Congress, but also the public, has realized that this is a lunatic way to make policy and it has resulted in these corporate-captured agreements that are doing a lot of damage economically for sure. But not only there has been more and more resistance by chunks of Congress to give away this authority. 

So for instance fast track lapsed for the period between 1995 and 2002 that was sort of fallout from all the badness that happened with NAFTA and the WTO and members of Congress realized. There was a knock-down drag-out Fast Track fight that got Fast Track reauthorized for a short period of time in 2002 but then that ended in 2007 and it took a knock-down drag-out fight in 2015 to pass it by very few votes and that authorization is going away. 

So now is the moment when the whole thing can be redone, and a new kind of trade authority can be created that puts a steering wheel and emergency brake on these negotiators. Because the kind of really bad stuff that has happened is, for instance, in the World Trade Organization, and the NAFTA, but mainly in the World Trade Organization agreement, one of the ways that corporate interests were able to use the broad fast track delegation was to achieve something that the big pharmaceutical corporations were trying to do for decades. So Big Pharma had been trying to get the US patent system changed. A patent is a monopoly license. For decades the US law had been that a patent lasted for 17 years. So for 17 years the maker of a medicine could have the right to set any price, to decide how much of it could be produced, to not license production to anyone else, and this system of monopoly patents on medicines and the duration of the medicine monopolies is part of why medicine prices are so high. So, people can remember say you know, ibuprofen, is now sold as Nuprin and other brands, Motrin, when that was under prescription, each tablet was the equivalent to almost $100 today. Now you can buy a whole container for $12 with 300 tablets. So that is the difference between something under monopoly license. So, 17 years is what we had, in the WTO negotiations U.S. negotiators pushed on the whole rest of the world and then basically rewrote U.S. law to 20 years of monopoly. And this is something consumer groups had worked with a variety of members of Congress to stop over and over and over for decades when Big Pharma was trying to do it in Congress, and we won. It got done through the back door of the Uruguay Round, which created the World Trade Organization. The World Trade Organization’s implementing bill passed on this legislative loser on the Fast Track, literally, just has a provision in the thousands of pages that said “strike 17 replace with 20” and that quickly U.S. patent law was written to give Big Pharma a longer monopoly to raise medicine prices by billions and there was no debate, there was no discussion, something that had been rejected in democratic processes was undone through the back door of a trade agreement  and there are scores of examples like that. For instance, we didn’t import any meat or poultry that didn’t at least meet U.S. safety standards. In the NAFTA and the WTO implementing legislation passed on Fast Track was another of these changes and again none of this stuff can be amended when it comes to Congress it just goes right through and it changed the words from “must be equal to US standards” to “must be equivalent to” and now we import an enormous amount of meat and poultry from countries whose inspection safety systems are not only not similar to ours but are diametrically opposed in key ways, for instance not having continuous inspection, not having the same risk standards, et cetera. So, these are just a handful of the examples of the really bad things that got rammed down our throat thanks to this procedure.

Ryan: And you mentioned this earlier but the current Fast Track period ends next year which means whoever wins in November will have to decide reauthorization. Are you anticipating another public fight around this?

Lori: I suspect that whomever is elected president, there will not be any trade authority immediately but there could be a fight over it. I think in Congress there is a real appetite to rethink a new model of trade authority that has Congress have a more robust role on the formative stages of trade agreements to shape what the contents are and also to have more accountability over negotiations to make clear that Congress has a role in all negotiations. But also I suspect if Biden is elected, the Biden administration is not as likely to ask for a new authority given that Biden has promised he’s not going to focus on new trade agreements but rather focus initially on trying to get U.S. policies in place to try to fix the economy and get our own house in order. If Trump is reelected, he probably will ask for Fast Track authority right away and I doubt he would get it. Not only because Congress wants to have a big rethink about it in general but also because many in Congress think the president has basically bent the rules of the current system and many in Congress are not of a mind to extend more authority. 

But there will be a big knock-down drag-out fight over that because the corporate interest that want the status quo will be wanting to see an extension of what is an incredible corporate power tool.  I mean from their perspective, it allows behind-the-borders non-trade policies to be set in a context where hundreds of corporate trade advisors have privileged access to otherwise secret documents, secret negotiations, access to negotiators while congress is left Cooling its heels. And Congress, the press, and the public are basically excluded from even seeing the documents much less than having a more fulsome role, as would be the case if these policies were made in the sunshine of democratic policies.

Ryan: Rethinking trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit Rethinktrade.org as well as tradewatch.org to educate yourself and find out how you can get involved in work we are doing in the fight for fairer and more equitable trade policies.

Print Friendly and PDF

Donald Trump Bestows Pledge to America’s Workers Presidential Award to Entities That Offshore American Jobs and May Be Importing Uyghur Slave Labor Goods

By Matthew Groch and Sarah Grace Spurgin

The September 23, 2020, White House event with Ivanka Trump and Commerce Secretary Wilbur Ross was supposed to generate good economic news for President Donald Trump by spotlighting the best of U.S. business entities and all the great things they were doing for U.S. workers.

Except, four of the nine businesses being spotlighted as winners of the inaugural Pledge to America’s Workers Presidential Awards have been certified by the U.S. Department of Labor for offshoring American jobs. Those businesses include Lockheed Martin Corporation, Northrop Grumman Corporation, Oberg Technologies LLC., and Textron Inc. And the National Retail Federation, which also received the award, represents a batch of companies that have relocated much of their production to low-wage countries and have come under attack from human rights groups sourcing good produced by Uyghur and other Muslims ethnic minorities whom the Chinese government has locked up in prison campaigns in the western Xinjiang region of China.

It is no surprise that after recent reports of over 300,000 American jobs having been lost to offshoring and trade during Trump’s presidency, the administration would want to try to distract from its actual record. So, you’d figure they would check up on the entities getting the awards.

One recipient of the award was Lockheed Martin. The firm promised it would commit $100 million in new training over five years when it signed the pledge in 2018. Despite a history of offshoring U.S. jobs (including since 2017), Lockheed Martin has received over $140 billion in federal contracts from the current administration.

Lockheed Martin was not the only award recipient who received federal contract dollars while shipping out U.S. jobs.  Textron Inc. has also received billions in federal contracts from the Trump administration while being certified as outsourcing U.S. jobs during the Trump presidency… and it still got an award!

The National Retail Federation (NRF) was also a recipient of the new award. The NRF is a trade association made up of thousands of retailers across the world, including big names such as Nike, Cisco and L.L. Bean. These three firms combine for a cool $104,508,450 in federal contracts awarded during the Trump administration (most of which went to Cisco) despite each having a history of certified job losses to trade or offshoring U.S. jobs, according to the U.S. Labor Department Trade Adjustment Assistance (TAA) program. In fact, according to TAA data L.L Bean has offshored jobs as recently as March of this year and Trump still deemed them deserving of the Pledge to the American Worker Award.   

These three firms (and others in the NRF) have been called out by various human rights organizations for continuing to source products from the Xinjiang region of China, where the Chinese government has imprisoned Uyghurs and other Muslim minorities, forcing them to work for low wages under brutal conditions.

The U.N. estimates more than a million Muslims have been detained in these camps. Trump’s own State Department has accused Chinese officials of subjecting Muslims to torture, abuse “and trying to basically erase their culture and their religion.”

Yet, the Trump administration chose to honor the trade association representing the companies called out by name by 72 Uyghur rights groups and over 100 civil society organizations.

Since its inception, Trump’s “pledge” has seemed to be strong on PR pageantry and weak on substance. For instance, there is no accountability or even tracking about whether firms are meeting their pledges.

The selection of these entities for awards underscores that the Trump administration has not delivered on many of Trump’s pledges to American workers. For example, although in 2016 Trump promised Carrier workers in Indiana that he’d save their jobs, 1,300 of those jobs have been offshored to Mexico. And although Trump vowed to punish corporations that ship jobs overseas, his administration has lavished more than $425 billion in federal contracts on companies that are certified to have offshored jobs.

So, congratulations to the inaugural class of Trump’s Pledge to America’s Workers Presidential Awards — shining examples of how to exploit workers at home and abroad.

Print Friendly and PDF

Lori Wallach: Global Trade Agenda in a Post-Covid-19 World

Lori Wallach, Director of Public Citizen's Global Trade Watch, discusses the role trade agreements will play in a post-COVID-19 world and how they may shape domestic rules and policies on the digital economy.

Print Friendly and PDF

Current Trade Deficit Is 22% Higher Than Same Period in 2016

August 2020 Data Show the Largest Monthly Trade Deficit Since August 2006

WASHINGTON, D.C. – An inflation-adjusted analysis of today’s latest Census Bureau trade data conducted by Public Citizen shows that the $424.8 billion trade deficit in the first eight months of 2020 is more than 22% higher than the $347 billion deficit during the same period in 2016.

The August 2020 monthly deficit of $67 billion is also the largest monthly deficit since August 2006, an unexpectedly large growth in the trade deficit given that the value of trade flows declined 15% overall (down $570 billion) compared to last year because of the global COVID-19 crisis.

“The overall 2020 deficit is on track to be larger than in 2016,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division. “The Labor Department has certified more than 200,000 more American jobs offshored since 2016, with more than $425 billion in government contracts granted to firms that offshored jobs.”

Public Citizen’s analysis of the new U.S. Census Bureau trade data also showed:

  • The eight-month 2020 deficit in manufactured goods is 12% higher than in 2016.
  • The August 2020 trade deficit is the largest monthly deficit since August 2006. August’s 2020 goods and services trade deficit rose from $63.4 billion in July 2020 to $67.1 billion, a 5.9% increase. Imports grew 3.17% in August relative to July, from $231.6 to $239 billion, while exports only grew 2.15%, to $171.9 billion, and remain below the $209.6 billion in February 2020 before the pandemic.
  • The August 2020 monthly trade deficit in goods ($83.8 billion) is the highest on record. And the 2020 eight-month trade deficit in goods ($579.7 billion) is 7.32% higher than during same period in 2016, when it was $540.2 billion (in inflation-adjusted dollars). The U.S. trade deficit in goods decreased 3.6% in inflation-adjusted terms from $601.3 billion in the first eight months of 2019 to $579.7 billion in the same period in 2020.
  • The August 2020 surplus in services trade was the smallest since January 2012, at $16.76 billion.

  • The goods deficit with Mexico hit a record high of more than $16 billion in August 2020. The trade in goods deficit with North American Free Trade Agreement (NAFTA) partners is almost 19% higher in the first eight months of 2020 relative to the same period in 2016, but down 11% relative to 2019 even as Mexican exports to the U.S. began to expand significantly in June.
  • The China trade-in-goods deficit is down relative to 2016, but there is a “trade diversion” effect of imports increasing from other countries.
  • The 2020 eight-month trade in goods deficit with China of $194 billion is 20% smaller compared to 2016, when it was $244 billion in inflation-adjusted dollars for the January to August period. The China deficit is down more than 17% in inflation-adjusted terms from 2019, when it was $236 billion in the first eight months.
  • In inflation-adjusted dollars, the goods trade deficit with the rest of the world (excluding China) increased from $365.7 billion to $385.3 billion in the first eight months of 2020 relative to the same period in 2019, a more than 5% rise.

 

*Data Note: Trade data is sourced from the U.S. Census Bureau and the U.S. Bureau of Economic Analysis. We present deficit figures adjusted for inflation to the base month of August 2020 and expressed the data in constant dollars, so the figures represent actual changes in the trade balances. We also offer the “nominal” figure, which is the number you will see in the U.S. Census Bureau data for figures earlier than 2020. Some economists view the nominal data as more accurately reflecting the overvalued U.S. dollar.

###

Print Friendly and PDF

Virtual Press Conference: Promises Made, Workers Betrayed: Trump's Bigly Broken Promise To Stop Job Offshoring

President Trump has awarded more than $425 billion in federal contracts to corporations listed among those responsible for offshoring 200,000 American jobs during the Trump era, according to a new report released today by Public Citizen’s Global Trade Watch.

Print Friendly and PDF

House Passes Bill to Catch Dangerous Imported Products

Public Citizen Supports Increased Import Safety Inspections, Lauds Passage of the “Consumer Product Safety Inspection Enhancement Act”

WASHINGTON, D.C. – The U.S. House of Representatives today passed H.R. 8134, the Consumer Product Safety Inspection Enhancement Act, which will enhance Consumer Product Safety Commission (CPSC) inspection of the more than one million-per-day e-commerce shipments that currently enter the U.S. under “de minimis” rules that skirt normal Customs procedures, including safety inspections. More information about this problem is available in Public Citizen’s congressional testimony here. Lori Wallach, director of Public Citizen’s Global Trade Watch released the following statement:

“Right now, American consumers shopping online are being exposed to a flood of counterfeit and dangerous products with none of the more than one million packages a day coming in from China alone getting inspected thanks to a de minimis rule that lets such shipments skirt normal Customs procedures. This legislation will require safety inspectors be posted at the ports of entry where now hundreds of millions of uninspected packages enter and head to U.S. consumers who ordered goods online. 

Public Citizen thanks U.S. Rep. Jan Schakowsky (D-Ill.) for her leadership on this issue and calls on U.S. Senate Majority Leader Mitch McConnell (R-Ky.) to bring this bill protecting American consumers to the Senate floor for a vote.”

###

Print Friendly and PDF

Rethinking Trade - Season 1 Episode 19: Kenya and the Environment

The changes needed to support living-wage jobs, to combat the climate crisis, to make medicines accessible for all...
Much of it won’t be possible unless we overhaul our corporate-rigged trade system. Trade Expert Lori Wallach and Activist Ryan Harvey explore ways to make our progressive trade vision a reality. Rethink Trade is an initiative of Public Citizen's Global Trade Watch.

Transcribed by Garrett O’Brien

Ryan:

Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert Lori Wallach.

Ryan:

Lori, a lot of our listeners may have seen the New York Times piece a few weeks back entitled Big Oil Is in Trouble, Its Plan: Flood Africa with Plastic. What it reveals is that chemical and oil and gas companies, who are facing growing opposition to plastic bags and other plastic goods that create a waste problem (including China cutting them off from plastic waste imports), they want to use Africa as a dumping ground. Their plan is to use Kenya as a lever to undermine African countries’ plastic laws protecting against plastic waste and they are using the US-Kenya trade deal negotiations to do this. This is sort of a classic example of how trade deals can chip away at, or get rid of, a country’s domestic environmental regulations, and that’s what we’re going to be talking about today. Can you give us all a bit of an introduction to this specific case, and also how and why trade rules have this type of authority?

 

Lori:

I’m going to take the second question first, because the predicate to understanding the situation with Kenya, and the US Free Trade Agreement that is being negotiated, is to be aware that a lot of the contents of so-called “trade agreements” have nothing to do with trade. But rather that impose new limits on government regulatory authority on behind-the-border issues like whether you can ban plastics waste or say, no more use of single-use plastic bags, or that create new rights or privileges for corporations, monopoly protections for pharmaceutical firms to charge high prices for medicines or rights for foreign investors to operate without meeting local laws. So those rules typically are enforced through a provision that is in most trade agreements that says “the signatory country shall conform domestic laws, regulations, and administrative procedures to the terms of the agreement,” that’s the language in the WTO version. 

What that boils down to is you can have a country like Kenya, because here’s the situation there, that has signed onto an actual multilateral environmental agreement called the Basel Convention that recently designated plastic waste as a hazardous waste that can be banned under that international agreement you can ban the shipment across borders of that good as an environmental priority, and Kenya is a country that’s a leader throughout sub-Saharan Africa in establishing strong plastics wastes laws so they don’t allow single use bags like a lot of US states and cities but also they have other policies. You could have that as your domestic national law, but then if in your trade agreement stuck into some chapter like the one where this would probably be is something called “technical barriers to trade.” It’s just to set the standards that the big companies get wedged into trade agreements that get designated as a “illegal trade barrier.” So suddenly your domestic law is in violation with a so-called trade agreement and your domestic law has nothing to do with trade but you can face trade barriers, actual sanctions, against your real trade, against your exports as a developing country, you can have tariffs, taxes put on it, for not changing you domestic law on something like an environmental protection and that is what is at the heart of that New York Times exposé. 

When word got out that the US negotiators had been lobbied by some interest in oil and gas and the chemical industry to use the Kenya agreement to try and set a policy that would make Kenya reverse its toxics pollution rules with respect to plastics and therefore become open as a dumping ground for these companies’ waste, but also for the sale of petroleum based products like single-use plastic bags. So that’s how something totally unrelated to trade that is a totally reasonable domestic environmental law can get sacked through closed-door trade negotiations.

Ryan:

And in Kenya’s case, I mean you touched on this a bit, were talking about pressure being applied before the ink touches the paper-- there’s also plenty of ways companies can attack environmental regulations after a deal is signed, particularly through, no discussion about trade deals and environmental regulations could be complete without bringing up, Investor State Dispute Settlement System (ISDS). How do these tactics work and how have they been used to attack environmental protections? Maybe you could just give us a little introduction to that.

Lori:

There are three ways that these trade agreements rules end up undermining domestic laws. One is just good old pressure. So, in the negotiations like this you have, behind closed doors, an industry lobbyist who is an official US trade advisor. There are 500 official US trade advisors with ties to corporations there are a handful of unions and even smaller handful of environmental groups; very few interests to counter to corporate interests pushing for deregulatory, pro-polluter policies in trade agreements, and they just pressure the countries as they’re negotiations, “you better change blah blah law or we won’t do this trade agreement” or “we’ll cut off your access to the US” so that’s one way it works. The second way it works is that you actually do the negotiation, you jam in these kind of non-trade rules. A classic is for instance, bad rules that got slipped into the revised NAFTA that create more obstacles for Mexico and Canada having good laws in Genetically Modified Organisms (GMOs). So, unrelated to trade per se but consumer, environmental protections. And then once they’re in the agreement they can be challenged from one country attacking another in tribunals in where, if you don’t get rid of that law, you face trade sanctions, border taxes on your actual trade, your export, until you do. 

You know a really ugly example of that is the US took a case on behalf of Big Ag, agribusiness, to attack the European ban on artificial growth hormones in meat, they went to one of those tribunals this one at the World Trade Organization, the rules are so slanted and the tribunals are so unfair that the WTO tribunal said, “Sorry Europe you banned these growth hormones which are associated with various cancers so that your farmers can’t use them but it's beyond what is allowed under the food standards of the WTO, so you can’t keep the stuff out. And if you continue to do so, you have to pay.” And the US imposed over 200 million dollars of sanctions on the European Union’s exports to the US of other stuff unrelated to meat, and did so for over a decade because they were trying to force the European Union to back down. 

Now, most countries back down right away. The US did it so a variety of countries, Mexico and Canada, attacked our labeling of meat with respect to where it's grown, harvested, and slaughtered, the so-called Country of Origin laws, in the face of a billion dollars of potential future trade sanctions we just caved and gutted the law. So that’s one way. The other way is the investor-state tribunals, and that is when a private interest, not just a government trying to enforce another government’s commitments in a trade agreement, but a private entity can try to challenge a government, elevated like it’s its own government, and extract cash for not meeting trade agreement rules.

 The bottom line of all of this is in Kenya they’re doing the right things on plastic pollution and the US should be cooperating with Kenya to promote those kind of environmental and health initiatives, not use a trade agreement to create a basically booby-trap that is going to blow up laws unrelated to trade because some corporations get those provisions jammed into a trade agreement.

Ryan:

So, I guess that would bring us to our final question which is one that I’m sure listeners are asking as well, which is how can we reverse course? How can trade rules be written that not only prevent these attacks from happening in the first place but enforce rules that protect environmental regulations and standards from the get-go and are there any examples right now of those types of rules in action?

Lori:

So, we have to think about this on two levels. The first is the Kenya agreement itself. The plastics issue is just one example of why the US negotiating anything like our like our past trade agreements with the country of Kenya, under any circums­­­tance, but particularly right now, is a ridiculous idea. And there is no upside for development, for the environment or if you look at it just nationally, for US jobs, for US exports, but if you look at it on the flipside for what’s going to happen in Kenya, its counterproductive if were trying to have this agreement either help workers or the environment in either country or for that matter build our foreign relations and reputation. If you see your member of Congress or even better next time you are near a computer send him an email, make a call, to make sure they know that you don’t want this US-Kenya agreement going forward. It’s just not the right thing to be doing probably at all, certainly not now.

 And the second thing is the model. Now could there be a US-Kenya agreement that includes trade that could be for people and promoting, improving health standards, environmental protection, human rights protections? Of course. The problem is that that is not the model we have. So with the renegotiation of the NAFTA we took an agreement that was like 20 rungs below Hell and we brought it up to the crust. But that ain’t no agreement that is a good agreement, it’s one that hopefully means, the new agreement means, that there will be less harm done by a NAFTA.

 If you want to actually have a good agreement, you need to actually start with what the goals are, which is how do you actually improve people’s livelihoods? How do you use the agreements to set standards that companies have to meet in order to get the benefits of the agreement? Versus today’s agreements which put handcuffs on countries and tell them all the things they have to do for corporations. And that is a bigger discussion that is probably starting and will start perhaps after the election. But for right now, I think the best thing to do is to make sure your members of Congress know, no US-Kenya agreement under these circumstances, and then go to tradewatch.org and also rethinktrade.org and become part of the discussion of what a good trade agreement could look like because there is a way to do this right and the only way we’re going to get there is if we’re all informed and fighting for it.

Ryan:

Rethinking trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit Rethinktrade.org as well as tradewatch.org to educate yourself and find out how you can get involved in work we are doing in the fight for fairer and more equitable trade policies.

Print Friendly and PDF

Since 2017, Hundreds of Thousands of American Jobs Were Offshored, Trade Deficit Is Up 18%

Since 2017, hundreds of thousands of additional U.S. jobs have been offshored and the trade deficit has grown, according to U.S. Department of Labor and Census Bureau data:

300,000 More American Jobs Lost to Trade

  • More than 300,000 American jobs have been lost to offshoring and trade during Trump’s presidency, as certified by the Labor Department. The Economic Policy Institute said total trade job loss is much higher — estimating 700,000 jobs lost to China alone in Trump’s first two years.
  • Nationwide, 311,427 American jobs have been government-certified as lost to trade since 2017, with 202,543 explicitly listed as offshored, but the total number is higher. These numbers represent only the workers that the Labor Department approved for Trade Adjustment Assistance (TAA), a voluntary program that workers must know about apply for and thenprove that trade caused their job loss in order to receive assistance. And, the TAA numbers do not include all 2019 or most 2020 because of processing lags.
  • Since 2017, General Motors closed U.S. plants and moved popular vehicle lines to Mexico; Ford announced its new Mustang electric SUV will be made in Mexico; Boeing offshored 5,800 jobs, General Electric offshored 2,046, and United Technologies offshored 1,572 jobs. The Machinists and Steelworkers have lost dozens of facilities to offshoring during this period.
  • Although then-president-elect Donald Trump promised to stop Carrier workers’ jobs from being offshored, almost 600 of the union workers at Carrier’s Indianapolis plant lost their jobs and all 700 of Carrier’s Huntington Indiana jobs were offshored to Mexico. Carrier parent firm United Technologies offshored at least 1,572 jobs according to Trade Adjustment Assistance
  • Michigan’s trade-related job loss has more than doubled over the last three years. Michigan has hemorrhaged jobs to offshoring with a 211% increase in trade-related job loss. (From 2017-2019 TAA-certified job loss was 15,675 compared to 7,428 for 2014-2016.) It’s getting worse: Michigan suffered a 308% increase in trade-related job loss in 2019 over 2018.

The trade deficit is 18% higher than in 2016

  • S. Census Bureau data show that the U.S. trade deficit in the first seven months of 2020 is 18% higher than it was during the same period in 2016. This is especially troubling because trade volumes crashed 15% due to the COVID-19 pandemic. (Inflation adjusted: $356 billion trade deficit January-July 2020 compared to $302 billion during the same period 2016.)
  • In July 2020, the U.S. had the largest monthly goods trade deficit ever recorded and the largest overall monthly trade deficit since July 2009 during the global financial crisis and recession.

The manufacturing sector expansion that began in 2016 flattened in 2018, with significant declines starting early in 2019

  • Trump didn’t “create” a manufacturing boom. The U.S. Institute for Supply Management’s Purchasing Managers Index (PMI), a gold standard measure for the sector’s status, shows manufacturing growth began in 2015 and continued into 2018. The PMI data show that the manufacturing upswing began to flatten in 2018 and began a decline in late 2018 that continued through 2019 – all well before the COVID-19 crisis.  

Chart 1

U.S. Institute for Supply Management Purchasing Managers Index

  • The U.S. has not experienced a “blue-collar job boom.” Annual average manufacturing job gains during the entire 2010-2019 recovery was 166,000, which accounts for the 500,000 gain in U.S. manufacturing jobs from 2016 to 2019. Since 2017, there has been no jump relative to prior years, and total gains account for a small fraction of the 4.5 million manufacturing jobs lost since 2000.
  • More workers filed for government aid for trade job loss through the Trade Adjustment Assistance program in 2019 than in 2017, per the 2019 annual report from the Labor Department. (There were 1235 TAA filings in 2019 versus 1091 TAA filings in 2017.) The number of workers who are certified as losing jobs to trade has remained high during Trump’s presidency: 88,000 in 2019; 77,499 in 2018; and 95,505 in 2017.)
  • Mishandling of the COVID-19 crisis has wiped out 750,000 American manufacturing jobs. See here for live version of the Economic Policy Institute graphic below that shows jobs per month.

Chart 2

U.S. has created new incentives to offshore jobs

  • The 2018 tax law created new incentives to offshore jobs, with a 21% corporate tax rate for income earned domestically, but a 10.5% tax rate for profits earned offshore.
  • The “Phase-One” Trump-China trade deal made it safer and easier for big corporations to offshore with new investor and intellectual property protections for firms that move production to China. But there’s nothing in the deal to end forced labor in China or require basic worker rights or environmental protections to stop the race to the bottom. The agreement also lacks disciplines against China’s massive subsidies, which make it impossible for U.S. firms to compete with Chinese products.

 

Print Friendly and PDF

ITC Hearing - Global Trade Watch's Lori Wallach Testimony

The United States International Trade Commission (USITC) Investigation on “COVID-19 Related Goods: The U.S. Industry, Market, Trade, and Supply Chain Challenges” Testimony of Lori Wallach, Public Citizen’s Global Trade Watch

Print Friendly and PDF