Rethinking Trade - Season 1 Episode 5: A Progressive Shock Doctrine on Globalization?

To try to address human needs during the COVID-19 crisis, many governments have shredded the concepts and laws underpinning corporate-managed hyper-globalization. A quick return to business-as-usual is not likely.

In this episode, we discuss Lori’s recent piece in Le Monde Diplomatique, where she identifies four main ways in which the current moment provides unique opportunities to win significant structural changes to make the global and domestic economy fairer, more resilient and more sustainable.

What comes next depends largely on how we mobilize today. With many people who had been sheltered from the ravages of hyperglobalization now personally affected and fuming about the United States not being able to make or get essential goods needed to save lives, it’s time for a progressive “Shock Doctrine.”

Transcribed by Lauren Martin

RYAN HARVEY: 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. So Lori, you just wrote this big piece in Le Monde Diplomatique called “The State Steps in To Save Global Economics,” and in the intro you say, "trying to respond to COVID-19 has essentially forced governments to override the rules and the ideological underpinnings that define corporate globalization, and that there are ways that this upheaval could be organized into structural change to the neo-liberal hyperglobalized order." And then finally you describe what the world looked like before this era and how there are already some models from before that could be resurrected. Do you want to explain the piece briefly? 

WALLACH: The basic gist of it was that, for all of the horror and pain of this pandemic, it is revealing things about the inherent structural, frailty downsides, damage, inequities of our current so-called neo-liberal, globalized, corporate-led regime that create conditions for organizing for some big structural changes. And in the way Naomi Klein often talks about corporations seizing moments of disaster, “the shock doctrine,” to double down on policies that benefit them, in a certain way in this moment, the things that are being revealed are the things that show the corporate-rigged system is the problem, which means there’s a moment, perhaps (if we do the work) for organizing something like a progressive “shock doctrine,” to use this awareness of the status-quo’s problems to get some of the long-standing structural changes to make the rules of both our national economies and the way they connect globally to work for more people and to safeguard the planet’s environment.  

HARVEY: In the article, you list these four main reasons why the COVID-19 crisis could unhinge the current corporate-led, globalization regime. And the first one you bring up is forced solidarity. Do you want to explain this part? 

WALLACH: The pandemic has forced most residents of developed countries – many for the first time – to personally experience pain and anxiety from this regime of corporate-rigged hyperglobalization. For a long time, millions of industrial workers and small farmers and their neighbors in gutted communities, typically not in our major coastal cities, in the United States but also throughout the developing world, knew that this system was a disaster. It had hit them personally. But now we are seeing so many other people who haven’t been affected, suddenly realizing that there are inherent, unaddressed menaces to this system that they could ignore in better times, that they thought wasn’t their problem, it was those other people’s problem. That means, in a way, we’ve been forced into a solidarity, a way of the makers and the buyers, to realize this is a system that really doesn’t work for any of us. This is really important for two reasons. First, it’s mainly been the developed countries’ governments that have been pushing the trade and investment agreements that formalized and implemented the system of hyperglobalization, and that the politics in these countries could be shifting because of this experience, is key for change. A corollary to that is that it’s been the marginalized people in the developed countries who have become ripe for the picking by right-wing, nationalist political forces and this forced solidarity of a common problem, could help shift domestic politics. But also it’s the suddenness of the catastrophe—say, in contrast to the slower, frog in pot, climate boil—that can really awaken many people who have felt insulated from the damage of hyperglobalization. This is to the point where you even have publications like The Economist and the Financial Times, that have cheerlead-ed the whole Davos-mentality, neoliberalism, globalization is values in themselves, have suddenly started to editorialize that maybe some more regional and localized production has merits, and that we shouldn’t only think of the efficiency gods, but rather also think about issues like reliability and resilience. That is a tremendous shift.  

HARVEY: That kind of is a perfect intro to your second point, which is that there is not likely to be a return to “business as usual,” that this crisis has also seen some of the rules that define “business as usual” tossed out the window.  

WALLACH: Well, this is a very pivotal point. On the one hand, people in countries all over the world have just witnessed their governments break every rule that their government said absolutely could not be broken. Because in the face of having to deal with a crisis, no one in the governments are making the usual excuses of, “well we’re so sorry we can’t do that very sensible thing because of the World Trade Organization (WTO) or a free trade agreement or an economic partnership agreement, or investor state dispute settlement.” There is no thinking about what those rules are. There’s thinking about how the heck people’s lives are going to be saved and goods are going to be produced and people’s needs are going to come first ahead of these rules. And it’s very hard to put that genie back in the bottle, because the sort of the self-enforced “we must follow these rules,” “resistance is futile,” that entire concept has been chucked out the window. You do see some really improbable officials, really people who are the high priests of the current globalization system, saying things like recognizing that in the heat of a crisis you can’t let the market allocate scarce resources, that you have to actually make the government make sure that the health sector delivers for people and not allow speculation and concentration.  

Well, to a lot of people I'm talking to, they're saying, you know, that sounds really sensible to be the rule when there isn't a crisis, also, when it comes to essential goods. Why should we have rules that promote monopolies, thin unreliable supply chains, inequality, etc.? So in a way, as a practical matter, because the premises have gotten shattered, but also because things are not going to go back to normal in a matter of weeks, there's going to be a period of time where governments are going to have to be much more engaged. And we've just seen dozens of countries, when push came to shove, decide they needed to try and make sure they had medical supplies for their residents. The U.S. was one of the last to look into this, but the rest of the world started thinking about these issues. We have both as an intellectual matter, but as a practice, a context where basically the smashing of the golden calf of efficiency and globalization as a goal is going to be in place for a while. And that creates openings. 

HARVEY: And one of those openings, Lori, is what we're seeing now in the debate around corporate globalization. And what you point out in the piece is that this debate is no longer a left versus right paradigm. And you say that while acknowledging the dangers of ceding this critique to the far right. Why don't you tell us a bit about this point, and also how you see progressives engaging in this kind of terrain. 

WALLACH: So while all of these paradigms of globalization have been smashed in the short term, team status quo, the corporations, a lot of officials are in a totally tone-deaf way, claiming that the answer is to double down, that we need to cut all the tariffs on all the medical goods, somehow that will make things better. Well, obviously, that's not the problem. The problem is no redundancy, not enough capacity, no system for organizing priorities of where supplies go, where the sickest people are. So while team status quo is trying to use this opportunity to double down, what's emerging is a new dynamic that is, if you will, team status quo for the old policies and the corporatists vs. populists from the Bernie Sanders, Elizabeth Warren progressive populist spectrum all the way over to say the Josh Hawley, very conservative Missouri Republican senator version, all of whom are calling for interestingly similar structural changes that have the government much more involved in making sure that the economy that comes out of this crisis is one that is more resilient to deliver necessary, essential goods to people, that strengthens our national resilience, our national security, in a broad sense, national security, our health, our infrastructure, etc. And that divide is super interesting because you basically have more of a chance of having structural changes when you have broken out of some of the binary left-right dynamics in this country. 

The example of this, for instance, is, listen to this: quote, this pandemic also exposed a Grand-Canyon-sized fault in our supply chain. We don't make critical products in America anymore. It's a threat to our health, our national security and our economy. Americans have long known about this problem. Washington is just waking up to it. And Wall Street was hoping it wouldn't get caught. End quote.

So that sounds like Bernie Sanders or Elizabeth Warren, pick your choice. But it is neither of them, could be. That actually was the guy, Josh Hawley, the Missouri Republican. So what's ending up happening is odd combinations of Democrats and Republicans are coming together with solutions where, for instance, you have Pramila Jayapal, co-chair of the Congressional Progressive Caucus, and that guy Hawley, both calling for a guaranteed national income to be paid by the government to basically get around the inefficiencies of all of these different loan programs and bailout programs, or the money goes to the companies, and then they're supposed to pay people's salaries. And that kind of really smashing of partisan lines is the moment when there are opportunities to make really big change. Now, at the same time, we have to be super careful because the left and the right in the populist space can both identify the problem and even identify some of the policies that are to be the fix. 

But it's super perilous if it is the right part of the spectrum that owns that, because part of the biggest fix here is accountability and democracy. And you're not going to get those kinds of fixes from the likes of, say, a Steve Bannon who can do the critique of what's wrong with the current system, but also was, you know, in love with authoritarianism. This gets back to where we started, which is this is a moment where progressives need to really step up. It's not going to happen by accident. The changes will happen if we organize for them.

HARVEY: And Lori, point four is a really big point, and obviously this is a really short show, but let’s talk about rebalancing relations with China and decentralizing the global production economy. What could this look like? 

WALLACH: Well the fourth factor in all of this is something that was starting to happen before this crisis. And this crisis has sort of shone a spotlight on, which is, not just in the United States but in countries around the world, there’s a growing recognition that the role China, as the government, and it’s government-structured economic system in this current structure of globalized economy is really unsustainable, unhealthy, perilous, to both numerous countries’ essential-goods supply chains like medicine and personal protective equipment (PPE), but also serve more broadly to their infrastructure. Heaven forbid the next crisis is that there is a horrible computer virus, not a medical virus that is introduced that crashes our electric grid. And part of that virus destroys some of the switches and mechanical aspects of the system and we need a lot of new electric-grade steel, and we need to remake a lot of infrastructure. Right now we are way too reliant on imports that could take weeks and weeks to get to us, if they’re available to us, to be able to do that.  

There is this notion that interestingly started in the military supply chain world, so there are Republicans thinking about it, about just practically not having us over-reliant on any country. Separate from China, just any country. And I think it really started to come to mind when the Twin Cities had that bridge fail, that horrible disaster some years ago. And that bridge was closed for a lot longer than it needed to be and snarled up that whole community because we couldn’t make that kind of steel to have a long-span bridge. We had to wait for it to be floated up from Brazil or sent over from China. And so that moment had a lot of people who do infrastructure planning and people in the Pentagon saying “Hmm, now that is a problem.” Heaven forbid, from the Pentagon’s perspective, we’re in a war and supply chains got cut. And various people who think about national infrastructure start thinking about, Heaven forbid, we had a major west coast earthquake or name your problem, how would we fix things? So all of that got the right thinking about these practical issues.  

Of course, more on the left, there’s been a lot of concern about how U.S. corporations have plotted with the Chinese government in a mutually-beneficial (at the time) co-habitation of the Chinese government wanting the technology, the know-how, the investment, the employment. The U.S. corporations were enticed with “here’s a billion-plus consumers,” but what they really wanted was “here are a billion-plus people who can work with no labor rights and very low wages,” and the result has been a system where in many different sectors there is an over-reliance on production in China, if not of an entire good, some key element or part or component, or input (the raw material- chemical, steel, etc.) that has become really only made in China, or too much of it is made in China so that there really isn’t redundancy, there isn’t diversification. And to some degree, this crisis is making the whole world realize we need redundancy, we need diversification, but it’s really hard to separate the China factor out of that because it has been the Chinese government’s plan over time, as part of a geopolitical strategy, to dominate in different sectors.

And in the same time that the U.S. and most of Europe, not all of Europe, but a lot of Europe have made words like ‘industrial policy,’ i.e. a plan to invest in dominating a sector in the West, it's become a dirty word. But in China you actually saw a government with goals, making plans, and putting a lot of money, subsidies – you hear a lot about China ‘cheating’ – it’s subsidizing that stuff and then trading it. Or reducing the currency value to make goods that could be exported competitive, not by their actual intrinsic value but because you’re rigging the exchange rate to make imports expensive and exports less expensive. All of those tools the government of China has employed, and in the last 30 years it was to get multinational companies to come in. But now that they have the technology, the subsidies are increasingly not given to foreign companies, they’re actually only being given to the indigenous-created Chinese companies that now have the same technology they got from the foreign companies that were enticed by the labor. And you have increasingly some of the U.S. companies that were the big multinationals that were benefitting from the cheap labor and promised the market who are themselves starting to get squeezed. And at the same time as this sort of military, we-need-redundancy, the big companies are less excited about the prospects of their profits in China, because they’re being squeezed out by the now-new Chinese companies that are getting subsidized. 

You've always had progressives extremely concerned about issues like corporate concentration and issues around labor rights and human rights in China, where, let's be blunt, lot of workers right now in those Chinese plants, that are exporting things to the U.S., are Uighurs and other politically persecuted groups who are in forced labor situations.

So all of that's come together to have a lot of governments, including across the political spectrum in the U.S., a lot of politicians and people, starting to think about the fact we just need a more diversified way of producing. And some governments have gotten very active in that direction. The Japanese government just announced billions of dollars of government funds to get Japanese companies to move from China back to Japan for the sake of redundancy. I think that that also creates a moment when people are thinking about where things are made, to think about how we can have policies both in the global sphere, but also domestically that can try and revitalize more production in more places. Which is to say, some more robust domestic and regional production, not autarchy, which is just the technical word for self-reliance. But redundancy. So, of course, we're still going to have trade.

The question is, under what rules? And can we diversify the sources of those imports, so we're not only overly reliant on one place or if there's a problem, everything falls apart. But also, can we have some more domestic production, which is not only a matter of our security and resilience, but also could have some great corollary benefits in creating some more middle-class jobs for a lot of the folks who have been partially marginalized by this current system.

HARVEY: Lori, speaking of some of these rules, in the conclusion in your piece, you paint a picture of what the pre-neo-liberal era looked like and you describe some of the older rules that exist that can still be utilized today. And you also talk about new rules moving forward. Why don't you close us out with what some of those rules look like?

WALLACH: I think that the key thing for everyone to keep in mind is, there are lots of policy tools to get different outcomes, some of which we've seen succeed in the past. The real issue is getting the goals right. So if we want an economic regime that prioritizes things like getting people the essential goods they need reliably, that prioritizes having more localized and regional production, which both helps for the redundancy that leads to resilience and reliability, but also has the corollary benefit of more production jobs for more people, which is an income inequality remedy, but also honestly at this point, is an urgent aspect of addressing the climate crisis, to not be schlepping things from one production facility at the lowest environmental standard in one part of the world to the whole rest of the world spewing carbon along the way. If our goals are like that, then the tools we can use our many. A couple that I write about are just things that I think a lot of people have forgotten about.

But for instance, before the mid 1990's, establishment of things like the World Trade Organization and free trade agreements like NAFTA, every trade agreement that had been established, including the GATT, the General Agreement on Tariffs and Trade (the post-World War Two standard of trade) they all treated trade in food differently from other goods. Why? Everyone needs food to survive. So those trade agreements ensured that governments had lots of policy space to determine how to make sure there were affordable, reliable supplies of food. So they allowed things like supply management. So you set up a quota system. You have a certain amount of imports, but you always have a certain amount domestic production. That way you knew, no matter what you had both, if you had a bad harvest, you had imports. And if something happened overseas, you had domestic production or stockpiles or subsidies. And that logic, I think, makes sense for food, as we're about to see now with the [COVID-19] crisis in meat packing and the overconcentration in that sector. But also, it should apply to other critical sectors like medicine. The combination of domestic and regional manufacturing and trade is how you maximize your resilience.

Similarly, as far as how you would distribute around the world this kind of production without it being sort of random or playing favorites of the day between countries or companies, there was a whole system that existed until the WTO went into effect which phased it out. And that's it was called the multi-fiber arrangement. It was a managed trade system that distributed production quota, in that case for textiles and apparel. But it was a way to make sure that either countries with smaller industrial capacity, so the Caribbean islands, smaller African countries, or countries with higher wages, the U.S., Europe, would still be part of producing in that sector, so that all the jobs and investment wouldn't run to the lowest wages like it did as soon as the MFA, the multi-fiber arrangement went away. When the multi-fiber arrangement system went away, the corporate-managed trade logic, within years concentrate production in China and a few other Asian countries that had the lowest wages and standards. And those industries in Africa, the Americas, the Caribbean, obviously the U.S. and Europe, were just decimated. The system of basically negotiating a system of quota guarantees that each country can have some level of protected production so that there's some basic fallback.  

And another thing to think about from the past is the kind of rules that we're in, the thing that was supposed to be the WTO before the WTO. That was the thing called the ITO, the International Trade Organization. A sort of quirk of trade history is that the WTO wasn't the first idea of having a global body. The first idea was something that came out of the discussions after World War II. A lot of Progressive's got together and created an agency that—brace yourself, it sounds like, wow, it's taken 50 years to get back to that—sets the International Labor Organization labor standards and competition, anti-trust standards and rules against currency mismanagement as a mandatory floor on which the trade rules were situated. The idea was to elevate human needs without imposing lots of one-size-fits-all dictates. It took international standards. Countries had agreed to as sovereigns and said, OK, here are the other things about equality and wages and fair competition and currency cheating we've all agreed on as countries. And now our trade agreements are cutting of tariffs, are opening of markets. It's going to be premised on our agreement on all that other stuff.

And that ITO, unfortunately, was basically blown up by the U.S. Senate, which didn't want that kind of set of rules. And the GATT was actually just this provisional thing that was just the tariff rules that was in a way like an annex to this ITO that got tanked. But that ITO structure, and there's a full treaty that would obviously would have to be updated, but conceptually it shows how you would re-prioritize different international rules and institutions to create a more lift-up global trade regime, not a race-to-the-bottom one. And, you know, these are just some of the ideas. Entire books, papers, treatises have been written about this. The trick is going to be the fight to win the debate about what the goals are, because these policy tools, there are many of them, lots of good ideas. The battle is going to be really about this moment leading to a more progressive vision of the rules nationally as well as internationally.

Because here's the thing: it could go either way. This crisis is showing the vulnerabilities, but the contest next is of power and politics. It's not a lack of policy options. I think that unless progressives in numerous countries organize to demand an end to business as usual, post the urgency of the crisis, we could see a mildly adjusted version of the status quo. Or we could find ourselves actually subject to some kind of right-wing nationalist alternative. That's on us. Cause like those on the left, the likes of Steve Bannon can critique the extreme failings of hyperglobalization. But the alternatives offered by those who love authoritarianism, like him, certainly will not be the democratic accountability that really is a core antidote to the failings of hyperglobalization. 

HARVEY: That's all for today. Thank you all for listening. Rethinking Trade is produced by Public Citizen's Global Trade Watch. I encourage you to visit RethinkTrade.org, as well as TradeWatch.org to educate yourself and to find out how you can get involved in the work we're doing to fight for a fairer and more equitable trade policies.

Print Friendly and PDF

Civil Society Organizations and Concerned Activists Submit Nearly 7,500 Comments on Proposed U.S.-Kenya Trade Agreement

By Melanie Foley

In March 2020, the Trump administration notified Congress of its intent to negotiate a Free Trade Agreement (FTA) with Kenya after a meeting between the U.S. and Kenyan presidents.

Public Citizen submitted formal comments to the U.S. Trade Representative explaining why negotiating a standard U.S. FTA with Kenya is a very bad idea in general, and doing any trade negotiations that are not focused on COVID-19 response at this time is counterproductive.

The amount of trade between Kenya and the United States is small, but if Kenya negotiates a standard FTA with the United States, it will be forced to give up strong laws banning certain genetically modified foods and protecting consumers’ privacy online. And Kenya will become vulnerable to floods of subsidized U.S. agribusiness products that could wipe out local farmers.

It remains unclear why Kenyan President Uhuru Kenyatta would sign his country up for a raft of new anti-development obligations under a U.S. FTA when Kenya already enjoys largely duty-free access to the U.S. market under the African Growth and Opportunity Act (AGOA).

From comments Kenyatta made after meeting with Donald Trump, it appears that Trump suggested that AGOA would end and Kenya would be left hanging. Yet, barring a coup, Trump will not be the president when the next AGOA renewal is to take place in 2025, so he could not veto it if that was the threat. And second, Congress, not the executive, has the authority to renew AGOA, which it does as a routine matter with little to no opposition. The negotiations should not be an attempt to break up or undermine AGOA or Kenya’s primary trading bloc, the East African Community. Indeed, the mere suggestion of these talks may have already given the appearance that the administration is attempting to do just that.

The European Union’s fateful decision to revoke the preferences under the Lomé Convention should be a cautionary tale for the administration. The Lomé signatories — African, Caribbean and Pacific nations including many former European colonies — could compete in the global market with these preferences and based their economies around them. But in 2000, the European Commission announced the end of Lomé and the beginning of reciprocity-based Economic Partnership Agreements (EPAs). The divide-and-conquer approach of negotiating EPAs with blocs of Lomé members plus the revocation of special preferences not only harmed the economies of these countries, but also proved to be a political blunder, embittering the states against the European Union. 

The timing of this FTA is also highly questionable. As the world grapples with the COVID-19 crisis, the United States should not prioritize negotiating a new trade agreement, much less one that could undermine public health and safety protections. The only trade that the countries should be discussing now is how to maximize both nations’ access to urgently needed medical equipment, supplies and medicine. This point was recently emphasized by 400 civil society groups from around the world in an open letter urging governments to halt all trade and investment treaty negotiations during the COVID-19 outbreak and refocus on access to medical supplies and saving lives. It is bad policy and bad politics to take advantage of a distracted public to double-down on the neoliberal, corporate-dominated trade model that has contributed to mask and medicine shortages.

The Citizens Trade Campaign (CTC) — a national coalition of environmental, labor, consumer, family farm, religious, and other civil society groups — also submitted comments on a potential U.S.-Kenya deal. The CTC’s members are a diverse and powerful group, including the American Federation of Teachers, Americans for Democratic Action, Communications Workers of America, Friends of the Earth U.S., Institute for Agriculture and Trade Policy, Interfaith Working Group on Trade and Investment, International Association of Machinists and Aerospace Workers, International Brotherhood of Boilermakers, International Brotherhood of Electrical Workers, International Brotherhood of Teamsters, International Union of Bricklayers and Allied Craftworkers, International Union of Painters and Allied Trades, National Family Farm Coalition, National Farmers Union, Public Citizen, Sierra Club, UNITE HERE, United Methodist Church General Board of Church and Society, United Brotherhood of Carpenters, United Mineworkers of America and United Steelworkers, as well as state-based coalitions, organizations and individuals throughout the United States.

Submissions from the CTC, Public Citizen, and nearly 7,500 individual trade justice advocates outlined the same set of demands. If there is to be a U.S.-Kenya trade agreement, it must:

  • Be negotiated transparently, replacing the corporate advisory system with an on-the-record public process;
  • Include strong human rights, labor and environmental standards with swift and certain enforcement;
  • Exclude Big Pharma monopoly rights that raise medicine prices;
  • Exclude investor protections that incentivize the offshoring of jobs and empower corporations to attack democratic policies in unaccountable foreign tribunals;
  • Promote balanced agricultural trade that safeguards the interests of small, independent farmers to strengthen rural communities;
  • Require imported food, goods and services to meet U.S. consumer and environmental standards;
  • Eliminate limits on procurement policy that forbid Buy American and other Buy Local policies, offshoring U.S. tax dollars; and
  • Protect digital privacy by excluding e-commerce rules that shrink the policy space of Congress and U.S. regulators.

Even as the timing for the launch of any new trade agreement negotiations are inauspicious and the goals unclear, what the recent debate over the renegotiated North American Free Trade Agreement (NAFTA) spotlighted is that public opinion around what can and cannot be in a U.S. trade agreement has changed. The support the new NAFTA received from both parties in both chambers of Congress and from some sectors of civil society was in the context of revising an existing agreement. Trying to fix an existing bad deal like NAFTA to reduce its ongoing damage is very different from creating a truly good trade deal that generates jobs, raises wages and protects the environment and public health.

Any new U.S. trade agreement being negotiated from scratch – including a potential agreement with Kenya – must build from the floor set by the new NAFTA. That is because the measure of such a new agreement will be whether it can actually benefit people, with the alternative being no agreement. In contrast, the alternative to the new NAFTA was the status quo of the old NAFTA.

For a tabla rasa deal to enjoy support, the bar will be higher than the revised NAFTA. That means no special protections for foreign investors or Big Pharma, stronger rules to stop race-to-the-bottom outsourcing of jobs and pollution, binding climate standards, and no limits on the policymaking processes or public interest protections needed to ensure that our food and products are safe, our privacy is protected, monopolistic online firms are held accountable and big banks do not crash the economy again.

Public Citizen and our allies are poised to monitor these negotiations and outcomes. We will ensure the public is apprised of how terms of a potential U.S.-Kenya trade agreement will affect peoples’ jobs, health and safety and the environment. We will fight fiercely to sustain the improvements for which we have long advocated that were included in the new NAFTA and to promote the critical improvements that remain to be made so that any new U.S. trade agreement actually benefits most people, rather than replicating past failed trade-pact models that have benefited large commercial interests to the detriment of most.

Print Friendly and PDF

Rethinking Trade - Season 1 Episode 4: The Looming COVID-19 Medicine Shortage

The COVID-19 crisis revealed how reliant the United States has become on imported masks, respirators and other essential medical goods. The latest news is about medicine shortages. Decades of bad trade and tax policies have incentivized pharmaceutical corporations to outsource the production of many categories of drugs – and also production of the Active Pharmaceutical Ingredients (APIs) that are drugs’ key ingredients. Most APIs come from just two countries, China and India. As workers there have fallen ill and plants have been closed for social distancing, production has dropped. In many categories, there is no domestic production to make up the difference.

Transcribed by Lauren Martin

RYAN HARVEY: 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, today we’re going to be talking about a topic that’s been in the news recently, and that is this forecast that we might be looking at a shortage of medicines in the US sometime soon. What is all this about and what are some of the major issues at play in this forecast?

LORI WALLACH: The prediction that you’re seeing now, that we’ll fall short of the medicines we need, not medical supplies, is related to the broader problem of how our system of hyperglobalization has made us very vulnerable to getting everything we need to be safe and to fight this virus from one or two countries. There are two different, related issues. First is where medicine itself is actually made, and then there is where the things that go into medicine, which are called active pharmaceutical ingredients, APIs, are actually made. There are 156 essential, critical medicines that every hospital has.  The stuff on the crash cart, the stuff that every floor of every hospital has,96% of those critical 156 drugs are produced just in China and India. And even before the COVID crisis there were potential shortages and short supplies in 63 of those 156 drugs. China, obviously, has had a big slowdown, because people there got sick. And both China and India have stopped exporting a lot of their medical supplies. So that means, even if there are countries that produce medicine, they can’t get the inputs. And a lot of generic finished medicines actually come from India. So all in all, because there’s no redundancy, because a handful of really big companies have concentrated production and made a lot of money that way in a few very low wage countries, we could end up seeing shortages.

HARVEY: That term you used Lori, redundancy, we’ve talked about that in previous podcasts. Can you just remind the listener what we mean when we say redundancy?

WALLACH: It’s a production issue, and it means that there isn’t just a sole source of a supply, or just one or two. So redundancy is something that, basically, you would think of in every critical system. So if you have an emergency plan, about, say, how to get out of town if there’s a terrorist attack, you have plan A: a car, plan B: the train, plan C: the bicycle. Those are all redundant ways to meet your goal. And so in a lot of companies, for a very long time, they would have redundant production. So in order to make sure they could make the final product, they would have two or three sources. Maybe one that was their own factory and then two other suppliers outside that made the key parts. And so they had lots of different options in case their factory had a problem or one of the other factories had a problem. They had redundancy in their supply chain.

But over time, in the medical sector very dramatically, a handful of really big companies have been buying up their competitors. And once they buy, one pharmaceutical company buys the other one, they don’t just keep running the same plants and making the same stuff and getting double the income.  They typically close down the production capacity that’s considered an efficiency. That would mean less costs. Translated out that means they fire all the people who are in the other plant and then they have wherever outsourced work is in India, in China, wherever, they add another shift or they add more people. And now the one company has only its production capacity- maybe a few more hours, a few more workers- but that whole different factory that once existed if something happened to company A’s production, company B’s production was there, now it’s just company A that bought up company B and shut down that production. So we see that for instance, the big pharma companies, they don’t want to change that, because it’s super profitable to basically have all this production in China and India, where people are paid very little, the environmental costs are extremely limited, and then they import the goods back to sell at a high, high price here.

HARVEY: And, maybe we can talk about how this situation came to be. A couple decades ago, what did this industry look like, and how did it change over the last few decades of neoliberal trade policies and other really corporate driven, corporate rigged policies pushed in the international trade arena?

WALLACH: So the pharmaceutical industry looked a lot more like every other industry, which is companies had redundancy in their supply chain so they either made some of the parts themselves or they had two or three sources of it, and there were a lot more competitors. I mean if you’re old enough, you remember a bunch of airlines that don’t exist anymore, and you remember a bunch of telephone companies that don’t exist anymore, and you remember a bunch of car models and brands that don’t exist anymore. So we don’t notice it as often with the pharmaceutical companies cause they’re not really brand names in the way we know, “hmm, there’s no more Plymouth, there’s no more Pontiac, no more Saab, there’s no more Oldsmobile.” But in fact, these companies have been consolidating and consolidating so that there is a really short list of really big companies that both do medicine and medical supplies.

But some of the pharmaceutical companies just do pharmaceuticals, but you know, they buy up and shut down their competition. It helps their monopoly. They have monopoly licenses called patents to sell their medicines for whatever price they want, then heaven forbid another company comes up with something that is a different medicine that can compete, so they buy them up and put them out of business.  As a result we have a very limited supply, and right now we need to gear up to make more of a lot of things. So things where the supplies are really short right now are the drugs that are being used for COVID:Like the sedatives that are being used when you have to put someone on a ventilator, because it’s obviously, you’re going to be fighting against having something down your throat. They’re going to put you in an almost induced coma. And the supply chain is both way too concentrated, but also elements of it, like the second stage(not just the active pharmaceutical ingredient but the compounding) ironically for instance, a lot of [them] were made in the Lombardy region of Italy, whichhich has been the hardest hit, the first area where really there was a huge COVID outbreak. So when we have both limited suppliers and limited alternatives for the parts, the APIs and the actual production is too concentrated in a few places- antibiotics in Lombardy- then the whole world can have economic and health problems that are actually worse than the medical problem that the drugs are needed to combat.

HARVEY: So, Lori, you mentioned Big Pharma earlier, but I wanted to talk a little bit more about their role in this whole process. Not just in accumulating large amounts of money and of outsourcing jobs to countries with lower wages and less restrictions to, you know, participate in the race to the bottom, but they’ve also been active in here in the US on domestic policy and also influencing other trade policies. Maybe you could talk a little about that.

WALLACH: So, the big pharmaceutical companies have done a couple different things. One, they’ve pushed for trade agreements that include these extreme monopoly protections and that basically make other countries—poor, developing countries with low wage workers—sign up for the special protections, so that they can outsource their production there and still get the monopoly guarantees. Then, number two, they have fought for tax policies in the US so that they can literally ship their corporate headquarters someplace else and then claim that they get a lower tax rate because they’re a foreign company. That’s called an inversion. So a lot of the big US pharmaceutical companies are incorporated in Ireland because it’s a tax haven. And then number three, they have pushed for other tax policies that have let them actually charge them. American companies can charge the Irish company basically a business expense for the patents that are held in the US. They take it as a business deduction. So they’re dodging taxes basically twice while getting more incentives to outsource. And that whole combination of policies in the face of also no anti-trust policies to speak of, certainly not in our trade agreements and not very strong any place except Europe, means that these companies keep consolidating and consolidating and consolidating until there are just a few, so there’s no competition between them. And they are able to rig the policies so that the countries also aren’t making these companies face market competition terms.

HARVEY: When you brought up Ireland, it made me think. I was looking through the TAA database,which is up on the Public Citizen website, and when I was looking up medical supplies, I was noticing a lot of outsourcing to Ireland. Is that because manufacturing jobs are going to Ireland, or was this part of that process you were describing?

WALLACH: You can see this fluky trend of the pharmaceutical corporations trying to dodge taxes, if you look either at the Trade Adjustment Assistance database that tracks certain certified job losses caused by trade by the government, or if you look at trade flows in pharmaceuticals. So if you look at TAA you see this weird situation where all these pharmaceuticals factories that used to employ workers in New Jersey, in Pennsylvania, in California, in Wisconsin, in Illinois, you see them certified as job loss outsourced to Ireland. Well, the company relocated to Ireland as a corporation to dodge taxes, but they’re not opening big factories there. Then they’re outsourcing the production to some contract company that is, for instance, in India, or in China or some other low wage venue, and that contract company is getting the APIs down the supply chain from some other company almost certainly in India or China, and those companies are sourcing some of the things that make the APIs from within their own countries. So we have basically seen both job loss,but more importantly in the short term now, a lack of reliable supply caused not by acts of God but by specific trade and tax policies. Because you can also see if you look at the trade data of the value of pharmaceutical goods, it looks like Ireland is our number one trade partner. That’s what  it most looks like if you look at value of imports of pharmaceutical goods. But that’s just because of the corporate patent licensing scam. In factif you look at the volume, where the stuff actually comes from, it’s all coming from China and India.

HARVEY: On that point, since we should wrap up, what are the solutions here? What’s currently being done regarding securing adequate supply lines of APIs, and also what kind of policies are needed? What could help change this scenario to something a lot better?

WALLACH: Maybe if there’s any good thing that comes out of this COVID crisis it is that governments start to take seriously the warnings that have been issued for years. That they need to have certain essential goods produced closer to home and also to have stockpiles.

So in 2014 the Department of Defense did a study, and it was looking simply at the military readiness in medical supplies for an emergency like a pandemic or, heaven forbid, a war. And what that study (and again, six years ago) determined was that supply chains are so incredibly thin, capacity to manufacture was so limited, and so much of it was relying on China, a country that could be on the other end of a dispute whether directly or through proxies, that the US military was in enormous peril of not having the supply of essential goods and medicines that were necessary. And no one did anything about it. 

So what should happen? Different layers. In the short term, we need to figure out where we will have these shortages and quickly start to gear up production using for instance, the Defense Production Act, to turn the kinds of facilities that are making now certain kinds of clean production (because obviously pharmaceutical production has to have very strict controls) to be able to make some of what we may not be able to get in the global market. Number two is thinking forward. We need to think about how both the making of key medicines but also the components of them, the APIs, can have production if not increased in the US, which is in itself a good idea, but also production increase, if you will, in the region. And the importance of that is emphasized by if you look at the critical list. There are 156 drugs that are basically in every crash cart, in every hospital, they’re the medicines you have to have. And right now 96% of those, 96% of those, are produced outside of the US and not even nearby. So if we think of what we want to have here and what we want to have in neighbors, in the Caribbean, which before all the companies started merging the Caribbean actually interestingly and Puerto Rico (part of the US but in that neck of the woods) there were tax incentives and other programs to have pharmaceutical manufacturing there. Or, in Mexico and Canada there is a sort of North American and the Caribbean redundancy in the medicine supply chain with APIs and the actual production. And then the final piece of it is, obviously, the government has entirely mismanaged the situation. We still need stockpiles even if it’s the case that we need to be having the ability to ramp up production and we need more production capacity. I mean that’s the thing about redundancy, there’s a continuum from “it’s lean, it’s mean, it’s super profitable” and the whole damn thing goes to hell if one thing goes out of place, versus having enough redundancy that if you need to gear up production in the face of some crisis, you actually have the hardware to be able to make what you need to be healthy. And there’s short-term and long-term ways in which we can and we really must make those changes. That’s certainly one thing everyone’s learning the hard way from this crisis.

HARVEY: That’s all for today. Thank you all for listening. Rethinking Trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit rethinktrade.org as well as tradewatch,org today to educate yourself and find out how you can get more involved in the work we’re doing to fight for fairer and more equitable trade policies.

Print Friendly and PDF

Introducing the “Rethinking Trade with Lori Wallach” Podcast

With the world rightfully focused on fighting COVID-19, corporate lobbyists are hard at work pushing for more of the same failed trade policies that helped create the unreliable supply chains now failing us. In conversation with Public Citizen’s Global Trade Watch Director Lori Wallach and National Field Director Ryan Harvey, “Rethinking Trade with Lori Wallach” provides a new resource in our efforts to expand public awareness about how trade policies impact our lives and the planet we live on.

We launched the podcast this month with an episode focused on how corporate-led globalization has fueled shortages in our medical supply-chains and limited our ability to fight against the Coronavirus. In this week’s episode, Lori explains how medicine shortages could become the next obstacle in the COVID-19 crisis. Decades of bad trade and tax policies have incentivized pharmaceutical corporations to outsource the production of many categories of drugs – and also production of the Active Pharmaceutical Ingredients (APIs) that are drugs’ key ingredients.

We will post the transcript of each episode exclusively on the Eyes on Trade blog. The transcripts for the first three episodes are available here:

Give Rethinking Trade a listen and subscribe today.

Print Friendly and PDF

USTR’s Adding Amazon Websites to ‘Notorious’ Markets List Is Terrific, but President Won’t Exercise Existing Authority to Close Loopholes Allowing Dangerous Goods to Flood U.S. Via Online Platforms

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

Note: Today, the Trump administration published its annual “Review of Notorious Markets for Counterfeiting and Piracy.” Several Amazon websites were added to the “Notorious” list. Public Citizen has called for the president to exercise his existing authority to close a loophole, called the de minimis waiver, that results in most imported  goods purchased by consumers online skirting normal U.S. Customs and Consumer Product Safety Commission inspections. Public Citizen testified on the subject at a recent hearing of the Consumer Protection and Commerce Subcommittee of the House Energy and Commerce Committee. Prior to the COVID-19 crisis, more than 1 million express air packages were arriving daily from China alone without inspection, according to a recent Department of Homeland Security study.

“USTR’s Notorious Markets report again spotlights that consumers are being threatened by fake, dangerous goods purchased on online marketplaces, so why won’t the president use the robust authority that he has to close the ‘de minimis’ loophole that now permits most shipments of goods bought online to skirt any inspection?

“Since the administration started raising concerns about so many goods purchased online being in violation of U.S. trade law and being dangerous counterfeits, no action has been taken to require systematic inspection of such goods or to exclude goods on the Consumer Product Safety Commission’s high-risk list from the ‘de minimis’ waiver, which allows packages of imported goods valued at less than $800 skirt normal Customs data requirements and dodge all inspection.”

Print Friendly and PDF

No Good Option on Implementation of New NAFTA

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

Note: Today, the Trump administration sent Congress a statutorily required notification that Mexico and Canada “have taken measures necessary to comply with” the terms of the new North American Free Trade Agreement (NAFTA) that are to “take effect on the date on which the agreement enters into force.” The administration also sent Mexico and Canada the required notification that the United States “has completed the internal procedures required” for entry into force of the revised NAFTA. These actions mean the new NAFTA will enter into force and replace the old NAFTA on July 1, 2020.

The current situation is not consistent with the hard-fought labor standards improvements in the new NAFTA given Mexican workers being pressured to continue laboring in NAFTA-supply-chain factories despite serious health risks, continuing uncertainty about legal challenges against Mexico’s labor reforms and Mexico’s president announcing COVID-related 50% government budget cuts that could slow the establishment of required new labor rights capacity.

But postponing the agreement’s start will not do anything to improve Mexican workers’ situation, and in fact would delay phase-ins of key improvements in the new NAFTA, such as whacking Investor-State Dispute Settlement (ISDS), strengthening rules of origin and replacing fake “protection” union contracts in Mexico.

Because the old NAFTA remains in place, delaying implementation of the new NAFTA does not create leverage for change. The interests calling for a delay in implementation are those who were happy with the old NAFTA and dislike requirements to include more North American content in cars and the threat of goods that do not meet labor standards being stopped at the border.

The U.S. president should acknowledge that Mexico is not now in compliance with its labor rights obligations under the new NAFTA, because absent major changes, the American public will witness more race-to-the-bottom job outsourcing to Mexico that will expose Trump’s absurd claims about having entirely replaced NAFTA with the “best and most important deal ever.”

Public Citizen will be closely monitoring implementation of the new NAFTA and measuring the actual outcomes against the gains Trump has promised for American workers.

Print Friendly and PDF

Rethinking Trade - Season 1 Episode 3: Governments, Not Corporations, Should Regulate Trade in COVID-Crisis Goods

Today, instead of corporations unilaterally deciding where and when to sell every product, governments worldwide are doing what many expected of them all along - prioritizing residents’ needs and securing medical goods. In this episode, Lori explains why such reasonable conduct is actually forbidden by trade agreements and what changes are needed to create a more resilient, equitable global economy.

Transcribed by Lauren Martin

RYAN HARVEY: Hey everyone, and welcome back to Rethinking Trade. I’m Ryan and I’m joined once again by our in-house trade expert Lori Wallach. Lori is a long-time fighter for economic justice, she’s among the leading experts on international trade policy in the United States, and she’s also the director of Public Citizen’s Global Trade Watch. 

So Lori, we’ve been hearing a lot in the last few weeks in the mainstream media about export restrictions on medical goods. I was wondering if you could maybe break some of that stuff down for us and explain how these export restrictions impact folks like us.

LORI WALLACH: So, you’re going to hear a lot about export restrictions from people who want to try and defend the failed status quo trade system that has lead to this hyper-globalization that is resulting in us being unable to get or make the essential medical supplies we need to combat the crisis. What they’re focusing on is what they think is ideologically a heresy, that countries should consider the needs of their own residents before having goods made in a country sent someplace else. And, the US is one of the last countries to look at this, in fact most countries were doing needs testing- “hm, do we need this to deal with the COVID crisis here before they were exporting things,” – only a few countries, China and India, actually banned exports of masks or medicines. Most countries are doing needs tests, let’s review before we have it exported. The US just started doing needs tests and in fact, the Commerce Department was promoting exports, getting US companies that made ventilators and the few that make masks, to send that stuff to China and helping set up that actual transactions right through February into March.

HARVEY: And, are these export restrictions the reason we’re not able to get masks and respirators right now?

WALLACH: No. So, the reason we can’t get the things we need is that the corporate rigged trade agreements and our hyper-globalized supply chains have led to a production system where the majority of many critical products are only made in one or two countries. And so, even if the whole good isn’t made in or two countries the key part is. So that if one link in that chain- and a lot of the links are in China- breaks, then worldwide shortages very quickly develop. And we know from the US Department of Health and Human Services that 95% of the masks supply, the surgical mask supply, is imported. And 70% of the respirators like the N95 masks that are used in hospitals.

 So, we’re super reliant on imports, for sure, but the countries who are having a crisis at the same time we are deciding to first supply their own residents with things they make isn’t the cause of our crisis. Because the problem is there just aren’t enough to go around. So, it’s some kind of accountability for the people who are being governed to expect their government to try and look out for them- that’s the role of governments. Our problem is that we don’t make enough stuff here anymore. 

We have policies that promoted outsourcing to an extent that we are simply not resilient in the face of this crisis despite being the world’s largest economy. And, our government has in no way managed or prepared for a crisis like this. We have no stockpiles once the crisis was foreseeable, they didn’t make sure we had the goods we needed. They didn’t start limiting our exports. 

So, the biggest issue is, we need to bring supply chains for critical goods closer to home. And we need redundancy so that we never have a situation again where a huge percent – right now 90, nine oh percent- of active pharmaceutical ingredients, the stuff that goes into every pill that is made. All the medication regardless of where it’s actually formed into a pill, the active pharmaceutical ingredients, 90% are made in China and India. So India stopped exporting those goods, they needed them domestically. China limited exports. There’s no redundancy, there aren’t other sources. So in addition, obviously production was limited, because the economy started to slow down first in China, so it would’ve been impacted even if exports weren’t limited. We need redundancy and we need more domestic production capacity, particularly in big countries, so that we’re not so reliant on distant, foreign supply chains.

HARVEY: So, one of the realities of the globalized economy today is that cutting off exports in a time of a crisis would also cut off non-producing countries, often poorer countries, countries in the Global South, from accessing those same supplies when they need them most in times of crisis. So maybe you could explain what alternative trade models could look like, what a different system could look like, that doesn’t have such an impact but still allows countries to protect themselves in moments like the one we’re in right now.

WALLACH: So, a lot of what you hear about export restrictions in the news is coming from cheerleaders of trade status quo. So for instance there’s a study that got a lot of mainstream media coverage from a guy named Chad Bown from the Institute of International Economics. And his argument was “we shouldn’t do export restrictions because if we do that other countries will retaliate, and export restrictions will be imposed that cut off our supply.” And it was just ridiculous because the US was two months after every other country started looking at “hm, what do our residents need, should we be selling this stuff someplace else?” Every other country was starting to need tests and limit exports and somehow the US catching up to that would make other countries retaliate? But actually they’ve been doing the reviews on exports for two months. That’s a silly reason to be concerned about export limits. 

The thing that’s legit is what happens to countries that don’t have the capacity. So, when we think about this as a practical matter, we shouldn’t be thinking about how do we defend the status quo model, heaven forbid governments decide whether or not it’s a good idea something should be traded. Rather, we should be thinking about yeah, governments should have a role and the role is to make sure that people have the essential supplies they need. And when it comes to, for instance, let’s just say, our neck of the woods the Caribbean islands, some of the poorest Central American countries. 

When we’re thinking about limits on exports, then one of the first things we should think of, okay, China doesn’t need our stuff. They’re making their own. Or, India doesn’t need medicine from us, they make a large share of the world’s supply. Germany and the Europeans don’t need ventilators, that’s one of the main places they’re produced. But let’s look at the Caribbean Islands. Boy, they actually do need our stuff, so as we’re thinking about what we need for US residents, our exception to not exporting, we should think about some of the very small or poor countries near us who become very reliant on us. And so, you know in the case of medical supplies, Mexico and the US are huge suppliers to the Caribbean and Central America. So then the US and Mexico coordinating to say “alright we’re each going to have these reviews on our exports,”- legit, we have to look after our people- “but together let’s also figure out how our neighbors, who have become totally reliant on us, are also going to make sure that they get stuff.” And yeah, we’re going to totally say no exports to name the places that don’t need our stuff, for sure. Are we going to make sure neighbors who are really reliant or are small countries, even if they’re not neighbors, might be in a crisis, we want to help them out if their neighbors aren’t helping them? Yeah, that would be the exception. 

By having a total free for all of laissez-faire, the market demands, let’s all get into a huge fight, who’s going to pay the most, the Chinese government’s going to pay the most them all mask production outside of China where most mass production is should be bought up by China for basically a profiteering scheme of who can pay the most. Which typically is not going to be a smaller developing country. That’s totally the wrong way to go.

HARVEY: And this type of export restriction you’re describing, you know, deciding which goods are needed during a crisis, restricting exports of those goods to certain countries but also assessing that there might be countries that actually still need those export and deciding that that’s okay. Would that violate any of the trade agreements that we’re in right now? Are there penalties for making those decisions?

WALLACH: Yeah, for sure. I mean any country that’s doing export limits, that’s doing needs reviews, is technically violating the WTO’s rules against export limits or controls. The corporations will decide what will be shipped where, when, and even if it’s made in particular country that company decides whether that thing in the country is sold in the country during a crisis or not. That is what the trade rules require, 100% corporate managed trade. So, it’s heresy to have governments say “uhhh, hold on one second there company, we need to look at something beyond your profit margins, we need to look at resilience in a health emergency, basic humanitarian supplies for our country or our neighbors.” 

So that’s why you’re seeing all this shouting in the mainstream press as if this is some outrageous behavior to actually do a needs test about whether something should be exported and if it is, to where. In fact, the kind of trade rules we should have should take into consideration not just corporate profits or some mathematical notion of efficiency, but actually resilience of supply chains. Are there ways we’re going to make sure we have access to essential things we need. 

And, frankly at this moment the whole world is saying “we don’t give a rat’s ass what the WTO rules are, we want to save people’s lives. As governments we’re accountable to the people who are residents of our countries. Like no one in Geneva at the WTO Secretariat elected me, I’m going to have people furious with me if I don’t take care of the people in my country.” And that’s a real learning moment because when push comes to shove, there is a strong desire to make sure countries have keep supplies and there is resilience. And there is an opening to push for change. Those rules in the WTO and in various free trade agreements will have to be changed. And there are mechanisms that we’ve had in the past to do it. 

Just for instance, before the WTO, for decades of the General Agreement on Tariffs and Trade, there was a particular agreement called the multifiber arrangement. It was an agreement that basically dolled out market share in textiles and apparel. Different countries got different quotas on what would be their guaranteed piece of that production. And the idea was, textiles and apparel are an easy entry infant industry for developing countries, so if just the big guys, so if Europe, the US, Japan, took all the textiles and apparel production, the smaller countries, the developing countries, would never get a start. And so that was a managed trade system. It was managed for a goal: development. And it was kind of a Cold War tool to show countries “hey, come join the market economy.” But it had goals, and it managed trade towards a goal. You can have a very similar system with respect to essential health products where basically a certain part was traded and guaranteed, and outside that guaranteed quota countries could have trade restrictions. 

So that they could be basically producing domestically and protecting that ability to produce even if in the globalized market of race to the bottom wages they wouldn’t be the most efficient producer. So we’ve seen it done, it can be done again.

HARVEY: I think you said it best earlier, that this has been a learning moment for sure. This is the global system that this trade ideology created and that its defenders are still defending today. But interesting that some of the wealthier countries when push comes to shove will violate their own trade rules to protect themselves. It’s almost like there could be trade rules that could allow governments to take care of people even at the expense of corporate profits without bringing about some kind of retaliatory penalty, or you know jeopardizing the flow of goods.

WALLACH: It is a shocking way to realize what a fragile state our current trade and globalization regime has left millions of people around the world. But the good news is there are alternatives. Unlike say, the virus, this is not something that is a mutation of nature. We made this mess and we can undo this mess. And that is why we need to rethink trade. This is an ongoing discussion, more to come soon.

HARVEY: Rethinking trade is produced by Public Citizen’s Global Trade Watch, where we don’t just talk about trade policy, we fight to change it. Visit rethinktrade.org today to get involved in our campaigns and help us fight for global economic justice. Thanks for listening.

Print Friendly and PDF

Yup, Commerce Was Urging U.S. Firms to Export Ventilators, Masks Etc. to China as Our Imports of Such Goods Were Drying Up

Learn more about this Public Citizen research in the recent Washington Post piece, “U.S. sent millions of face masks to China early this year, ignoring pandemic warning signs.”

The current regime of hyperglobalization is undermining U.S. resilience against the COVID-19 crisis. The U.S. cannot make or get critical goods people need.

Why? In the 25-plus years since the start of the World Trade Organization and North American Free Trade Agreement, more than 60,000 U.S. manufacturing facilities have been lost.

This includes many in the pharmaceutical and medical goods industries. Among the individual companies officially certified by the U.S. government as outsourcing or otherwise killing the largest number of medical goods production jobs to trade are Siemens, Medtronic, Bayer, 3M, Johnson & Johnson, GE Health, Abbott Labs and Boston Scientific.

More than 34,500 jobs in the sector have been certified as lost to trade under just the narrow Trade Adjustment Assistance (TAA) program, which includes only a subset of workers who lose jobs to trade and does not provide a comprehensive list of facilities or jobs that have been offshored or lost to import competition.

The mass outsourcing of U.S. industrial capacity that now leaves us without basic goods needed to combat this pandemic was not an act of God.

Rather, the hundreds of corporate representatives who serve as official U.S. trade advisors helped hatch corporate-rigged U.S. trade policies intended to do just that, while the same interests’ lobbyists rigged tax policy. The result was a slew of trade and tax policies that literally reward relocating production overseas where U.S. corporations could pay workers less and avoid environmental protection costs. (Trump made this exponentially worse with his 2017 ‘tax deform’ that imposed two times the corporate tax rate on firms that produce here versus those that outsourced.)

These U.S. polices have made us much less resilient in facing this crisis.

Having the world’s largest trade deficit year after year means the U.S. is extremely reliant on other countries, especially China, to provide essential goods.

China’s decision to limit exports of personal protective equipment, such as masks, would have caused shortages under any circumstances. But then, as part of the total failure of the Trump administration to plan a response to the COVID-19 threat, as late as March U.S. Department of Commerce officials were urging U.S. firms to expand exports to China of the limited domestic production of key medical goods instead of considering U.S. residents’ needs. According to the Washington Post, “U.S. manufacturers shipped millions of dollars’ worth of face masks and other protective medical equipment to China in January and February with encouragement from the federal government.”

Check out our infographics that show how that worked out… No doubt there is not a mask to be found for love or money.

With many critical goods now mainly made in one or two countries, when workers there fall ill or those governments foreseeably prioritize their own people’s needs before exporting goods, a worldwide shortage of masks, gloves, medicine and more can quickly develop.

And it’s difficult to quickly increase production elsewhere. Long, thin globalized supply chains mean U.S. firms that seek to ramp up production cannot find inputs, parts and components. And monopoly patent protections in many trade agreements expose countries to trade sanctions if they produce medicine, ventilators and more without approval by and payment to pharmaceutical and other firms.

With policymakers and the public distracted, corporate lobbyists are pushing for more of the same trade policies that hatched the unreliable supply chains now failing us all. Instead, we must fundamentally Rethink Trade. The goals should be healthy, resilient communities and economic well-being for more people – not the current priority of maximizing corporate profits.

Public Citizen’s Global Trade Watch released a new series of trade data infographics related to the U.S. response to the COVID-19 crisis. The new data features show:

  • How U.S. exports to Chinaof such goods jumped in the first months of 2020 as the Trump administration failed to prepare for a health crisis at home even as China shut down exports of such products as demand in China grew; and

*DATA NOTES: The U.S. Department of Labor certifies trade-impacted workplaces under its TAA program. This program provides a list of trade-related job losses and job retraining and extended unemployment benefits to workers who lose jobs to trade. The TAA is a narrow program, covering only a subset of workers who lose jobs to trade. It does not provide a comprehensive list of facilities or jobs that have been offshored or lost to import competition. Although the TAA data represent a significant undercount of trade-related job losses, the TAA is the only government program that provides information about job losses officially certified by the U.S. government to be trade-related. Public Citizen provides an easily searchable version of the TAA database. Please review our guide on how to interpret the data here and the technical documentation here.

Print Friendly and PDF

Corporate Power and the Disappearing Face Mask

By Sarah Grace Spurgin

I feel good about the amount of rice and beans I have in the pantry, toilet paper in the closet, and disinfectants in the cabinet. 

But the mask… Sure, I can use a homemade one when I inevitably need a tire changed, fresh vegetables or just some basic human interaction. But how is it possible our nurses, doctors, and other frontline responders are left without the real thing?

My friend works at a clinic for homeless men in Washington, D.C. He spent every hour of every day for the past two weeks searching for the now-fabled N95 masks that protect their wearer from breathing in airborne coronavirus. He gave up, and the clinic’s staff are not protected while treating the city’s most vulnerable. Why can’t anybody find the basic necessities – masks, sanitizer, disinfectants much less the supply of ventilators needed to handle this crisis? 

In answering that, I’m going to try to avoid the phrase “supply chain” as much as possible, because even when spiced up with accurate terms like too-extended, brittle and sole-source, it sounds so dull.

Really, the answer breaks down to a multisyllabic mouthful conundrum:  hyperglobalization.

I like to use the word hyperglobalization, which Harvard economist Dani Rodrick coined, to explain how I understand the modern economy. It perfectly captures our overextended commercial interconnectedness: We rely too heavily on a corporate-rigged form of international trade to provide for many necessities of our everyday lives.

Interconnectedness can be a wonderful thing, but our current production and trade systems are made by and for transnational corporations who couldn’t care less about you or me. They fought for protections in trade pacts that make it cheaper and safer to outsource production to low-wage countries. And as part of that shift, in many sectors firms have exploited weak anti-trust policies to buy up their competitors and shut down “extra” production facilities.

So now worldwide production for many essential goods is concentrated in too few facilities in too few countries with little redundancy and no reserve supplies sitting in warehouses. That is a formula for disaster is any little thing goes wrong, much a very big thing like a global pandemic.

A lot of that production is in China, so when people there were hit with COVID-19 and plants closed, the impact was felt worldwide. And we felt it especially here thanks to the United States having a enormous trade deficit, which means we are extremely reliant on imports.

To put it in perspective, before the COVID crisis, the United States received one million packages shipped by air express every single day from China and only 25% of U.S. imports arrive by air. Much of that is finished products.

The 75% of U.S. imports that arrive by sea and land shipping include a lot of parts made elsewhere. When those parts are not available, it means production here also gets shut down.

When the pandemic hit, and these hyperglobalized supply chains broke, we from China or get the parts that allow us to increase production here.

We are finally being forced to reckon with the precarious position we’ve put ourselves in by turning a blind eye to the corporate-driven model.  

With the ever-expanding internet economy and globalized production, you might think we would have a better safety net, since we theoretically have more options. Instead, we’ve actually cornered ourselves and are facing the grim reality that the benefits of the current system of globalization are outweighed by the costs.

Don’t get me wrong, I love that I can get a new jigsaw puzzle to pass the time in quarantine. And new paint brushes and paints. And anything else my heart could desire. Except what we all really need: masks, hand sanitizers and for our hospitals personal protective equipment and ventilators. Medicine could be next on the MIA list.

The key part of medicines are active pharmaceutical ingredients, or APIs. In 2018, 88% of the manufacturing sites making APIs were located overseas. More and more of our APIs come from China, and any disruption of the manufacturing of these ingredients can (and does) lead to global shortages. For example, in 2017 an explosion at an API factory in China led to a global shortage of the antibiotic piperacillin/tazobactam, used to treat severe infections.

But that experience did not lead to new policies. Trade can be a great thing, and we should keep doing it! But as everyone is now realizing, having only one or a few sources of critical goods is a pretty bad strategy.

The FDA has already reported COVID-19 drug shortages related to API imports from China. The supply chain was disrupted because workers in the manufacturing plants and those transporting products were out and/or facilities closed.

Now, what about those pesky N95 masks? Well, China made half the world’s masks before the outbreak. However, much of the world’s protective-medical equipment is made in Hubai, the Chinese province where the coronavirus was first reported last year. As China shuttered factories to combat the spread of COVID-19, and the need worldwide for N95 masks spiked, the demand far surpassed the global supply.  Even now as China has expanded mask production nearly 12-fold, it is not exporting few of those masks, which are needed in China. While Donald Trump has certainly botched the federal government's response to this pandemic, he is not the only person to blame for these shortages. Decades of neoliberal trade policy are responsible for the mass outsourcing of U.S. manufacturing capacity – with the loss of 60,000 plants and five million U.S. manufacturing jobs since the mid-1990s start of the North American Free Trade Agreement and the World Trade Organization and then China’s 2001 entry into the WTO.

However, the cause of these shortages isn’t about us versus China. This is about us against the corporations that have spent millions to get the trade policies that help them exploit the cheapest labor and lowest standards possible.

Too many policymakers and too many Americans not themselves engaged in manufacturing closed their eyes to the corporate-rigging of our trade policies. As a country, we not only let corporations ship U.S. production lines offshore but enacted trade policies that encouraged it. The companies made huge profits because it was cheaper to pay workers less per day than U.S. workers earn per hour and then ship our masks, medicines and more in from China.

Now we are all paying for this folly. Will we learn the lesson this time?

Will domestic production eventually (hopefully) ramp up and we will have more masks and medicines than we can count? Until then, it is a life-or-death situation for the millions of Americans on the frontlines battling this crisis, and the millions more unaware of how to effectively protect themselves and the ones they love.

International trade, as it turns out, is deeply personal. It’s not just Big Supply Chain Economics or wonky men in stuffy suits making back-room deals (although that is a lot of it). Trade policy affects our everyday life, more so now than ever. This situation was precarious to begin with, and we are now teetering on the edge of redefining global economics.

This redefining will go one of two ways: further entrenching corporate power as Naomi Klein warns, using unconditional bailouts that lead to government budget crises that lead to cuts in Social Security and other basic government service and safeguards, or a major restructuring to finally put people and the planet over profits.

I, for one, hope it’s the latter.

Print Friendly and PDF

Rethinking Trade - Season 1 Episode 2: Crisis Capitalism COVID Response: Let’s Do More Rigged Trade Deals, No One’s Watching

With everyone rightfully focused on fighting COVID-19, corporate lobbyists are hard at work pushing for more of the same failed trade policies that helped create the unreliable supply chains now failing us all. We dive into a couple of their latest attempts, including proposed free trade deals with Kenya and the UK and efforts to use stealthy World Trade Organization talks to limit regulation of monopolistic online platforms and climate-killing energy firms.

Transcribed by Lauren Martin

RYAN HARVEY: Hey everyone and welcome back to Rethinking Trade. I’m Ryan and I’m joined once again by our in-house trade expert, Lori Wallach. Lori is a long-time fighter for economic justice, she’s among the leading experts on international trade policy in the United States and she’s also the director of Public Citizen’s Global Trade Watch. 

So, Lori, in our last episode you talked about the coronavirus and the role hyper globalization and bad trade deals have played in creating the shortages and supply chain failures for medical equipment that we’ve been dealing with here. And so, while we’re living in a sort of quarantine standstill, these corporations who got us into our current trade mess are not taking a break, are they? Their plan seems to be to use a sort of crisis capitalism strategy in the background to continue pushing their failed policies in several venues, right?

LORI WALLACH: So, while we’ll all very distracted trying to get through our daily lives, and those of us who have the privilege of doing so continuing to do their jobs from home, a lot of the usual corporate interests- the big pharma companies, the Wall Street firms, big oil, are trying to use that distracted period to double down on some of the worst policies that helped get us into this failure of being able to get the things we need in a time of crisis. And it’s happening in two main places that folks in the US would want to pay the most attention to. 

First, at the World Trade Organization, the global commercial body that’s based in Geneva, they’re trying to continue the negotiations to make more corporate rigged agreements that they had started before this crisis. And the two really big ones that we need to pay attention to and in future episodes of this podcast we’re going to dig into them, one of them is called the ecommerce Negotiations. But that is a bait-and-switch name, it’s really trying to set global rules that would handcuff all of the hundred and fifty plus countries in the WTO from setting policies to regulate the digital giants. So that struggles to protect people’s privacy, to try and break up these huge outsized, uncontrollable monopolies, to try and make sure that we’re not getting unsafe products, and fake products through ecommerce, to try and make sure people aren’t getting discriminated against in the way different search algorithms work. All those big issues the idea that these WTO negotiations is to set global rules that set rights for the Facebooks and the Googles and the Ali Babas and then to basically constraint every government right to make policies domestically to protect workers and consumers. So those so-called ecommerce negotiations are really bad news and they are continuing.

Second thing is negotiations relating to what is described as “domestic regulation of the service sector.” What that means-and Wall Street is all over that one especially, but also the big oil companies because it’s covering energy- is services, basically everything you can’t drop on your foot. So, education, healthcare, all sorts of transport services, etc., energy extraction. All of those kinds of interests have been fighting for years to get WTO rules that further handcuff countries from setting domestic regulations of those kinds of activities. And already the WTO has an agreement called the General Agreement in Trade in Services, GATS (as compared to GATT which is the General Agreement in Trade and Tariffs, GATT is about goods).

GATS was this really unthinkable expansion of so-called trade rules to just pretend it's about trade and have rules limiting service sector regulation that was done when the WTO was hatched in 1995. These service sector regulation constraints would be on top of the constraints already in the GATTS, which are bad enough as it is. 

And the third area is what is called investment facilitation. That’s a sneaky way for multinational corporations to have new rights and privileges with respect to the ability to buy up natural resources and to do what they want with them in other countries. And for multinational corporations like the big chain retailers to be able to invest in countries and not have to follow zoning rules or rules about how big they are. 

So that’s going on in the WTO and there’s been a big global letter that started to circulate of civil society groups that says basically, “what the hell are you people doing, thinking about going on as business as usual, trying to quickly lock in more of the bad rules that got us in part of this global crisis of lack of supply and lack of strong response to the COVID crisis. And stop all of it, the only thing you should be doing at WTO is waiving the existing rules, for instance that the pharmaceutical companies have longer monopolies.” So that’s the WTO mess.

Then if you’re in the US, you also have to pay attention to two new trade negotiations that have been launched. One with Kenya, an Eastern African country, it would be the first country in sub-Saharan Africa the US would have a free trade agreement with. And number two with the UK. Now both of these agreements are basically seen by the corporate lobby as a way to try and set up a new paradigm of what a trade agreement should look like. And it’s really a battle of what the future of trade agreement should be. How auspicious that that’s happening right now in the middle of this crisis? Which is to say, when some of this got started a couple months ago with Kenya and six months ago with the UK, those companies were very eager to try and double down and have business as usual. 

Now with this crisis a lot of people are realizing how totally damaging this current hyper globalization model is, and not just to the manufacturing workers who got clobbered with 5 million manufacturing jobs lost, but to all the consumers who no longer in this crisis can get the basic things they need because we don’t make any of it here in this continental sized country. We basically now have an opportunity to try and make sure that those agreements aren’t about the usual corporate rigged rules but rather put people and the planet first. And the Kenya agreement is what I want to just quickly touch on right now, because it’s kind of especially pernicious. Because the first question is, why the hell are we even negotiating a trade agreement with Kenya? 

As best as anyone can tell, what happened was the president of Kenya, President Uhuru Kenyatta, came to have a long sought summit with Donald Trump and Trump apparently signaled that Africa’s existing, existing for the last 25 years, special trade preferences called the Africa Growth and Opportunity Act, that somehow that would go away. That law lasts until 2025 and it gives African countries that meet certain criteria the right to have duty free access to the US market beyond what they would otherwise have. And it was a law that was fairly controversial when it was started. A lot of unions and a lot of African countries were hoping to have a more progressive set of conditions, but the laws worked to some degree to provide some special access for goods made in Africa, which has made it easier for them to actually compete with goods that are similar things- textiles, apparel, footwear- that are made in China, where Chinese goods still face some tariffs and the African goods are duty free. 

So that law goes through 2025 and it keeps getting renewed in five or ten year chunks. So, it appears that Trump insinuated that that law was going to go away in 2025. Which is just ridiculous, because heaven forbid if he wins his second term, he’s not going to be around in 2025, but anyway it’s congressional legislation, it’s not a dictate of the executive branch. So, President Kenyatta apparently, convinced that if they didn’t make some kind of a trade agreement deal they would have nothing, agreed to start these negotiations. The thing is, the way it works now, African countries don’t have all the dangerous reciprocal corporate obligations that show up in US trade agreements, like to provide big pharma longer monopoly rights and to guarantee, for instance, that service sector providers, financial firms, others, can have unregulated access to operate in their countries. And so, Kenya’s basically about to break with the rest of Sub-Saharan Africa, which certainly would be, Kenya would be negotiating on its own against the US which would be a very unbalanced negotiation.

And the real question is, to what end? So, if there’s a good go for it, okay, great if we get the right rules. Is the goal to make things better for people in the US and the people in Kenya? Is the goal to try and promote common environmental or human rights or health goals? Is the goal even to show Eastern African countries that the US can be a good partner and not just China, that’s spent a lot of time basically making unfortunate very large loans that will soon be due, to do big projects in Africa. But it’s really unclear what the real goal is. And so the goal for the corporations that’s filled in for being clear about the other goal is, is to just try and use this as a model, to make a cookie cutter that then all the other African countries that should get knocked out of this existing program and they have to sign up for these corporate rules. So it’s really on us to make clear that one, maybe there shouldn’t be this agreement unless it’s really clear that it will be good for people, and two, if it’s going to be this agreement then what are the terms that we would want, that really put people and planet first. And for once, unusually, there is this short window where you actually have a say about what should be in an agreement.

So right now is a period where the public can comment and to make it really easy for folks, we have got some model comment notes that you can get access to and send in, we have a very easy single action way for you to actually put your two cents in about whether there should be this Kenya agreement and if so, what should be in it. If you go to rethinktrade.org and sign up to get our updates one of the first things you can get is how to put your two cents in, your comments to the federal government and some information. It’s right at the starting stage and that’s the only stage that in the current US system, which is otherwise very secretive and closed, that the public actually gets a say. 

This is our time to really say what we think. And, the big corporations and all their lawyers on K Street, the lobby gulch in DC, are going to be submitting lots of comments about all the goodies they want for themselves. So, we’re the team that needs to send our comments to say “hey, if this Kenya agreement is happening, people and planet first. Not another race to the bottom trade agreement that is rigged for the big companies.” And with the WTO keep an eye out for the global sign on letter calling on all governments, all the member governments to the WTO and the WTO itself to put a halt to these negotiations now ongoing in Geneva to try to expand the WTO’s failed rules to give even more power and privileges to companies and instead, the WTO should be focusing on how its existing rules that helped get us in this mess are waived so that we can get more production of medicine around the world without the WTO’s special monopoly patent rights for corporations. 

We can get more production of ventilators and medical devices without countries being worried that if they make that stuff without getting permission and paying the big licensing fees for the patents that they’re going to get nailed at the WTO with big tariffs. We basically need the government to have the maximum flexibility to make sure that their residents are able to get the medicines and treatments they need in this crisis. And to that end the WTO should not be obsessing with how to enforce its existing anti-people and planet rules or for that matter expanding them, but rather getting the heck out of the way. So, WTO get the heck out of the way. Everyone else, stay the F at home until our next episode. This is Rethinking Trade, I’m Lori Wallach.

HARVEY: Rethinking trade is produced by Public Citizen’s Global Trade Watch where we don’t just talk about trade policy, we fight to change it. Visit rethinktrade.org today to get involved in our campaigns and help us fight for global economic justice. Thanks for listening.

Print Friendly and PDF