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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.

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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.”

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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.

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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.

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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.

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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.

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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.

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New Infographics Reveal Jump in U.S. Exports to China of Ventilators, Masks in Early 2020 as U.S. Imports of Same Goods Fell; Plus 1989-2019 Data on Sources for U.S. Medical Imports

Hyperglobalization Undermines Response to COVID-19 Crisis

Public Citizen’s Global Trade Watch today 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

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. More than 60,000 manufacturing facilities have been lost to 25 years of corporate-rigged U.S. trade policies that made it easier and less risky to move production overseas to pay workers less and avoid environmental protection costs.

The United States is especially vulnerable. Having the world’s largest trade deficit year after year means the United States is extremely reliant on other countries, especially China, to provide essential goods.  The data show that imports into the United States from China of many of these products had declined relative to 2019, and in February and March 2020 had declined relative to January 2020 when demand for such goods began to peak in China as COVID-19 cases grew. This drop-off in imports of COVID-19-response goods from China was not caused by a drop in U.S. demand. Indeed, U.S. demand for masks, gloves, ventilators and more was growing in March. And the United States increased imports of these goods from other countries to try to fill the gap left by the drop in goods from China. But in January 2020, U.S. government officials urged U.S. firms to expand exports to China of the limited domestic production of key medical goods instead of considering U.S. residents’ needs.

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

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Rethinking Trade - Season 1 Episode 1: COVID-19: Bad Trade Rules Have Weakened Our Response

Trade expert Lori Wallach breaks down how corporate-led globalization has fueled shortages in our medical supply-chains and limited our ability to fight against coronavirus.

Transcribed by Kenya Juarez

RYAN HARVEY: Welcome to Rethinking Trade, where we aim to educate and mobilize folks around a new vision for trade that prioritizes the needs of working people and the planet over those of multinational corporations. I am Ryan, and I am joined by Lori Wallach, Lori is a long-time fighter for economic justice, she is among the leading experts on trade policy in the United States and she is the director of Public Citizen’s Global Trade Watch. How’s it going Lori?

LORI WALLACH: Hello!

HARVEY: I am sure you’re getting the same question that many of us are asking: How is it come to be that we are in this situation where the world’s largest economy doesn’t seem to have even the basic medical supplies like masks or respirators that we need in this time of extreme crisis?

WALLACH: Unfortunately, it’s actually a problem we have made for ourselves. This is not an act of God like the virus, this is actually hyper globalization, something a lot of people have fought, so I use the word “we” advisedly. Our current system of too much globalization promoted by decades of corporate-rigged trade agreements has made it much harder for us to limit the damage of this crisis, or to respond to it in a way that maximizes the chances for people to stay healthy and frankly our economy is taking a bigger hit because of this attenuated supply chains and the way we are too reliant on globalized production. 

HARVEY: Lori what does it mean when economists on TV talk about the supply chains being too brittle or too long? Or use terms like “sole-source”? What does this stuff mean?

WALLACH: “Too long” is a euphemism for us having outsourced our domestic manufacturing capacity, in the last 20 years since the China World Trade Organization Agreement, since NAFTA, we have lost more than 5 million of our manufacturing jobs, that’s about a quarter of them in 20 years. We have seen 60,000 manufacturing facilities closed and this wasn’t just a matter of greedy companies looking to pay workers less, but our trade agreements actually included provisions that incentivize outsourcing production to low-wage countries. If you look back at the big trade fight of the 2000s and 1990s NAFTA, the China permanent normal trade relations fight in 2000, what happened was exactly what opponents of those trade policies feared. 

So, too long means for instance, for the N95 masks that are essential for healthcare workers to stay safe, a lot of them are made in China and it would normally take 65 days from the time an order is put in to have that product delivered in the US, because it has to be made there, that has to be packaged, typically on a ship by ocean and has to go through customs. So, 65 days to get something urgently needed, we just don’t make enough domestically. 

Brittle means it’s too easy to break a supply chain, supply chain just means the way that different inputs and parts that we need to make something or for that matter a supply chain being it all comes from one place, it's too easy for some pieces to come apart. So, for instance just one part in one country is no longer being produced because for instance China had the coronavirus crisis earlier and shut down a lot of factories and here's an example that is very concrete. The company that makes Purell hand sanitizer, its sources a particular spring that makes the stuff squirt out in its dispensers in China. They chose as it was the cheapest place to have it made, you could have made it in the US. It was one source that got all those springs from, so when those Rings were not being produced at the same volume they could make the Purell but they didn’t have the piece to make the Purell container, so people could get a final usable bottle of Purell. When you look for instance at what’s brittle, you look back when even in 2003, when the SARS epidemic hit, China accounted for about 4% of global output of goods at that point and now it's over four times as much, some people say 20% at least 16% at the low end. So that means, whatever is happening in China  in January, when the pandemic first hit there, affects the entire world, as far as what we even can produce here, because these supply chains were so brittle we’re relying on stuff that's made some place else’s. 

And sole source means all the productions is in one place, China often but not exclusively, so when there's a problem there's no redundancy, and again this is not a surprise, we saw this on the SARS epidemic, 17 years ago when a particular kind of computer chip was not being made in Malaysia, when Malaysia was hard hit by SARS, and a bunch of production and manufacturing all around the world shut down because without that one particular part that was only being produced there it couldn’t go on. Sole source is in part because of the decisions companies have made to cut costs, so lay off people in other countries that used to make those things and it’s not just all trade, because also an anti-trusted monopoly of corporate concentration issues. And right now there’s one really clean example of that, it’s kind of scary the medical supply chain, so there’s been an epidemic of big guys buying up all around the world, smaller manufacturers, of you know, everything ventilators masks, etc. A lot of them are companies that are incorporated in the US or in Europe a lot of them have their production in China, but the thing is when they buy up the competition they are number one, trying to get rid of the competition of the prices, but also means there’s no redundant manufacturing, because how they are making their profits go up is if they used to be free factories that made something, they buy the competitor shut down the 2 competing factories, maybe they make the supply line to make the new brand, that they purchased when they bought the company they shut down, maybe they add some workers, but now it’s all been produced in one place, even it’s being produced in different names of brands these big companies brought up. That is a really serious problem even though it's not the sole source under our current globalized production system is way too concentrated. Here is one example, the masks everyone now is looking for, not the fancy ones, not the n95, so stuff we should just all have when we go out and about for essential stuff.

Before this crisis like in December, if you put December dates China made 50%, one country 50% of the supply and not surprisingly, when China had the crisis hit first, they stopped exporting this stuff. As of January, 50% of the supply was simply shut down, they are only starting to begin to share what they can produce but in January China also bought up the supply worldwide, they bought up 56 million units. To put this in perspective, China was able at that point to produce, having 50% of global capacity, they could do 10 million per day. And they bought another 56 million, they then basically made production of masks mandatory, the government just instructed companies, so they have increased their production 12 times. They are now making 115 million masks a day, but China has only started with very limited scale exporting any of it.  You know it's not just Chinese-owned companies, there's a Canadian firm: Medicare that is in Shanghai and as of last week there are newspaper stories that they were being allowed to export things that they made because the government basically said if any medical supply is being made here it is being kept here. 

The absence of masks, you can’t buy one for love or money in the US right now, is both because they're not making enough of them domestically and when there is a big lag in demand, you can expect the country that can make them to hold onto them to be accountable to their own people, and that is something is happening around the world. There’s been a lot of hoopla about “oh my goodness, countries are holding onto these supplies, they are banning exports to medical goods,” that is something Germany and France have done, Korea, Taiwan, India it's being attacked as if it’s some horrible criminal trade violation but if you think about it practically, you think of what Germany is doing, they make a lot of ventilators there; Sweden (the big ventilator companies are from Sweden, other ones the US and Germany) and the ventilators they ultimately send to Italy waited 12 hours because under their law you basically have to do a needs task, so you apply normally what they just exported but there were  temporary emergency COVID measures, we have to basically tell the equivalent of the centers to disease control, say:” Hey we want to export “x” number of  ventilators to Italy, can we have an authorization?” That agencies check to make sure that there isn’t immediate demand in Germany and then they approve it and the ventilators cross the door.

That is more or less democrat accountability of a government being responsive to the needs of their own people. The hysteria is misdirected as if it's like a trade violation, the problem is we don't have enough demand, it's not like Germany was saying: “We’re going to stay on these until Italy is desperate and willing to pay two times as much.'' We have demands in the world for let’s say100 ventilators and right now, world capacity is 60 ventilators, and in part that is because all of this consolidation and removal of excess capacity, not excess as it turns out. And we're trying to gear up to make up the difference but if it’s 60 ventilators available and a hundred of them are needed, and you are a country that makes the ventilators, it's not really a shock that you keep at 5 or whatever it is that you need before you send out the ones that others want. So, I think all of this is that brutal lesson this crisis, I certainly why a continental size country like the United States with the natural resources to be able to manufacture anything without having to rely on these attenuated brittle supply chains, should not have gotten its manufacturing capacity and looking forward it needs to learn from this lesson and start to bring back capacity for certain essential goods home.

Obviously that is a super important thing as we’re seeing for resilience, to be able to take care of core needs, but it has some great benefits, in the 5 million manufacturing workers who are a chunk of the 60 plus percent of Americans  who don’t have college degrees largely, who lost good paying jobs, could put their skills to a job that pays the middle-class wage which would have a corollary benefit of fighting income inequality, and it would make us much safer and more resilient in the face of this kind of a medical crisis or other crises.

HARVEY: And are those changes going to happen? Or what needs to happen to bring those kinds of changes about in your opinion?

WALLACH: That’s part of what we’re going to be thinking about and talking with everybody about on Rethinking Trade and need lots of folks thinking and best input, but what I will say is there are two things that are happening: 

One- yes, a lot of people who cheered on, profited from or just ignored the US manufacturing capacity are waking up to the perils, and  I can’t tell you how many people  who in the past said “Why are you so worried about this trade stuff?” Are emailing me and Facebook messaging me saying “Oh my Lord, I get it now” But that is not enough to make the change in policy, we’re all going to have to fight for it and we'll be sharing a lot about what that's going to look like because the corporations that have reaped the windfall profits of this current untenable ultra globalized system are doubling now. 

If you think about the concept of crisis capitalism- there’s a crisis, let’s see what kinds of outrageous things we can grab as companies that we never would have gotten away with if people were paying attention- they're trying to get more and more and you know they’re right now about to get a waiver of all of the tariffs, not on medical supplies but on everything, which is to say wedding dresses and designer clothes, pickup trucks, claiming that somehow that’s going to help deal with the crisis or that’s somehow going to help the economy. The White House is considering doing this, which of course can totally conflicts with Trump’s policy, and even worse it’s going to get the industry that now remain on the manufacturing capacity, the one that have any tariffs, textiles and autos, which are the very ones now trying to retool to make the ventilators and the masks. The textile companies have tooled up for masks, the auto companies are trying to make ventilators. And you know, it’s an outrageous thing to even be considering that but at the same time near the corporations are doing a big PR attack on how “The tariffs are in place to discipline against China’s trade violations, they're making it impossible to get medical supplies.” And I think the one that I wanted to end with, which is maybe the only competent thing that this administration has done in the face of this crisis, where everything else they’ve done has made it worse, from ignoring the crisis  to then downplaying on the crisis, to then not preparing for months, then to not controlling production to get the stuff we need, such as protection for our medical workers or now that there is some production on imports, not distributing it, all of that is wrong it’s a disaster.

The one good thing they have done is the US trade representative’s office a month ago went with a fine tooth comb through the trade schedules and got rid of all penalty tariffs and on any medical products and when they say medical products I've looked at the list, it’s really broad. So that is the only competent response yet, to listen to television news, read the newspaper and all the screaming about it, you’d think there were 200% tariffs on all these goods. Folks, the problem is not that we have protectionism on our trade front, the problem is we have not protected our basic needs and our manufacturing capacity, we're not talking about high tariffs on everything, what we're talking about is having a plan and some policies that make sure that we actually can make the things or get the things we need in a crisis like this.

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

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China Is the Top Source of U.S. Pharmaceutical Imports, With India and Mexico Also Major Sources

(No, Ireland is not the main U.S. imported medicine source …)

Over the past decade, China has been the largest source of medicine imported into the United States, with India and Mexico vying for second- and third-largest depending on the year. This infographic shows the volume of medicine imported by the United States from its top 10 import sources over the past decade. The volume data set reflects the amount of actual product that is shipped to the United States.

We also provide the import data for the same period measured on the basis of value of imported medicine to show how some sources have misreported that Ireland is the top U.S. source of imported medicine.  

By volume, the top three pharmaceutical import sources in 2019 are China, India and Mexico, with Canada, Germany, Italy, the United Kingdom, Israel, Spain and, finally, Ireland rounding out the rest of the top 10, respectively.

However, by value, the top three pharmaceutical import sources in 2019 are Ireland, Germany and Switzerland, with Italy, India, Belgium, Denmark, Canada, the United Kingdom and Japan rounding out the top rest of the top 10.

While the volume data set represents the amount of medicine that is sent to the United States, the value data set reflects the high prices of some medicines protected by monopoly patents as well as pharmaceutical corporations’ tax-avoidance strategies. This includes some firms’ corporate “inversions,” which are created when firms relocate their legal “home” to countries with low tax rates and then charge their legal entities in their old base countries’ large patent-licensing fees, which then can be deducted from taxes as a business expense.

The actual sources of most imported medicines and the gap between volume and value data are demonstrated in the infographic.

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