As Battle Over NAFTA 2.0 Heats Up, New Report Documents 25 Years of NAFTA's Disproportionate Damage to U.S. Latino and Mexican Working People

With the signing of the renegotiated North American Free Trade Agreement (NAFTA) on Nov. 30 as the migrant crisis at the border escalates, the Labor Council for Latin American Advancement (LCLAA) and Public Citizen’s Global Trade Watch released a timely analysis of the North American Free Trade Agreement’s (NAFTA) disproportionate damage to U.S. Latinos and Mexican workers, and whether the NAFTA 2.0 deal would stop it.

“While President Trump’s manipulation of grievances over trade and immigration brought him to power, absent from his worldview is the reality that NAFTA was developed by and for multinational corporations seeking to pay workers less and has hurt both U.S. and Mexican workers,” said Hector Sanchez, executive director of LCLAA at a Press Club event today. “Indeed, NAFTA’s destruction of millions of Mexican small farmers’ livelihoods and the pact’s race-to-the-bottom wage incentives have pushed many in Mexico to search for work outside their home country.”

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Titled “Fracaso: NAFTA’s Disproportionate Damage to U.S. Latino and Mexican Working People,” the report’s findings upend President Donald Trump’s xenophobic NAFTA narrative that blames Mexican workers for harming U.S. workers. The report’s analysis of the NAFTA 2.0 text in the context of the ongoing NAFTA-related damage to Mexican and U.S. workers alike spotlights why further improvements are necessary before a final NAFTA 2.0 deal can achieve broad support in Congress next year. The report was produced through a partnership that united LCLAA’s decades of advocacy for Latinos and Public Citizen’s decades of analysis of trade pacts and their impacts.

“NAFTA not only didn’t deliver on its proponents’ rosy promises of more jobs and higher wages, but its ongoing damage ended decades of bipartisan congressional consensus in favor of trade pacts,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “For a final NAFTA 2.0 package to get through Congress next year, the signed deal will need more work so its labor standards are subject to swift and certain enforcement and the other improvements are made to stop NAFTA’s ongoing job outsourcing, downward pressure on wages and environmental damage.”

The data on NAFTA’s disproportionately negative effect on both Mexican and U.S. working people undermine Trump’s nationalist critique while also spotlighting why more-of-the-same neoliberal NAFTA policies are equally unacceptable. Among the report’s findings:

  • Government-certified NAFTA job loss has been greatest in regions where the U.S. Latino population is concentrated. The 15 states where 85 percent of Latinos reside account for nearly half (46 percent) of total NAFTA job loss certified under just the narrow Trade Adjustment Assistance program.
  • Latino workers were disproportionately represented in the light manufacturing industries hit hardest by the outsourcing NAFTA incentivized. Latinos lost 138,000 jobs in the apparel and textile sector and 123,000 jobs in the U.S. electronics industry during the NAFTA era.
  • As NAFTA eliminated U.S. manufacturing jobs, the related wage stagnation for workers without college educations across all industries hit Latinos asymmetrically. Rather than the Latino-white pay gap closing, it increased during the NAFTA years.
  • For Mexican workers, increased investment and trade with the United States failed to translate into per capita income growth or rising wages in Mexico. Annual per capita income grew less than 2 percent in the first seven years of NAFTA and less than 1 percent thereafter.
  • Real average annual wages have declined in Mexico under NAFTA. According to analysis by Bank of America/Merrill Lynch, manufacturing wages in Mexico are now 40 percent lower than in China. Prior to NAFTA, Mexican auto wages were five times lower than in the United States. Today, even as U.S. wages have stagnated, Mexican auto wages are nine times lower
  • NAFTA devastated Mexico’s rural sector. Amid a NAFTA-spurred influx of subsidized U.S. corn, about 2 million Mexicans engaged in farming and related work lost their livelihoods.
  • With millions of Mexicans displaced from rural communities competing for the hundreds of thousands of new manufacturing jobs outsourced from the United States, and a lack of independent unions in Mexico to bargain for better wages, employers could keep wages reprehensibly low. Overall, in real terms average annual Mexican wages are down 2 percent and the minimum wage down 14 percent from pre-NAFTA levels.
  • As NAFTA destroyed Mexican livelihoods and displaced millions in rural Mexico, it became a powerful push factor for migration. From 1993, the year before NAFTA, to 2000, annual immigration from Mexico increased from 370,000 to 770,000. With annual immigration on the rise, the total number of undocumented immigrants from Mexico living in the United States increased from about 2.9 million in 1995 to 4.5 million in 2000 to 6.9 million by 2007 when the financial crisis limited job opportunities and slowed migration rates.
  • Nearly 28,000 small- and medium-sized Mexican businesses were destroyed in NAFTA’s first four years alone, spurring the El Barzon movement of formerly middle-class Mexican entrepreneurs protesting NAFTA. Losses included many retail, food processing and light manufacturing firms that were displaced by NAFTA’s new opening for U.S. big-box retailers that sold goods imported from Asia.

This report makes clear that neither status-quo neoliberalism nor Trump’s anti-Mexico nationalism is in the interest of working people in the United States or Mexico.

“Tens of millions of Mexican and U.S. Latino workers have been hurt by NAFTA – from the factory worker in El Paso, Texas, who lost her livelihood making blue jeans after the apparel industry moved to Mexico to take advantage of low wages, to the Mexican farmer in Chiapas who can barely make ends meet as the prices paid for his corn plummeted after subsidized U.S. corn flowed into Mexican markets after NAFTA,” said Yanira Merina, national president of LCLAA. “It is the future of these workers, their families and their communities that will be determined by whether there is a new NAFTA deal that can raise wages and replace NAFTA’s race to the bottom with fair trade.”

“NAFTA 2.0 labor enforcement must be greatly strengthened,” said Guillermo Perez, labor educator at the United Steelworkers and president of the Pittsburgh LCLAA. “It is in the interest of workers in all three countries to ensure that Mexico adopts strong workers’ rights provisions and monitors and enforces their implementation. Workers in Mexico must be able to form labor organizations and collectively bargain for better wages and working conditions to stop downward pressure on wages in Canada and the United States.”

“Trade agreements like NAFTA, which are not fair and leave workers in the U.S., Canada and Mexico out in the cold, have caused immense pain and disruption in the lives of everyday working people in all three countries. The NAFTA 2.0 that was signed will not stop the wage suppression in Mexico and the related outsourcing from the U.S. and Canada. Our future, the future of manufacturing and the future of workers’ lives depends on getting trade policy right,” said Dora Cervantes, general secretary-treasurer at the International Association of Machinists & Aerospace Workers.

The full report is available here.

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Signing of NAFTA 2.0 Does Not End Fight for Progressive Improvements to the Agreement

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

The NAFTA 2.0 text that is being signed contains some improvements that progressives have long demanded, some damaging terms we have long opposed and some important unfinished business.
 
If I had to grade the agreement now, I’d give it an incomplete because more work is needed to ensure swift and certain enforcement of the pact’s labor and environmental standards among other essential improvements necessary to stop NAFTA’s ongoing damage to workers and the environment.  
 
President Donald Trump and commentators who don’t know better are likely to place undue significance on this ceremonial event, but the signing is simply the next step in an ongoing process that must produce a final deal that can win majority support in Congress. 
 
As is, the agreement falls short of the changes needed to stop NAFTA’s ongoing job outsourcing, downward pressure on our wages and attacks on environmental safeguards, but there is a path to improving it so a final NAFTA package could win wide support.
 
A new NAFTA can go into effect only if majorities of both the U.S. House of Representatives and U.S. Senate approve it next year. Given the results of the midterm elections, only a final deal that can earn Democratic support will get through Congress.
 
If trade officials work with congressional Democrats, unions and others on the improvements needed to stop NAFTA’s ongoing job outsourcing and environmental damage and raise wages, a final deal could achieve broad support next year. Of course, who knows what lunatic things unrelated to trade that Donald Trump might do in the meantime to derail that prospect.
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How the Midterm Election Affects the Fate of NAFTA Renegotiations

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

A lot of corporate lobbyists and congressional Republicans were downright scornful of U.S. Trade Representative Robert Lighthizer’s efforts to engage on NAFTA renegotiation with the congressional Democrats and unions that have opposed past trade deals. Now his approach appears prescient: After this election, only trade deals that can earn Democratic support will get through Congress.

Regardless of the change in control of the House, there is a path to creating a final NAFTA package that could achieve broad support.

In response to publication of the NAFTA 2.0 text, congressional Democrats that have opposed past pacts did not launch a campaign against it, but rather identified where progress was made and where more work is essential, including the labor standards enforcement that is necessary to counter NAFTA’s job outsourcing incentives and downward pressure on wages. This election has increased the number of House members whose support of any trade deal will be premised on such improvements.

If trade officials are willing to work with congressional Democrats, unions and other groups on the improvements needed to stop NAFTA’s ongoing job outsourcing and raise wages, there clearly is a policy path to a renegotiated NAFTA that could gain wide support next year. Of course, who knows what lunatic things unrelated to trade that Donald Trump might do in the meantime to derail that prospect?

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Third-Quarter Data Shows Record U.S. Trade Deficits During Trump Presidency

Contrary to Trump’s Campaign Pledges to Speedily Reduce the Deficit, Nine-Month Data Show Largest Deficit Ever Recorded With China and Largest With NAFTA Nations in a Decade

Government data released today reveals the highest U.S. goods trade deficit in a decade for the first three-quarters of 2018, contradicting President Donald Trump’s midterm campaign trail triumphalism on trade. During Trump’s presidency, the U.S. trade deficit with China has risen to the highest ever recorded, while the deficits with the world and with North American Free Trade Agreement (NAFTA) nations have steadily grown, reaching nine-month levels in 2018 higher than any year since before the 2008-2009 financial crisis.

“Instead of the speedy reduction in the trade deficit that Trump promised as a focal point of his campaign, during his presidency, the U.S. trade deficit with the world, China and NAFTA countries has steadily grown,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “This alarming data spotlights that the Trump administration has chosen not to employ all of the tools at its disposal to bring down the trade deficit.”

Today’s U.S. Census Bureau release of the nine-month 2018 trade data reveals a global deficit and a China deficit that is higher than the nine-month level of Trump’s first year, which was higher than the nine months of President Barack Obama’s last year (all figures adjusted for inflation). The U.S. also is on track to end 2018 with the highest goods trade deficit with NAFTA partners since 2008. This is being driven by increasing imports from Canada and Mexico since 2016, but especially from Mexico this year.

As our Trump trade deficit tracker shows, the nine-month 2018 data indicate:

  • The U.S. trade deficit with China sets another all-time record. The goods trade deficit with China over the first nine months of 2018 was the highest deficit ever recorded for the first three quarters of a year – a 13 percent increase over 2016. Comparing the first nine months of Trump’s first year to his second year, the China goods deficit increased 8 percent, from $280 billion in 2017 to $301 billion in 2018. This compares to $268 billion for the first three quarters of 2016, Obama’s last year in office.
  • After increasing steadily during the Trump presidency, with a total increase of 23 percent over 2016, the U.S. goods trade deficit with NAFTA partners during the first three quarters of 2018 was the highest in a decade. The U.S. trade deficit with NAFTA partners during the first nine months of the year increased 11 percent, from $144 billion in 2017 to $160 billion in 2018 after falling to $130 billion in 2016, the last year of Obama’s term. The 2008 nine-month deficit, before the effect of the crisis was felt, reached a record $188 billion before falling to $101 billion in 2009 over the same nine-month period.
  • The overall U.S. goods trade deficit with the world over the first nine months of 2018 was the highest in the decade since before the financial crisis and up 13 percent over 2016. The U.S. trade deficit with the world over the first nine months of 2018 increased 7 percent, from $599 billion in 2017 to $643 billion in 2018, up from $570 billion in 2016, the last year of Obama’s term. The 2008 nine-month deficit, before the effect of the financial crisis was felt, had reached a record $744 billion before falling to $420 billion over the same period in 2009.

The growth of the NAFTA trade deficit has been overshadowed by focus on U.S.-China trade conflicts. But it is notable that the growth of the U.S.-Mexico deficit is accelerating, with 11 percent growth from the first nine months of 2017 to the same period in 2018 compared to 6 percent growth over that period from 2016 to 2017. The U.S. deficit with Canada is still growing, but the rate has not accelerated.

This data likely will color the debate next year as a renegotiated NAFTA heads toward congressional consideration. Public Citizen’s analysis of the NAFTA 2.0 text revealed some improvements progressives have long demanded, damaging terms long opposed and important unfinished business. The analysis showed that fixing NAFTA’s trade-deficit-raising terms that incentivize U.S. firms to outsource jobs to Mexico to pay workers poverty wages, dump toxins and bring their products back here for sale remains a work-in-progress.

The latest trade data spotlights actions the Trump administration has chosen not to take to bring down the U.S. trade deficit.

The data arrives on the heels of Trump’s Treasury Department failing to label any country a currency manipulator. An analysis released recently by Public Citizen shows how the Treasury Department’s decision to rely on reporting criteria created by the previous administration has ensured no action on the issue, despite then-candidate Trump pledging to crack down on countries that gain trade advantages by distorting currency values.

As well, Trump has not exercised the authority he has to reverse waivers of “Buy America” procurement policies that outsource U.S. tax revenues to purchase imports for government use. He also has not followed through on his campaign pledges to penalize imports from firms that consistently outsource jobs or limit government contracts to firms that outsource jobs.

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When Third-Quarter Data Is Released Friday, U.S. Trade Deficit Likely to Show A Continued Climb Under Trump

Deficit for Nine Months of 2018 Likely to Be Largest Ever Recorded With China and Largest With NAFTA in a Decade as Imports from Mexico Grow

The United States is on track to post a record high goods trade deficit for the first three quarters of 2018, contradicting President Donald Trump’s midterm campaign trail triumphalism on trade.

Instead of the speedy reduction in the trade deficit that Trump promised as a focal point of his presidential campaign, during his presidency, the U.S. trade deficit with the world, China and North American Free Trade Agreement (NAFTA) nations has steadily grown. The data underscores that the Trump administration has chosen not to employ all of the tools at its disposal to bring down the trade deficit.

When the U.S. Census Bureau releases nine-month data Friday, the global and China deficits are likely to be higher than the nine-month level of Trump’s first year, which was higher than the nine months of President Barack Obama’s last year. The U.S. also is on track to end 2018 with the highest goods trade deficit with NAFTA partners since 2008. This is being driven by increasing imports from both Canada and Mexico since 2016, but especially from Mexico this year.

This note provides comparison data for the cumulative third-quarter 2018 deficit relative to past years. This offers a clearer picture of overall trade flow trends than changes in month-to-month numbers. Monthly trade figures are volatile, and the “seasonal adjustment” of the monthly data done by the Census Bureau does not control for key factors, such as U.S. exporters trying to speed up shipments to avoid imposition of various countervailing tariffs. We focus on goods balances because services data by country lags the goods data by months. (The relevant services data will not be available until December 2018.) All figures are adjusted for inflation, so they represent changes in trade balances expressed in constant dollars.

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When Friday’s data is released, we will post updated nine-month cumulative data, which also will be available on our Trump trade deficit tracker. But year-to-date trends through the first three quarters of 2018 likely will be in line with the following major trends observed through the first eight months of the year:

  • The U.S. trade deficit with China is on pace to set another all-time record. The goods trade deficit with China over the first eight months of 2018 was the highest first eight months ever recorded – a 12 percent increase over 2016. Comparing the first eight months of Trump’s first year in office to his second year, the China goods trade deficit increased 7 percent from $245 billion in 2017 to $261 billion in 2018. This compares to $234 billion for the first eight months of 2016, Obama’s last year in office.
  • After increasing steadily during the Trump presidency, with a total increase of 24 percent over 2016, the U.S. goods trade deficit with NAFTA partners during the first eight months of 2018 was the highest in the decade since the financial crisis. The U.S. trade deficit with NAFTA partners during the first eight months of 2018 increased 10 percent from $129 billion in 2017 to $142 billion in 2018 after falling to $115 billion in 2016, the last year of Obama’s term. The 2008 eight-month deficit, before the effect of the crisis was felt, reached a record $167 billion before falling to $88 billion in 2009 over the same period.
  • The overall U.S. goods trade deficit with the world over the first eight months of 2018 was the highest in the decade since the financial crisis and up 13 percent over 2016. The U.S. trade deficit with the world over the first eight months of 2018 increased 7 percent from $532 billion in 2017 to $570 billion in 2018, up from $506 billion in 2016, the last year of Obama’s term. The 2008 eight-month deficit, before the effect of the financial crisis was felt, reached a record $658 billion before falling to $362 billion over the same period in 2009.

The growth of the NAFTA trade deficit has been overshadowed by focus on U.S.-China trade conflicts. But it is notable that the growth of the U.S.-Mexico deficit is accelerating, with 10 percent growth from the first eight months of 2017 relative to the same period in 2018 compared to 7 percent growth over that period from 2016 to 2017. The U.S. deficit with Canada is still growing, but the rate has not accelerated. 

This data is likely to color the debate next year as a renegotiated NAFTA heads toward congressional consideration. Public Citizen’s analysis of the NAFTA 2.0 text revealed some improvements progressives have long demanded, damaging terms long opposed and important unfinished business. The analysis showed that fixing NAFTA’s trade-deficit-raising terms that incentivize U.S. firms to outsource jobs to Mexico to pay workers poverty wages, dump toxins and bring their products back here for sale remains a work-in-progress.

The latest trade data spotlights actions the Trump administration has chosen not to take to bring down the U.S. trade deficit.

The data arrives on the heels of Trump’s Treasury Department failing to label any country a currency manipulator. An analysis released recently by Public Citizen shows how the Trump Treasury Department’s decision to rely on reporting criteria created by the previous administration has ensured no action on the issue, despite then-candidate Trump pledging to crack down on countries that gain trade advantages by distorting currency values.

As well, Trump has not exercised the authority he has to reverse waivers of “Buy America” procurement policies that outsource U.S. tax revenues to purchase imports for government use. He also has not followed through on his campaign pledges to penalize imports from firms that consistently outsource jobs or limit government contracts to firms that outsource jobs.

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Will the U.S. Treasury’s Imminent Report to Congress on Trade Partners’ Currency Practices Once Again Fall Short of Its Mandate?

A Critical Tool to Address Currency Manipulation and Stem Record-Setting Trade Deficits Has Been Shirked by the Trump Administration, a New Public Citizen Analysis Shows

The Trump administration will release its latest report on trade partners’ currency practices imminently. Like its prior three iterations of this semi-annual report mandated by Congress to identify countries whose distortion of currency values to gain trade advantages must be addressed, it is unlikely any country will be listed. A new analysis by Public Citizen shows how the Trump Treasury Department’s decision to rely on reporting criteria created by the previous administration has ensured no action on the issue, despite then-candidate Donald Trump pledging to crack down on countries that gain trade advantages by distorting currency values.

Public Citizen’s analysis shows that the Treasury Department is not taking full advantage of the tools available to put countries on notice for damaging currency practices. The latest “Report to Congress on the Foreign Exchange Policies of Major Trading Partners of the United States” is expected this week.

“One of Trump’s most emphatic campaign promises was to declare China a currency manipulator on Day One and crack down on any country misaligning its currency to cheat on trade, but Trump’s Treasury secretary has chosen to rely on criteria created by the previous administration that ensure no action is taken,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

Large U.S. structural trade deficits consistent with misaligned currencies have grown in recent years. Data released Friday by the U.S. Census Bureau show that the U.S. merchandise trade deficit with the world over the first eight months of 2018 is the highest in the decade since before the 2008-09 financial crisis.

After rising over the Trump administration’s first two years, the U.S. merchandise trade deficit with NAFTA partners in 2018 is now also on pace to be the highest in a decade. The U.S. goods trade deficit with China over the first eight months of 2018 is the highest ever recorded.

Drawing in part from analysis by economists at the Peterson Institute for International Economics and the Council on Foreign Relations, Public Citizen recommends several changes to Treasury’s reporting regime to better align the review methodology with statutory obligations. This includes broadening the number of countries analyzed by eliminating self-imposed, arbitrary cutoffs on which countries are investigated, reviewing countries’ overall policy stances rather than immediate practices and reporting on countries’ efforts to improve transparency on foreign exchange interventions.

“While the NAFTA 2.0 deal sets an important precedent by being the first to include a currency provision in its main text, it provides no mechanism for actually disciplining countries that manage their currency values in a way that affects trade. The Treasury reporting process, on the other hand, is tied to a set of remedial actions and covers many more countries. The Trump administration must take full advantage of the authority Congress has provided to influence the foreign exchange practices of trading partners through the semi-annual reporting process,” Wallach said.

The full Public Citizen analysis is available here.

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Public Citizen Analysis: How the New NAFTA Text Measures Against Key Changes We Have Demanded to Stop NAFTA’s Ongoing Damage

Note from Lori Wallach, Director, Public Citizen’s Global Trade Watch

Here is our initial 14-page analysis of the NAFTA 2.0 text, following up on the statement from Sunday night. We have reviewed how the text measures up to the changes to NAFTA that Public Citizen and many other progressive organizations have long demanded. After some digging, which has been exhausting giving the 900 pages of text and annexes, we have boiled down whole chapters into bulleted highlights and lowlights and assessed whether demands are met or there are mixed outcomes or it’s too soon to know or there’s been a fail. 

Overall, the NAFTA 2.0 text reveals a work in progress with some improvements for which we have long advocated, some new terms that we oppose and more work required to stop NAFTA’s ongoing job outsourcing, downward pressure on wages and environmental damage.

The new text isn’t a transformational replacement of the entire corporate-rigged U.S. trade agreement model that NAFTA launched in the 1990s. But at the same time, in key respects, this deal is quite different from all past U.S. free trade agreements. The revised deal could reduce NAFTA’s ongoing job outsourcing, downward pressure on our wages and environmental damage if more is done to ensure the new labor standards are subject to swift and certain enforcement, and some other key improvements are made. There’s a ways to go between this text and congressional consideration of a final NAFTA renegotiation package in 2019.

Important progress has been made with the removal of corporate investor protections that make it cheaper and less risky to outsource jobs and a major reining-in of NAFTA’s outrageous Investor State Dispute Settlement (ISDS) tribunals under which corporations have grabbed hundreds of millions from taxpayers after attacks on environmental and health policies.

Termination of ISDS between the U.S. and Canada would eliminate 92 percent of U.S. ISDS liability under NAFTA and the lion’s share of total U.S. ISDS exposure overall. This, combined with the major roll back of corporate rights and ISDS coverage between the U.S. and Mexico would prevent many new ISDS attacks on domestic environmental and health policies after more than $390 million has been paid to corporation by taxpayers to date. That even this corporate-compliant administration whacked ISDS means future presidents cannot backslide and also sends a powerful signal to the many nations worldwide also seeking to escape the ISDS regime. 

A lot more work remains to be done: Unless strong labor standards and environmental standards are made subject to swift and certain enforcement, U.S. firms will continue to outsource jobs to pay Mexican workers poverty wages, dump toxins and bring their products back here for sale.

Despite Donald Trump’s “Buy American/Hire American” rhetoric, the new deal maintains NAFTA’s waiver of Buy American rules that require the U.S. government to procure U.S.-made goods, so unless that gets fixed more U.S. tax dollars and more U.S. jobs will be outsourced.

The new deal grants pharmaceutical corporations new monopoly rights so they can keep medicine prices high by avoiding generic competition. This could undermine the changes we need to make medicine more affordable here and increase prices in Mexico and Canada, limiting access to lifesaving medicines.

Areas of progress include a first-time-ever innovation of conditioning trade benefits for a percentage of autos and auto parts on the workers producing them being paid $16 per hour or more. Terms that forced countries to continue to export natural resources that they seek to conserve are eliminated. Longstanding safety and environmental problems relating to Mexican-domiciled trucks’ access to U.S. roads are addressed. Rules of origin that allowed goods with significant Chinese and others non-North American value were tightened.   

Americans have suffered under NAFTA’s corporate-rigged rules for decades. Nearly one million U.S. jobs have been government-certified as lost to NAFTA, with NAFTA helping corporations outsource more jobs to Mexico every week. The downward pressure on U.S. workers’ wages caused by NAFTA outsourcing has only intensified as Mexican wages declined in real terms since NAFTA, with Mexican manufacturing wages now 40 percent below those in coastal China.

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The Imminent Text Release is a Major Milestone in NAFTA Renegotiations, but Don’t Bet on It Being the Final Deal

Will Canada agree to a North American Free Trade Agreement (NAFTA) renegotiation deal this week given the high-stakes Quebec election occurring on Oct.1? Our Canadian friends say it’s unlikely given Quebec is ground zero in the dairy trade battle now consuming NAFTA talks. The Liberal Party candidate for premier of Quebec is in a close race, and winning the province is considered vital to Prime Minister Justin Trudeau’s fall 2019 reelection. However, even without a Canada deal now, paths still remain for a three-nation deal to arrive at Congress for a spring 2019 vote. More on that below.

What’s certain is that a revised NAFTA text, likely representing the U.S.-Mexico deal completed in late August, will be posted for all to see imminently. Public Citizen will conduct a speedy review and post an initial analysis on key elements shortly after release. Knowing some important progress has been made, Public Citizen will measure the text against the changes that we and many other progressive organizations have long demanded that are necessary to stop NAFTA’s ongoing damage. Almost one million American jobs have been government-certified as lost to NAFTA, with more outsourced to Mexico every week, including recently by Verizon and Boeing. New NAFTA investor-state dispute settlement (ISDS) attacks on environmental and health policies are being regularly filed after $392 million already has been seized from taxpayers by corporations using NAFTA’s ISDS regime.

While the text release will be an important step in NAFTA renegotiations and invariably launch a flotilla of statements from policymakers and the private sector alike, it is a milestone in a long process, not the end point. And that is not only because Canada may be MIA. What is contained in the published text and how members of Congress and other key constituents react will provide greater insights to NAFTA’s ultimate fate than whether Canada is signed on at this point.

For those who intend to support any deal or oppose any deal, the text release will provide a hook to state a final position. But for most, the text release will provide a long-awaited opportunity to ascertain if there are poison pill provisions or building blocks of an acceptable deal. To date only the 500 cleared trade advisers representing mainly corporate interests and those members of Congress who ventured to the secured Capitol reading room to review the text know any details. And not all elements of the text have even been available to them.

Viewed as a work in progress, the text release likely will raise many intriguing questions:

Congressional Reaction Will Be Telling: U.S.  Trade Representative Robert Lighthizer has declared that his goal with NAFTA renegotiation is to replace the old deal with a new approach that can obtain broad bipartisan support and be passed by a wide majority. If the text generates some unhappiness in both parties, but no rebellion in either amid foreseeable consternation about Canada, then that outcome remains possible.

What Does Labor Think: The acknowledgement to date of both progress and shortcomings by powerful players who have been opposed to past deals, namely unions, has been closely watched. The U.S. labor movement has been united in expressing concern about the enforcement of a new pact’s labor provisions that will be essential to raise wages in Mexico and ease the lure to outsource jobs. Progress on eliminating the investor protections that make it easier to outsource jobs and subject domestic policies to attack and addition of stronger rules of origin for the auto sector and related wage standards has been welcomed. But absent swift and certain enforcement of much stronger labor standards, U.S. corporations will continue to outsource jobs to Mexico to pay workers a pittance, dump toxins and import products back for sale here.

If Poison Pills Are Identified, Can They Be Excised?: The administration’s fact sheets on the  U.S.-Mexico deal revealed that it included a 10-year exclusivity term for biologic medicines. Most congressional Democrats have strongly opposed these extra monopoly rights that allow pharmaceutical firms to keep prices high by avoiding competition from generic medicines. If Democrats gain control of a chamber of Congress in the midterm elections, could changes to this term or others become necessary to gain their support? President George W. Bush had to alter some terms in free trade agreements he had previously completed but not sent to Congress when Democrats gained a House majority in 2006.

What Is the Road to Trilateralandia?: If the text that is released does not include Canada, then what? To start with, despite the current near-hysteria about Canada’s situation in the NAFTA talks, the notion of countries signing a trade agreement at different times is not new. For instance, most countries signed the Central America Free Trade Agreement on May 28, 2004. But negotiations with the Dominican Republic had not been concluded when the Fast Track notice of intent to sign and enter that deal was sent to Congress. So, a second signing ceremony including the Dominican Republic was held on Aug. 5, 2004. Congress passed the deal in July 2005.

Back to 2018, under Fast Track rules, a text must be posted by Sept. 30 for the deal that Congress was notified of on Aug. 30 to be signed by outgoing Mexican president Enrique Peña Nieto. Although Andrés Manuel López Obrador (AMLO), who enters office on Dec. 1, 2018, had a negotiator at talks since June and has announced he supports the deal, our Mexican allies confirm what was previously reported: AMLO doesn’t want to be the one signing it. Nor does he want NAFTA talks to become a perilous first order of business that could derail the momentum for his domestic economic reforms that his overwhelming electoral win generated. Already, the peasant farmer organizations that were an important part of his base have announced opposition to the U.S.-Mexico deal because it does not alter terms that thwart AMLO’s ability to deliver on his promises to revitalize small-scale farming. Thus, one scenario is that the U.S. and Mexico proceed to sign a deal by Nov. 30. And then a second signing ceremony on a trilateral deal occurs later. A final trilateral deal then is sent to Congress. This is not as improbable as it may seem. Many of the outstanding issues that remain to be resolved with Canada, such as dairy or the “cultural exception,” involve terms that will be memorialized in specific Canadian schedules of commitments or in Canadian lists of “non-conforming measures,” not in rewrites of chapters of the text, although there is that chapter formerly known as “NAFTA Chapter 19” that was, written out of the deal. The trickiest questions may relate to whether the administration must obtain additional authority to continue talks with Canada, and if so, what that means for the timing with Canada. Given Fast Track’s two 90-day notice periods, a new grant of authority would push the signing of a trilateral deal to April at the earliest, which would thrust NAFTA – and Donald Trump – into the middle of Trudeau’s reelection campaign. Oh Canada!

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NAFTA Notice: A Final Deal Must Be Judged on Whether It Will Stop NAFTA’s Serious Ongoing Damage

NAFTA-Announcement-Homepage-2

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

Note: The Trump administration gave notice to the U.S. Congress on Friday, Aug. 31 of its intent to sign a renegotiated North America Free Trade Agreement (NAFTA). Aug. 31 is the last day to give notice for a deal to be signed by outgoing Mexican President Enrique Peña Nieto. The U.S. reached agreement with Mexico on new terms, but talks with Canada are ongoing. The text of any deal would be made public only after 30 days’ notice. While much attention has been given to whether various deadlines can be met and the political and legal implications of various scenarios, the fundamental question is whether the content of a new agreement can halt NAFTA’s ongoing damage:

“We understand that progress has been made on some essential NAFTA changes we have long sought, like razing NAFTA’s investor tribunals where multinational corporations have grabbed $392 million in compensation from North American taxpayers after attacking environmental and health policies. But swift and certain enforcement of what we understand are improved labor standards is lacking and must still be added or U.S. corporations will keep outsourcing jobs to Mexico to pay workers a pittance, dump toxins and import products back to the U.S. for sale here.

Given the encouraging news about some of the key NAFTA changes we have long sought, we are closely monitoring the ongoing process with respect to improvements in labor enforcement that are necessary to counter NAFTA job outsourcing. We also closely monitoring the ongoing negotiations with Canada where several important consumer protection issues are at stake, including extended monopoly rights for pharmaceutical corporation that would increase medicine prices. Ultimately, we must see the final text to know whether our demands have been met.

Any final deal must be judged on whether it will stop NAFTA’s serious ongoing damage, given the pact now helps corporations outsource more jobs to Mexico every week (Almost one million American jobs have been government-certified as lost to NAFTA) and launch new NAFTA investor attacks on health and environmental laws after already $392 million has been grabbed from taxpayers. 

As we have made clear since Day One of renegotiations, the only agreement that can achieve broad support must end NAFTA’s job outsourcing incentives and Investor State Dispute Settlements tribunals – where corporations can attack our laws – and add strong environmental and labor terms with swift and certain enforcement to raise wages.

It may seem improbable that this administration could be making changes progressives have long sought, but public anger over outsourcing has made it impossible for business-as-usual trade agreements to get through Congress. The big questions are whether Trump will deliver a final deal strong enough to meet his election promises to return manufacturing jobs and cut the large NAFTA trade deficit and if so, whether Republicans in Congress would buck the corporate lobby and support a deal that would end NAFTA’s job outsourcing incentives and ISDS tribunals where corporations can attack our laws and add strong environmental and labor terms with swift and certain enforcement to raise wages.”

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U.S. Trade Deficit for First Half of 2018 Likely to Be Largest Recorded in Years, With China Deficit on Track to Be Highest First-Half Ever Recorded

January-June 2018 Data Out This Friday Likely to Show a Trump Trade Deficit Higher Than First Halves of 2017 or 2016

Contrary to Donald Trump’s claim last week that he has reduced the trade deficit by $52 billion, the United States is on track to post a record high goods trade deficit for the first half of 2018. When the U.S. Census Bureau releases the six-month data this Friday, the global deficit and China deficit are likely to be higher than in the first half of Trump’s first year in office, which was higher than the first half of President Barack Obama’s last year. The six-month 2018 North American Free Trade Agreement (NAFTA) deficit also is likely to be higher than the first half of Obama’s last year.

US-Trade-Balance-First-Five-Months-03
U.S. Trade Deficit with Selected Partners, Sum of First Five Months (Source: U.S. Census Bureau)

Trump’s $52 billion trade deficit reduction claim seems to be premised on a misleading comparison between an annualized change in the goods and services trade balance between the first quarter of 2018 (a $902 billion deficit) and the second quarter of 2018 (a $850 billion deficit.) But the U.S. goods trade deficit in the first quarter of 2018 was the largest first-quarter deficit since before the financial crisis, meaning a decline from that in the next quarter says very little about the overall trend. This comparison, like changes in month-to-month deficit figures that often are reported in the press, obscure actual trends. The monthly data are volatile, especially now, as U.S. exporters race to beat retaliatory tariffs on U.S. goods. Reviewing the same five-month goods trade balances shows that U.S. deficits with the world and with China were higher over the first five months of 2018 compared to the first five months of 2017, which in turn were higher than the first five months of 2016, even after adjusting for inflation.  (All figures in this memo are inflation-adjusted, so they represent the actual growth in the deficit expressed in constant dollars.)

What to Look for When Census Releases the Six-Month 2018 Trade Data on Friday

  • The goods trade deficit with China over the first half of 2018 is on track to be the highest first-half ever recorded. Comparing the first five months of Trump’s first year in office to his second, the China goods trade deficit increased 8 percent from $141 billion in 2017 to $152 billion in 2018. This compares to $136 billion for the first five months of 2016, Obama’s last year. As was widely reported, U.S. exports were inflated during the first half of 2018 by shipments racing to get ahead of the imposition of tariffs, but imports also grew substantially.
  • The goods trade deficit with the world over the first half of 2018 is likely to reach a level closer to the record deficits before the 2008-09 financial crisis. The U.S. trade deficit with the world over the first five months increased 5 percent from $320 billion in 2017 to $336 billion in 2018 after already hitting $296 billion in 2016, the last year of Obama’s term. The 2008 first five-month deficit, before the effect of the crisis was felt, reached a record $385 billion before falling to $206 billion in 2009 for the same period. 

  • The six-month 2018 NAFTA goods trade deficit may also increase in Trump’s second year, as it did in his first relative to Obama’s last year in office. The NAFTA deficit for the first five months of 2018 increased from $70 billion in 2016 to $82 billion in 2017 to $84 billion in 2018. Because re-exports now represent 20 percent of U.S. goods exports to NAFTA nations, for the NAFTA figures we use domestic export data. This excludes goods not actually produced in the exporting country. In 2016, 44 percent or nearly $100 billion of U.S. re-exports went to NAFTA partners – $53.5 billion to Mexico and $45.7 billion to Canada. No other country received more than 6 percent of U.S. re-exports. Not removing re-export artificially inflate export

Why Month-to-Month Trends Miss the Main Story

Many trade watchers focus on the change in month-to-month numbers, especially now as they study whether newly imposed tariffs are altering trade flows. But monthly trade figures are volatile, and the “seasonal adjustment” done by Census does not control for factors such as U.S. exporters trying to beat the imposition of various countervailing tariffs. Thus, the main storyline when the May trade figures were released was that the monthly deficit with the world was the lowest since October 2016. But missing in this assessment was that U.S. trade deficits with the world and with China were higher during the first five months of 2018 compared to the same period in 2017, which were in turn higher than the first five months of 2016, even after adjusting for inflation. A more complete picture of U.S. trade balance trends is achieved by comparing the year-to-date totals through the same point of previous years. This removes the need for seasonal adjustment, given the data cover the same months each year. (We focus on goods balances rather than total goods and services in this memo because services data broken down by trading partner lags the goods data by months. The services data by partner for the first half of 2018 will not be available until September 2018.)

NAFTA Balances and the Skew from Re-Exports: Yes, We Have A Deficit With Canada

Accurately accounting for NAFTA trade balances is complicated. Since NAFTA went into effect, the share of U.S. exports to Mexico and Canada that are re-exports of goods made in other countries has jumped from 5 percent in 1993 pre-NAFTA to 20 percent in 2017. (Re-exports are goods imported, for instance, from China into the United States and then exported to Canada without change. In 2016, one-third of U.S. re-exports to Canada were produced in China.) Counting re-export of foreign-made goods in U.S. export data inaccurately inflate export numbers. But to get an accurate balance, the import side of the equation also must be considered. The United Nations’ trade database, called Comtrade, provides official government data on domestic exports (i.e., not including re-exports). Consider the controversial question of whether the United States has a trade deficit with Canada. The Comtrade data show $221 billion in U.S. domestic exports to Canada and $266 billion in Canadian domestic exports to the United States in 2016, the most recent year that can be compared to available services data. That yields a $45 billion U.S. goods trade deficit with Canada. After subtracting the $24 billion U.S. services trade surplus with Canada documented by the U.S. Bureau of Economic Analysis, the United States still had a $21 billion goods and services trade deficit with Canada in 2016. When this issue came to the forefront earlier this year, analysts who did not subtract re-exports instead calculated a $7 billion U.S. surplus with Canada for 2016.

A Deeper Dig into the Data: About Those Soy Exports

Several deeper cuts of the data are worth considering. The first relates to what the United States is exporting, which to the world in 2017 was $138 billion of agricultural goods and $1.1 trillion of manufactured goods. There has been breathless coverage of how China’s retaliatory tariffs have impacted U.S. soybean exports, which are noted to be the second largest U.S. export to China after civilian aircraft, engines and parts. What this reveals is the lack of U.S. value-added exports to China after that nation’s accession to the World Trade Organization (WTO). After soybeans, the top 15 U.S. export products to China include commodities like crude oil (No. 4), copper scrap ( No. 7), propane (No. 8), aluminum scrap (No. 11), wood pulp (No. 12), cotton (No. 14) and paper waste (No. 15). The giant trade deficit with China is the result of exporting only $120 billion worth of goods in total. However, a large portion are low value-added commodities. Of the top 15 U.S. export products to China, $24 billion represent such goods, and only $31 billion, or 56 percent, represent high value-added product categories like cars and electronics. Meanwhile, 84 percent of Chinese imports into the United States are in these high- value categories. The United States runs over a $100 billion deficit with China in electrical machinery alone.

The second deep dive relates to the impact on wages from the composition of the goods we import and export. One way to view this is by checking the subset of the data on our manufacturing trade balance. Even the most orthodox economists admit that trade changes the composition of jobs – and thus the wages – available for U.S. workers. As the grandfather of modern trade economics, Nobel-Prize winning economist Paul Samuelson found in one of the last papers he published before his death, offshoring of higher-paid jobs to countries like China and India can cause U.S. workers to lose more in wages than they gain from access to cheaper imported goods. The downward pressure on wages is still the predominant feature of the U.S. labor market and trade is one of the significant factors fueling it and one of the only ones that can be altered via policy changes. The Center for Economic and Policy Research (CEPR) revealed that when comparing the lower prices of cheaper imported goods to the income American workers lost from low-wage competition under current trade policy, by 2001 the trade-related wage losses were larger than gains from access to cheaper goods for the majority of U.S. workers. CEPR found that those without college degrees (58 percent of the workforce) had likely lost an amount equal to 12.2 percent of their wages under NAFTA-style trade, even after accounting for the benefits of cheaper imports. That meant a net loss of more than $3,965 per year for the average worker. Despite this, defenders of the trade status quo dismiss the relevance of trade deficits, especially given strong economic growth figures in an economy running near full employment. Yet, while headline economic indicators are strong, damage that is occurring may remain invisible. When the tide goes out on a hot economy, the damage in lower wages and the disappearance of middle-class jobs for the majority of Americans without college degrees may be seen and felt acutely, just as it was after the 2008-09 financial crisis.

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Will the U.S. and EU Revive the Damaging Pro-corporate, Anti-people TTIP Agenda?

EU-US-Deal-Notes

Trump promised a new approach on trade policy that would fix past damage to working people. But what his administration and European Union officials said this week in their joint statement after European Commission President Jean-Claude Juncker’s visit to the White House sure sounds like a revival of the status-quo, pro-corporate agenda that Trump railed against in his campaign.

It remains unclear what the joint statement ultimately will lead to. However, anyone who cares about the safety standards on which we rely for our food and medicine, the energy and climate policies needed to save our planet, or financial regulations designed to prevent banks from gambling with our money and creating another crisis should be extremely worried.

The statement’s overall tone and specific worrying buzz words reflect the agenda that had been pushed by the largest U.S. and European banks, agribusinesses and other powerful industry groups in the Transatlantic Trade and Investment Partnership (TTIP) talks undertaken during the previous administration. That TTIP agenda had been resoundingly rejected by civil society on both sides of the Atlantic because people in Europe and the United States refuse to allow our fundamental environmental and consumer safeguards to be rewritten behind closed doors.

The statement calls for “zero non-tariff barriers.” “Non-tariff barriers” is trade-speak for any domestic policy or regulation that can affect multinational corporations’ ability to move goods or services across borders. Many consumer, health, or environmental safeguards we rely on to protect people and the environment are considered “non-tariff barriers” by business interests. Given that, does inclusion of this clause mean that the goal of these negotiations will be zero domestic safeguards on either side of the Atlantic – such as European GMO standards or U.S. financial regulations post-crisis – that might inconvenience a multinational corporation? That would be an even more radical pro-corporate plan than what was tried (and failed) in the TTIP negotiations.

Worryingly, the statement calls for “reducing barriers” to “chemicals,” “pharmaceuticals,” and “medical products.” The U.S. chemical industry sought to use TTIP to undermine Europe’s superior Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) policy. This chemical safety regime  is much more robust in protecting the public from unsafe chemicals than the broken U.S. policy.

Meanwhile, European pharmaceutical manufacturers called for the U.S. FDA to relinquish its current responsibility to independently approve the safety of medicines sold in the United States, proposing that the U.S. government automatically accept a European determination that a drug produced in Europe is safe for U.S. consumers. This language suggests that this dangerous industry wish list may be revived.

References to “a dialogue on standards in order to increase trade, reduce bureaucratic obstacles and slash costs” also sound suspiciously like a revival of the problematic and highly undemocratic “regulatory cooperation” agenda from TTIP. While cooperation among regulators is not inherently a bad idea, it IS very dangerous for such cooperation to happen in the context of trade negotiations that have explicitly prioritized reducing costs for businesses over any protection of consumers or the environment. The biggest banks, agribusiness, chemicals and pharma corporations in Europe and the U.S. have made clear what consumer and environmental protections they intend to undermine in the name of such “regulatory cooperation.”

The statement also explicitly calls for increasing exports of liquefied national gas (LNG) from the United States to Europe. This would create more market incentives for LNG companies to increase the environmentally destructive practice of “fracking” across the United States, even when many U.S. states have already or are considering banning the controversial practice altogether. Pushing for the extraction and transatlantic transport of even more fossil fuels takes both the United States and European Union in the categorically opposite direction of what is needed to transition to a low-carbon economy to address climate change.

It may be unsurprising – if tragic – that the Trump administration would pursue this policy, given its shameful withdrawal from the Paris Climate Accords. But that the EU would continue to pursue this is a stark abrogation of its commitment to combat climate change.

Finally, the statement’s call for the immediate creation of an Executive Working Group to move the agenda forward raises alarm bells. What is the scope of its mandate? Will there be any mechanisms to ensure that it is democratically accountable on both sides of the Atlantic? What is the nature of the “negotiations” it is undertaking?

A revival of the TTIP agenda might make some corporate cronies happy, but it would cause tremendous harm to the rest of us on both sides of the Atlantic. And it would be a clear betrayal of Trump’s promises to fix trade policy.

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Today’s D.C. Visit by Top Mexican Trade Officials May Reveal Whether a Renegotiated NAFTA Deal Can Be Signed in 2018

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

 Note: Today, the top Mexican trade officials of the current Peña Nieto and incoming López Obrador administrations will meet with U.S.  Trade Representative Robert Lighthizer. At issue is whether deals can be reached between the United States and Mexico on the last outstanding issues in North American Free Trade Agreement (NAFTA) renegotiations in time for the pact to be signed before Mexico’s current president leaves office. The high-level meeting occurs five weeks before the August 31 date by which the U.S.  Congress must be formally notified of a deal under Fast Track procedures for Mexico’s current president to sign a new pact. Even if a deal is signed this year, a U.S. congressional vote would likely occur in 2019. Lori Wallach said:

 “What’s new is Mexico’s heightened motivation to finalize a deal now, given that both the outgoing and incoming administrations appear to have compelling reasons to want a deal done in time for the current Mexican president to sign it and they generally agree on what terms would be acceptable. 

“If a deal cannot be reached now and negotiations roll into 2019, the timeline for talks to be concluded, as well as NAFTA’s ultimate fate, become less certain.

“Achieving a deal that can get through the U.S. Congress and that satisfies Donald Trump’s high-profile campaign pledges to bring back manufacturing jobs and reduce the NAFTA trade deficit is extremely tricky, but ironically less so if current predictions of Democratic gains in the midterm elections hold true. For decades, congressional Democrats have advocated for the NAFTA changes that could deliver the outcomes Trump promised, including elimination of NAFTA’s investor protections that promote job outsourcing and the addition of strong, enforceable labor and environmental standards to raise wages in Mexico and level the playing field.”

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Unpacking Disingenuous GOP Complaints About Presidential Trade Authority

At midnight on June 30, Fast Track, which delegates Congress’ constitutional trade authority to the president, extended for another three years.

The congressional Democrats, who fought this broad give-away of control over trade agreements even when it was President Barack Obama’s request in 2015, could not even obtain a vote because the procedure is so rigged it automatically extends unless a “non-extension resolution” is passed. But that vote can only occur if the congressional GOP leadership allows it.

And the congressional GOP, most of whom supported the extreme Fast Track procedure but now are cynically howling about undue presidential authority over trade, chose not to take action.

Under the U.S. Constitution, Congress is supposed to write the laws and set trade policy, while the executive branch represents the United States in negotiations with foreign governments. When it came to trade agreements, this arrangement required cooperation between the branches.

For 200 years, these key checks and balances helped ensure that no one branch of government had too much power over trade policy. But, starting with Nixon, presidents have tried to seize those congressional powers using Fast Track.

Fast Track, which supporters renamed Trade Promotion Authority as the procedure became increasingly controversial, empowers the executive branch to unilaterally select partner countries for “trade” pacts, decide the agreements’ contents, and then negotiate, sign and enter into the agreements — all before Congress has a vote on the matter. Normal congressional committee processes are forbidden, meaning that the executive branch is empowered to write lengthy legislation on its own with no review or amendments. And, then the president is guaranteed a vote on the done deal within a set amount of time with no amendments allowed and debate limited.

President Obama — despite his campaign promise to reject Fast Track — requested the authority for the Trans-Pacific Partnership (TPP). A years-long battle ensued, with opposition coming from a majority of the U.S. public, most House Democrats and a sizeable bloc of Republicans, organized labor, environmental groups, public health organizations, family farmers, and many more. Despite the unprecedented strength and diversity of this coalition focused on a trade issue, Fast Track authority was passed by a one-vote margin in June 2015.

This delegation of Fast Track authority was for a three-year period with an automatic renewal for another three years after that. The only way to stop the automatic renewal of Fast Track would have been with a congressional resolution of disapproval.

The AFL-CIO sent a letter to Congress opposing Fast Track renewal in its current form because of its opacity and inadequate labor standards. But the broad coalition in Congress and outside that almost stopped Fast Track in 2015 did not organize a push to end the procedure because the disapproval mechanism is designed to only function if the congressional leadership allows it.

And, it was a telling spectacle to watch Sen. Bob Corker (R-Tenn.) and other GOP senators going ballistic over President Donald Trump’s authority to do anything to stop trade cheating while revealing their disinterest in getting rid of the Fast Track legislative luge run. 

Fast Track has been the necessary swamp oil to grease the skids to pass pacts like the North American Free Trade Agreement (NAFTA), and other job-killing deals packed with special corporate protections and rights. The corporate lobby opposes the president having trade authority to combat trade cheating that costs American jobs, but loves Fast-Tracked trade deals that make it easier to outsource additional jobs.

The GOP inaction on Fast Track disapproval made 100 percent clear what is really going on: Team Trade Status Quo is keen to eliminate presidential authority on trade matters that break with their pro-job-outsourcing trade agenda while remaining committed to the current iteration of Fast Track with a view to trying to use it to get more-of-the-same trade deals.

That dynamic makes the current NAFTA renegotiation a moment of truth. The U.S. Trade Representative, Robert Lighthizer, is using this delegation of Fast Track to negotiate a NAFTA replacement that actually has a chance of making things better for working people rather than expanding greater corporate control over our lives.

The renegotiated NAFTA just might eliminate the job outsourcing incentives at NAFTA’s heart, including the system that empowers multinational corporations to attack our laws for taxpayer money before a panel of three corporate lawyers. And the NAFTA replacement may even add labor and environmental standards that could actually help raise wages and improve conditions for people throughout North America.

In the face of this potential game-changer of a trade agreement, congressional Republicans’ inconsistency on Fast Track belies the truth, that for them criticism of presidential trade authority was never about constitutional checks and balances – it was all about making sure their corporate cronies can do whatever they want.

However, the revised NAFTA deal is not done yet. And the GOP’s decision not to act against Fast Track extension suggests that they still think they can get the terrible, TPP-style NAFTA deal that they want.

The diverse coalition that fought Fast Track and that defeated the TPP must remain vigilant and show that a revolutionary new model for NAFTA that puts working people first is the only type of deal that will pass in Congress.

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For G-7, Trump’s racism and misogyny are ok, but his trade policies are intolerable

Trump-G7-2017
U.S. President Donald Trump greets Canadian Prime Minister Justin Trudeau during the 2017 G-7 Summit in Italy. (Official White House Photo by Shealah Craighead)

U.S. President Donald Trump seems as welcome at the G-7 picnic as a rabid skunk.

Most G-7 leaders have worked to build warm relationships with Trump, despite his xenophobia, racism, misogyny, climate denialism, warmongering and corrupt business self-dealing. But apparently, taking on the trade status quo was a bridge too far.

That is a bitter irony, given that the trade and financial policies that the G-7 has relentlessly promoted created the political context that helped to make Trump president. Decades of U.S. presidents from both parties and their G-7 counterparts have pushed international economic policies that have created expansive new rights and powers for multinational corporations and hurt working people.

Pushing corporate-rigged trade agreements, blessing financial deregulation and loosening trillions in speculative investment flows were the economic priorities.

Even as millions of manufacturing jobs were lost, absent was coordinated G-7 action to counter China’s currency manipulation or a unified approach to end Chinese subsidies and other unfair trade practices that, among other problems, fueled the global steel and aluminum oversupply glut.

And as working-class wages declined and income inequality and financial instability grew, the majority harmed by the G-7 version of globalization were told their fate was inevitable.

In the United States, that message was conveyed by Democratic and Republican presidents alike even as the economic and social fallout became increasing difficult to deny. About 4.5 million net American manufacturing jobs have been lost since the 1994 start of the North American Free Trade Agreement (NAFTA) and 2000 trade deal with China related to its admission to the World Trade Organization. Sixty-thousand manufacturing facilities shuttered. And real wages flattened, given that the replacement of the higher-wage manufacturing jobs with lower-wage service sector jobs pushed down wages economy-wide even if one did not lose their job to trade.

Enter Trump, who, whatever else his trade policies may or may not do, ended the bipartisan presidential practice of not seeing or talking about the many Americans who have been harmed by our trade status quo.

Therefore perhaps Trump’s truly unforgiveable sin, finally meriting open ire from G-7 partners, is to demonstrate that the trade status quo is, in fact, not pre-ordained, but rather is a set of policies he is shredding.

Trump may well not achieve the better trade outcomes he promised.

That would require him to stay focused on changing China’s cornucopia of unfair trade practices rather than settling for the usual Chinese promises to buy more U.S. exports. And, unless he can implement a replacement deal that eliminates NAFTA’s investor-state outsourcing incentives and adds strong labor and environmental terms with swift and certain enforcement to raise wages, companies will keep moving jobs to Mexico to pay workers a pittance and dump toxins and import those products back for sale here.

And, the U.S. corporate lobby is in overdrive working against any attempt to change the trade policies to preserve the status quo. Doing so is apparently a higher priority for them than preserving the Republican congressional majority. The Koch Brothers just announced a campaign designed to line up congressional Republicans against Trump’s trade agenda before the midterm elections, even as polls show GOP and Independent voters support that agenda.

Plus, Trumpian chaos has led to Trump caving on well-thought-out policies, such as the China trade enforcement action aimed at dismantling the technology theft essential to the China 2025 agenda to dominate industries of the future. That approach was revived, for now.

But whether or not Trump’s trade policies succeed, the other G-7 leaders should reflect on the painful lesson of Trump’s rise and that of other authoritarian politicians who wrap themselves in economic populism: Political leaders who fail to offer a new approach on trade and the related economic policies that provide greater economic security for all only serve to alienate more and more people who are left behind, creating fertile political ground for more Trumps.

Trump’s pledges to upend the trade status quo, end job outsourcing and create manufacturing jobs attracted hard-hit working-class votes in the key Midwestern swing states that put him in the White House. And President Barack Obama’s relentless efforts right through the 2016 campaign to pass the business-as-usual Trans-Pacific Partnership (TPP), and Secretary Hilary Clinton’s ambiguous views on the TPP and connection to President Bill Clinton’s NAFTA, dampened working-class enthusiasm for the Democratic ticket.

If Trump’s foreseeably cringe-worthy exploits at the G-7 don’t drive home this point, perhaps yesterday’s election of Doug Ford — considered the Donald Trump of Canada and brother of the infamous right-wing, populist, crack-smoking Ontario Mayor Robert Ford — as Ontario’s new Premier will.

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Corporate Lawyers Hijack UN Meeting, While Civil Society Is Sidelined

By Melinda St. Louis

As originally published in TruthOut

Thanks to years of public education and organizing around the globe, the once-obscure investor-state dispute settlement (ISDS) system is on the ropes. The ISDS system, buried in trade and investment agreements, grants new rights to multinational corporations to sue governments before a panel of three corporate lawyers. These lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits, and their decisions are not subject to appeal. The corporations need only convince the lawyers that an environmental law or safety regulation violates the expansive investor rights granted by such pacts.

As governments are increasingly questioning the legitimacy of this system, the law firms and corporate beneficiaries of the regime are trying defend it, including by rigging international intergovernmental meetings like the one I recently managed to attend despite being banned. 

Supporters of the ISDS regime are on the defensive for good reason. The Trans-Pacific Partnership (TPP) never achieved majority support in the US Congress in large part due to bipartisan opposition to ISDS -- from the Republican-majority National Conference on State Legislatures and US Supreme Court Chief Justice John Roberts, to Nobel laureate economist Joseph Stiglitz and Sen. Elizabeth Warren. The EU Trade Commissioner admitted that ISDS was "the most toxic acronym in Europe." As the number of ISDS cases filed each year has exploded and corporations have won billions in attacks on a stunning array of policies, governments from South Africa to Indonesia to Ecuador have terminated many of their treaties that include ISDS. Even the Trump administration has proposed eliminating ISDS from the North American Free Trade Agreement (NAFTA).

The law firms, tribunalists, hedge funds and private equity firms getting rich off of these raids on governments' treasuries have been scrambling to figure out how they can save the system, even as they are being forced to reckon with massive opposition to ISDS by civil society and governments alike.

The result has been a high-stakes shell game, with ISDS defenders setting up discussions about whether the system requires "reforms" that are designed to avoid real change.

Biased ISDS "Reform" Discussions

Exhibit A: The little-known United Nations Commission on International Trade Law (UNCITRAL), which provides one set of rules under which many ISDS cases are litigated, has now been forced to engage in a discussion about the need to reform ISDS. Very few people -- even within governments -- have paid much attention to UNCITRAL. But the arbitration industry, and all the law firms who make millions bringing ISDS cases on behalf of corporations or sitting as arbitrators in these ad-hoc tribunals, have been heavily invested in this process.

Whose views is UNCITRAL most interested in hearing, as the agency holds a series of meetings to discuss whether ISDS reform is desirable and what those reforms should be? The report from the first November 2017 UNCITRAL ISDS "reform" meeting made that quite clear: Of the 27 the groups listed as non-governmental "observers," all but two (93 percent) represented the arbitration industry. If this were not sufficiently galling, many of the governments' own delegations to the meeting included private ISDS lawyers and arbitrators. Indeed, some governments, including Mauritius, Iceland and Bahrain, were solely represented by practicing arbitrators. 

The arbitration industry is obviously not keen for UNCITRAL to engage in meaningful reform of the system. Those who wish to save the ISDS regime are aiming to hijack the UNCITRAL reform discussion to maintain the status quo or promote half-measures around the margins that do not address ISDS's fundamental flaws. For instance, the European Union has been pushing a proposal to establish a "multilateral investment court" within this process, which could actually institutionalize and formalize the ISDS system.

Critical Voices Not Welcome?

Concerned about this danger, Public Citizen's Global Trade Watch, along with other international civil society organizations, applied to be observers at the April 2018 meeting in order to provide more critical views of some of the emerging proposals. UNCITRAL's observer application process is opaque and unclear, but we sent a detailed letter explaining how we met their observer criteria relating to international focus, competence and expertise in the subject area, and whether we would contribute to reaching the goal of a more balanced representation of major viewpoints.

We fully expected to be approved as observers, given our deep expertise in the issue and that we have been accredited to attend all the World Trade Organization Ministerial meetings and other UN meetings on ISDS. But Public Citizen and other close allies received rejection letters from UNCITRAL.

The message seemed pretty clear: UNCITRAL welcomes the arbitration industry to be a part of these discussions, despite the clear conflict of interest. But several civil society organizations like ours that represent the public interest were to be kept away.

A Fly on the Wall

Despite being officially banned from the premises, yours truly managed to attend the April 2018 UNCITRAL meeting in New York as a guest of an approved organization. The flawed, biased process became even more evident.

The arbitration industry dominated observer and governmental delegations in the actual formal sessions. Thirty-seven of the 44 non-governmental observer organizations represented private lawyers and arbitrators, while only seven represented broader civil society interests. Hardly "reaching the goal of a more balanced representation of major viewpoints" that was the remit of the UNCITRAL secretariat.

An "academic forum" -- held on the sidelines of the UNCITRAL meeting -- was organized by a well-known arbitrator who served as an official member of Switzerland's delegation to the meeting. Many academics who participated in the forum were also arbitrators themselves with a personal financial stake in the ISDS system. Not only were well-known academic critics of the system notably absent from the invitation list, but the event itself was held at the New York International Arbitration Centre -- not exactly a neutral, academic venue. 

The UNCITRAL secretariat did not have its story straight about the role of this academic forum or a separately organized "practitioners' forum," which even more explicitly represented the views of the arbitrators. 

During an introductory meeting with civil society organizations, the UNCITRAL representative explained that the practitioners' forum and the academics' forum were separate from the UNCITRAL proceedings. The official said that results of those discussions would only be linked to the UNCITRAL website if they meet a "test" of "objective, neutral and fact-based, technical and not political, and from research and not political organizations." It is peculiar that the views of people with a personal financial stake in maintaining the ISDS status quo as arbitrators might be considered "neutral" and "not political" in a discussion about reforming the ISDS system.

It only got more bizarre. During the UNCITRAL meeting, an official US government delegation representative took the floor and invited all the government delegates to an evening event hosted by his law firm, King and Spalding. The firm has represented corporations in some of the most egregious ISDS claims, including the infamous Chevron v. Ecuador case. No one in the room seemed to question the propriety of a private law firm that earns millions from the ISDS system speaking on behalf of the US government delegation to invite delegates at an intergovernmental meeting to that law firm's event. 

At that King and Spalding event, the UNCITRAL secretariat announced that because they "wanted to ensure the widest possible input, [UNCITRAL] set up the practitioners' forum and the academic forum," and they specifically wanted "to hear from arbitrators because they are the people most affected by the UNCITRAL process." Yes, those would be the same forums that UNCITRAL officials said were unrelated to the meeting. And of course, no mention of the communities around the globe who are affected by ISDS attacks against their environmental, public health and safety laws.

Further, while civil society organizations were informed by UNCITRAL that no space was available inside the UN building for side events, the International Chamber of Commerce held just such a side event down the hall from the official meetings in the UN building.

Perhaps perceiving the public relations nightmare that might arise from their biased meeting, towards the end of the week, some governments and the UNCITRAL secretariat took some small steps to include the perspectives of the few civil society organizations present.

But the takeaway from the UNCITRAL's process for its so-called "reform" discussions thus far is that lawyers making millions in ISDS cases are welcomed, while the voices of the millions of people whose lives are harmed by ISDS cases brought by multinational corporations are barely an afterthought.

Venues like UNCITRAL and the arbitration industry may want to tamp down the wave of opposition to the unjust ISDS system, even as they go through the motions of considering "reform." But sidelining the growing critique against ISDS from across the political spectrum around the globe will most certainly backfire. Worldwide, the call to end ISDS is only growing louder, and pro-status quo forces ignore those voices at their peril.

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NAFTA Talks Should Continue Until a Good Deal Is Achieved

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

Lori Wallach, director of Public Citizen’s Global Trade Watch, released the following statement upon the conclusion of today’s North American Free Trade Agreement (NAFTA) ministerial meeting:

“Until a deal is achieved that eliminates NAFTA’s job outsourcing incentives and foreign tribunals exposing our laws to attack, and that adds strong labor and environmental standards with swift and certain enforcement to raise wages, talks should continue. The administration has been making progress on important elements of the major NAFTA replacement deal that is needed, and we hope they continue negotiating until they get a deal that would enjoy broad support.

Only a deal that eliminates NAFTA’s job outsourcing incentives and investor-state dispute settlement tribunals and adds strong labor and environmental standards with swift and certain enforcement can obtain broad support in Congress, a reality demonstrated by the Trans-Pacific Partnership falling dozens of votes short of passage in the previous Congress.

Certainly the continuation of the status quo of NAFTA helping corporations outsource more jobs to Mexico every week and attack health and environmental safeguards in secretive tribunals is not acceptable. President Trump promised to bring jobs back with a quick NAFTA renegotiation, but more important than a fast deal is the right deal that transforms the failed NAFTA model. Members of Congress, unions and small businesses, state legislators and consumer groups have articulated for decades the structural changes needed to NAFTA to reverse its outsourcing incentives, downward pressure on wages and attacks on our health and environmental laws.”

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New Data Show Trump’s First Quarter 2018 China and Mexico Trade Deficits Largest on Record as All Eyes Focus on This Week’s Trade Discussions in China, Looming NAFTA Deadline

U.S. Trade Deficit With World Largest Since 2008 Financial Crisis, Contrary to Trump’s Campaign Pledge to Quickly Reduce Deficit to Bring Back Manufacturing Jobs  

WASHINGTON, D.C. – Record-high first-quarter trade deficits add to the urgency of the Trump administration succeeding in reworking the terms of U.S.-China trade and the North American Free Trade Agreement (NAFTA), Public Citizen said today.

The 2018 first quarter goods trade deficit with China and with the world is significantly larger than figures for the first quarter of 2017 even as the March monthly goods deficit with China declined as U.S. exporters accelerated shipments to beat tariffs that may be imposed relating to the 301 action, which gave an extra boost to U.S. exports overall this month.

President Donald Trump’s pledge to quickly reduce the U.S. trade deficit remained unfulfilled after the U.S. trade deficit rose in 2017. As his second year in office begins:

  • The first-quarter goods trade deficit with China is the largest ever recorded at $91.1 billion, up from $80.7 billion for the same period last year;
  • The goods trade deficit with the world of $196.7 billion is larger than any period since before the 2008 financial crisis – up 8.5 percent over the first quarter of 2017 deficit of $181.4 billion.
  • The first-quarter goods trade deficit with Mexico is the largest ever recorded at $33.3 billion, up from $30.6 billion for the same period last year. After improving from 2011 to 2016, but worsening in 2017, the NAFTA first-quarter 2018 goods deficit is up slightly relative to the first quarter of 2017 – an increase from $49.1 billion to $49.6 billion. (NAFTA data exclude re-exports, which account for 20 percent of U.S. exports to NAFTA countries.)
  • The 2018 first-quarter goods trade deficit with the world is up $24.4 billion compared to the $172.4 billion first-quarter global goods deficit in 2016, the last year of the Obama administration. The deficit in manufactured goods remained 88 percent of the overall deficit from 2016 to 2017, contradicting Trump’s promises to help manufacturing workers.

(All data in inflation-controlled terms.)

With the comment period on proposed China 301 tariffs closing at the end of May, Trump’s senior trade and economic advisers are in Beijing this week seeking major changes to the terms of U.S.-China trade. NAFTA talks must be completed within weeks for a pact to be voted on this year, but only a deal that removes NAFTA’s job outsourcing incentives and adds strong and strictly enforced labor and environmental standards could change the trade deficit trends. Given the failure of the Trans-Pacific Partnership to obtain majority support in Congress, such a major redo of the past U.S. trade agreement model is also necessary for a new pact to be approved by Congress.

“This ever-expanding trade deficit is like the ghost of Trump trade promises past that is haunting the U.S. negotiators now in Beijing trying to remedy the debacle of our China trade policy and those trying to conclude a NAFTA replacement deal that ends the outsourcing incentives and thus could win broad support,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The Deficit Is Now Mostly Made Up of Manufactured and Agricultural Goods, With the Oil Deficit Down

Economists who critique the significance of bilateral deficits nonetheless agree that large sustained overall trade deficits can suppress demand and slow economic growth. The overall U.S. trade deficit is mostly made up of manufactured and agricultural goods. Growth in U.S. oil exports and a decline of oil imports since 2011 have masked the deterioration of the non-oil trade deficit.

Over the past three years, the worsening of the non-oil trade deficit has been comparable in magnitude to the worst part of the 2000s “China shock” period, reaching 3.5 percent of GDP between 2014 and 2017 compared to 3.6 percent of GDP between 2002 and 2005. The non-oil trade deficit increased from $573 billion to $756 billion from 2014 to 2017, including the increase in Trump’s first year of office from $703 billion to $756 billion.

“Expect ever-expanding trade deficits that eviscerate Trump’s grand trade reform promises unless the administration transforms our failed China trade policy and removes NAFTA’s job outsourcing incentives, adds strong labor and environmental standards, and thus achieves a NAFTA replacement that can get through Congress,” Wallach said.

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New Trump Administration Trade Report Sticks to the Status Quo

The Trump administration’s recently released 2018 National Trade Estimate Report could become classic reading for political science students studying the “deep state” concept.

The 2018 report, which provides a 500-page compilation of policies in other countries that U.S. commercial interests claim are “trade barriers,” is remarkably similar to Obama-era editions of this congressionally-mandated annual report.

Yes, it was shocking that the Obama administration issued a report that labeled countries’ public health and environmental policies, food-labelling laws, and even religious standards as significant trade barriers. Sadly, this aspect of the report is not surprising for the new administration. 

But attacks in the report on other countries’ policies that reflect the new administration’s approach can only be explained by the reality that too many career trade-policy staff are rutted in pro-status-quo groupthink.

Exhibit A: A key administration demand in the North American Free Trade Agreement (NAFTA) renegotiations is to cut investor-state dispute settlement (ISDS). Administration officials have made clear that ISDS is considered a problem because it makes it less risky and costly to outsource jobs and because it undermines sovereignty. The ISDS system empowers foreign investors and corporations to skirt domestic courts and attack domestic policies by going before tribunals of three corporate lawyers to adjudicate claims. These extra-judicial international arbitration tribunals can order unlimited compensation be paid to investors by a host country’s taxpayers.

Yet this year’s report identifies as a barrier Mexico’s hydrocarbons law because it requires foreign companies to use the domestic court system in Mexico to arbitrate certain government disputes – rather than allowing foreign firms to use unaccountable international tribunals.

Along the same lines, the Trump administration is seeking to roll back NAFTA terms that require the waiver of Buy American and other domestic preference programs. But the report attacks Quebec’s requirement that 60 percent of the goods used in wind energy projects be sourced domestically as this “could pose hurdles for U.S. companies in the renewable energy sector in Canada.”

Jumping from NAFTA to other news headlines, another barrier listed is the European Union’s new privacy law. According to the report, the policy adds “new requirements for accountability, data governance, and notification of a data breach,” which may “increase administrative costs and burdens” for U.S. companies operating in Europe. Funny thing is that U.S. megacorporation Facebook, facing attacks on its lax safeguards, just announced it is adopting the European standard for its operations worldwide.

It bears noting that once again even public health policies designed to improve maternal and infant health are attacked as trade barriers in the report. That includes Malaysia’s proposed revisions to “its existing Code of Ethics for the Marketing of Infant Foods and Related Products” that would restrict corporate marketing practices aimed at toddlers and young children. Also, the report criticizes Hong Kong’s recent regulations governing the marketing of infant formula. Although acknowledging that the regulations are based on “World Health Organization guidance and purportedly voluntary,” the report parrots the food industry’s concern that Hong Kong’s new policies might become mandatory.

Other eyebrow-raising trade barriers? The report criticizes Malaysia – a predominantly Muslim country – for having certain restrictions on the importation of alcohol, and Brunei – another predominantly Muslim country – for requiring that non-halal foods be sold in specially designated rooms.

It remains to be seen whether future National Trade Estimate reports by the Trump administration will be consistent with the administration’s stated positions or the deep-state “trade-think” of decades of Democratic and Republican administrations past will prevail. Either way, we will be watching closely.

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On Announcement of Revisions to U.S.-Korea Free Trade Agreement

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

WASHINGTON, D.C. – As the administration announced revisions to the U.S.-Korea Free Trade Agreement (FTA), Lori Wallach, director of Public Citizen’s Global Trade Watch, commented:

“Despite the touted 10,000 tariff cuts and promises of more exports, more jobs, our deficit almost doubled in the FTA’s first five years as U.S. agricultural exports declined and a flood of Korean cars were shipped here.

“It’s unclear how the proposed changes to the pact itself would reverse the doubling of our Korea trade deficit under KORUS, but the new currency agreement could make a difference if it has teeth, delaying the U.S. tariff cuts on Korean trucks could stop the big imbalance from getting even worse, and the parallel steel agreement is significant.

“The limited revisions to KORUS do not the promised new American trade agreement model make, which puts added pressure on NAFTA renegotiations to deliver a deal that eliminates the job outsourcing incentives in our past trade deals and adds strong labor and environmental standards with swift and certain enforcement.  

“Success on many key issues that were not addressed at all in this deal – such as the elimination of job outsourcing incentives and the controversial ISDS tribunals, the tightening of automobile rules of origin, and the addition of strictly enforced labor and environmental standards – will determine if a renegotiated NAFTA can get the bipartisan support necessary to get it passed.”

KORUS Outcomes: First Five Years

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

U.S. exports to Korea declined 7.8 percent ($3.7 billion), and imports from Korea increased 13.1 percent ($8.1 billion) by the end of KORUS’ fifth year.

  • Since the FTA took effect, S. average monthly exports to Korea have fallen in nine of the 15 U.S. sectors that export the most to Korea, relative to the year before the FTA.
  • U.S. exports to Korea of agricultural goods have fallen 5.4 percent in the first five years of the Korea FTA, despite almost two-thirds of U.S. agricultural exports by value obtaining immediate duty-free entry to Korea under the pact. U.S. agricultural imports from Korea, meanwhile, have grown 45.4 percent under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined 8.1 percent, or $554 million, since the FTA’s implementation. The Obama administration promised that U.S. exports of meat would rise particularly swiftly, thanks to the deal’s tariff reductions on these products. However, despite U.S. officials’ promises that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade, South Korea has imposed temporary bans on imports of American poultry in each of the last three years, including 2017. Comparing the fifth year of the FTA to the year before it went into effect, U.S. poultry producers have faced a 78 percent collapse of exports to Korea – a loss of 82,000 metric tons of poultry exports to Korea. U.S. pork exports have also dropped 1 percent.
  • The 85 percent trade deficit increase with Korea under the pact – from $14 billion in the 12 months before the pact went into effect on March 15, 2012, to $26 billion in its fifth year – came in the context of the overall U.S. trade deficit with the world decreasing by 5 percent. While U.S. goods imports from the world decreased by 7.1 percent, goods imports from Korea increased by 13.1 percent.
  • During that period Korea’s GDP rose 15 percent, and the unemployment rate has averaged 3.4 percent, belying the claims from KORUS defenders that the growing deficit was fueled by weak growth and thus weak demand in Korea.  
  • The U.S. service sector trade surplus with Korea grew much slower since the FTA. In KORUS’ first five years, it increased by only $2 billion from 2011 to 2015, a growth rate of 29 percent, which is notably 64 percent slower than our services surplus growth over the five years before the FTA went into effect.
  • Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 59 of the 60 months of KORUS’ first five years, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit in the five years before the deal.
  • The auto sector was among the hardest hit: The U.S. trade deficit with Korea in motor vehicles grew 55.7 percent in the pact’s first five years. S. imports of motor vehicles from Korea have increased by 64.2 percent, or $6.4 billion by the fifth year of the Korea FTA.
  • Exports of machinery and computer/electronic products, collectively comprising 27 percent of U.S. exports to Korea, have fallen 17.1 and 18.8 percent, respectively.
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Public Citizen Report: ‘Follow the Money: Did Administration Officials’ Financial Entanglements With China Delay Trump’s Promised Tough-on-China Trade Policy?’

WASHINGTON, D.C. – As the administration is poised to announce long-awaited action on a China trade investigation launched last summer, Public Citizen released a report revealing Trump administration Cabinet members’ and top advisors’ longstanding personal financial entanglements with the Chinese government and government-connected firms. The report raises the question of whether the lack of action during President Donald Trump’s first year in office despite China being candidate Trump’s top target of trade wrath is better explained by the current or past Chinese financial entanglements of numerous top administration officials rather than an ideological battle over trade in the White House.

The report reveals the widespread business connections – some ongoing – between Trump Cabinet officials and other senior staff and Chinese government-run or connected firms that may have affected administration trade policies on China. For instance, despite pledging to divest from two Chinese shipping firms in which he was invested, U.S. Commerce Secretary Wilbur Ross’ financial transaction reports do not include the sale of an estimated $125 million stake in Navigator Holdings, which operates a fleet of liquefied natural gas (LNG) tanker ships that could benefit from several gas-related investment deals with Chinese government-linked firms that Ross announced since becoming Commerce secretary.

“The exits of White House Economic Adviser Gary Cohn and U.S. Secretary of State Rex Tillerson will significantly diminish the top staff with past or current significant financial stakes in China and with Chinese government entities, although Ross remains,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Will changes in personnel lead to changes in policy with the recent trade enforcement actions paving the way to creation of the comprehensive new China trade policy that is decades overdue?”

Only on China trade were administration trade actions during Trump’s first year opposite of Trump’s campaign pledges and rhetoric. Even Trump’s bellicose China trade rhetoric from the campaign was replaced by an uncharacteristically subdued tone. Rumors have raged since Thanksgiving that the administration would impose punitive measures against Chinese technology theft via a Section 301 investigation that the administration initiated in August. But time and again, action was delayed.

During Trump’s China state visit, Ross gleefully touted Goldman Sachs’ new $5 billion joint fund with the Chinese government’s main investment arm and plans by other state-owned and state-linked firms to buy assets in sensitive U.S. infrastructure, energy and food sectors. Such investments may facilitate the Chinese government “Made in China 2025” plan to dominate the global economy but would seem antithetical to Trump’s promised “tough on China” agenda.

A review of the top-level staff of the Trump administration shows stark conflicts of interests not just relating to business in or with China, but with the Chinese government. These ties and conflicts include:

  • Previous or current ownership of shares in companies profiting from Chinese state-owned investment in the United States (Ross, Cohn, Treasury Secretary Steve Mnuchin, Trump Senior Adviser Jared Kushner);
  • Investments in companies doing business in China that may not have been divested at the time an official was engaged in policymaking that could impact his investments (Ross);
  • Co-investments with Chinese state-owned investors that may not have been divested at the time an official was engaged in policymaking that could impact his investments (Ross);
  • Previous direct ownership of stakes in Chinese state-owned companies (Cohn and Tillerson);
  • Ownership of businesses awaiting approvals for pending trademark applications in China (Ivanka Trump); and more.

The new report provides a compilation of information that is available about these links; many investments might not be disclosed as they may be held in investment vehicles in which the underlying assets are not known.

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TPP-11 Countries Sign a Deal — While We Dodged a Bullet on ISDS Expansion Here, Our International Allies Face a Major Fight

Thanks to years of organizing, we in the United States saved ourselves from the corporate-dominated Trans-Pacific Partnership (TPP) by ensuring that the controversial deal was universally reviled across party lines and could never gain a majority in Congress.

But it is deeply unfortunate for our international partners that this week the remaining 11 TPP countries — including Canada and Mexico — signed the deeply flawed TPP model for their countries in a cynically renamed “Comprehensive and Progressive Trans-Pacific Partnership.” We know from our years-long, internationally-coordinated TPP campaign that our sisters and brothers in those nations fought against the corporate-rigged TPP model as hard as we did. We stand in solidarity with them as they continue to mobilize to block the ratification and implementation of this TPP-11 deal in their countries.

While some of the most egregious provisions pushed by Big Pharma that would have further threatened access to life-saving medicines were fortunately set aside (for now) in the revised TPP-11 deal, most of the TPP’s dangerous rules remain intact. It is shocking, for instance, that Canada, Mexico and others agreed to maintain the infamous investor-state dispute settlement (ISDS) system (with only some minor tweaks), that empowers multinational corporations to attack public interest laws before panels of three corporate lawyers.

We dodged a bullet here in the United States — the TPP would have doubled U.S. exposure to investor-state attacks against U.S. policies by newly empowering more than 1,000 additional corporations in TPP countries, which own more than 9,200 additional subsidiaries in the United States, to launch investor-state cases against the U.S. government.

But, it is beyond perplexing that Canada and Mexico would agree to expand their liability to these ISDS attacks on their laws in the TPP-11. In the North America Free Trade Agreement (NAFTA) renegotiations, the United States has proposed to radically roll back ISDS, which should be good news for Canada and Mexico, since Canadian and Mexican taxpayers have paid $392 million to mostly U.S. corporations who won ISDS attacks against their public interest laws using NAFTA.

The corporate lobby, which has been doing all it can to block the positive NAFTA proposal to roll back ISDS, is undoubtedly rejoicing that the TPP-11 countries have signaled their willingness to accept expansion of the controversial ISDS system.

But the diverse consensus to end ISDS in NAFTA and elsewhere spans the political spectrum, with stark criticism coming from voices as disparate as U.S. Supreme Court Chief Justice John RobertsReagan-era associate deputy attorney general Bruce Fein, the pro-free-trade libertarian Cato Institutethink tank, U.S. Senator Elizabeth Warren (D-Mass.)Nobel laureate economist Joseph Stiglitzunions and environmental groups.

We will continue to push to remove ISDS from NAFTA and support our allies in Canada, Mexico and in the other TPP-11 nations as they fight ISDS expansion.

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In Memory of Zahara Heckscher

Zahara_HeckscherAll of us at Public Citizen lift up in loving memory our dear friend and peaceful warrior Zahara Heckscher, who passed away on February 24 at the age of 53, after her years-long battle with breast cancer. 

Among her many talents as a writer, poet, teacher and facilitator, Zahara was a fierce, creative and committed activist. As she valiantly battled advanced breast cancer, she became determined to fight for all patients to have access to the cutting-edge cancer medicines that extended her life. 

When she learned that prescription drug companies were using the Trans-Pacific Partnership (TPP) negotiations to lock in extended monopolies that threatened access to affordable medicines, Zahara became a passionate trade justice advocate on behalf of cancer patients around the world. 

She galvanized testimony from people living with cancer and HIV/AIDS from the United States and other TPP countries to protest what she dubbed the “TPP death sentence clause” — a provision that would require governments to grant monopoly periods for biologic medicines used to treat cancer and other serious illnesses and thus deny patients access to more affordable generic and biosimilar medicines.  

The battle over biologics and access to cancer treatment was responsible for dragging out TPP talks for years. In October 2015, she carried those patients’ stories with her to the final round of TPP negotiations in Atlanta to demand that the TPP negotiators drop the “death sentence clause”. She was arrested as she attempted to enter the negotiations, holding an IV-pole, calling on the U.S. Trade Representative (USTR) to drop its insistence on demanding the extended monopoly period for biologic medicines. 

The video of her arrest was shared widely on social media, and her subsequent media interviews on Democracy Now, The Big Picture and others contributed to the national conversation about the dangers of the TPP for health. Due in part to the advocacy of public health advocates like Zahara, the pharmaceutical industry and USTR failed to convince the other TPP nations to accept the full twelve-year monopoly they had been demanding, but the final TPP did include a five-year period.

Zahara insisted that cancer patients cannot wait even one additional year for access to medicines that can keep them alive, so she turned her efforts to stopping Congress from ratifying the TPP.

On World Cancer Day in February 2016, she and fellow cancer survivor Hannah were arrested blocking the entrance to PhRMA, the pharmaceutical industry’s lobby that had pushed the TPP death sentence clause, to warn the public and Congress about TPP’s dangers for access to cancer medicines.  Together, Zahara and Hannah then co-founded Cancer Families for Affordable Medicines, creating public education and advocacy materials for cancer patients and their loved ones to support access to medicines by convincing their members of Congress to vote no on the TPP. 

As the pressure on Congress to pass the TPP mounted in the summer of 2016, Zahara took her message directly to Capitol Hill, getting arrested a third time at the office of Congressman Polis, and traveling to speak in-district to undecided members of Congress to demonstrate what was at stake in the TPP for cancer patients and their loved ones. Despite the fact that TPP passage was a top priority of the White House, Republican congressional leadership and Chamber of Commerce, the district-by-district activism by people like Zahara ensured that the TPP could not achieve majority support in Congress.

In the last year, Zahara’s waning physical strength did not stop her from continuing her trade justice activism. Concerned by reports that the Trump administration was pushing for the same “death sentence clause” in its renegotiations of the North America Free Trade Agreement (NAFTA), just last month, Zahara made an educational video to urge people to take action to ensure that NAFTA renegotiations not further undermine access to essential medicines.

Until the very end, Zahara used every tool at her disposal — from her razor-sharp intellect to her poetic spirit to even the cancer itself — to bless the world and to change it for the better. Her strategic and creative trade justice activism was just one small piece of her multi-faceted legacy. She was an inspiration. We will miss her dearly.

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Mexico City NAFTA Renegotiation Round: If No Progress on Major U.S. NAFTA Reform Proposals, What is Path Forward?

WASHINGTON, D.C. – As the seventh round of North American Free Trade Agreement (NAFTA) renegotiation talks begin in Mexico City this weekend, Lori Wallach, director of Public Citizen’s Global Trade Watch, commented:

“A NAFTA replacement deal that would enjoy bipartisan congressional support is entirely possible because U.S. negotiators have stood up to the interests trying to thwart real change and have resolutely pushed proposals to cut NAFTA’s job outsourcing incentives and the ISDS tribunals where corporations can attack our laws and to add stronger rules of origin and an accountability-injecting sunset clause.

With time running short, the question is whether some of these U.S. proposals to restructure NAFTA can be agreed upon in Mexico City and progress made on adding strong labor and environmental standards with swift and certain enforcement to stop companies from moving U.S. jobs to Mexico to pay workers poverty wages and dump toxins and then import those products back for sale here.”

The State of Play as the 7th Round of NAFTA Renegotiations Talks Begin

Two major related questions loom over the seventh round of NAFTA renegotiations that will be begin this weekend: the timeline and whether the three countries can make progress on the elements of a deal that will be necessary for it to get through the U.S. Congress.

The extended end-of-March deadline that the NAFTA countries set for completing a deal is fast approaching, as is the July 1 Mexican presidential election.

The U.S. corporate lobby has battled against the proposals that U.S. Trade Representative (USTR) tabled at the October NAFTA round to restructure NAFTA’s investment, procurement and rules of origin terms and to add higher rules of origin and a review and sunset provision. Not surprisingly, given these changes are necessary both to deliver on President Trump’s campaign promises on NAFTA and to achieve a deal that can get through Congress, the administration has not budged on these proposals.

For most of 2017, both Mexico and Canada simply refused to engage on the main U.S. demands, which was the corporate lobby’s advice. In late December Mexico shifted course, perhaps recognizing that ignoring priority U.S. NAFTA reform proposals actually would not make them go away.

Now with the window of opportunity closing to get a deal before Mexico’s election season kicks into high gear, will agreement be reached in Mexico City on any of the core U.S. reforms? Doing so could pave the way to the sorts of grand bargains that get trade deals done. And given that the United States launched the renegotiations with specific goals in mind, if the changes needed to deliver on those goals remain deadlocked, what is the path forward to any deal - much less one that achieves the bipartisan support needed to ensure passage?

Not surprisingly, the administration is seeking a deal that counters NAFTA’s job outsourcing trend and appeals to the Democratic-swing voters in Midwestern states that sent Trump to the White House – and the unions to which many of them belong. And, certainly this administration does not want to repeat the Obama administration’s strategic blunder of agreeing to a deal that cannot achieve majority support in Congress despite months of intense lobbying a la the Trans-Pacific Partnership.

Agreement on the U.S. proposal on NAFTA’s controversial investment chapter and its Investment-State Dispute Settlement (ISDS) system could be the key to unlocking the impasse. ISDS is unpopular in Congress, not only with Democrats but with a sizeable bloc of GOP committed to opposing any pact that includes ISDS. Progressive and conservative organizations and unions have long held the same view.

ISDS has become a third rail issue because it both promotes job outsourcing and undermines what conservatives call sovereignty and progressives call democratic governance.

The substantive investor protections ISDS enforces operate like no-cost risk insurance and combined with access to a pro-investor dispute resolution regime outside domestic courts, eliminate many of the usual risks and costs that make corporations think twice about moving production to a low-wage developing country like Mexico. More than 930,000 specific U.S. jobs have been certified by the U.S. Labor Department as lost to NAFTA outsourcing and import floods under just one narrow program called Trade Adjustment Assistance (TAA).

Meanwhile, the GOP-majority, the National Conference of State Legislatures, the National Association of Attorneys Generals, the National Association of Countries and the League of Cities all oppose ISDS as a threat to sovereignty. No doubt. The regime grants new rights unavailable in U.S. law or courts to thousands of foreign corporations to sue the U.S. government before a panel of three private-sector lawyers. These lawyers can award the corporations unlimited sums to be paid by American taxpayers, including for the loss of expected future profits. These foreign corporations need only convince the lawyers that a U.S. law or safety regulation or court ruling violates their NAFTA rights. Their decisions are not subject to appeal and the amount awarded has no limit.

Even conservative U.S. Supreme Court Chief Justice John Roberts has weighed in on the ISDS sovereignty threat in his dissent in BG Group PLC v. Republic of Argentina. In that 2014 case, the majority ruled in favor of the enforceability under U.S. law of an ISDS tribunal’s ruling. Roberts decried the notion of a country allowing an extra-judicial international tribunal to “… review its public policies and effectively annul the authoritative acts of its legislature, executive and judiciary … a Contracting Party grants to private adjudicators not necessarily of its own choosing, who can meet literally anywhere in the world, a power it typically reserves to its own courts, if it grants it at all: the power to sit in judgment on its sovereign acts.”

Unless the Unites States joins the growing number of countries extracting themselves from ISD agreements, it’s just a matter of time before the United States loses a case. The number of cases being filed and the types of laws, government decisions and court rulings being attacked through ISDS is expanding. There were 50 total ISDS cases from the 1950s to 2000. In recent years, more than 50 cases are filed annually. Almost half a billion dollars has been paid out so far by Canadian and Mexican taxpayers just under NAFTA and $36 billion in additional known claims is now pending under NAFTA. (Because a lot of these cases result in governments changing laws or paying off foreign corporations before the cases get to the stage where they get listed publicly, many cases remain unknown.) And increasing large developed countries are facing ISDS attacks, with Germany paying out tens of millions thanks to two cases. 

The intensive focus of the corporate lobby on saving ISDS in NAFTA has verified that these investor privileges and protections that facilitate outsourcing, not any actual trade terms, are what the corporate lobby most values about NAFTA. Yet, for all the claims and hype about ISDS somehow being necessary for U.S. investors’ success, the reality is that if they are worried about investing in Mexico, they can buy risk insurance so it’s their skin in the game not the U.S. Treasury’s. And, if firms investing in oil, gas or mining concessions in Canada or Mexico want ISDS-style protections, they can include in their concessions contracts with those governments’ terms sending disputes to the same UN and World Bank arbitration venues that NAFTA uses. That would provide U.S. firms the same protections in Mexico or Canada that NAFTA now provides them, but it would not empower Mexican or Canadian investors – or Japanese or Chinese firms incorporated in Mexico or Canada – with investments in the United States to use ISDS to attack U.S. policies.

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New Trade Deficit Tracker

Public Citizen’s Global Trade Watch launches new Trade Deficit Tracker. Contrary to candidate Donald Trump’s pledge to speedily reduce the U.S. trade deficit, in Trump’s first year in office the goods trade deficit is larger than any time since 2008 and up 5 percent overall even in inflation-controlled terms from last year, with a significant jump in the China trade deficit and a 8 percent increase in the North American Free Trade Agreement deficit. Trump has not exercised his available executive authority to fulfill campaign pledges to limit imports, including those from firms that outsource jobs; label China a currency manipulator; revoke trade agreement waivers on “Buy America” procurement policies that outsource U.S. tax dollars to purchase imports for government use; or limit government contracts to firms that outsource jobs.

The overall 2017 U.S. goods trade deficit in inflation-controlled terms was $796 billion in 2017, up 5.4 percent or $40.9 billion from 2016, which was led by a U.S.-China goods deficit of $375 billion in 2017, up 5.5 percent and $19.5 billion from 2016. The 2017 U.S-NAFTA goods trade deficit was up 7.8 percent or $13.8 billion from 2016.

To document the significant increase in U.S. trade deficits under the Trump administration, Public Citizen’s Global Trade Watch has launched a new tracker. The tracker visualizes and tracks significant developments related to U.S. trade deficits with NAFTA partners (Canada and Mexico), and China respectively. Click here or on the image below to visit the tracker.

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www.citizen.org/our-work/globalization-and-trade/trumps-trade-deficit

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Trade Deficit Up 5 Percent in Trump’s First Year, Raising Stakes for Quick NAFTA Replacement Deal that Stops Outsourcing, China Trade Action

With Trade Policy Unchanged in Trump’s First Year, Outcomes He Attacked Continue

WASHINGTON, D.C. – Contrary to candidate Donald Trump’s pledge to speedily reduce the U.S. trade deficit, in Trump’s first year in office the goods trade deficit is larger than any time since 2008 and up 5 percent overall even in inflation-controlled terms from last year, with a significant jump in the China trade deficit and an 8 percent increase in the North American Free Trade Agreement deficit. Trump has not exercised his available executive authority to fulfill campaign pledges to limit imports, including those from firms that outsource jobs; label China a currency manipulator; revoke trade agreement waivers on “Buy America” procurement policies that outsource U.S. tax dollars to purchase imports for government use; or limit government contracts to firms that outsource jobs.

“Right now, the same trade policy that Trump attacked ferociously and promised to speedily replace is still in place,” said Lori Wallach. “The first-year Trump jump in the U.S. trade deficit adds urgency to the administration actually securing a NAFTA replacement deal that ends NAFTA’s job outsourcing incentives and implementing a new China trade policy.”

The overall 2017 U.S. goods trade deficit in inflation-controlled terms was $796 billion in 2017, up 5.4 percent or $40.9 billion from 2016, which was led by a U.S.-China goods deficit of $375 billion in 2017, up 5.5 percent and $19.5 billion from 2016. The 2017 U.S-NAFTA goods trade deficit was up 7.8 percent or $13.8 billion from 2016.

“It’s not surprising that the deficit is up, because in year one there has been a wide gulf between Trump’s fiery trade rhetoric and action. So the same failed trade policy Trump attacked as a candidate is still in place, outsourcing continues and promised actions remains undone,” Wallach said. “The Trump administration has made some good proposals to transform NAFTA, but the corporate lobby is so intent on blocking those changes that it has delayed – and could – derail the whole process. And so far, the administration has not implemented the comprehensive new approach to our China trade policy that is needed.”

China Trade: Trump reversed his pledge to take action on his first day on currency issues and has achieved little since to expand U.S. exports to China or limit Chinese imports here. Nor has he followed through on promised actions to limit Chinese steel and aluminum imports using section 232 of the Trade Expansion Act of 1962. Also outstanding is action on a Section 301 petition on China the administration initiated in mid-2016.

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U.S.–NAFTA Trade: Between 2011 and 2016, the U.S. goods trade deficit with NAFTA nations declined 11.6 percent, or $23.2 billion (excluding re-exports). This decline has been consistent except for a small 2.9 percent increase in 2014. The U.S. NAFTA goods trade deficit is now mostly manufactured and agricultural goods. Fossil fuels have declined as a share of the total deficit from 82 percent in 1993 before NAFTA to 16 percent in 2016.

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Trade Deficits Up in Trump’s 11 Months in Office; Rather Than Promised Speedy Reduction, 2017 Deficit Will Be Larger Than in 2016

Pressure Mounts for Trump to Deliver on Trade Pledges as Korea Trade Pact Renegotiation Talks Open in D.C. and NAFTA Talks Head to Showdown in Montreal Later This Month

WASHINGTON, D.C. – Today’s November trade data release shows the U.S. trade deficit with Canada and Mexico is 7.9 percent higher and with China is 5.1 percent higher during the first 11 months of the Trump administration compared to the same period in 2016, spotlighting the gap between President Donald Trump’s campaign pledges to speedily reduce the U.S. trade deficit and the lack of trade policy reforms achieved in his first year. The 2017 11-month China deficit is $352 billion, Mexico is $116 billion and Canada is $59 billion, respectively, compared with $335 billion, $110 billion, and $52 billion, respectively, at the 11-month mark in 2016.

Overall, the North American Free Trade Agreement (NAFTA) deficit has grown during the first year of the Trump administration after seeing a progressive decline from 2011 to 2016, while the China trade deficit continues its upward trajectory.

“The growing trade deficits and related lost jobs stands in stark contrast to Trump’s promised speedy reduction of our trade deficit by transforming our China trade policy and securing a better NAFTA deal,” said Lori Wallach, director, Public Citizen’s Global Trade Watch. “The administration has made some good proposals to transform NAFTA, but the corporate lobby’s efforts to block those changes may derail the whole process, and so far the administration has taken no action on China trade at all.”

Since that pact’s implementation in March 2012, U.S. exports to Korea have declined, while U.S. imports from Korea have increased, resulting in a large goods trade deficit increase of 85 percent in the pact’s first five years in effect. Today’s data shows that the U.S.-Korea trade deficit remains higher than before the agreement went into effect.

Trump launched the promised NAFTA renegotiation in August, but U.S. corporate interests have persuaded Canada and Mexico to not engage on U.S. proposals to transform NAFTA in ways that U.S. unions, small businesses and consumer groups have long argued would slow job outsourcing and downward pressure on U.S. wages. As a result, the January 23-28 Montreal round of NAFTA talks has become a pivot point. If Mexico and Canada do not engage, the prospect is heightened that Trump may give notice to withdraw from NAFTA. NAFTA entered its 24th year on Jan. 1, 2018.

With respect to China, Trump reversed his pledge to take action on his first day on currency issues and has achieved little since to expand U.S. exports to China or limit Chinese imports here. Trump also has not exercised his authority to revoke trade agreement waivers on “Buy America” procurement policies that outsource U.S. tax dollars to purchase imported goods for government use. Nor has he followed through on promised actions to limit Chinese steel and aluminum imports using section 232 of the Trade Expansion Act of 1962. Also outstanding is action on a Section 301 petition on China the administration initiated in mid-2016.

U.S. – NAFTA Trade

Between 2011 and 2016, the U.S. goods trade deficit with NAFTA nations declined 11.6 percent, or $23.2 billion. This decline has been consistent except for a small 2.9 percent increase in 2014. During Trump’s first 11 months, however, the U.S. goods trade deficit increased 7.9 percent, or $12.8 billion relative to the same period in 2016. The U.S. NAFTA goods trade deficit is now mostly manufactured and agricultural goods. Fossil fuels have declined as a share of the total deficit from 82 percent in 1993 before NAFTA to 16 percent in 2016.

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View graphic covering NAFTA trade deficit data over longer timespan.

The full-year trade data (January–December) show a similar trend. After the Great Recession, the NAFTA deficit hit its peak in 2011 but has been decreasing gradually each year, with a small increase in 2014.

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 U.S. – China Trade

The U.S. goods trade deficit with China has increased every year since 2009, except for an insubstantial decrease in 2016. Under the Trump presidency, that small deficit reduction has been reversed, and the goods trade deficit is now rising again.

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View graphic covering U.S.-China trade deficit data over longer timespan.

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New Trade Data Shows Marked Rise in Deficits During Trump’s First 10 Months, Spotlighting Urgency of Successful NAFTA Renegotiation, Action on China Trade

2017 Trade Deficits With NAFTA Countries and China on Track to Surpass Large 2016 Deficits – Instead of Speedy Deficit Decreases Trump Promised

WASHINGTON, D.C. – Contrary to President Donald Trump’s campaign promises to speedily reduce the U.S. trade deficit, the deficit with Canada and Mexico is 9.4 percent higher and with China 4.1 percent higher during the first 10 months of the Trump administration relative to the same period in 2016, according to the Census Bureau’s goods trade data released today. The North American Free Trade Agreement (NAFTA) deficit in the first year of the Trump administration is on track to reverse a steady decline from 2011 to 2016 of 11.6 percent, or $23.2 billion, while the China trade deficit looks to resume its steady growth since 2009 after a brief decline in 2016.  

Candidate Donald Trump promised quick action to balance the large and persistent U.S. trade deficits with China and the NAFTA nations. “We have a massive trade deficit with China, a deficit that we have to find a way quickly, and I mean quickly, to balance,he said.

While Trump launched renegotiation of NAFTA in August, he reversed his pledge to take action on his first day in office on China trade and has achieved little since to expand U.S. exports to China or limit Chinese imports here. He also has not exercised his authority to revoke trade agreement waivers on “Buy America” procurement policies that outsource U.S. tax dollars to purchase imported goods for government use. Nor has he followed through on promised actions to limit Chinese steel and aluminum imports using section 232 of the Trade Expansion Act of 1962.

“Candidate Trump slammed our huge trade deficits and related lost jobs and lower wages, and promised a speedy fix, but almost a year into his presidency, no major policies have changed, and now Trump owns trade deficits even larger than last year’s,” said Lori Wallach, director, Public Citizen’s Global Trade Watch. “The administration has made some good NAFTA renegotiation proposals that could make a difference, but the U.S. corporate lobby is urging Mexico and Canada to block those changes. It’s a mystery why the Commerce Department has not followed through on the China actions it announced earlier. 

U.S. – NAFTA Trade

Between 2011 and 2016, the U.S. goods trade deficit with NAFTA countries declined 11.6 percent, or $23.2 billion. This decline has been consistent except for a small jump in 2014, when the U.S. deficit increased by 2.9 percent. During Trump’s first 10 months, however, the U.S. goods trade deficit has increased 9.4 percent, or $13.6 billion relative to the same period in 2016.  The U.S. trade deficit with NAFTA countries is now mostly composed of manufactured and agricultural goods, while fossil fuels have declined as a share of the total deficit from 82 percent in 1993 before NAFTA to 16 percent in 2016.”

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Click here for graphic covering NAFTA trade deficit data over longer timespan

The full-year trade data (Jan. – Dec.) show a similar trend. After the Great Recession, the NAFTA deficit hit its peak in 2011, but has been gradually decreasing each year with a small increase in 2014.  3

U.S. – China Trade

The U.S. goods trade deficit with China has been increasing every year since 2009, except for an insubstantial decrease in 2016. Under the Trump presidency, that small deficit reduction has been reversed, and is now rising again.

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Click here for graphic covering U.S.-China trade deficit data over longer timespan

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The Peterson Institute Agrees That Trade Agreements, Bilateral or Multilateral, Can Alter the U.S. Trade Deficit

The Congressional Research Service (CRS) recently released a report asserting that, “Economists generally argue that it is not feasible to use trade agreement provisions as a tool to decrease the deficit because trade imbalances are determined by underlying macroeconomic fundamentals.” Ironically, the scholar they cite in support of that claim has repeatedly said the very opposite.

The CRS report cites a policy brief written by C. Fred Bergsten from the Peterson Institute for International Economics that says most economists argue that reducing the U.S. budget deficit is the most effective, if not only, “policy initiative that would reduce the U.S. current account deficit on a lasting basis.” Bergsten does not provide sources in support of his claim.

In the brief, Bergsten omits a substantial body of literature that illustrates how trade agreements have had substantial effects on U.S. trade deficits. But more perversely, Bergsten himself has claimed that inclusion of certain terms in trade agreements can alter the U.S. trade balance.

Earlier this year, in a piece on renegotiation of the North American Free Trade Agreement (NAFTA) Bergsten wrote that, “... currency manipulation is an unfair trade practice that can have huge effects on trade flows and trade balances, and it is thus quite appropriate for the administration to address it in their trade negotiations.”

Bergsten co-authored another paper in 2012 suggesting that not only has currency manipulation increased the U.S. trade deficit, but it has also caused substantial job loss in the United States:

This buildup of official assets — mainly through intervention in the foreign exchange markets — keeps the currencies of the interveners substantially undervalued, thus boosting their international competitiveness and trade surpluses. The corresponding trade deficits are spread around the world, but the largest share of the loss centers on the United States, whose trade deficit has increased by $200 billion to $500 billion per year as a result. The United States has lost 1 million to 5 million jobs due to this foreign currency manipulation.

Bergsten points out later in the 2012 paper that adding strong and enforceable currency manipulation provisions in multilateral or bilateral trade agreements could help alleviate this problem.

While a bevy of editorial writers and news reporters often repeat the claim that trade deficits are caused by macro-economic factors, not trade agreements, Bergsten himself has often made the opposite point. This begs the question of why the Congressional Research Service would have as its one source in support of a specious claim an economist who has regularly argued the very opposite.

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Import Alert: Careful What You Eat During Thanksgiving

Trade Deals Like NAFTA Have Led to a Surge of Imported Food, Threatening Food Safety in America

There’s a good chance that some of the food you will eat during Thanksgiving was produced outside the United States. In fact, about 50 percent of fresh fruit and 94 percent of seafood consumed in the United States is imported. But even though Americans are consuming more imported foods today than ever – largely due to trade deals like the North American Free Trade Agreement (NAFTA) – the vast majority is never inspected before it reaches your plate.

Since 1993, U.S. food imports from Mexico and Canada have tripled, increasing from 10.6 million to 32.2 million metric tons. During the same time, U.S. food imports from the rest of the world grew as well, but only at half the rate.

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While the average American diet relies more and more on imported food, safety regulations and food inspections have not kept up. Only one percent of most food, including dairy, seafood and fruit, are inspected by federal regulators. Less than ten percent of meat and poultry is inspected.

Yet, “trade” agreement rules, like those in NAFTA, require us to import meat and poultry from any processing facility in any country that is deemed to have “equivalent” safety standards, even if core parts of U.S. food safety requirements are not met. Before NAFTA, only meat and poultry from individual processing plants in Canada and Mexico that met U.S. safety and quality standards – and that were certified as doing so by U.S inspectors – could be sold here. NAFTA not only required us to allow imports produced under the other countries’ differing standards, but required us to accept meat from any and all processing plants in Mexico and Canada that were certified as complying with those countries’ domestic standards, not necessarily U.S. standards.

The non-partisan Government Accountability Office describes the federal oversight of food safety as an area of “high risk for fraud, waste, abuse, and mismanagement, or most in need of transformation.” Their 2016 report says one of the top obstacles to food safety is that “a substantial and increasing portion of the U.S. food supply is imported, which stretches the federal government’s ability to ensure the safety of these foods.”

Unfortunately, things may get worse. President Trump has proposed a budget cut of $83 million to the food safety programs administered by the Food and Drug Administration, which oversees 80 percent of the U.S. food supply.

Recent polling shows that food safety is one of the top issues voters are concerned about in the ongoing NAFTA renegotiation. That’s why a coalition of labor, environmental, family farm, consumer, and faith organizations representing over 12 million people has demanded that the renegotiated NAFTA require all imported food to meet U.S. safety standards and mandate more robust inspection. Plus, the groups are demanding that a NAFTA replacement restore the country-of-origin labels on meat that were eliminated in 2016 after the Canadian and Mexican governments successfully attacked the popular U.S. policy as an illegal trade barrier.

NAFTA’s food safety rules are a recipe for disaster. So as you sit down to enjoy your Thanksgiving meal, be careful what you eat!

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News Analysis: Next Round of NAFTA Talks May Bring Renegotiation to an Inflection Point if Canada and Mexico Refuse to Engage on U.S. Proposals

From Lori Wallach, Director, Public Citizen’s Global Trade Watch

Renegotiation of the North American Free Trade Agreement (NAFTA) faces a critical juncture as the fifth round of talks officially starts Friday in Mexico City.

At issue is whether Canada and Mexico will engage on a series of proposals to significantly reshape NAFTA that were submitted by the United States during the fourth round of talks in October – and, if they refuse, how the administration will respond. Also at issue if they do engage is what additional proposals the administration will put forward to deal with the abysmal labor standards and wages in Mexico. How these issues play out will greatly affect the fate of NAFTA.

The U.S. proposals from October would reverse some of NAFTA’s incentives to outsource investment and jobs from the United States and are among reforms that Democratic and Republican members of Congress, labor unions and other NAFTA critics spanning the political spectrum have demanded for decades. More than 930,000 U.S. workers have been certified under just one narrow government program as losing their jobs to NAFTA.

The administration has made clear that the choice facing Canada, Mexico and the corporate lobby is either a new approach or no NAFTA. Ironically, the corporate lobby’s strategy increases the likelihood of a no-NAFTA future.

The corporate lobby’s response to the administration’s proposals to eliminate NAFTA job outsourcing incentives suggests that the new reality of a different NAFTA or no NAFTA is being dismissed as a bluff, or that the corporate lobby prefers no NAFTA. Whether a case of magical thinking or ideological rigidity after years of corporate interests dictating U.S. trade policy, the fifth NAFTA renegotiating round will reveal whether the corporate lobby has persuaded the governments of Canada and Mexico to join a game of high-stakes poker that increases the odds of the no NAFTA outcome.

Given that the U.S. Chamber of Commerce, National Association of Manufacturers, Business Roundtable, Coalition of Service Industries, PhRMA and other business lobbies have spent decades and hundreds of millions to insert protections and policies unrelated to trade into U.S. “trade” agreements, they may prioritize defending the protections they won. But why associations representing U.S. farmers and ranchers would get on that ideological bandwagon is inexplicable. The Farm Bureau and commodity groups have joined the Chamber in the our-way-or-the-highway approach that paves the way to a no NAFTA outcome. But the agriculture sector is most reliant in sustaining NAFTA and its duty access for U.S. exports.

If the United States were to withdraw from NAFTA, the pact’s implementing legislation would authorize the president to proclaim a reversion of trade terms between the three countries to the Most Favored Nation tariff levels of the World Trade Organization (WTO). Forty-six percent of U.S. tariff lines, 50 percent of Mexican tariff lines and 76 percent of Canadian tariff lines are duty-free under the WTO, and the existing tariffs would be drastically lower than those before NAFTA because the WTO tariff cuts have been fully implemented. The current average WTO Most Favored Nation applied tariffs on a trade-weighted basis for the United States, Mexico and Canada are respectively 2.4, 4.5 and 3.1 percent.

However, agriculture is the outlier: U.S. exports to Mexico, beef, pork, poultry and wheat would face significant tariffs. (Almost all U.S. corn exports to Mexico, by far the largest U.S. agricultural export, would be duty-free. Mexico went duty-free for yellow corn for all WTO countries in 2008, thus 95 percent of U.S. corn exports to Mexico would be duty-free without NAFTA. A large share of U.S. soy exports also would be duty-free under Mexico’s WTO tariff rates.) Just assuming hypothetically that the president withdrew from NAFTA and chose not to revert to duty free treatment for Canada under the 1988 U.S.-Canada Free Trade Agreement, which was suspended not terminated when NAFTA was enacted, WTO tariffs for Canada would be significant for U.S. exports to Canada of wheat, barley, dairy and beef. 

That farmers have the most to lose under the no-NAFTA outcome and do not have a dog in the fight over auto-sector rules of origin or foreign investor protections, for instance, makes even more perverse their participation in the Chamber’s dangerous game of trying to shut down any discussion of the U.S. NAFTA restructuring proposals that enjoy wide support outside the corporate lobby groups.

U.S. Trade Representative Robert Lighthizer’s response to team status quo’s declaration that the proposed reforms are non-starters was to declare: “These changes of course will be opposed by entrenched Washington lobbyists and trade associations.” The corporate lobby has been in a full meltdown since, operating under a premise that somehow rejecting the proposals will make them go away.

In contrast, Lighthizer has raised a tantalizing prospect: a new trade agreement model could rebuild broader consensus for trade expansion, creating a new bipartisan coalition to pass a NAFTA replacement. The proposals that have triggered the corporate hissy fit would further this goal. There is wide support in Congress and among unions, small businesses and consumer groups for the October U.S. proposals to:

  • Eliminate some investor protections that make it cheaper and less risky to move American jobs to low-wage Mexico,
  • Roll back waivers of Buy American and other domestic procurement preferences that outsource U.S. tax dollars rather than reinvesting them to create jobs at home,
  • Tighten the rules of origin so that goods with significant Chinese and other non-NAFTA content would no longer enjoy NAFTA benefits, and
  • Require NAFTA countries to review the agreement every five years to ensure it is meeting desired outcomes and affirmatively agree to extend it.

Assuming that the countries can engage in real negotiations at the fifth round, the next step toward building broad consensus for trade expansion will involve the administration creating proposals to raise labor and environmental standards and wage levels in Mexico. There is no real remedy to NAFTA’s outsourcing incentives unless a new NAFTA raises Mexican wage levels. Canada’s proposal for a new NAFTA labor chapter is much closer to what unions in all three countries seek than the already-rejected Trans-Pacific Partnership (TPP) labor and environmental standards language that has served as the template for U.S. proposal to date. At the same time, the U.S. administration is exploring what new approach could remedy the clear failings of the labor provisions in past U.S. pacts, a problem made glaringly clear with the recent Central America Free Trade Agreement ruling that persistent, severe labor abuses in Guatemala did not violate the standard U.S. trade-pact labor rules included in that pact.

Also key to attracting large blocs of voters in favor of a revised deal will be not adding the TPP’s extended monopoly protections for pharmaceutical firms or terms rolling back food safety and financial regulation. The administration is inclined to support these terms, but various TPP signatories led by Canada rejected the very provisions last weekend, which derailed efforts to sign a TPP-11 deal.

In an odd role reversal, longtime critics of NAFTA hope Canada and Mexico will engage on the U.S. reform proposals during the fifth round. In contrast, if the NAFTA partners mimic the corporate lobby’s dismissive non-started approach, this round of talks could be the beginning of the end for NAFTA.

Given that low wages and lax environmental standards in Mexico draw firms to relocate production and jobs from the United States, the best outcome for workers in all three countries from the ongoing NAFTA renegotiations is a new agreement that raises standards. Indeed, raising wages in Mexico is essential to reversing American job outsourcing to its southern neighbor, where average manufacturing wages are now 9 percent lower in real terms than before NAFTA. However, because NAFTA includes provisions that explicitly incentivize outsourcing, and almost a million American workers have been certified as losing their jobs to NAFTA, and every week NAFTA helps corporations outsource more middle-class jobs, no NAFTA is better than more years of the current agreement.”

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Asia Trip Spotlights Chasm Between Trump Campaign Rhetoric on Trade and Action, Raising Political Stakes for Meaningful Deliverables

WASHINGTON, D.C. – With President Donald Trump beleaguered on many fronts, the stakes for delivering on his trade promises are high as his first trip to Asia features the very nations Trump targeted with the heated trade critique that helped him win the presidency. Undoubtedly there will be announcements of “breakthroughs,” so below we offer some indicators to measure the actual trade outcomes.

Trump pledged to make U.S. trade policy “a lot better” for working people, starting with day-one action to reverse the China deficit, renegotiating or ending the “job-killing” Korea Free Trade Agreement (FTA) and reducing the U.S. trade deficit with Japan. But so far, beyond formally burying the Trans-Pacific Partnership (TPP) – a pact widely acknowledged as already dead for a lack of majority congressional support – Trump has accomplished nothing on the Asia trade front.

The lack of action is especially problematic because many of Trump’s trade critiques – including those raised by Democrats for decades - are correct. Since his election, the situation is getting worse and whether Trump can deliver on his pledges to bring down the trade deficit and create American manufacturing jobs will be  measurable via monthly government trade and jobs data.

  • The latest monthly U.S. goods deficit with China reached $35 billion (August), the largest in nearly two years. The China deficit is on track to be higher in Trump’s first year than in 2016. Absent real changes in China trade policy, Trump cannot deliver on his pledge to bring down the U.S. trade deficit and create American jobs given China typically represents nearly half of the overall U.S. goods and services deficit.
  • After doubling the U.S.-Korea goods trade deficit in its first four years, the Korea FTA is again on track for another large deficit by the end of Trump’s first year in office with the auto industry centered in his politically crucial Midwest states slammed while U.S. farmers have yet to see the promised gains.

Ironically, the trip also spotlights the hollowness of the panicky claims from the corporate lobby. No, Asian nations have not signed an alternative trade deal, the Regional Comprehensive Economic Partnership (RCEP), with China after the TPP’s demise. RCEP is as stuck as ever. No, the TPP did not go forward minus the United States. Expect claims of ‘general agreement’ on that goal on the sidelines of the Asian Pacific Economic Partnership summit in Vietnam. But in fact, the administration’s decision to roll back the investor-state dispute settlement (ISDS) corporate rights and tribunals in the North America Free Trade Agreement (NAFTA) renegotiations reflects an issue that has bogged down Japan’s efforts to get the remaining 11 countries to enact TPP. No, Trump has not launched a China trade war. Indeed, the promised trade actions on steel and aluminum are mired and the 100-day plan touted this spring proved to be a repackaged list of things China promised the Obama administration.

Some less-than-obvious indicators of concrete action would include:

 CHINA: Will Trump terminate negotiations for a U.S.-China Bilateral Investment Treaty (BIT) that the Obama administration nearly completed? Or, as China demands, revive this deal that would make it easier to outsource more American jobs to China? China has indicated some “new” trade deals could be in the offing during Trump’s visit. One way to unpack whether these are simply rewarmed promises from the past or real change will be the fate of the China BIT, an expansive treaty started by the Bush administration and almost completed by Obama. The pact, which China is keen to sign, would give Chinese firms broader rights to purchase U.S. firms, land and other assets and newly expose the U.S. government to demands for compensation from Chinese firms empowered to attack U.S. policies in extra-judicial ISDS tribunals. Former Goldman Sachs executive-turned National Economic Council chief Gary Cohn reportedly shut down plans to terminate the China BIT negotiations earlier this year.

Given that the administration is demanding a major roll back of the ISDS provisions in NAFTA, it would be notable if Trump does not shut down the China BIT, which provides special protections to firms that outsource to China and simultaneously would greatly expand U.S. ISDS liability. Because only a small portion of foreign investment in the United States is now covered by ISDS agreements, to date the United States has avoided paying corporations over ISDS claims. But with China continuing to invest aggressively throughout the United States, a BIT with China would greatly increase U.S. liability. According to a soon-to-be-unveiled Public Citizen database on the footprint of Chinese investment here, total investment reached over $45 billion in 2016 including over 40 acquisitions of American assets worth at least $50 million each, a high-water mark for inbound investment. Buyers include large Chinese conglomerates with ties to the government like Dalian Wanda as well as state-owned enterprises like the Chinese sovereign wealth fund, China Investment Corporation. Chinese investors have entered U.S. sectors similar to those in which foreign investors have launched the most egregious ISDS cases worldwide such as energy and pharmaceuticals. These 2016 deals include Chinese purchases of over 100 oil wells in Texas and a pharmaceutical distribution center in Kentucky.

KOREA: Will Trump push for changes to the 2012 U.S.-South Korea Free Trade Agreement (FTA) or will his visit focus only on North Korea? How to peacefully resolve North Korea’s nuclear escalation is a thorny question. What should happen with the Korea FTA is an entirely separate question that is not complicated. Civil society organizations and many Democrats in Congress opposed the U.S.-Korea FTA in 2011 when the deal was before Congress because at its heart are new rights and powers for corporations to raise medicine prices and attack environmental, health and financial stability safeguards and to get duty free access for goods with significant Chinese content.

U.S. exports to Korea actually declined after the pact. U.S. average monthly exports to South Korea have fallen in nine of the 15 U.S. sectors that export the most to South Korea, relative to the year before the FTA. U.S. exports to South Korea of agricultural goods have even fallen 5.4 percent in the first five years of the FTA. As with most other U.S. FTAs, imports into the United States soared. Thus, the U.S. goods trade deficit with Korea increased by 85 percent in five years. The U.S. goods trade deficit with Korea is once again deteriorating as imports from Korea grow faster than U.S. exports to Korea, reaching $2.3 billion in the latest available monthly data (August 2017).

A broad network of Korean civil society organizations, trade unions, public health organizations similarly opposed the U.S.-Korea deal. Opposition Korean parliamentarians raised many of the same concerns over corporate rights and ISDS, financial stability, access to medicines and more.  The deal sparked violent clashes among parliamentarians after parliament was physically barricaded to avoid a vote and then when tear gas was unleashed in the legislative chambers.

JAPAN: Will Japan agree to a bilateral U.S. trade agreement and/or specific measures to reduce what is the third largest bilateral U.S. trade deficit (behind only China)? The U.S.-Japan goods trade deficit was $74 billion in 2016, and Japan has been a permanent fixture on the U.S. Treasury Department’s “monitoring list” for currency manipulation. It is unclear whether Trump can achieve much to address the deficit or the bipartisan call for binding disciplines on currency manipulation, which Japan rejected in the context of the TPP. But, interestingly, the administration’s position on ISDS in NAFTA is thwarting the Abe administration’s efforts to salvage the widely-rejected corporate rights enshrined in the TPP via a “TPP-11” deal. Many TPP countries, including Malaysia, Vietnam, Australia, and others, had only accepted the ISDS provisions under extreme duress to make a deal with the United States. But recent comments by U.S. Trade Representative Robert Lighthizer about the U.S. proposals to radically roll back the ISDS provisions in the context of the NAFTA renegotiations has emboldened the opposition to these provisions among the TPP-11 nations. Lighthizer’s explanation of why investors do not need ISDS were widely circulated in Australia, New Zealand, and elsewhere.

The New Zealand government, for instance, had been supporting Abe’s efforts to salvage the TPP with minimal changes, but New Zealand’s recently elected new Prime Minister Jacinda Arden, announced this week that her government would “do our utmost to amend the ISDS provisions of the TPP” and that her Cabinet has “instructed trade negotiation officials to oppose ISDS in any future free trade agreements.” Adding this bombshell to the reported 50 requests by the TPP-11 countries to freeze or amend the deal’s clauses, including shelving intellectual property provisions on pharmaceutical data, the prospects for a TPP-11 deal in Vietnam are diminishing.  Even in Japan itself, the political foundation within Abe’s ruling Liberal Democratic Party (LDP) is on much shakier ground for a TPP-11 deal.  Koya Nishikawa, a former agriculture minister and LDP leader who was key in delivering needed support from the powerful farm caucus for the TPP, recently lost his seat in the Japanese Diet.  Without Nishikawa, Japan’s already skeptical agricultural sector may not be supportive of a TPP deal.

  • On TPP-11 dynamics: Jane Kelsey, University of Auckland, kelsey@auckland.ac.nz;
  • English-speaking expert from Japanese civil society on TPP-11 and Japan’s political dynamics surrounding trade: Shoko Uchida, Director, Pacific Asia Resource Center, kokusai@parc-jp.org
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In Epic WTO v. Flipper Case, Trade Organization Ruling in Favor of U.S. Dolphin-Safe Tuna Labeling Program May Reflect Concerns About Trump Criticisms of WTO

U.S. Gutted Ban on Dolphin-Deadly Tuna After 1991 Trade Case; Today’s Ruling Means U.S. Dodges $163 Million in Sanctions for Voluntary Labels That Replaced Ban – But Mexico Can Appeal Decision

WASHINGTON, D.C. – After two decades of successful trade attacks that led to the gutting of a U.S. ban on tuna caught in a manner that harms dolphins, today’s World Trade Organization (WTO) ruling was a welcome if unexpected shift that may reflect the institution’s response to intensive pressure by the Office of the U.S. Trade Representative to reform the WTO’s dispute resolution process and President Donald Trump’s threats to withdraw from the body, Public Citizen said.

At issue in today’s ruling are voluntary labels that provide consumers with information to enable them to choose dolphin-safe tuna. The labels were put in place after the U.S. eliminated its ban on dolphin-deadly tuna after losing previous WTO cases. Millions in American taxpayer funds have been spent defending attack after attack on dolphin protections at the WTO.

“The WTO is a political institution, so this ruling may be motivated by a sense of self-preservation, given that the administration has spotlighted how WTO tribunals order countries to gut domestic policies based on unaccountable tribunals making up new obligations to which countries never agreed,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “At another politically fraught moment for the WTO shortly after the 1999 Seattle WTO protests, when a ruling against Europe’s ban on asbestos was seen as substantiating protestors’ claims about the body, a surprise reversal also was issued.” 

Today’s ruling is subject to appeal by Mexico. Public Citizen called on the Trump administration and the Mexican government to include language in North American Free Trade Agreement (NAFTA) renegotiations explicitly affirming the current U.S. labeling program so as to shut down any future disputes after 25 years of trade-pact attacks on U.S. dolphin-safe labeling policies. The initial 1991 tuna-dolphin case, dubbed GATTzilla v. Flipper, instigated environmental and consumer group engagement on “trade” agreements.

Today’s ruling focused on whether a 2016 strengthening of the enforcement provisions of the U.S. dolphin-safe tuna labeling regulations with respect to countries other than Mexico made the policy compliant with WTO rules. The WTO repeatedly had declared that the policy discriminated against Mexico, and that rules that limited exceptions for policies aimed at conserving natural resources or protecting animal life or health did not apply. Most recently, an April 2017 WTO decision authorized Mexico to impose an annual $163 million in trade sanctions against the United States, concluding that 2013 changes to the policy still did not meet WTO rules. The April ruling set the amount of sanctions Mexico could impose after the WTO ruled against the U.S. labeling program in 2011, upheld that ruling on appeal in 2012, ruled in 2015 that the initial U.S. changes to the policy did meet WTO rules and upheld that decision on appeal.

Today’s decision means that the United States will not immediately face the previously authorized $163 million in annual trade sanctions.

The decision is the latest development in an ongoing trade impasse between the U.S. and Mexico on dolphin-safe tuna that started in 1991. The current round of attacks started in 2008 with the WTO repeatedly ruling against the U.S. dolphin-safe tuna labeling program even though it is strictly voluntary and accessible to Mexican fishing fleets should they opt to use dolphin-safe tuna-fishing methods just as U.S., Ecuadorean and other nations’ fleets do. Tuna that does not meet the dolphin-safe standard still can be sold in the United States without that label.

“To make sure that the attack on dolphin-safe tuna ends once and for all, a formal and final settlement of the case safeguarding the policy must be part of NAFTA renegotiations,” Wallach said.

Short overview and background of the case: 1991-2017  

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How Progressives Can & Must Engage on NAFTA Renegotiations

Findings from National Poll

Trade stands out from every other policy issue because Donald Trump’s unhappiness with the status quo is shared by virtually all progressive advocacy groups and nearly all Democratic Members of Congress who are otherwise fighting Trump every day. It is urgent for progressives to engage on trade because Trump has triggered the renegotiation of the North American Free Trade Agreement (NAFTA), which will likely conclude early next year or sooner if the president gives the six-month notice provided for in NAFTA to withdraw the U.S. as a signatory. The president also has the ‘fast track’ authority won by President Obama that guarantees him a vote 90 days after he submits an amended agreement to the Congress, with amendments, Senate filibuster and supermajority voting forbidden.

At a time of great peril for our democracy and deepening public opposition to Donald Trump on many fronts, he wins high marks from voters on handling trade and advocating for American workers: 46 percent approve of his handling of trade agreements with other countries, 51 percent, his ‘putting American workers ahead of the interests of big corporations’ and 60 percent, how he is doing “keeping jobs in the United States.”[1]

The Republicans continue to hold an advantage over Democrats on handling the economy in polling.[2] And frankly, Democrats’ advantage in the generic congressional ballot is not as impressive as it should be (8-point lead among registered voters but only 5 among likely voters), as Democrats in Congress seem focused on everything but economic issues.  The Democrats’ silence on the trade issue this year and in the 2016 presidential election – even though three-quarters of House and Senate Democrats opposed trade authority for the TPP – contributed mightily to Trump’s victory in many of the Rustbelt states and to the Democrats’ current disadvantage on the economy.

Progressives need to communicate that they are fighting for American jobs, for raising incomes and wages and for putting the interests of American workers before corporations who shaped NAFTA and are now using it to accelerate job outsourcing, which our research showed is viewed by voters as the greatest threat to America’s living standards.

Fighting for the right major changes to NAFTA is broadly popular among Trump voters as well as the college educated and diverse Clinton voters who are more conflicted about trade, TPP and NAFTA. Focusing on NAFTA in the right way and calling out Trump on what changes he is really fighting for allows progressives to speak powerfully on the economy, lagging wages and American jobs.

Outsourcing and trade agreements

What Donald Trump knows and all progressives must understand is that for voters, the trade issue is not about trade agreements per se. It is about the outsourcing of good paying American jobs that these agreements facilitate.

What many activists will find most challenging is how little voters dwell on the agreements themselves and how uncertain most of them are about their effects on the economy, jobs and living standards. Even though TPP was debated nationally in the presidential contest and championed by Trump and Obama, only 59 percent of voters in our recent poll could identify it now. In focus groups conducted this summer, Trump and Clinton voters struggled to remember what TPP was all about.

A sizeable number are unsure of NAFTA’s impact: 15 percent unsure on the economy, 20 percent on jobs and 26 percent on whether it damaged the environment.

People do hold strong views, become animated in focus groups, and connect the dots to their daily lives when ‘outsourcing’ is brought up. Nearly 60 percent view ‘outsourcing’ negatively, with nearly half intensely negative; only 11 percent view ‘outsourcing’ favorably, putting it in the same league with Vladimir Putin.[3]  Just hearing the word in focus groups made both non-college educated voters in the Midwest states and college-educated Seattle voters see red: those are “middle income jobs,” companies who outsource are “traitors” and “should be financially penalized.”

It is outsourcing that is at the heart of people’s anger with CEOs and big corporations that pursue profits by shifting investments to places with much cheaper labor costs, without any loyalty to their country, company and employees. That anger unites college graduates and white working class voters: 59 percent of the latter react negatively to outsourcing, and the college voters are almost 10-points more negative.

Progressives’ entry point to the trade debate is not the trade agreement themselves, but the outsourcing that people view as the biggest and growing threat to decent paying American jobs. NAFTA renegotiations give progressives an opportunity to talk about an economy where jobs don’t pay enough to live on, which will improve their standing on the economy, while also advocating for changes to NAFTA and the U.S. approach to trade that can really lead to more, better paying American jobs. 

Beyond partisanship

NAFTA is divisive and polarizing – but progressives hoping to ignore the issue allow Trump to continue to prevail on American jobs. If progressives make ‘outsourcing’ the entry point into the trade debate, they can unite Democrats and Trump voters around effective criticisms of NAFTA and messages demanding Trump deliver major changes.

Our research shows Democratic voters become critical of trade agreements and NAFTA when they realize how corporate special interests are lobbying in secret to include provisions that provide special powers to corporations to sue the U.S. government before tribunals of corporate lawyers over our laws to demand taxpayer money or insert provisions into NAFTA to reverse Dodd-Frank Wall Street regulations. This was also true over the course of the TPP debate, as Democrats and progressives became educated about these very same issues. Our recent research showed that college graduates are more anti-corporate than the white working class – which explains why they react more strongly to an anti-corporate NAFTA message and against Investor-State Dispute Settlement (ISDS) and its corporate tribunals.

Together, a critique of NAFTA for facilitating outsourcing and failing to put American workers ahead of corporations shifts Democrats even more dramatically against NAFTA.

Wide support for changes to NAFTA

Support for changing NAFTA is broad. A 43 percent plurality wants to see major changes to NAFTA, while just 39 percent are looking for more modest adjustments. Even fewer Trump and white working voters are looking for small changes. After hearing criticisms of NAFTA – effectively simulating the national debate on NAFTA that is unfolding – the bloc demanding major changes comes to dominate among minority voters (59 percent), metro residents (57 percent), college graduates (55 percent), and Clinton voters (51 percent) too.  

Getting this strategic context right enables progressives to focus the battle on what changes need to happen. If Trump isn’t really pushing for the kinds of changes that are most important for voters, he could be marginalized by the NAFTA debate itself.

Voters’ Top Priorities for NAFTA Change Not Same as Trump’s

The strongest attack on NAFTA is a change the administration is failing to prioritize – and one that is critically important to the progressive agenda on trade and to progressives speaking about an economy that must produce more better-paying American jobs.

The most convincing argument for major changes says that American workers are losing because NAFTA lacks enforceable “labor and environmental standards so companies can move U.S. jobs to Mexico to pay workers poverty wages” and dump pollutants and “import those products back to the U.S. for sale.” Over 80 percent of Trump voters and over 60 percent of Clinton voters found that a convincing argument against the current NAFTA. But new terms to remedy this do not appear to be at the top of the Trump trade agenda in the leaked stories about the negotiations.

The second strongest critical argument focuses on how NAFTA has facilitated the outsourcing of good “middle class jobs to Canada and Mexico” and continues to do so every week. That was a convincing argument to 85 percent of Trump voters and 61 percent of Clinton voters.

In the next tier are arguments about the safety of our food, which also receives an intense reaction. NAFTA limits our ability to ensure food safety, which is very concerning to 63 percent of Trump voters, 54 percent of white working class voters and 42 percent of college graduates.

College graduates express a lot of concern after hearing about Investor-State Dispute Settlement – or the “special powers” given to corporations to “sue the government over our health and safety laws” for unlimited “U.S. taxpayer money.” This raised concerns among 60 percent of college graduates.

Interestingly, one of Trump’s main critiques – the trade balance - scored lower and had the lowest intensity. The key here is that progressive critiques of NAFTA are the ones that voters find most concerning.

Impact of Messaging

The strongest message that gets to Trump voters, but also rings powerfully true for Clinton voters, focuses on how NAFTA facilitates outsourcing, producing an economy where people haven’t seen a pay increase in years, which will continue to worsen unless NAFTA changes.  Rather than leveling the playing field for us, NAFTA “make[s] it easier for companies to outsource jobs to Mexico” where they “can pay employees less” so since NAFTA went into effect, our wages have “been flat.” It says that major changes are needed to NAFTA or else it will continue to give the “greenlight to corporations to outsource American jobs, pushing down wages for everyone in the US.”

By transforming the trade debate into a big economic argument with outsourcing as the main problem, progressives become the advocates for more American jobs with higher wages and salaries.

After a simulated debate where everyone heard competing arguments, half a trade-outsourcing message focused on the ongoing job loss and wage decline, and half a trade-outsourcing message focused on corporate power and privileges, voters are much more likely to believe NAFTA has been damaging and demand major changes. They are more likely to say it is bad for the economy and jobs.

While the shifts are considerable no matter which argument and message, those who heard about ongoing job losses and wage decreases were much more likely to become convinced NAFTA has hurt their own ability to get good, decent-paying jobs (+21-point shift versus +13 point shift). That is the most important change if progressives are to use the NAFTA debate to improve their credibility on the economy.

 

[1] This memo is based on a national phone survey of 1,000 registered voters, using 60 percent cell phones, conducted September 30-October 6, 2017 by Citizen Opinion on behalf of Public Citizen. The polling was preceded by six focus groups among white working class Obama-Trump voters in Macomb County, MI and Oak Creek, WI and college educated Clinton voters in Seattle Washington in July 2017.

[2] According to a June 2017 NBC/Wall Street Journal poll of 900 adults nationwide, the Republican Party has a 7-point advantage over the Democratic Party on dealing with the economy (36 to 29).

[3] Vladimir Putin viewed favorably by 15 percent of adults nationwide in a Bloomberg poll conducted July 8-12, 2017.

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As Battle Over NAFTA Investor Protections Heats Up, Trinational Coalition Delivers 400,000 Petitions Demanding Elimination of Corporate Rights and Tribunals

Investor-State Dispute Settlement Becomes Key Measure of Whether NAFTA Renegotiations Will Benefit Working People or Expand Corporate Power

WASHINGTON, D.C. – Growing public opposition to the expansive corporate privileges at the heart of the North American Free Trade Agreement (NAFTA) took center stage as the fourth round of NAFTA talks began today in Washington, D.C. U.S., Mexican and Canadian civil society organizations delivered more than 400,000 petitions demanding that NAFTA’s expansive corporate rights and protections and Investor-State Dispute Settlement (ISDS) be eliminated during renegotiations. [Still photos and video available of delivery event.]

“If you want to know how trade deals like NAFTA have been rigged against working people and our communities, all you need to do is to look at the Investor-State Dispute Settlement process,” said Chris Shelton, president, Communications Workers of America.

“Americans want trade deals that will add new protections for our environment, create American jobs and raising wages, not another corporate giveaway by a phony populist like Trump, said CREDO political director Murshed Zaheed. “If Trump doesn’t use NAFTA renegotiation to eliminate the Investor State Dispute Settlement provision it will further expose his administration as craven crony capitalists masquerading as faux populists.”

“The Teamsters are North America’s supply chain union. With members in long-haul trucking and freight rail, air, at ports and in warehouses, as well as members in manufacturing and food processing, this union has a big stake in trade policy reform,” said Jim Hoffa, general president, Teamsters. “We will be monitoring the modernization of a flawed and failed NAFTA, and fighting to make sure that the new NAFTA works for working families.”

U.S. officials are expected to table a proposal on the controversial NAFTA investment chapter during this week’s negotiations. NAFTA’s investor protections and ISDS make it less risky and expensive for corporations to outsource jobs and empower them to attack domestic policies that protect public health and the environment by going before tribunals of three corporate lawyers who can order unlimited compensation to be paid to the corporations by taxpayers.

Last month, more than 100 small business leaders sent a letter calling for elimination of ISDS in NAFTA. Organizations representing U.S. state legislatures and state attorneys general and hundreds of prominent economics and law professors also have declared opposition to ISDS, as has a group of Republican members of the U.S. House of Representatives. Conservative U.S. Supreme Court Chief Justice John Roberts has warned about the threat of ISDS. But corporate interests are scrambling to defend the controversial regime they use to attack domestic laws and raid taxpayer funds.

While just 50 known ISDS cases were launched in the first three decades of this shadow legal system, corporations have launched more than 50 claims in each of the past six years. More than $392 million in compensation has already been paid out to corporations to date after NAFTA ISDS attacks on oil, gas, water and timber policies, toxics bans, health and safety measures, and more. More than $36 billion in NAFTA ISDS attacks are pending.

“People from the Yukon to the Yucatan are united in demanding an end to NAFTA’s corporate privileges that promote job outsourcing, lower wages and attacks on health safeguards,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “A NAFTA replacement deal that benefits people and the planet cannot grant corporations powers to skirt our laws and courts and demand unlimited taxpayer compensation from tribunals of corporate lawyers.”

“NAFTA is strewn with handouts to corporate polluters that must be eliminated, starting with the free pass for chronic job offshorers to attack air, water, and climate protections in tribunals of corporate lawyers,” said Ben Beachy, director of Sierra Club’s Responsible Trade Program. “Any NAFTA replacement must stop protecting multinational corporations and start protecting the workers and communities across North America who have endured decades of damage under this raw deal.” 

"ISDS makes big corporations feel safer moving jobs around the globe to wherever workers are the most exploited and environmental regulations are the weakest, and it also puts democratically-enacted public interest laws in jeopardy both at home and abroad,” said Arthur Stamoulis, executive director of Citizens Trade Campaign. "While many changes are needed to make a NAFTA replacement deal work for working families and the planet, if trade negotiators maintain ISDS, we’ll know the NAFTA renegotiation has been hijacked by special interests intent on preserving corporate power.”

"ISDS effectively usurps democratic governance, and makes it impossible for elected governments to create policy that benefits ordinary citizens without the threat of a corporate lawsuit,” said Carli Stevenson, campaigner, Demand Progress. “As we fight to preserve the free and open internet in the United States, we stand with activists worldwide against attempts by any corporation to use trade agreements to make their profits sacrosanct and act against the interests of citizens, workers, and consumers. ISDS should not be a part of any trade agreement."

 “ISDS empowers mega-corporations to attack democratic values, human rights, and environmental protections and force governments to award their corruption and greed with unlimited payments of our tax dollars,” said Matt Nelson, Executive Director of Presente Action. “The reality is clear, forces pushing the ISDS have no loyalty to their governments or the people, only to their pipedreams to rule our public institutions like their own private castles."

“Investor-State Dispute Settlement puts power in the hands of international tribunal that do not have the best interests of workers, public health, and the environment, but rather benefit corporations looking to make a profit or gain more power,” said Patrick Carolan, executive director, Franciscan Action Network. “This is not in line with Catholic Social Teaching and Franciscan values which emphasizes the need for just and fair laws for all people.”

“Big Pharma is already demanding more extensive provisions on intellectual property in NAFTA to extend their market monopolies on medicines even longer. At the same time, it’s also pushing to expand NAFTA’s investment chapter to include intellectual property claims. This would mean pharmaceutical giants could use the system of closed-door tribunals to try to overturn important, long-standing features of a country’s laws on patents or other aspects of intellectual property, in pursuit of yet more profits for the one of the most profitable industries in the world, said Richard Elliott, executive director, Canadian HIV/AIDS Legal Network.

Organizations involved include:

AFL-CIO

Canadian HIV/AIDS Legal Network

Center for International Environmental Law

Citizens Trade Campaign

Corporate Accountability International

Council of Canadians

CREDO Action

Communications Workers of America

Daily Kos

Demand Progress

Democracy for America

Derechos Digitales

Food and Water Watch Action Fund

Franciscan Action Network

Friends of the Earth

Global Exchange

Good Jobs Nation

Institute for Agriculture and Trade Policy

Interfaith Workers Justice

International Corporate Accountability Roundtable

International Labor Rights Forum

Just Foreign Policy

Leadnow

Machinists Union

Maryknoll Office for Global Concerns

Open Media

Our Revolution

People Demanding Action

Presbyterian Church (U.S.)

Presente Action

Progressive Congress Action Fund

Public Citizen’s Global Trade Watch

Sierra Club

SumOfUS

Teamsters

Trade Justice Network (Canada)

United Church of Christ

United Electrical Workers

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Comments Concerning the Costs and Benefits to U.S. Industry of U.S. International Government Procurement Obligations

An excerpt from Global Trade Watch's official comment submission on U.S. procurement obligations is below. For the full report, please click here

Public Citizen welcomes the opportunity to submit comments to the U.S. Department of Commerce and the Office of the U.S. Trade Representative (USTR) on U.S. government procurement obligations in trade agreements. Public Citizen is a nonprofit consumer group with more than 400,000 members. A mission of Public Citizen is to ensure that in this era of globalization, a majority can enjoy economic security; a clean environment; safe food, medicines and products; access to quality affordable services; and the exercise of democratic decision-making about the matters that affect their lives.

In the context of a creeping expansion of the scope of “trade” agreements negotiated behind closed doors with hundreds of official corporate advisors, Americans across the political spectrum have become aware and upset about the ways in which today’s “trade” pacts conflict with their goals and values. As agreements have expanded far beyond traditional matters such as cutting tariffs and limiting quotas, more Americans have become engaged in demanding a new approach. As a result, the status quo U.S. trade policy model now faces unprecedented crises politically, economically and socially.

Thus, a review of trade-pact procurement terms is timely. These terms constrain how the public can direct our federal and state officials to spend our tax dollars. The rules require firms operating in trade partner countries to be treated like U.S. firms – and foreign goods to be treated as if they were made in America – with respect to many types of government contracts over a set dollar-value threshold, with some limits for U.S. defense agencies and some products. Effectively, these rules offshore our tax dollars rather than investing them to create jobs and innovation at home. As a result, currently “Buy American” now actually means companies and products from 60 countries must be given the same access to U.S. government contracts as U.S. firms and products for all but the lowest-value contracts. And 37 U.S. states are bound to such rules with respect to the 45 signatory countries of the World Trade Organization (WTO) Agreement on Government Procurement (GPA).

These terms also eliminate a reason that U.S. businesses profiting from U.S. government contracts choose to produce domestically. Such firms advocate for the current trade pact procurement rules because they allow them to relocate production to low-wage countries with U.S. trade pacts – profiting from leaving their U.S. workers behind and often also avoiding U.S. tax obligations – and still obtain lucrative taxpayer-funded contracts. Fifty-six percent of the top 50 U.S. government federal contractors in FY 2016 were certified under just one narrow U.S. government program as having engaged in offshoring, and 41 percent of the top 100 FY 2016 contractors were certified as having offshored American jobs. More than a third of total U.S. government contract spending in FY 2016 went to firms certified as having offshored jobs. This totaled $176 billion in U.S. federal government contracts in 2016. As a candidate, President Donald Trump pledged to punish firms that offshore American jobs. However, in 2017 the flow of federal contract awards to major offshorers has continued, with United Technologies, for instance, receiving 15 new awards despite offshoring 1,200 of its 2,000 Carriers job to Mexico, and notorious offshorer General Electric obtaining scores more. As described in this submission, a U.S. president has the unilateral authority to reverse the waivers to Buy American policies that facilitate this business conduct.

In addition to supporting job offshoring, the current trade pact rules on government procurement also limit the criteria governments can use to describe the goods and services they seek and what conditions may be imposed on bidders. The terms reflect the interests of U.S. corporate trade advisors interested in acquiring access to procurement opportunities in other countries and thus limiting the conditions and terms governments may require of them. But the rules apply reciprocally, meaning that they also severely constrain the ability for U.S. citizens and our elected officials to use procurement as an important policy tool. If the federal government – or a state – does not conform its policies to these constraints, then countries that are part of the agreement can challenge our policies in foreign tribunals that can impose trade sanctions against the United States until our laws are eliminated or changed.  

Given that total U.S. government procurement activity is $1.7 trillion, the implications are significant. When able to set criteria on government purchases, the U.S. federal government and our state governments have the capacity to spur innovation and further other policy goals by creating demand for specified goods and services or those produced under specified conditions. However, currently, the trade agreements with procurement terms to which the United States is a signatory impose constraints on the federal government and, to differing degrees, the 37 U.S. states now bound to comply with some of these trade pact terms. It is worth noting that in the early 1990s, when U.S. states were asked to opt in to being bound to the WTO’s GPA, few governors or state legislatures recognized that doing so would result in a form of international pre-emption that would severely limit their policymaking. As states became more aware of the threats posed, fewer and fewer were willing to become bound to these terms. By the mid-2000s, fewer than a dozen states opted in to these policy constraints in the last Free Trade Agreements (FTA) negotiated by the George W. Bush administration. Reflecting this reality, the Trans-Pacific Partnership did not cover state procurement. However, 37 U.S. states remain bound to WTO procurement policy constraints.

As this submission enumerates, the current procurement terms in U.S. trade pacts represent bad economics and limit domestic policy space, and must be eliminated. Even if the underlying notion of offshoring our tax dollars and imposing one-size-fits-all policies about how taxpayer funds may be expended was a good one in general, doing so is a losing proposition for the United States. The U.S. procurement market is much larger than any but that of the European Union. Thus in exchange for some U.S. firms obtaining some contracts in significantly smaller procurement markets, access on equal terms to U.S. firms is provided to the entire massive U.S. procurement market for any firm operating in a trade partner nation or for goods produced in such a nation, including with respect to firms from nations that provide no reciprocal access, such as China. Improved statistical reporting and information exchange is essential to track the exact impact of such terms.

Notably, a U.S. president has the authority to unilaterally exit the WTO GPA by providing 60 days written notice to the WTO Director-General and thus eliminate U.S. obligations with respect to 41 of the 45 WTO GPA parties with which we do not have FTAs. WTO rules do not provide for penalties in response to such an action. The procurement provisions of various FTAs can be eliminated or altered through renegotiation. With respect to U.S. law effectuating these international law obligations, a U.S. president also has unilateral authority to eliminate the waiver for trade pact partners of domestic procurement preferences. This element of our trade agreements is implemented by regulation, rather than in the trade agreement implementing legislation. The economic and social benefits of overhauling the U.S. approach to trade pact procurement terms are sizable.

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North Korea Crisis No Reason to Preserve Failed Trade Deal; U.S. Exports to South Korea Dropped, Deficit Nearly Doubled Since Pact

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

 “How to peacefully resolve North Korea’s nuclear escalation is a thorny question, but what should happen with the 2012 U.S.-South Korea Free Trade Agreement is an entirely separate question that is not complicated. We opposed the U.S.-Korea Free Trade Agreement in 2011 when it came before Congress because we knew that any deal that has at its heart new rights and powers for corporations to offshore jobs, raise medicine prices and attack environmental, health and financial stability safeguards is bad for people and the planet.

In its five years in effect, this U.S.-Korea trade agreement proved even worse than expected. The unique outcome is that U.S. exports to South Korea actually declined after the pact was implemented. As with most other U.S. FTAs, imports into the United States soared. Thus, the U.S. goods trade deficit with Korea increased by 85 percent in five years. U.S. average monthly exports to South Korea have fallen in nine of the 15 U.S. sectors that export the most to South Korea, relative to the year before the FTA. U.S. exports to South Korea of agricultural goods have even fallen 5.4 percent in the first five years of the FTA.

Claims that U.S.-Korean cooperation on a mutually shared existential priority will somehow be undermined by cancelation of a trade deal that has done the opposite of what was promised is absurd. The 28,000 U.S. troops stationed in Korea are just one demonstration of U.S. support for South Korea and commitment to its defense. Hysterical foreign policy arguments are always the claim of last resort in support of a failed trade agreement, and time and again they have proved meritless. Given the broad public opposition to the FTA in Korea, ending a deal negotiated in secret with 500 official U.S. advisers representing corporate interests would be viewed by many in Korea outside the foreign policy elite as good news.”

Background information and our previous press release summarizing the Korea FTA five-year data release by the U.S. International Trade Commission on May 4, 2017

With respect to the economics of the deal’s termination, Korean tariffs would not rise to 14 percent as suggested by former-U.S. Trade Representative Robert Zoellick. An oped he wrote that ran earlier this week says levels “could” rise, a hedge to cover the reality that he is citing Korea’s bound World Trade Organization tariff rates, not their actual applied rates. (It is the “applied” rate that reflects the actual tariffs charged while the “bound” rate is the highest level to which a country could raise tariffs although only on a Most Favored Nation basis, which means with respect to all countries.) The relevant data is the applied trade weighted mean tariff level provided by the World Bank, which for Korea is 4.78 percent. The United States is at 1.63 percent. (The applied trade weighted mean is the actual average tariff level based on actual trade flows.)

 

May 4, 2017, Public Citizen press release

Today’s Five-Year Korea FTA Data Show March Imports from Korea Higher than Any Month But One Since Pact Started: What Is Trump’s Plan for Pact?

U.S. Trade Deficit With Korea Has Soared as U.S. Exports Fell, Imports Jumped Under 2012 U.S.-Korea Free Trade Agreement

 WASHINGTON, D.C. – Despite the Trump administration’s tough rhetoric about the U.S.-Korea Free Trade Agreement (FTA) pact, imports from Korea in March 2017 were higher than any month but one in the pact’s five years in effect.

Today’s release of new U.S. Census trade data for the first full five years of the Korea FTA spotlight statements from both President Donald Trump and Vice President Mike Pence in the past month that the agreement’s outcomes are not acceptable. While the Trump and Pence statements were notable for coming despite escalating military tensions on the Korean Peninsula, what the administration will do about the pact and when remains a mystery.

“Our trade deficit with Korea has increased dramatically under this agreement Trump bashed on the campaign trail, and workers in the swing stats that elected  Trump  have been hardest hit, so what will Trump do about it,” asked Lori Wallach, director of Public Citizen’s Global Trade Watch.

While then-Representative Pence voted to pass the agreement in 2011, now-Vice President Pence, in an April 2017 trip to Seoul, declared the pact to be “falling short” and needing review and reform. Later that month, Trump declared of the Korea deal: “We’ve told them that we’ll either terminate or negotiate. We may terminate.”  Trump spotlighted the “job-killing trade deal with South Korea” in his nomination acceptance speech and on the stump, where he also often noted that “this deal doubled our trade deficit with South Korea and destroyed nearly 100,000 American jobs.”

Many of Trump’s trade-related campaign pledges were broken in his first 100 days, calling into question the prospects for action on the Korea pact. A powerful White House faction opposes the trade policy changes that Trump promised would deliver more American jobs and lower deficits

The agreement, sold by the Obama administration with a “more export, more jobs” slogan, has resulted in U.S. exports to Korea declining 7.8 percent ($3.7 billion) and imports from Korea increasing 13.1 percent ($8.1 billion) by the end of its fifth year. The 85 percent trade deficit increase with Korea under the pact – from $14 billion in the 12 months before the pact went into effect on March 15, 2012 to $26 in its fifth year – came in the context of the overall U.S. trade deficit with the world decreasing by 5 percent.  While U.S. goods imports from the world decreased by 7.1 percent, goods imports from Korea increased by 13.1 percent.

Defenders of the pact claim the results stem from weakness in Korea’s economy, but in fact Korea’s GDP has risen by 15 percent from 2011 to 2016 while unemployment rates have averaged 3.4 percent, hardly the indicators of a weak economy.  

Meanwhile, the U.S. service sector trade surplus with Korea has increased by only $2 billion from 2011 to 2015 a growth rate of 29 percent in its five years in effect that is notably 64 percent slower than our services surplus growth over the five years before the FTA went into effect. (Service sector data for the full fifth year of the deal will be released in October.)

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

  • Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 59 of the 60 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit in the five years before the deal.
  • Since the FTA took effect, U.S. average monthly exports to Korea have fallen in 10 of the 15 U.S. sectors that export the most to Korea, relative to the year before the FTA.
  • The auto sector was among the hardest hit: The U.S. trade deficit with Korea in motor vehicles grew 55.7 percent in the pact’s first five years. U.S. imports of motor vehicles from Korea have increased by 64.2 percent, or $6.4 billion by the fifth year of the Korea FTA.
  • Exports of machinery and computer/electronic products, collectively comprising 27 percent of U.S. exports to Korea, have fallen 20.6 and 20.1 percent respectively.
  • U.S. exports to Korea of agricultural goods have fallen 5.4 percent in the first five years of the Korea FTA, despite almost two-thirds of U.S. agricultural exports by value obtaining immediate duty-free entry to Korea under the pact. U.S. agricultural imports from Korea, meanwhile, have grown 45.4 percent under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined 8.1 percent, or $554 million, since the FTA’s implementation. The Obama administration promised that U.S. exports of meat would rise particularly swiftly, thanks to the deal’s tariff reductions on these products. However, despite U.S. officials’ promises that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade, South Korea has imposed temporary bans on imports of American poultry in each of the last three years, including 2017. Comparing the fifth year of the FTA to the year before it went into effect, U.S. poultry producers have faced a 78 percent collapse of exports to Korea – a loss of 82,000 metric tons of poultry exports to Korea. U.S. pork exports have also dropped 1 percent.
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NAFTA Plan Does Not Describe Promised Transformation of NAFTA to Prioritize Working People

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

 Note: Today, the Trump administration published a document on its NAFTA renegotiation objectives. Under the 2015 Fast Track law, the administration must publish “a detailed and comprehensive summary” of its specific negotiating objectives 30 days before formally beginning trade talks.

“This document does not describe the promised transformation of NAFTA to prioritize working people that some voters were expecting based on President Trump’s campaign pledges.

More than 910,000 specific American jobs have been certified as lost to NAFTA under just one narrow program, but this document does not make clear whether NAFTA’s job offshoring incentives or its ban on Buy American procurement policy will be eliminated or labor or environmental standards better than the widely rejected one in the TPP will be added.

The document is quite vague so while negotiations can start in 30 days, it’s unclear what will be demanded on key issues, whether improvements for working people could be in the offing or whether the worst aspects of the TPP will be added making NAFTA yet more damaging for working people. The administration should follow the European Union’s practice and make public its actual proposals being shared with Mexico and Canada prior to talks starting.

The Trump administration has a very narrow pathway to both achieving the president’s campaign pledges on NAFTA and passing a new NAFTA deal. Achieving Trump’s campaign-promised NAFTA deficit-lowering and U.S. job creation goals will require changes to NAFTA that GOP congressional leaders and the corporate lobby oppose and about which this document remains vague. Even if a bloc of GOP rank and file members may support elimination of NAFTA’s investor offshoring incentives and Buy American ban, which are necessary to achieve Trump’s goals, a sizeable bloc of Democratic votes will be needed to pass a new NAFTA of that sort. But GOP congressional leaders and the corporate lobby are demanding TPP elements be added to NAFTA and that will push away Democrats. Some aspects of that TPP agenda can be seen in today’s document because much of the text repeats the negotiating objectives of the 2015 Fast Track bill, which GOP leaders and the corporate lobby loved and most congressional Democrats, a sizeable bloc of GOP congressional members and labor and civil society groups opposed.”

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NAFTA Legacy Series: Mexico’s Lost Opportunity

With NAFTA renegotiations about to begin, Public Citizen has compiled the latest information on how NAFTA’s outcomes measure up to its proponents’ promises. This is the fourth of a four-part expose.

To hear President Trump’s version of NAFTA, Mexico was the big winner. The reality is that NAFTA cost more than two million Mexicans lost their livelihoods related to agriculture. Mexican workers’ real wages are 9 percent lower or $1,500 less than in the year before NAFTA with median manufacturing wages of $2.50 per hour sufficient to support basic needs.

After the first two decades of NAFTA, Mexico’s real gross domestic product per capita growth rate has been a paltry 18.6 percent, ranking 18th out of the 20 countries of Central and South America. In contrast, from 1960 through 1980, Mexico’s per capita gross domestic product grew 98.7 percent. Mexico would be close to European living standards today if it had continued its previous growth rates.

And Mexican taxpayers have forked over $204 million to corporations attacking domestic laws in front of NAFTA tribunals of three corporate lawyers whose decisions are not subject to appeal.

The Mexican people – like people in the United States - were promised that NAFTA would strengthen their economy and raise wages. But after more than 20 years of NAFTA, over half of the Mexican population, and over 60 percent of the rural population, still fall below the national poverty line.

Mexican farmers suffered the worst under the agreement. Before NAFTA, Mexico only imported corn and other basic food commodities if local production did not meet domestic needs. But NAFTA eliminated Mexican tariffs on corn and other commodities and required revocation of programs supporting small farmers. Amidst a NAFTA-spurred influx of cheap U.S. corn, the price paid to Mexican farmers for the corn that they grew fell by 66 percent, forcing many to abandon farming. From 1991 to 2007, about 2 million Mexicans engaged in farming and related work lost their livelihoods. The price of tortillas – Mexico’s staple food – shot up 279 percent in the pact’s first ten years, even as the price paid to Mexican corn farmers plummeted.

To read more on NAFTA’s effects on Mexico, please click here

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NAFTA Legacy Series: Empty Promises for U.S. Farmers

With NAFTA renegotiations about to begin, Public Citizen has compiled the latest information on how NAFTA’s outcomes measure up to its proponents’ promises. This is the third of a four-part expose.

Agriculture is supposed to be the winner under NAFTA, right? Um, no: the U.S. agriculture trade balance with NAFTA partners Mexico and Canada fell from a $2.5 billion surplus in the year before NAFTA to a $6.4 billion deficit in 2016. The rising trade deficit in agricultural products has contributed to the loss of more than 200,000 small family farms. Since NAFTA has taken effect, one out of every ten small farms has disappeared.

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Yes, we exported much more corn to Mexico since NAFTA. But our NAFTA trade deficits in beef/live cattle and vegetables outweigh those gains. And, here’s another conventional wisdom buster: even without NAFTA U.S. corn would not face tariffs in Mexico. Mexico eliminated tariffs on corn for all countries in 2008.

But government data reveals that since 1993, U.S. agricultural imports from NAFTA countries have grown much quicker than U.S. exports to those same countries, resulting in massive agricultural trade deficits. Since the Great Recession, U.S. food imports have grown twice as fast as U.S. food exports.

To read more on NAFTA’s effects on U.S. agriculture, please click here.

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NAFTA Legacy Series: Corporate Courts Attack Public Interest Laws

With NAFTA renegotiations about to begin, Public Citizen has compiled the latest information on how NAFTA’s outcomes measure up to its proponents’ promises. This is the second of a four-part expose.

The key provision in NAFTA grants new rights to thousands of foreign corporations to sue the U.S. government before a tribunal of three corporate lawyers. These lawyers can award corporations unlimited sums to be paid by American taxpayers, including for the loss of expected future profits. These corporations need only convince the lawyers that a U.S. law or safety regulation violates their NAFTA rights. The corporate lawyers’ decisions are not subject to appeal. This system is formally called Investor-State Dispute Settlement.

More than $392 million in compensation has already been paid out to corporations in a series of investor-state cases under NAFTA. This includes attacks on oil, gas, water and timber policies, toxics bans, health and safety measures, and more. In fact, of the 14 claims (for more than $50 billion) currently pending under NAFTA, nearly all relate to environmental, energy, financial, public health, land use and transportation policies – not traditional trade issues.

While this shadow legal system for multinational corporations has been around since the 1950s, just 50 known cases were launched in the regime’s first three decades combined. In contrast, corporations have launched approximately 50 claims in each of the last six years. ISDS is now so controversial that some governments have begun terminating their treaties that include ISDS.

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As corporations and law firms become emboldened and more creative in their uses of ISDS, it is likely only a matter of time before U.S. taxpayers are on the hook: as long as NAFTA is in effect, more than 8,500 corporate subsidiaries from Canada and Mexico are empowered to use ISDS to challenge our policies.

To read more about how these tribunals of three corporate lawyers have been operating under NAFTA, please click here.

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NAFTA Legacy Series: Lost Jobs, Lower Wages, Increased Inequality

With NAFTA renegotiations about to begin, Public Citizen has compiled the latest information on how NAFTA’s outcomes measure up to its proponents’ promises. This is the first of a four-part expose.

NAFTA was sold to the U.S. public in 1993 with grand promises of improved trade balances and more jobs. Instead, more than 910,000 specific American jobs have been certified as lost to NAFTA – due to rising imports and offshoring – under just one narrow government program that undercounts the damage.

And the United States’ trade small trade surplus with Mexico and small deficit with Canada crashed into a $134.3 billion deficit – counting both goods and services.   The U.S. goods trade deficit with NAFTA partners Canada and Mexico increased 521 percent – it was $173 billion in 2016 - as annual growth of that deficit was 47 percent higher with Mexico and Canada than with countries that are not party to a NAFTA-style trade pact – a group that includes China. And, annual growth of U.S. services exports to Mexico and Canada since NAFTA has fallen to less than half the pre-NAFTA rate.  

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As we lost hundreds of thousands of manufacturing jobs, wages were pushed down economy-wide. According to the U.S. Bureau of Labor Statistics, two out of every five displaced manufacturing worker rehired in 2016 experienced a wage reduction, with one out of four taking a cut of greater than 20 percent. For the average manufacturing worker earning more than $38,000 per year, this meant an annual loss of at least $7,700. And as these workers joined the glut of those already competing for non-offshorable service sector jobs, wages in these growing service sectors were also pushed down.

The Center for Economic and Policy Research has discovered that the trade-related losses in wages now outweigh the gains in cheaper goods for the vast majority of U.S. workers.

Lost jobs and lower wages have exacerbated income inequality to levels not seen since the Great Depression. Even proponents of NAFTA admit that trade pressures have likely contributed to today’s historic degree of inequality. The pro-NAFTA Peterson Institute has estimated that 39 percent of observed growth in U.S. wage inequality is attributable to trade trends.

To read more about NAFTA’s effects on the U.S. economy, jobs and income inequality, please click here.

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Ecuador Says No to ISDS, Exits BITs*

After years of sustained activism in Latin America and across the globe, the President of Ecuador recently terminated its remaining 16 treaties that empower multinational corporations to challenge its laws before panels of three corporate lawyers and demand unlimited sums of taxpayer money.

By terminating treaties that include the corporate-rigged investor-state dispute settlement (ISDS) system, Ecuador is the latest country to prioritize its people over corporate rights.

Ecuador’s decision to terminate its ISDS pacts was spurred by firsthand experience with some egregious cases, particularly with Big Oil. For example, Chevron is looking to avoid paying for its massive pollution in the Ecuadorian Amazon. And, Occidental Petroleum received a $1.4 billion award against Ecuador despite having obviously violated its contract with the government.

In response to citizens’ uproar against ISDS throughout Latin America, in 2013, the Ecuadorian government established an audit commission of government officials, academics, lawyers and civil society groups to analyze the costs and benefits of the country’s existing treaties and make recommendations.

On May 8, the government made public the Audit Commission’s 688-page report, which recommended that the government should terminate its remaining treaties and develop an alternative investment treaty model that removes ISDS and rebalances the rights of citizens over corporations.

The Audit Commission reported that the treaties had failed to deliver on promised foreign investment and had, in fact, undermined the development objectives laid out in Ecuador’s constitution. The report found that Ecuador had been forced to pay nearly $1.5 billion to multinational corporations (equivalent to 62 percent of its annual health spending), and that, under currently pending cases, the government runs the risk of having to pay out $13.4 billion (more than half the government’s entire annual budget for 2017).

Ecuador’s President Raphael Correa heeded the advice in the Audit Commission’s report and on May 16, 2017, issued executive decrees that terminated the existing treaties, including its treaty with the United States.

Ecuador joins countries — such as South Africa, Indonesia, Bolivia and India — that have terminated their investment treaties. Meanwhile, Mercosur and the South African Development Community have recently explicitly excluded ISDS from their respective investment protocols.

And Ecuador’s move away from ISDS-enforced treaties mirrors the growing movements in Europe and the United States to stop the expansion of corporate power through ISDS. Bipartisan opposition to ISDS in the Trans-Pacific Partnership (TPP) was a significant reason that the deal could never achieve majority support in the U.S. Congress. The wave of opposition to ISDS in Europe also helped to stall the U.S.-EU negotiations for a Transatlantic Trade and Investment Partnership (TTIP).

Worldwide, the tide is turning against the notion that multinational corporations and investors should be granted extraordinary rights and the ability to enforce them against governments in a corporate-rigged, extrajudicial system. Ecuador’s announcement shows that the diverse movement of civil society, legal scholars and government officials concerned about ISDS are making progress in rolling back the regime.

In the United States, the upcoming renegotiation of the North American Free Trade Agreement (NAFTA) is an obvious opportunity to demand that ISDS be eliminated from any NAFTA replacement.

As pressure grows worldwide for governments to withdraw from the ISDS system, the Trump administration has 60 days before it must reveal its position. (Under Fast Track, the administration must publicly post a detailed description of its negotiating plans 60 days after the initial notice.)

Given that ISDS was a key contributor to the U.S. Congress’ opposition to the TPP, it is not surprising that the administration’s NAFTA renegotiation notice was greeted by demands from Congress and civil society that ISDS elimination must be a top priority.  

*Updated 5/22/17 .

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Will NAFTA Renegotiation Produce TPP 2.0 and Intensify Damage? Or Fulfill Trump Promise of a ‘Much Better’ Deal for Working Americans? Maintaining Secretive Process With 500 Official Corporate Advisers Does Not Bode Well

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

Note: Today, the Trump administration sent formal notice of NAFTA renegotiation to Congress.

As a candidate, Donald Trump promised to make NAFTA “much better” for working people. Today’s notice is markedly vague. But Trump’s NAFTA renegotiation plan that leaked in late March described just what the corporate lobby is demanding: using NAFTA talks to revive parts of the Trans-Pacific Partnership (TPP), like expanded investor incentives to offshore jobs that could make NAFTA even worse for working people.

The obvious measure of whether NAFTA renegotiation is intended to benefit working people is if Trump makes clear he will eliminate NAFTA’s special investor rights that make it easier to offshore American jobs and attack our laws before tribunals of three corporate lawyers who can award the firms unlimited sums of taxpayer money.

If corporate elites are allowed to dictate how NAFTA is renegotiated, the agreement could become more damaging for working families and the environment in the three countries. And modest tweaks will not stop NAFTA’s ongoing damage, much less deliver on Trump’s promises for a deal that will create American jobs and raise wages.

Already the 500 corporate trade advisers who got us into the TPP have been consulted on NAFTA renegotiations, while the few labor advisers were shut out of that March meeting. And the public and Congress are being left in the dark about negotiating plans and goals.

If Trump won’t make negotiations transparent – by issuing detailed goals and making draft texts available – how can the public know that the deal is not being shaped to benefit Trump’s many Canadian and Mexican investments, or that the Goldman Sachs team in the White House isn’t turning NAFTA into TPP 2.0?

Trump’s conflicts of interest and self-dealing opportunities with NAFTA renegotiation are not hypothetical; the sprawling Trump business empire has 14 Canadian and two Mexican investments. Some of Trump’s clothing line is made in Mexico. Trump won’t divest his business holdings or release his tax returns, so unless he reveals his full Mexican and Canadian business dealings, we won’t even know in whose interest these NAFTA talks are being conducted.

Trump’s broken promises on trade are piling up. Instead of punishing firms that offshore American jobs, he has awarded United Technologies 15 lucrative new government contracts even after they proceeded to offshore 1,200 of their 2,000 Indiana Carrier jobs. Instead of enacting the promised “get tough on China” trade policy, he flip-flopped on his pledge to declare China a currency manipulator on Day One and has done nothing to counter our massive $347 billion China trade deficit.

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Today’s Five-Year Korea FTA Data Show March Imports From Korea Higher Than All But One Month Since Pact Started: What Is Trump’s Plan for Pact?

U.S. Trade Deficit With Korea Has Soared as U.S. Exports Have Fallen; Imports Jumped Since 2012 U.S.-Korea Free Trade Agreement

WASHINGTON, D.C. –Imports from Korea in March 2017 were higher than any month but one in the five years the U.S.-Korea Free Trade Agreement (FTA) has been in effect. Today’s release of new U.S. Census trade data for the first full five years of the Korea FTA spotlight statements from both President Donald Trump and Vice President Mike Pence in the past month that the pact’s outcomes are unacceptable. While the statements were notable for coming despite escalating military tensions on the Korean Peninsula, what the administration will do about the pact and when remains a mystery.

“Our trade deficit with Korea has increased dramatically under this agreement, which Trump bashed on the campaign trail, and workers in the swing states that elected Trump have been hardest hit, so what will Trump do about it,” asked Lori Wallach, director of Public Citizen’s Global Trade Watch.

While then-Representative Pence voted to pass the agreement in 2011, now-Vice President Pence, in an April 2017 trip to Seoul, declared the pact to be “falling short” and needing review and reform. Later that month, Trump declared of the Korea deal: “We’ve told them that we’ll either terminate or negotiate. We may terminate.”  Trump spotlighted the “job-killing trade deal with South Korea” in his nomination acceptance speech and on the stump, where he also often noted that “this deal doubled our trade deficit with South Korea and destroyed nearly 100,000 American jobs.”

Many of Trump’s trade-related campaign pledges were broken in his first 100 days, calling into question the prospects for action on the Korea pact. A powerful White House faction opposes the trade policy changes that Trump promised would deliver more American jobs and lower deficits.

The agreement, sold by the Obama administration with a “more export, more jobs” slogan, has resulted in U.S. exports to Korea declining 7.8 percent ($3.7 billion) and imports from Korea increasing 13.1 percent ($8.1 billion) by the end of its fifth year. The 85 percent trade deficit increase with Korea under the pact – from $14 billion in the 12 months before the pact went into effect on March 15, 2012, to $26 billion in its fifth year – came in the context of the overall U.S. trade deficit with the world decreasing by 5 percent. While U.S. goods imports from the world decreased by 7.1 percent, goods imports from Korea increased by 13.1 percent.

Defenders of the pact claim the results stem from weakness in Korea’s economy, but in fact, Korea’s GDP has risen by 15 percent from 2011 to 2016 while the unemployment rate has averaged 3.4 percent – hardly the indicators of a weak economy. 

Meanwhile, the U.S. service sector trade surplus with Korea has increased by only $2 billion from 2011 to 2015 a growth rate of 29 percent in its five years in effect that is notably 64 percent slower than our services surplus growth over the five years before the FTA went into effect. (Service sector data for the full fifth year of the deal will be released in October.)

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

  • Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 59 of the 60 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit in the five years before the deal.
  • Since the FTA took effect, U.S. average monthly exports to Korea have fallen in 9 of the 15 U.S. sectors that export the most to Korea, relative to the year before the FTA.
  • The auto sector was among the hardest hit: The U.S. trade deficit with Korea in motor vehicles grew 55.7 percent in the pact’s first five years. U.S. imports of motor vehicles from Korea have increased by 64.2 percent, or $6.4 billion by the fifth year of the Korea FTA.
  • Exports of machinery and computer/electronic products, collectively comprising 27 percent of U.S. exports to Korea, have fallen 17.1 and 18.8 percent, respectively.
  • U.S. exports to Korea of agricultural goods have fallen 5.4 percent in the first five years of the Korea FTA, despite almost two-thirds of U.S. agricultural exports by value obtaining immediate duty-free entry to Korea under the pact. U.S. agricultural imports from Korea, meanwhile, have grown 45.4 percent under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined 8.1 percent, or $554 million, since the FTA’s implementation. The Obama administration promised that U.S. exports of meat would rise particularly swiftly, thanks to the deal’s tariff reductions on these products. However, despite U.S. officials’ promises that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade, South Korea has imposed temporary bans on imports of American poultry in each of the last three years, including 2017. Comparing the fifth year of the FTA to the year before it went into effect, U.S. poultry producers have faced a 78 percent collapse of exports to Korea – a loss of 82,000 metric tons of poultry exports to Korea. U.S. pork exports have also dropped 1 percent.
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New Report Reveals Trump Is Not Punishing Corporations that Offshore American Jobs, but Awarding Them New Government Contracts

56 Percent of Top U.S. Government Contractors Offshored Jobs

WASHINGTON, DC – Despite President Donald Trump’s campaign promises to punish firms that offshore American jobs, the flow of federal contract awards to major offshorers has continued unabated since Trump’s inauguration, according to a new report released today by Good Jobs Nation and Public Citizen’s Global Trade Watch. The report, titled “Trump’s First 100 Days: Federal Contracting with Corporate Offshorers Continues,” reveals that a majority of the largest U.S. government contractors ship jobs overseas. Even after United Technology decided to offshore 1200 of its 2000 Indiana Carrier jobs to Mexico despite Trump’s interventions, the firm has obtained 15 new federal government contracts since Inauguration Day.

Key findings of the study include:

  • 56 percent of the top 50 federal contractors in FY 2016 were certified under just one narrow U.S. government program as having engaged in offshoring, and 41 percent of the top 100 FY 2016 contractors were certified as having offshored jobs.
  • The top federal contractors certified as having offshored jobs received $176 billion in contracts in 2016, which accounts for more than a third of total contract spending for that year.
  • Since Trump’s inauguration, the flow of federal contract awards to major offshorers has continued, with United Technologies, for instance, receiving 15 new awards and General Electric obtaining scores more. 

Read the full report here.   

“Our analysis proves that Donald Trump is not fulfilling his signature campaign promises to stop offshoring and bring back American jobs.  Even though he’s signed over 60 executive orders during his first 100 days, he has yet to use the power of the pen to stop corporations that receive taxpayer dollars from shipping American jobs overseas,” said Joseph Geevarghese, director of Good Jobs Nation.    

“After pledging to punish companies that offshore American jobs, Trump has not even used his expansive unilateral authority to ban offshorers from being awarded lucrative government contracts.  Instead of delivering on his promises to end offshoring and create American jobs, Trump is rewarding companies that offshore with big contracts paid by our tax dollars. He has not introduced the End Offshoring Act or launched the NAFTA renegotiations he promised for his first 100 days, and he caved on taking tough actions to reduce our huge job-killing China trade deficit,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. 

“It's disgusting that companies like T-Mobile get taxpayer money at the same time they’re sending thousands of jobs abroad,” said Jamone Ross, a former call center worker for T-Mobile in Texas, who lost his job  in 2012 along with 500 co-workers when T-Mobile shifted their work to Asia and Honduras.  “When I lost my job I’d just gotten married and bought a house. Thanks to T-Mobile, I spent the first year of my marriage taking out loans to keep up my mortgage payments, and the next year digging myself out of debt.  Friends of mine lost their cars and their apartments. If Trump really cares about American workers, like he says, he should stop this, right now.”

U.S. presidents have broad executive authority to enact “policies and directives” for federal contracting. Trump has failed to exercise this authority to cut off firms that offshore from obtaining lucrative government contracts paid with taxpayers funds.

The report highlights that Trump appeared willing to flex his muscle as “purchaser-in-chief” right after the 2016 election with his high-profile interventions to try to prevent United Technologies, a major defense contractor, from shipping its Carrier subsidiary’s operations to Mexico.  However, the study finds that since then Trump not only has failed to take promised actions, such as introducing and “fight[ing] for passage within the first 100 days of my Administration” of a Stop Offshoring Act in his first 100 days, but his administration has approved lucrative contracts with some of the nation’s most notorious chronic offshoring corporations.

 

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Trump’s Trade Agency Attacks Other Countries’ Efforts to Promote and Protect Breastfeeding in New Report

On March 31, the Office of the United States Trade Representative (USTR) released the National Trade Estimate report. This is a statutorily-required annual review of U.S. trade partners’ “significant trade barriers” that the U.S. government seeks to have eliminated.

The 492-page report provides excellent insight into the growing global backlash against our current “trade” policies. While President Donald Trump has flip-flopped on his pledges to reverse the gigantic job-killing trade deficit with China, this U.S. government report labels as illegal trade barriers an array of public interest policies, including – shamefully – other governments’ policies to promote breastfeeding.

Despite substantial progress in reducing infant mortality around the world in recent decades, nearly seven million children under the age of five still die each year – about half of them newborns. Studies show that breastfeeding has the potential to save 800,000 children under the age of five every single year.

According to the United Nations Children’s Fund (UNICEF), “breastfeeding is the foundation of good nutrition and protects children against disease.” But only 43 percent of infants (0-5 months) in the world are exclusively breastfed, and this number is even lower in parts of Latin America, Africa and Europe.

For decades, infant formula manufacturers have been accused of aggressive marketing campaigns in developing countries to discourage breastfeeding and instead, to push new mothers into purchasing formula.  The famous boycott of Nestlé in the 1970s led to the development and adoption by nations worldwide of the UNICEF/World Health Organization (WHO) International Code of Marketing of Breastmilk Substitutes (The Code) in 1981. The Code sets guidelines and restrictions on the marketing of breastmilk substitutes, and reaffirms governments’ sovereign rights to take the actions necessary to implement and monitor these guidelines.

To promote and protect the practice of breastfeeding, many countries have implemented policies that restrict corporate marketing strategies targeting mothers. These policies have led to increased breastfeeding in many countries even though greater progress is still needed.  

Rather than embracing these efforts to safeguard the world’s most vulnerable inhabitants, the Trump administration, in its March 31 report, indicted the policies as “trade barriers” that should be eliminated:  

  • Hong Kong: The Report criticizes a Hong Kong draft code, designed to “protect breastfeeding and contribute to the provision of safe and adequate nutrition for infants and young children.” USTR labels the policy as a technical barrier to trade due to its potential to reduce sales of “food products for infants and young children.”
  • Indonesia: USTR labels a draft regulation in Indonesia that would prohibit the “advertising or promotion of milk products for children up to two years of age” as a technical barrier to trade.
  • Malaysia: USTR questions Malaysia’s proposed revisions to “its existing Code of Ethics for the Marketing of Infant Foods and Related Products” that would restrict corporate marketing practices aimed at toddlers and young children.
  • Thailand: The report critiques Thailand for introducing a new regulation that would impose penalties on corporations that violate domestic laws restricting the “promotional, and marketing activities for modified milk for infants, follow-up formula for infants and young children, and supplemental foods for infants.”

Seriously? Why not also label popular public health policies aimed at reducing medicine prices as trade barriers too? Oh, actually, that is also a feature of the report.

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Trump’s Trade Deficit “Fix”: Flip-flop on China Pledges and Attack Breastfeeding, Affordable Medicines and Anti-Obesity Policies

What’s a $437 billion dollar trade deficit between frenemies? Apparently not sufficient for President Donald Trump to keep his oft-repeated pledge to declare China a currency manipulator, the world learned last week.

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This reversal comes on the heels of last week’s study-not-action move on his promise to reduce the trade deficit. President Trump signed an Executive Order to create yet another study on foreign trade barriers –   oddly enough, on the same day that his administration released the government’s annual report that analyzes “significant foreign trade barriers” among U.S. trading partners. 

So what are these so-called “trade barriers”?

Well, sadly, they are an embarrassing list of attacks on other countries’ public health and environmental policies, financial regulations and even religious standards.

Japan’s programs that reduce the cost of medicines and New Zealand’s popular health programs that control medicine prices are on the hit list. (Yup, the list includes attacks on policies that promote competition from generic drugs to bring down prices for consumers, which ostensibly is what “free trade” is supposed to do.)

Also targeted is Vietnam – for strengthening its inspection processes for imported foods.  Mexico’s new energy efficiency standards for electronic and electrical equipment are smacked because they impose “burdensome and costly requirements on products exported to Mexico.”

Bad on Canada for having requirement that drug companies, um, demonstrate a medicine’s utility before firms can obtain monopoly patent rights. Somehow the European Union’s requirement that corporations “obtain parental consent to process the personal data of minors aged 16 years or younger” is a trade barrier because this forces corporations “to interrupt or curtail service to a large and active segment of their customer base.”

And then they go after the babies. Public interest policies aimed at promoting breastfeeding are “significant trade barriers.” That includes a draft Hong Kong code meant to “protect breastfeeding and contribute to the provision of safe and adequate nutrition for infants and young children.” The administration labels this to be a technical barrier to trade due to its potential to reduce sales of “food products for infants and young children.”

The report goes after Thailand for introducing a new regulation that would impose penalties on corporations that violate domestic laws restricting the “promotional, and marketing activities for modified milk for infants, follow-up formula for infants and young children, and supplemental foods for infants.” That would otherwise be known as Thailand’s implementation of the World Health Organization/United Nations Children Fund International Code of Marketing of Breast-Milk Substitutes.

Continuing with the attack on policies promoting children’s health, the report attacks several countries have introduced policies to reduce obesity among children and adolescents. In Chile, the government adopted a law that requires food products that exceed specified thresholds of sodium, sugar, energy (calories), and saturated fat “to bear a black octagonal ‘stop’ sign for each category with the words ‘High in’ salt, sugar, energy, or saturated fat.” The law prohibits corporations from advertising products that have at least one stop sign to children under the age of fourteen. The report explains this listing by claiming that this law has been costly for corporations.  (Odd, no mention of cost to the government or Chilean public of obesity-related childhood health problems.)

In Peru, a similar regulation “includes a mandatory front-of-pack warning statement on food labels for prepackaged foods that surpass an established threshold for sugar, sodium, and saturated fats, and for all food products that contain trans-fats. The Act also establishes restrictions on advertising and promoting such food products to children and adolescents.” The report labels this as a barrier to trade and asserts that it will continue to raise its concerns with Peru.

The report also gripes that it’s unfair that Malaysia – a predominately Muslim country – restricts the importation of alcohol, and that Brunei – another predominately Muslim country – requires that non-halal foods be sold in specially designated rooms.

Obviously, promoting bacon and booze sales in Muslim countries and sacking public health laws will solve our job-killing trade deficit. So why follow through on those “get tough on China trade cheating” pledges, or trade policy, or tackle the rules in our flawed trade deals that incentivize job-offshoring? Or, could it be that the Trump administration’s notion of “trade barriers” is coming from the same corporations that have shaped our past trade policies and, year after year, get the list of policies they dislike turned into the U.S. government’s list of other countries’ trade barriers requiring elimination?

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Draft NAFTA Renegotiation Plan in Official Fast Track Notice Letter Would Not Fulfill Trump’s Pledge to Make NAFTA ‘Much Better’ for Working People or Enjoy a Congressional Majority

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

For those who trusted Trump’s pledge to make NAFTA “much better” for working people, it’s a punch in the face because the proposal could have come from any past pro-NAFTA administration and describes the Trans-Pacific Partnership (TPP) or any other same-old trade deal.

If this is Trump’s plan for renegotiating NAFTA – expanding the investor protections that promote job offshoring plus maintaining the ban on Buy American and the foreign tribunals that can attack U.S. laws – he will have broken his campaign promises to make NAFTA better for working Americans and will have a deal that cannot get a majority in Congress.

This is the sort of corporations-first, not-better-for-working-Americans agenda that results from Trump’s decision to keep the same closed-door process and the 500 corporate advisers that got us into the original NAFTA and TPP debacles. Already, the corporate trade advisers have been consulted on the NAFTA agenda in a meeting two weeks ago, while the few labor advisers included in the system were shut out. But for this leaked document, the public and Congress are being left in the dark about negotiating plans and goals.

BACKGROUND:

A draft of the formal notice to Congress of intent to launch trade negotiations required under Fast Track leaked out on Wednesday. The text of the notice letter to Congress outlines a negotiating agenda that is largely what was contained in the final text of the TPP, an agreement that Trump excoriated on the campaign trail. The letter includes some shocking points:

  • After promising to stop job offshoring and “bring back” manufacturing jobs to the United States, Trump’s plan not only would maintain the investor protections in NAFTA and investor-state enforcement tribunals, but calls for expanding protections U.S. investors would have for relocating investment offshore. (This is written in coded language in the investment section of the document.)
  • After promising a Buy American, Hire American agenda, Trump’s plan would maintain the NAFTA rules that require the United States to waive Buy American and other domestic procurement preferences so that American tax dollars are also offshored instead of being reinvested domestically to create jobs at home.
  • Language on intellectual property and access to medicines, financial services deregulation, food standards and product safety reflects the TPP standard that was extremely harmful to consumer interests.
  • The language on labor and environment standards describes the TPP terms that Democrats in Congress and unions uniformly rejected.
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Pharmaceutical Giant Threatens to Drag Government Before Corporate Tribunal for Trying to Make Essential Cancer Drug Accessible

Novartis Battle Against Colombian Government Highlights the Threats to Public Health Posed By the Outrageous Investor-State Dispute Settlement Regime and Bad “Trade” Deals

By: Haytham Hashem, GTW Intern

Swiss pharmaceutical giant Novartis appears to have used trade and investment agreements to launch a legal and political pressure campaign against the government of Colombia’s efforts to make a Novartis leukemia drug accessible to cancer patients.

The drug, imatinib, also known as Gleevec in the United States, is a chemotherapy medication used to treat several forms of leukemia. A preferred choice for many leukemia patients and their doctors, imatinib is designated an “essential medicine” by the World Health Organization due to its record of effectiveness and safety. The drug must be taken daily, with the duration of treatment typically a minimum of 36 months, although courses commonly continue for five or more years.

Imatinib has led global sales for Novartis, generating $4.6 billion in 2015.

Currently, the medicine costs $15,000 per patient per year in Colombia, a country with a per capita GDP of just $6,105. Colombian civil society groups asked their government to issue a compulsory license for the medicine. This would end Novartis’ current monopoly rights to produce the drug and authorize generic competition, the most effective means of reducing price. A Colombian legislative committee urged the Minister of Health to declare a matter of public interest, a key procedural step toward allowing competition from generics.

Novartis and U.S. government representatives pressured Colombia not to issue the compulsory license. Colombia instead followed a more conservative course toward modest price controls. The Colombian Ministry of Health issued the public interest declaration, but indicated that a compulsory licensing would only be employed in case of acute shortage.

Nevertheless, last year Novartis provided formal notice of a dispute against the Colombian government using the controversial Investor-State Dispute Settlement (ISDS) system under the Swiss-Colombia Bilateral Investment Treaty. That agreement includes ISDS provisions similar to those found in the North American Free Trade Agreement (NAFTA). The period for trying to resolve the dispute expired in the end of 2016. In late December 2016, the Health Ministry announced that, in accordance with the public interest, price would go down by some 44 percent. Due to the secretive nature of ISDS cases, Novartis’ next steps in the ISDS case — and the specific charges against Colombia — are unknown.

Novartis isn’t the first drug company to use the extraordinary rights in trade and investment treaties to challenge governments’ medicine pricing policies: Eli Lilly attempted to use NAFTA to demand $450 million from Canadian taxpayers over Canadian courts’ decisions that the firm’s monopoly patent rights for two drugs did not satisfy the country’s standards to obtain a patent.

ISDS empowers multinational corporations to sue governments before panels of three corporate lawyers. These corporations need only convince the corporate lawyers that a law or safety regulation violates their new investor rights. The corporate lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits the corporations claim they would have earned if the domestic policy was never enacted. The corporate lawyers’ decisions are not subject to appeal and the amount they can order taxpayers to give corporations has no limit.

Public backlash against ISDS was one of the primary reasons that the Trans-Pacific Partnership (TPP) could not obtain majority support in the U.S. Congress and negotiations for a Transatlantic Trade and Investment Partnership have been sidelined.

Novartis’ threatened ISDS claim appears to be just one element of its extreme pressure tactics to strong-arm the Colombian government. A shocking, leaked letter from last year (English available here) from the Colombian Embassy in Washington, D.C., to the Colombian Minister of Foreign Affairs discusses mounting political pressure from U.S. Senate staff, the Office of the U.S. Trade Representative (USTR), and unnamed pharmaceutical companies to dissuade Colombia from moving forward to make the leukemia drug more accessible to those who needed it.

The leaked diplomatic communication warns that Colombia’s actions to lower the drug’s price could risk U.S.-Colombia relations, Colombian membership in the TPP, and trigger consequences under the 2012 Colombia-U.S. Free Trade Agreement. Threatening Colombia’s potential membership in the TPP over an access to medicines effort was particularly perverse, given that Doctors Without Borders called the TPP “the worst trade agreement for access to medicines in developing countries.”

Perhaps most disturbingly, the Colombian Embassy was sufficiently alarmed by the pressure from the United States to twice remark that it was concerned that proceeding with the compulsory license would put at risk the $450 million committed for President Obama's support for Paz Colombia, the peace initiative working to end the devastating 50 year-long Colombian conflict that has claimed nearly a quarter of a million lives — mostly civilian.

In response, Senators Bernie Sanders (I-VT) and Sherrod Brown (D-OH) wrote to then-USTR Michael Froman, describing the situation and condemning “any efforts to intimidate and discourage Colombia’s government from taking measures to protect the public health in a way that is appropriate, effective, and consistent with the country’s trade and public health obligations.” They pointed out that “compulsory licenses are consistent with Colombia’s International trade obligations and are a legitimate means to ensuring access to medicines.”

Access to medicine experts believe that Novartis is most focused on setting a precedent in the Colombia case, rather than focused on direct financial losses with respect to the drug’s sale in Colombia. The Colombian patent for imatinib is set to expire in 2018. There are an estimated 2,000 Colombian users of imatinib. Factoring the initial 2016 Ministry proposed price cut of 50 percent (to about $7,500 per year), would yield a total difference of about $27 million over two years.

That is not an insubstantial amount of money. But in 2014, Novartis’ total revenue was $53.6 billion, twice as much as Colombia’s public and private healthcare expenditures combined (GDP for reference).

Of course, the favored refrain from pharmaceutical companies — from Mylan’s EpiPen price-gouging CEO to the infamous Martin “Pharma Bro” Shkreli — is that high profits are necessary to fund research on new drugs. However, we know that is not true across the industry. In 2014, Novartis spent nearly 50 percent more on sales and marketing than it did on research and development.

Furthermore, Novartis’s development costs for imatinib were relatively low. And Novartis did not develop imatinib on its own. Imatinib is the product of collaborations and shared funding arrangements between charities, public agencies and Novartis, which benefited from regulatory exemptions and now government-granted monopoly patents to produce the drug that facilitates billions in corporate earnings.

Novartis’ ISDS threat against Colombia is just one more example of why the expansion of corporate power via ISDS is one of the most dangerous components of our broken trade model.

Fortunately, the TPP, which would have drastically expanded ISDS liability by empowering tens of thousands of additional corporations to use the process, was defeated by thousands of diverse organizations representing working people united across borders.

But we must stop all ongoing negotiations that would expand ISDS, such as for a U.S.-China Bilateral Investment Treaty, and replace past trade and investment deals, such as NAFTA and the U.S.-Colombia pact.

The U.S. national consumer, environmental, faith, and labor coalition, Citizens Trade Campaign, lists the removal of ISDS as one of its primary demands for NAFTA replacement.

For more on ISDS, see Public Citizen’s selection of case studies of ISDS attacks against public interest protections here, and summaries of all ISDS cases under U.S. free trade agreements here.

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On Unhappy Fifth Anniversary of U.S.-Korea Free Trade Agreement, Deficit With Korea Has Doubled as U.S. Exports Fell, Imports Soared

President Trump Appoints a Leading Promoter of Korea Pact as White House Special Assistant for Trade and Goes Silent on Deal After Decrying ‘Job-Killing Trade Deal With South Korea’ on Stump.

WASHINGTON, D.C. –President Donald Trump has been conspicuously silent about the U.S.-Korea Free Trade Agreement (FTA) since taking office, so whether the administration comments on the pact’s March 15 fifth anniversary is being closely watched. Trump spotlighted the “job-killing trade deal with South Korea” in his nomination acceptance speech and on the stump, where he also often noted “this deal doubled our trade deficit with South Korea and destroyed nearly 100,000 American jobs.”

 Trump’s approach to the pact was called into question when he appointed one of the Korea FTA’s most persistent promoters, Andrew Quinn, to be special assistant to the president for international trade, investment and development. When the deal was initially completed in 2007, Quinn, who played a role in FTA negotiations as counselor for economic affairs at the U.S. Embassy in Seoul, declared: “It's a great agreement” that “demonstrated the effectiveness of the model, i.e., a comprehensive high-standard agreement.” When Quinn later served in the Obama White House National Security Council as director for Asian economic affairs from September 2010 to August 2012, he worked on the ratification of the Korea FTA. He most recently served in the Obama administration as the deputy lead negotiator for the Trans-Pacific Partnership.

“Our trade deficit with Korea doubled under this deal, so it’s not surprising Trump spotlighted it as a job-killer during his campaign. But voters who supported him because they thought he’d do something to reverse the damage of this and other deals will be furious if he fails to act, and more so when they learn that the very ‘insiders’ he criticized on the stump are calling the shots,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The agreement, sold by the Obama administration with a “more export, more jobs” slogan, had already resulted in the doubling of the U.S. goods trade deficit with Korea by its fourth year, as U.S. exports declined 10 percent ($4.5 billion) and imports from Korea increased 18 percent ($10.8 billion), resulting in a trade deficit of $31.6 billion relative to one of $15.9 billion in the 12 months before the pact went into effect on March 15, 2012. That deficit increase with Korea came in the context of the overall U.S. trade deficit with the world decreasing by 2 percent. Meanwhile, the U.S. service sector trade surplus with Korea has increased by only $2 billion from 2011 to 2015, a growth rate of 29 percent that is notably 64 percent slower than our services surplus growth over the four years before the FTA went into effect. In the 10 months of available trade data since the FTAs full fourth year, the goods deficit with Korea has totaled $25.5 billion compared with $25.3 billion in the comparable period a year ago. Goods trade data for the full fifth year of the deal will be released May 4 and service sector data in October.

The division among Trump  staff over trade policy was on display in the only Trump administration comment on the Korea FTA, which came in the March 1 President’s Trade Agenda report that reflects the views of Trump’s nominee for U.S. Trade Representative Robert Lighthizer: “Further, the largest trade deal implemented during the Obama Administration – our free trade agreement with South Korea – has coincided with a dramatic increase in our trade deficit with that country. From 2011 (the last full year before the U.S.-Korea FTA went into effect) to 2016, the total value of U.S. goods exported to South Korea fell by $1.2 billion. Meanwhile, U.S. imports of goods from South Korea grew by more than $13 billion. As a result, our trade deficit in goods with South Korea more than doubled. Needless to say, this is not the outcome the American people expected from that agreement. Plainly, the time has come for a major review of how we approach trade agreements. For decades now, the United States has signed one major trade deal after another – and, as shown above, the results have often not lived up to expectations.”

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

  • The U.S. goods trade deficit with Korea increased 99 percent, or $15.4 billion, in the first four years of the Korea FTA (comparing the year before it took effect to the fourth year data) and in the 10 months of its fifth year is on track to beat the fourth year deficit. Nearly 80 percent of the deficit is in the automotive sector. Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 47 of the 48 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit in the four years before the deal.

  • Since the FTA took effect, S. average monthly exports to Korea have fallen in 10 of the 15 U.S. sectors that export the most to Korea, relative to the year before the FTA. Exports of machinery and computer/electronic products, collectively comprising 27.8 percent of U.S. exports to Korea, have fallen 21.6 and 8.2 percent respectively under the FTA.

  • U.S. exports to Korea of agricultural goods have fallen 19 percent, or $1.4 billion, in the first four years of the Korea FTA despite the administration’s oft-touted point that almost two-thirds of U.S. agricultural exports by value would obtain immediate duty-free entry to Korea under the pact. U.S. agricultural imports from Korea, meanwhile, have grown 34 percent, or $123 million, under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined 22 percent, or $1.5 billion, since the FTA’s implementation. The Obama administration promised that U.S. exports of meat would rise particularly swiftly, thanks to the deal’s tariff reductions on beef, pork and poultry. However, U.S. exports to Korea in each of the three meat sectors have fallen below the long-term growth trend since the Korea FTA took effect. Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $62.5 million in poultry, pork and beef exports to Korea in the first four years of the Korea deal – a loss of more than $5 million in meat exports every month.

    • Despite the promises made by U.S. officials that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade, South Korean banned nearly all imports of American poultry at the beginning of 2015 due to several bird flu outbreaks in Minnesota and Iowa. Comparing the FTA’s fourth year to the year before it went into effect, U.S. poultry producers have faced a 93 percent collapse of exports to Korea – a loss of nearly 100,000 metric tons of poultry exports to Korea. U.S. beef exports are finally nearing pre-FTA levels after declining an average of 11 percent during the first three years of the agreement. U.S. pork exports have also nearly recovered to pre-FTA levels after falling by an average of 16 percent in the first three years of the agreement.

  • U.S. goods exports to Korea dropped 10 percent, or $4.5 billion, under the Korea FTA’s first four years. In the 10 months of data since then, U.S. goods exports to Korea decreased by 1.4 percent or $483 million, relative to the same 10-month period in the previous year.

  • While U.S. goods imports from the world decreased by 6 percent, U.S. goods imports from Korea increased by 18 percent, or $10.8 billion, during the FTA’s first four years. In the 10 months of data since then, U.S. goods imports from the world decreased by 2 percent, while U.S. goods imports from Korea remained at the high levels of the period in the previous year.

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The auto sector was among the hardest hit: The U.S. trade deficit with Korea in passenger vehicles grew 66 percent in the pact’s first four years. In the 10 months since then, the U.S. trade deficit in vehicles has increased an additional 2 percent, relative to the same 10-month period in the previous year.
U.S. imports of passenger vehicles from Korea has increased by 69 percent, or by an additional 597,607 vehicles by the fourth year of the Korea FTA in addition to the 862,789 vehicles sold to the United States by Korea before the FTA. This import flood dwarfed the 36,580 increase in U.S. passenger vehicles that the United States exported to Korea by the fourth year of the pact. Even so, expect defenders of the agreement to say U.S. auto exports have grown faster than Korean auto exports or that U.S. auto exports to Korea have tripled – without mentioning that this figure just represents the addition of the 36,580 vehicles from the low pre-FTA sales number of 14,284 U.S. vehicles sold in Korea without mentioning that on balance the United States has suffered a 66 percent expansion of our auto trade deficit with Korea.

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