Jailed Mexican Labor Activist’s Immediate Release Demanded by Major U.S. Unions, Faith and Civil Society Groups in Letter Delivered Today to Human Right Commission

June 8 Arrest and Detainment of Mexican Labor Lawyer Susana Prieto Threatens to Overshadow Planned July 1 Start Date for New NAFTA

A group of powerful U.S. organizations demanded the immediate release of imprisoned Mexican labor lawyer Susana Prieto Terrazas, who was arrested on June 8 on trumped-up charges for “mutiny, threats and coercion.” Prieto’s daughter delivered a letter from the groups to the Mexican National Human Rights Commission today.

Prieto, an advocate for labor rights of workers in maquiladora factories near the Mexico-U.S. border, has defended workers who are protesting for improved safety measures against COVID-19 in reopened plants. Dozens of maquiladora workers have died after being exposed to the coronavirus. She recently sought to register a new independent union to replace a company-connected “protection” union. This is a core protection guaranteed by the revised North American Free Trade Agreement (NAFTA) and Mexico’s 2019 revised national labor law.

The arrest of Prieto and punitive bail denials that threaten her life given the high incidence of COVID-19 in collective settings such as jails, spotlights the ongoing labor rights crisis in Mexico. Growing focus on Prieto’s detention is overshadowing the July 1 start date of the revised NAFTA.

Members of Congress raised concerns about Prieto’s imprisonment to USTR Robert Lighthizer during a congressional hearing on June 17. Lighthizer said he was closely monitoring the case, “take[s] this very seriously,” found it to be a “bad indicator” of compliance with the new labor standards, hoped “[Mexico] can work it out themselves” but that “we’ll take action if appropriate.”

As well as facility-specific rapid response labor enforcement cases, the revised NAFTA allows NAFTA governments to charge each other with violations of their obligations. The dispute resolution process in the pact could result in Mexican imports to the United States facing tariffs if a NAFTA tribunal determines Mexico is not meeting its labor rights obligations.

The letter, signed by the American Federation of State, County and Municipal Employees (AFSCME), Citizens Trade Campaign, Communications Workers of America, International Association of Machinists and Aerospace Workers, International Brotherhood of Teamsters, Maryknoll Office of Global Concerns,  NETWORK Lobby for Catholic Social Justice, Our Revolution, Presente.org, Public Citizen, Service Employees Union International, United Auto Workers, United Brotherhood of Carpenters, United Methodist Church Board of Church and Society and the United Steelworkers, is available here in English and Spanish.

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Rethinking Trade - Season 1 Episode 9: The Hong Kong Protests VS. China's Democracy Crackdown

Hong Kong is at a significant crossroads—and its special trade status with the US has become a central point of leverage in determining the outcome of this crisis. 

One year ago, millions took to Hong Kong’s streets in response to the Chinese government’s attempts to limit free speech, protest and unions rights. The protests would become one of the largest sustained protest movements in recent history, and would succeed in derailing repressive legislation that Chinese leadership was pushing through the Hong Kong legislature. But last month, China moved to skirt that legislature and impose from Beijing a national security law that threatens the freedoms of the Chinese government’s critics. It would allow HK residents to be arrested for criticizing the Beijing government and jailed in mainland China. 

In this episode, Lori and Ryan discuss the protest movement and the central role US trade policies are playing in influencing the future of Hong Kong.

Transcribed by Kaley Joss

 

Ryan:

You're listening to rethinking trade with Lori Wallach.

 

Welcome back to Rethinking Trade, where we don't just talk about trade policy, we fight to change it. I'm Ryan, and I'm joined once again by our in house trade expert Lori Wallach. So, Lori, today marks 1 year since the start of these mass protests in Hong Kong. They are against an extradition law that was widely seen as opening the door to people in Hong Kong getting prosecuted and imprisoned in China. Recently, these protests flared up again because of a new national security law that China is imposing in Hong Kong. As we both know, the US-China and US-Hong Kong trade relationship have been a central part of that story on the show. We're going to talk about Hong Kong’s “special status” in relation to the US. We're going to talk about the protests, and how this all has to do with our trade policies. So, first, Lori can you describe Hong Kong’s special status in relation to the US, and what some of the trade issues are that have been involved in the recent discussions around Hong Kong?

 

Lori:

Hong Kong has a special treatment in the trade world. Hong Kong has its own seat at the World Trade Organization, separate from China. Also, in US law there's a statute called the Hong Kong relations act which was passed in 1992. This  basically guarantees that, as long as China continues to hold up the promises made to Hong Kong in the 1997 agreement between China and England, when England handed Hong Kong over to China, Hong Kong gets treated basically as a separate entity. What that means, practically, is that for instance when China is judged to be dumping products at below the cost of production and a penalty is put on Chinese imports, imports from Hong Kong don't get hit. Or, China has its own tariff schedule, Hong Kong has a different tariff schedule. Other differences are what the border taxes are, and if there's a penalty, like the section 301. But there is a condition to that, which is every year the US government has to certify that Hong Kong is in fact being given those special rights and treatments that China committed to. If that certification ends, then the 1992 Hong Kong Relations Act allows US presidents to basically withdraw that special treatment. That would mean higher tariffs on goods from Hong Kong, limits on investments from corporations incorporated in Hong Kong, and a variety of other penalties would then be able to be imposed.

 

Ryan:

So, recently, Donald Trump and Mike Pompeo made a move which a lot of people in Hong Kong seem to be supporting, even though it's venturing into unknown territory. Maybe you could talk about what that maneuver was.

 

Lori:

So, part of the Hong Kong Relations Act requires a certification every year by the Secretary of State. This certifies that in fact Hong Kong is being treated autonomously, with respect to free speech rights, independent unions and the like. If that certification is done, then the special, preferential treatment included in the Hong Kong Relations Act is continued. For the first time since the act was passed in 1992, the Secretary of State Pompeo did not certify autonomy. This was notable, and was big news. Now, the president could, at any point, start to effectively impose detrimental pressure on Hong Kong, and therefore pressure on China. 

 

This is one of things I'd love to hear your perspective on, because I know you've been talking organizer to organizer with activists in Hong Kong. I'm interested in hearing more details about what's going on in the protests there. I do know the motto of the protests has been “If we bleed you bleed,” which is to say, to mainland China, ‘if you cut off our rights then we're happy to have economic damage befall you’. That seems, maybe, to be part of the reason why the protest movement is happy that the U. S. decertified. Maybe, for once, Trump will actually follow through and do something that creates economic pain for China. That so far has not happened with respect to the Hong Kong actions. It's been shameful actually, but not surprising in the least, because in the whole year of these protests Trump has signaled he's with the president of China Xi as compared with the protesters. But I'm curious, Ryan, what you've picked up as far as why folks on the streets want pressure, and also how those protests are going?

 

Ryan:

One thing to keep in mind, is that there's been, you know, a year of sustained protests in Hong Kong. Some of these protests have been absolutely massive, with estimates of over 1,000,000 people. On several different occasions there's been lots of violence from the police. Some of the protests have been pretty violent as well. There's been fights between citizens in the streets as well as fights in parliament. It's a very significant situation, and a year of that will obviously harden people. I've spoken to groups from the more left wing progressive groups, as well as more middle of the road groups and the business community. The vibe generally that a lot of people indicate seems to be a general alignment on some big topics: cutting off the special status and seeing what that can do, agreeing with sanctioning targeted officials. This comes too after years of history. In 2014 there were huge protests in Hong Kong, and again back in 2003. This is just a recent development, but I think what's new is China's place in the world. There is a big question right now about what the future looks like, in terms of the US and China, and I think a lot of folks in Hong Kong are asking that question amongst themselves. 



One thing that happened at the end of last year- so these protests began on this day a year ago, in June, and within a few weeks it became clear that this extradition law wasn't gonna fly. So, it was suspended. I think about a month later it was actually removed, and then a few months later was it was completely off the books. That was a pretty big victory, but the protest didn't stop because they saw what was coming. They're living in a place where their legislator is only partially elected, part of it is actually appointed by members of the corporate sector, which is really interesting. The results of that have been a pro-Beijing legislator for a very long time. That changed in November. 

 

The elections in Hong Kong really swept pro-democracy people into parliament. It became clear to China that their attempts to pass any sort of an extradition law or any sort of laws governing activity in Hong Kong, wasn't gonna fly. So they just made this move, and said, well, “we’re making a declaration in the name of national security.” Under Hong Kong's relationship with China, they're technically allowed to do that. But, national security, as many people in Hong Kong we tell you, actually doesn't fall under criticizing the Chinese national anthem, or mocking the flag. There's actually strange overlapping interest between the streets, as in grassroots protest organizations, NGOs, student groups and people from the business sector. The interest comes in that there's a lot of people worried about what extradition could mean for them. A lot of people talked about the quote “white gloves in Hong Kong”, referencing Hong Kong's role as a money laundering hub for elites from China, so there's a lot of people who have a stake in the game. That's why I think we've seen such coalescing of people around the specific issues, such as cutting off the special status. 

 

Lori:

I think it's incredibly powerful and inspiring having watched what's happened in Hong Kong. The stakes are extremely high, as Hong Kong is this tiny island totally surrounded by China, officially controlled by China. China is notorious for not having rule of law or rights for citizens, and yet you have seen this incredible social solidarity of, as you said, a very diverse set of interests. Many of them are for protecting specific rights, a way of life of free speech and freedom. Some certainly are protecting commercial interests, because Hong Kong is operating commercially very differently than China. But, unified in a way that beat [overthrew] a head of state, officially appointed from Beijing. And Beijing made sympathetic leader Carrie Lam, withdraw outrageous policy proposals. So it is both inspiring what they accomplished and then kind of crushing to see how Beijing just, autocratically imposed a new measure which would go into effect. It literally would make a lot of what everyone listening to this podcast, and what you Ryan and I, do every day, a crime, which is criticizing the government. You could be swooped up out of your home and dragged off to a not-real court in Beijing, and then chalked into jail indefinitely in Beijing. For folks in Hong Kong, which is such a different culture that in Beijing, it's a life or death matter. It strikes me at this moment- we're in the United States, where tens of millions of Americans who have also, an incredibly inspiring way, taken to the streets over a life and death matter, which is historic structural racism in this country. It is really really hard, and difficult. Scary confrontations have happened between very established powers and people's aspirations to fight for their rights. There is a way in which the situations are entirely different, but also are both really inspiring examples of people power. Having spent a considerable amount of time in Hong Kong with friends there, but also during the WTO ministerial, their powerful protest movements there, or ‘the year of endless protests’ in a way is probably a foreshadow of the continuing work in the U. S., as we are also in a long term fight for basic rights.

 

Ryan:

Absolutely, and I think, in a way to look at Hong Kong there's two things. One, it comes as part of this wave of global, unprecedented protests and shifting political events around the world. Especially since the economic crisis. And, it also comes in this time where China is asserting itself globally as a real power. Hong Kongers are looking at that, at their place in the world in between these two super powers, and they're taking initiative to try to create their future in the way they want it, rather than it being dictated from outside. And I think that that kind of ties into stuff that you've been writing about and talking about recently, especially sparked by the covid-19 and the pandemic. But, also it's been coming for a while- there are big shifts happening in the world, and we're in this moment where new ideas or even old ideas that are still good ideas have a new place at the table.

 

We're pushing some of those in the trade world. Maybe you could talk about the situation out of Hong Kong, in the US and China, conversations you've been having about a progressive approach to China, and how our trade policies with China need to change?

 

Lori:

I think that as we look at the economic relationship between the U. S. and China it cannot be divorced from the broader geopolitical dynamic between the US and China. You've described it as sort of a babble of different views about how society and economy should be organized, neither of which are entirely inspiring. However, by many orders of magnitude, the situation in China, with respect to basic rights for people to express their opinions; protest; organize for themselves in their workplaces, as unions or as individuals fighting for control of their communities, of the land that gets grabbed out from under them; fight against pollution- all of those basic fundamental rights are denied in the Chinese system. They’re criminalized, there's no rule of law. And, there are a couple hundred very powerful families who are integrated in the Chinese ruling government system, through the Communist Party in China, and through the economic system. Very government affected and controlled. Many of them owned companies, and as we think forward about what a better relationship between the US and China would entail, the economics of it include something that has to do with us, not China. Which is, as the COVID crisis has shown, the hyper-globalization of our economy through decades of corporate trade agreements has gotten rid of the redundancy of production, and has created extremely long brittle supply chains which are to rely on one country. That country happens to be China, but if that one country were England it would still be a problem. This lesson is we need redundant supply chains in different parts of the world, and we need some domestic capacity. So, that when countries, reasonably, are looking to take care of their own citizens, and send their own supplies to domestic needs, we have some ability in critical goods to make some portion of what we need. That way we can balance the way the global economy production occurs so that we have more capacity domestically. We don't have to be totally self reliant by any means, but some capacity. We cannot have a scenario where we don't make, at all, certain medicines and certain active pharmaceutical ingredients, in the continental size country like the United States. And, we need to diversify the supply chains in trade. So that, heaven forbid, there is a natural disaster or whatever it is, that knocks out production as it did in China, and we see huge crashing imports, we don't end up quickly with major shortages that make our situation worse. But, all of that aside, that's medium term and long term thinking. The short term question is, is the US going to actually do anything to protect people in Hong Kong? Or, is President Trump just gonna stand by, and let the Beijing dictatorship crush free speech and democracy in Hong Kong. 

 

Ryan:

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

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Rethinking Trade - Season 1 Episode 10: ISDS Corporate Attacks Against COVID-19 Emergency Measures

Governments are taking emergency action to fight COVID-19, counter economic disaster and ensure peoples’ basic needs are met. Now corporate law firms are targeting those actions for outrageous Investor-State Dispute Settlement (ISDS) attacks.

ISDS law firms are actively recruiting multinational corporations to sue governments before a panel of three corporate lawyers to obtain unlimited taxpayer compensation for government actions related to the COVID emergency. These ISDS tribunals can even order compensation for multinationals’ loss of expected future profits and there is no outside appeal.

In this episode, Lori explains the immediate ISDS danger and breaks down the regime’s history of attacking environmental protections, consumer safety regulations and democracy itself. 

Transcribed by Mariana Lopez 

Ryan: Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I am Ryan, and I am joined once again by our in-house trade expert Lori Wallach.  So Lori, as we both know, the best and worst things can emerge in times of crisis and just recently amidst the coronavirus pandemic, we’ve seen one of the ugliest aspects of corporate trade policy rear its head once again: Investor State Dispute Settlement Tribunals. The internet now is flooded with blogs, webinars and other content from corporate law firms fishing for clients to attack governments and demand compensation over health measures taken during the  pandemic. Before we get into those gory details, maybe you can just tell us about how ISDS policies work and, you know, what these law firms have been saying. 

Lori: Investor State Dispute Settlement or ISDS is an outrageous scheme where trade agreements and agreements called bilateral investment agreements grant new rights and powers to multinational corporations to sue governments before a panel of three corporate lawyers. Those lawyers award the corporations unlimited sums to be paid by us, taxpayers, including for the loss of expected future profits. The corporations only have to convince the lawyers that a country’s domestic law, or policy, or safety, regulation or court decision violates their special foreign investor rights. And these decisions are not subject to appeal. The amount that gets awarded has no limit. So, literally it is a parallel system of injustice, where multinational corporations can skirt domestic courts, raid our treasuries, undermine our laws and are given an enormous amount of new powers relative to governments or to all of us, the people who are ostensibly represented by our governments. 

Now if that seems like something from a science fiction novel and too crazy to be true, first of all, it was included in the original NAFTA (that was the first trade agreement that had it) and the Trans Pacific Partnership Agreement went up in flames in the U.S. Congress in part because that agreement expanded those outrageous corporate powers. And there have been hundreds of rulings where corporations have extracted billions of dollars from numerous countries’ tax payers, after these corporate tribunals have ruled against toxic bans, mining limits, water safety programs and an enormous number of energy policies. Such that, for instance, just for North America, just under NAFTA, almost 400 million dollars has been paid out after successful corporate attacks on an array of public interest safeguards. 

Ryan: And so these law firms are trying to find clients willing to pursue cases under this system as a result of the coronavirus?

Lori: So globally right now, governments are taking actions to save lives and stop the pandemic. These kinds of actions are unprecedented in modern times, even as the need has been clear. But because the ISDS system is so invasive, many of the things governments are doing can be subject to corporate claims for hundreds of millions in compensation. And the kinds of things to consider are, for instance, based on previous crises like the financial crisis that hit, cases could arise, corporations could attack and demand compensation from things many governments are doing: restricting and closing business activities to limit the spread of the virus and protect workers, securing resources for healthcare workers by requisitioning the use of private hospital facilities, or putting manufacturers under orders to produce ventilators, or PPE or other emergency medical goods, or mandating relief from rent and mortgage payments to avoid people being turned out to the streets, or a bunch of countries have passed policies preventing foreign takeovers of strategic businesses stricken by the virus. Other countries have required utility companies to freeze bills and suspend disconnections to assure there’s access to clean water for handwashing. Other countries have done compulsory licensing and other actions to make sure medicines and tests and vaccines are affordable. A lot of countries are doing debt restructuring. All of those things may be applied equally to both foreign and domestic firms. But under ISDS, foreigns firms have special rights under special tribunals. They could demand compensation for any of those very necessary, even extraordinary kinds of actions that governments around the world are taking. 

Ryan: Can you explain more about how the ISDS regime works and what exactly these tribunals, you know, what do they look like, provide for big companies and how they impact regular people, public health and the planet. Maybe you can talk about some of the cases. 

Lori: So let me go back to some of these COVID threats. So, for instance, there were a whole series of cases after various financial crises, for instance in Argentina, where the government did things like suspend utility payments and require companies to keep water and electricity going. And foreign companies who were invested in those kinds of utilities were able to go to a tribunal where they pick one of the judges (the corporation picks one judge, the government picks another judge and then those two pick a third). The judges are paid by the house, so it is in their financial interests--they get hundred and hundreds an hour to keep the tribunal going as long as possible. And a corporation literally says, “Government of Argentina, your taxpayers owe me. You have to pay 100 million dollars because you made me keep my electricity flowing even though during this crisis people couldn’t pay the bills. And I know you did that to all the Argentine companies too, but I am foreign investor, and I have special foreign investor rights under ISDS, and I can go to this tribunal. So we’re going to have these three private attorneys decide outside your court system, just for me, the foreign investor, how much taxpayers are going to pay me, because in the middle of a crisis you took crisis actions that apply to domestic and foreign companies.”

And under that kind of regime, there have been repeated rulings in favor of the corporations. I mean one of the—there are several infamous ones about governments insisting that foreign water companies keep the water going and/or cancelling contracts when they weren’t purifying water systems when foreign companies had bought privatized water systems in developing countries. And on a regular basis, these corporate tribunals order the taxpayers of poor countries, and some wealthy countries too, to pay the corporations. I mean to some degree there is nothing like losing one of these cases to start getting public opinion to turn. Germany, with many corporations using that regime to collect hundreds of millions, was a place that was a cheerleader for ISDS until the government of Germany decided to phase out nuclear power after the Fukushima disaster and to strengthen the rules for coal-fired electric plants as part of their Paris commitments. And in both instances, foreign companies sued the German taxpayers and forced settlements where hundreds of millions were paid out because Germany changed a policy. And that change applied to German companies too, but the foreign investors went to ISDS and they got the money. And this has been a systematic problem of over 1,000 known cases. Already more than a dozen have resulted in payouts of more than a billion dollars, including for future loss of profits. And by the end of 2018, because the 2019 data is not yet available, governments worldwide ordered to pay or agreed to pay investors in just the cases we know about, because a lot of ISDS cases are secret. Eighty-eight billion dollars we know about have been paid out. And that’s not counting the developing countries that have billions and billions in outstanding ISDS payments. If you don’t pay under this regime, the corporation can seize one of your nation’s ships or seize your assets, your foreign reserves in another country’s banks, or try and take one of your national airline’s planes if it lands in a country where they have a court order to force the payment. It’s so outrageous you couldn’t make it up, except it’s the reality. 

Ryan: If we got rid of ISDS tribunals, what would a fairer, more equitable tribunal system look like?

Lori: Well there should be no parallel system of justice just for multinational corporations. They’re hardly an underprivileged class that needs special rights. So the answer is there should be no ISDS. Those agreements should be abolished. The original idea of the system when it was concocted with a more narrow scope, was that European companies and governments, invested in what were about to become their foreign colonies, would flee during the period of independence because the court systems in parts of the Caribbean and Africa and Asia weren’t set up. So the idea was, here is a system for these colonial investors in the transition to independence that will keep them staying invested( Royal Dutch Shell in Indonesia, etc.). And the system has overtime morphed to be this incredible corporate power scam. 

It may have been a bad idea to start with, but when it was just compensation for expropriation, you had to get your money back if your oil rig was taken, that’s one thing. Now it's just a vast system of if you change your regulation, a company thinks that’s unfair, they go in front of a bunch of corporate attorneys whose incentives are to rule for the companies because the companies start the cases, the governments can’t sue a corporation. So the tribunalists in the system want to curry favor with corporations because they’re the ones who start cases and hire the judges. It’s just so corrupt and unfair. There is no way to fix it. And what’s super disappointing is, in the face of worldwide opposition and numerous countries–South Africa, India–leaving the old ISDS regime, Europe is trying to repackage the same old thing with a new coat of paint and call it a global investment court and basically pretend (multilateral investment court is the formal name, the MIC) it is something other than ISDS even more formalized. The only answer is to get rid of the whole parallel rights for corporations. 

Ryan: And Lori, I am sure a lot of listeners are wondering how real is the threat of ISDS cases around coronavirus. But then also maybe we can talk about some of the good news, which is that the tide has turned on ISDS in some places: the new NAFTA having shredded the original deal’s ISDS rules and also both Donald Trump and Joe BIden giving some indication of opposition to ISDS tribunals. 

Lori: It is unfortunately very likely that a whole spate of ISDS attacks on governments’ responses to the COVID crisis will begin to be filed. And the reason why is, under this regime, an enormous amount of money can be made by both the lawyers and the corporations. It is a legalized raid on treasuries. And so, one of the ways we know that these cases are already being designed is that online every law firm you can imagine that has work in this area is trolling for clients. There are webinars, there are podcasts, there are advertisements about how exactly investors ought to structure their corporate holdings to be able to maximize their use of this system, to come out of the crisis in the best way. And it even—in some of these unlined platforms of the law firms, they describe “have you lost money because of this?” It’s, you know, sort of global, corporate ambulance chasing. 

And there are some very specific things governments are going to have to do to avoid being just slayed by this, at the very time economies and jobs are shaky and health costs are up. I mean the most important thing countries can do is just to restrict the use of ISDS and all its forms with respect to any claims relating to COVID. That is narrow if they don’t want to get rid of ISDS all together, and there are different technical ways you can do that. You can do that in a multilateral agreement among the countries who sign these treaties, you can do it unilaterally, but you can have limited effect because the tribunals can just ignore the government and rule against you and then seize your government airline’s plane to pay off the corporation. But there are ways for governments to restrict the use. There certainly should be a suspension for all the cases ongoing right now while governments are focused on fighting COVID-19. There are almost 400 open ISDS cases against 83 countries right now. So there’s no bandwidth to deal with this. But one of the countries, Bolivia, has already asked tribunals in two cases to suspend proceedings, and in both cases the tribunals rejected the request and just kept going. A third thing is to make sure that no public money is spent paying the corporations for decisions during the pandemic. And really it’s two different things: don’t pay your ISDS awards, make them so that the corporations have to go to domestic courts and try to seize your stuff (it delays it), but also if you have carved out ISDS that may be existing in your agreements that may be covering anything that covers COVID, you basically can protect yourself from having to pay. Obviously, countries should stop negotiating, signing and ratifying new agreements that include ISDS, and they should terminate their existing agreements with ISDS, which if you look at our website (tradewatch.org) we’ve done a study that shows that the countries that got out—Bolivia, Ecuador, Indonesia, India, South Africa-—have not seen drops in foreign direct investment. In fact, some of them had their credit ratings go up, because there isn’t this potential huge liability of corporate money grabbing. And then, obviously, every country should be reviewing all of their agreements that might include ISDS because they just don’t fit the reality of too much corporate power in the global economy and even more so in this crisis. 

And that gets to the good news. So, for many decades the United States was one of the leading proponents of ISDS, it was shoving it down every other countries’ throats. And as we saw during the Obama Administration with the fight over the Trans Pacific Partnership (TPP) in Congress, pretty much on a bipartisan basis, ISDS has lost support. And a lot of people claimed, “well maybe it wasn’t really opposition to ISDS that derailed the TPP, maybe it was just that Republicans didn’t like Obama and didn’t want him to have that vote.” But the reality is, the United States Congress just passed, by overwhelming House and Senate majorities, a new North American Free Trade Agreement that totally eliminates the existing ISDS between the United States and Canada, under which dozens of Canadian environmental laws have been attacked and millions paid out, and largely whacked ISDS between Mexico and the U.S.. And new U.S. trade agreements with the UK, Kenya, etc. aren’t going to have ISDS anymore. So if even the U.S., on a bipartisan basis, is stepping back, and you have lots of developing countries that have gotten out of their ISDS enforced agreements, then progress in the right direction is happening. And the Europeans need to stop pushing the same-old-same-old under a different brand, their multilateral investment court. 

I mean, hell, we are going into a U.S. presidential election where Vice President Biden, who in the past supported these agreements, on the record, in writing, has been answering campaign questionnaires saying his future trade agreements will not have ISDS (that’s a stupendous shift). And Trump has been behind agreements that already don’t have ISDS, so that’s a big shift domestically. Every activist should be happy about the work that people in the U.S. have done for decades to get there. And, you know, all these COVID attack cases are exhibits one, two and three of why every other country should abandon, ditch, get rid of, terminate, their ISDS agreements and liability. 


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

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Rethinking Trade - Season 1 Episode 8: Crisis at the World Trade Organization

Today, the World Trade Organization is in a major crisis of its own making, with its over-reaching enforcement regime derailed, its Director-General abruptly announcing his resignation and legislation introduced in both chambers to terminate Congress’ approval of the organization. 

When the WTO was launched in 1995, we were promised by an array of corporations and politicians that it would usher in a new era of win-win globalization that would deliver higher wages and good jobs. Instead, as activists and union members warned, the WTO has facilitated a race to the bottom in wages and mass job outsourcing, especially after China joined in 2001. The WTO has ruled again scores of U.S. policies, including environmental and consumer protections. 

What happens next at WTO affects us all. In this episode Lori digs in the history of the organization and describes the significance of its current crisis.

Transcribed by Kaley Joss

Ryan:

You’re listening to Rethinking Trade with Lori Wallach. Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan and I’m joined once again by our in-house trade expert Lori Wallach. So Lori, the World Trade Organization protests in 1999, the Battle in Seattle, that was my gateway into political activism. And we just celebrated the 20th anniversary of that event a few months back, but today we’re going to be talking about the WTO right now. Because it’s facing a significant crisis. Before we get into that, maybe you could just tell us what the World Trade Organization is, where it came from, and what some of the major issues have been in the fight against it. 

 

Lori: 

So, the WTO is an international commercial agency. It sometimes gets called a trade agreement, but most of its contents have nothing to do with trade. It is the global commerce agency that replaced an agreement called the General Agreement on Tariffs and Trade, which was a global trade agreement created in the fall of 1947. It was one of the so-called Bretton Woods agreements that came after World War II and the economic and social crisis that followed, where actually a bunch of Keynesians sat around and tried to come up with some good rules. They had a thing called the “International Trade Organization,” it had labor standards, it had currency disciplines, it’s not totally different than the agreement we’ve been fighting for these days. But the U.S. Senate objected—we got the GATT. The GATT was really about trade, border tax cutting, and quota cutting. And that’s what we traded under for many decades. It worked pretty well for the U.S., until in the ‘80s Ronald Reagan and the folks around him who were uber-deregulatory, big about corporate power and rights, wanted ways to get around the fact that there was a durable Democratic majority in Congress. 

 

In Germany, a neoliberal chancellor wanted to deal with busting up his unions, Margaret Thatcher was in cahoots in the same mindset as Kohl and Reagan. And they came up with this really elegant, but rotten, but effective strategy of shifting out of democratically accountable public venues like parliaments to close door trade negotiations, and the Uruguay Round of GATT negotiations was launched in 1982. It resulted in replacing the entire GATT. The GATT becomes one of twenty-plus agreements in force by this gargantuan new World Trade Organization which suddenly sets top-down, one size fits all rules for all kinds of stuff, totally unrelated to trade. 

 

So to start with, there are a bunch of just flat out corporate protectionism. New monopoly protections, classic sort of rent-seeking protectionism for patents and copyright monopolies—monopolies in a free trade agreement. Every country is required to make in their domestic laws certain guarantees for corporate rights and all kinds of new limits on behind-the-border type policies on food safety, product safety, energy policy, banking regulation. In one fell swoop, basically like some quiet, corporate coup d’etat. This thing labelled “free trade agreement” gets rolled in like a Trojan Horse. And actually, what’s on the inside is an enforceable system of global governance literally by, for, and to a large degree (given the revolving door of the staff), of multinational corporations. And every signatory country was obliged to conform it’s domestic laws to these rules. And if they didn’t, they faced indefinite trade sanctions, fines, cash, it was suddenly an enforceable system of governance. And if this sounds like I’m exaggerating, let me actually read the key clause in the agreement established in the WTO. “Each signatory country shall conform its domestic laws, regulations, and administrative procedures to the attached agreements,” and the attached agreements are a whole bunch of rules limiting service sector regulation, food and product safety regulation, giving new corporate rights for investors, for intellectual property, that every country was supposed to make its domestic laws meet. That’s the WTO. It started on January 1st, 1995. 

 

Ryan:

And since the WTO was launched, they’ve tried several times to launch new rounds of talks to expand their power and scope and it hasn’t quite worked out the way they wanted it to. It's becoming increasingly clear now that they’re in a real serious crisis. But there have been a few things recently that have happened as well. What’s going on over there and how significant is the situation at the WTO?

 

Lori:

So the WTO’s actual outcomes have helped doom it. It hasn’t helped that it’s tried to grab more power and scope, but it’s the record of what’s actually happened. So, during the period since the WTO went into effect, just for instance with the US, we’ve lost a quarter of our manufacturing jobs, nearly 5 million, with 60,000 factories shuttered. This really took off after the 2001 entry of China into the WTO. The U.S. went from a goods and services trade deficit before the WTO of 125 billion, which was not great but now, it’s 617 billion, as in almost a 400% increase. And then, add to that all of the WTO’s obscene corporate protectionism and bans on common sense consumer safeguards, we have seen law after U.S. law challenged in WTO tribunals. We’ve lost 93% of the WTO attacks against our public interest policies and that’s led to roll backs of country of origin labelling for consumers of meat, rollbacks of protections of dolphins, clean air act regulations and gasoline cleanliness, endangered species acts, sea turtle safeguards and more. And this system is so lopsided that you know, we’ve lost 93% of the public interest cases but we’ve lost 90% of the 79 cases brought against the US at the WTO. Which just is a perverse irony, the U.S. was the biggest pusher of establishing the WTO, and we’re the number one target of the WTO enforcement actions. Just under a third of all the WTO cases are against U.S. policies and laws. So, the WTO didn’t deliver on the glorious and great gains that were promised certainly to people in the U.S. and Europe. And for developing countries, like some of the developed countries, there have been some major problems. 

 

So we’ve seen this gutting out of middle class jobs and the attack on environmental laws, but the attack on public interest laws have been worldwide. So for instance, India Ghandian-era law constitution and laws that forbid the patenting of seeds and medicines were ruled to be a WTO violation. Of course, those policies are about trying to keep a country with a billion poor people being able to have seeds to plant to feed themselves and have access to medicine. Attacks on policies such as Europe’s ban on the use of artificial hormones on raising meat or Europe’s labelling and approval process for genetically modified organisms. There have been attacks on development policy like the banana trade policy that was basically a development policy that Europe had with its former colonies in the Carribean and Africa. So time after time the WTO rules against people-policies for corporate policies, but also how now there is in Congress a new wave growing of bipartisan upset about the WTO. The WTO’s unelected, unaccountable tribunal started also just making up policies, making up laws, and then enforcing them against countries. And that was irritating when it started to actually cause problems for some businesses who had been WTO boosters and then saw the WTO just making up rules and enforcing them that no country ever signed onto. 

 

Ryan:

And what has all that added up to today?

 

Lori:

Well, pretty much a meltdown at the WTO. So, starting with the Obama administration the U.S. you know, was furious with the WTO making up policies and sticking them on countries and was criticizing the enforcement system for not being very transparent, or timely or fair, and the Trump administration came in and stepped that up a level yet. Actually, the Bush two administration kinda started it, Obama stepped it up, then Trump went into overdrive. And the Trump U.S. Trade Representative Robert Lighthizer just flat out refused to appoint more judges to the final tribunal of the WTO, and he basically put it out of business at the end of 2019. So right now the WTO enforcement system is derailed, which given how bad its ruins are, is nothing to be too upset about actually. And the WTO hasn’t been able to complete any major negotiations basically since it was established. You know the Seattle Round obviously melted down, there was a 10-year skirmish over what was called the Doha Round of WTO expansion, but that was ultimately derailed. So it’s not negotiating, it’s not enforcing a lot of the rules that are locking in really crazy, extreme neoliberal 1980’s ideas. Meanwhile things that are at the cutting edge of concern, things like climate change, and issues around income inequality and in this COVID crisis access to essential medical goods, are either not covered in the WTO or covered in a way that makes things worse. So given the deadlock on enforcement and the deadlock on negotiations, it was not totally surprising but totally shocking when, just recently, the guy who was the head of the World Trade Organization, which is kind of a coveted position (and the guy still had a couple years on his term—a Brazilian diplomat named Roberto Azevedo) he announced he was leaving this fall. Almost two years early. Now that body that is very jammed will also be headless, so to speak. 

 

Ryan:

Recently Representative Defazio and Senator Hawley introduced a bill to withdraw the United States from the World Trade Organization. Can you talk about that a little bit?

 

Lori:

So when the U.S. Congress voted on what was called the Uruguay Round Agreements Act, which gave Congress’ approval to the WTO, it was so controversial that then-Senator Bob Dole (generally a free trade guy) insisted, given all the sovereignty implications of all the non-trade policies being imposed by the WTO, that every fifth Congress have a report on the outcomes and activities of the WTO and a privileged guaranteed vote to reverse the U.S. approval of the agreement. And a privileged vote means the kind of cloture and other rules in the Senate that block things up don’t apply... you get a vote. It gets pushed out of committee after a certain number of days, so the committees can’t block it. It gets a vote. And the agreement, the legislation, Article 125 of the Uruguay Round Agreements Act, has this five year option of withdrawing congressional approval. So first a conservative Republican Senator from Missouri named Josh Hawley put it in the Senate, and then shortly after two Democratic House full committee chairs, Congressman Peter Defazio and Congressman Frank Pallone, submitted the House version. 

 

Now, the way it’s written, both the House and Senate have to send it to the President within 90,what are called, legislative days. It’s not calendar days, it’s a little bit longer. And if they do that within 90 days when the report that’s required gets sent, then it would withdraw the U.S. Congressional consent for the WTO. Now, there are all kinds of complications with that because the House can’t get the 90 days vote in, given when the resolution was submitted. And even if Congress’ approval of the legislation was withdrawn, it’s not clear that it actually gets the U.S. out of the WTO, and that’s assuming Trump wouldn’t veto it. And that’s assuming it would pass, all of which are things that I think you can’t assume. But, the bottom line of the whole situation is, there is a decent likelihood there will be House and Senate votes where members of Congress are going to have to express what they think about the WTO. It’s kind of a free vote to express your concerns without any potential liability. Because of the timing, the technical problems, it’s not a vote to get out of the WTO even if, actually, the House and the Senate both supported the resolution by majorities. 

 

Ryan:

So let’s say that the US did leave the WTO or that the WTO did fall apart. What does the alternative to it look like? You kind of wrote the damn book on it—what could an alternative system look like?

 

Lori:

Well first of all, folks can still get that book Whose Trade Organization?. I think the best way to think about it is “what are the rules we want?” So, “what are the goals we want?” Is the first question, and then you think about the rules. Versus the way the WTO was created was: here’s a model, the whole neoliberal smorgasbord of policies, of corporate rights, of corporate protections, of intellectual property rules, of limits on regulation, and service sector and financial deregulation, and let’s see what happens! No, you go the other way around, so what do you want? You want living, family supporting jobs and wages. You want labor and human rights so that people can advocate for themselves. You want an agreement that is compatible with a living planet and doesn’t exacerbate climate crises, in fact, as part of a transition to a lower carbon economy. You want to make that sure food is safe and the services we rely on are reliable and affordable and safe. 

 

So if you think about it that way and you look at the WTO, basically in a certain way, you kinda want to go back to the ITO, the International Trade Organization. Which is, you take all of those WTO agreements, you just whack and bury a bunch of them. You don’t need a trade-related intellectual property agreement. There shouldn’t be protectionist patent and copyright monopolies in a trade agreement—they do not go there. That is just pharma and the content industry trying to ride on the good name of trade. You don’t need rules limiting what kind of food safety or environmental standards or product safety standards—you know the basic rule is as long as you treat domestic and foreign goods the same, the democratic process in the country that’s going to have the stuff in their market decides whether or not it can have pesticides and how much, and whether there should be GMOs and how they should be labelled. That’s not a trade issue. The discrimination treating foreign goods worse, that could be a trade issue. But as long as you don’t discriminate, the level of protection, the level of consumer information, that’s a democratic choice. So a bunch of those things need to get cut out of the system, then the stuff that’s missing needs to be put in. Which comes back around to the ITO. 

 

So that old International Trade Organization connected to the International Labor Organization’s conventions on labor rights- that needs to be the floor on which trade happens. It didn’t have an environmental component—it would be very easy to use the kind of language that’s now in the revised NAFTA that talks about multilateral environmental agreements that countries have, as sovereigns signed onto, becoming the floor on environment that countries have to meet to get the benefits of the trade agreement. Equally, there are human rights standards through the United Nations. We have international rules on the people’s side that should become a floor on which trade is predicated. And then things like currency manipulation—there were rules against currency manipulation in those days relating to the IMF, which had a different kind of function then, that were in the ITO. We definitely need to make sure there are currency rules. There were also antitrust rules to break up anticompetitive practice, which obviously in the global economy we need. And we need rules (and there are various versions of these in some places) to stop tax cheating and the use of tax havens to get an advantage and starve governments. So if you take out the stuff that shouldn’t be in there and you put in the stuff that should be in there, it focuses mainly on trade—trade and what the terms should be for when trade happens. Those are the kind of agreements that could really get the benefits of trade without all the corporate baggage attached. 

 

You know, when I think about what’s happened to the WTO and what we want, it makes me think back of walking around the Senate building with Ralph Nader during the fight in 1994 about approving the WTO. And he used to say to Senators, “if this darn agreement were ever fully implemented, the results would be so outrageous that people would want to get the hell out of it. And hopefully we don’t have to go through all the pain and suffering that’s going to ensure before we know it was a bad idea and we get out.” Well, it’s been 25 years and it is overdue to get out. But the other thing he said regularly was, “it’s not that there is no alternative, there are many alternatives. We just need rules that actually work for people and the planet, not corporations.” So stay tuned to the news about what’s going to happen with the WTO, could be at a turning point, sure would be overdue time to see something different as the rules of the global economy. 

 

Ryan:

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

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Rethinking Trade - Season 1 Episode 7: The Loophole That Lets Amazon Deliver Uninspected Imports to Your Door

Nearly 2 million imported products we buy online every day enter the United States and are delivered to consumers’ doors without any inspections. That’s thanks to a trade law loophole that also lets these imports dodge the fees that brick-and-mortar stores pay for the same products. 

Amazon and other E-commerce giants pushed for this change to what is called de minimis import policy, and it has facilitated a new flood of fake and unsafe imports that threaten consumers while undermining local businesses.

Transcribed by Lauren Martin

Ryan:

Welcome back to Rethinking Trade where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert, Lori Wallach. With all of us sheltering at home, more and more people are reliant on e-commerce for their shopping needs. So today, we’re going to talk about a little-known piece of the e-commerce world, which is because of a sneaky change to trade to trade laws, a lot of products we’re bringing into our homes are not even inspected. Lori, maybe you can describe this situation and explain kind of why it matters to folks like us?

 

Lori:

So normally when we think of the products that we buy, we assume that they’ve been inspected by the Consumer Product Safety Commission or the Food and Drug Administration or the USDA depending on what they are. And typically, that applies to imports, not at the level you’d want, it’s too low of an inspection rate, but the way that this is done is things that are most worrisome get targeted by risk for deeper inspection for imports. Except, thanks to a sneaky change to trade law, anything that comes in — most of e-commerce shipments, I might add at under $800 of value totally skirts normal customs procedures and all inspections from any U.S. safety agency. That is called “de minimis” importing. De minimis refers to the amount below which an import isn’t subject to customs laws. And for years, it was $200. So anyone who’s travelled into the U.S. before 2015 will remember that customs form, that paper form they made you fill out on the plane before you got back into the U.S., and it said “are you bringing back more than $200 worth of stuff?” That was the de minimis, and as long as the stuff you were bringing was less than $200, you just wrote “no” and that was the end of it. If you were over $200, you had to list what it was and you might have to pay a border tax on it, a tariff, and it might be subject to getting you pulled aside for inspection. In 2015, there was a push to change that from $200 to $800. What that means now is that an enormous amount of stuff including a bunch of things that are potentially very hazardous, like car airbags and fancy safety devices for kids from car seats for kids to fancy jogging strollers, to the really high-end helmets for motorcycles and biking, to a lot of different athletic equipment like hoverboards all of those things now come in under the de minimis which means none of it’s inspected. And it meant an explosion of imports. It’s called Section 321 under the statute that sets up de minimis. But today, about 1.8 million shipments, individual packages, are released every day, being imported without being inspected thanks to raising the de minimis from $200 to $800. And all the new things that can come in. Today about 1.8 million shipments a day are being released as de minimis with no inspection for safety, actually really no recording of what they are. That includes a million-plus air shipments, so air express, small packages, from e-commerce purchases just coming from China every day. None of this stuff is inspected.

 

Ryan:

When you say not inspected, you mean literally not inspected at all, not inspected for safety, not inspected for anything?

 

Lori:

I mean, you can bring this stuff in, listing only the most basic information. You don’t know where it originated from, you don’t know technically what it is. You can describe it in vague language. There’s none of the import codes, so you can’t have an idea if you’re an inspector that it’s in that category of dangerous things. It isn’t inspected for safety, it isn’t inspected for even what it is, and it gets around normal border tariff taxes, it’s just a huge loophole.

 

Ryan:

And I’m assuming it wasn’t parents that were lobbying for bike helmets that weren’t inspected, and it wasn’t drivers who wanted seatbelts that weren’t inspected. Who was pushing for this change to be made in the de minimis rules?

 

Lori:

So in 2015, folks will remember there was a knock-down, drag-out fight over trade authority, over Fast Track trade authority for the Trans Pacific Partnership. And there were other bits and pieces of the legislation that was written to extend Fast Track. But the fight and the focus was on Fast Track. One of those pieces was a change from $200 to $800 of this de minimis standard, and it was quietly but ferociously pushed by two sets of interests: the express delivery industry so the UPSs, the Fedexs, the DHLs — and by the e-commerce industry so the Amazons, the Walmarts, etc.. Both of those sectors said “hm, we actually if we got this higher, could be bringing in lots of stuff from China and other countries, much cheaper and much more quickly without the bother of inspections.” That is otherwise the rule of thumb for every brick-and-mortar store, and that was the rule for every package over $200 in value.

 

Ryan:

And the way they do this is, just on the business end when I order something from Amazon, I’m considered the importer, and so legally it’s me that’s importing this product directly and Amazon’s acting like they’re not involved. 

 

Lori:

Part of the problem is the change in the statute from $200 to $800. And that happened before the Trump administration. Part of the problem though is the ruling that was issued during the Trump administration which allows the importation of entire shipping crates full of individually addressed packages creating a myth that when Amazon in a fulfillment center in China makes 10,000 individual packages and puts them in a multi-ton shipping crate, each individual consumer is the person who is importing. So each individual package has to be under $800 to sneak in under this loophole. The whole shipping crate isn’t considered. Yes, every time one of us makes an order, we’re the “importer of record,” not the big e-commerce platform that on any given day is importing hundreds of dollars of goods. 

 

Ryan:

So companies like Amazon are obviously making a lot of extra money because of this. Who’s being harmed by this? How is this affecting other businesses, brick-and mortar-shops?

 

Lori:

This scam of importing through this de minimis, hundreds of millions of dollars of potentially unsafe, potentially fake when I say fake, I don’t mean knock-off Gucci bags, I mean it says it’s an airbag, but it’s not really one, and you rely on it and die. It says it’s the fancy $800 stroller that’s impact resistant but it isn’t and your kid gets hurt. Those goods coming in not only expose us all to safety risks, but also, brick-and-mortar stores who are selling the same stuff are put at an enormous disadvantage relative to the Amazons, the Ebays, etc. Because, if say, your favorite local bike store decides they’re going to sell a very high-end bike, a $700 bike, and they want four of them in stock, and they buy the four of them, and they’re subject to tariffs, it’s $2,800. The ability for you as a consumer to buy the $700 bike online, and bring it in under the fake Amazon platform, under the fake notion that you are the importer versus Amazon, means you never have to pay that border tax. So, Amazon ends up undercutting the brick-and-mortar guys, who actually, you probably went to the brick-and-mortar place to check out the bike but then, the reason why it’s so much cheaper on Amazon than in the brick-and-mortar places is this de minimis cheat. And what is that money? Those are tax dollars that aren’t going into U.S. infrastructure, social security, other programs that we like and care about. Instead it goes into Amazon’s profit margin. 

 

Ryan:

And some of these companies like Amazon, they’ve actually built infrastructure around this loophole. There was this great piece in ProPublica talking about these warehouses along the Canadian and I think also the Mexican border for packages going into the U.S., but they were all subject to the loophole, right?

 

Lori:

So the big online monopolists have figured out numerous ways to exploit this loophole they created in the 2015 bill. First, they put fulfillment centers in China and it’s not just them the original ruling on this stunt came from Zara, the women’s clothing store. Any online package fulfilled directly in China from the Zara fulfillment center same thing for Amazon you can put 10,000 of those individual packages into a shipping crate and each individual purchaser of an item is considered the importer, not Amazon who arranged the shipping crate. So that’s scam number one. Scam number two and that required getting a special exception from the Trump administration from the customs department. Scam number two: They have created warehouses, as you said, along the border with the U.S. and Mexico and the U.S. and Canada. So the way that one works is they bring the goods into Mexico or Canada, and they keep them what’s called “in bond.” That means it’s landing there, but it’s on it’s way to someplace else. So it’s not going to be entered into customs in Mexico or Canada. Because the actual ultimate consumer is in the U.S. So they bring in big shipments of whatever is the good, and then it’s packaged into individual consumer packages, which are put on trucks, driven across the border to a U.S. post office in a U.S./Mexico or U.S./Canada border town, and because of NAFTA there is no tariff when a good crosses from Mexico to the U.S. or Canada to the U.S. Therefore it goes into the U.S. system under the de minimis so no inspection and duty-free and it enters basically from big warehouses full of large amounts of these goods that basically the package gets picked and packed there and then shipped on a truck across the border and put in U.S. mail. The third sort of related scam is using the de minimis, basically online platforms using third party sales, so not even like an Amazon fulfillment warehouse, basically is setting up an avenue for a tsunami of goods from totally unregulated, mysterious, and often unknown fulfillers. The third-party stuff is kind of the scariest of all, where basically because of the exponential growth of e-commerce as a means by which Americans buy products, consumers are being widely exposed to serious health and safety risks by fake products produced anywhere in the world, which get millions of potential customers for sales and delivery. That’s not just made easy and quick by listing as a third-party seller on a well branded e-commerce platform, but has an air of legitimacy and a false sense of security so that a good that would normally be pulled from some unreputable third-party seller whizzes right through with no inspection, and frankly the consumer doesn’t even know. Those are three really scary ways that the big online giants are using this loophole.

 

Ryan:

So how do you tackle a problem like this? What are potential solutions to this and how can they be implemented?

 

Lori:

The simplest fix is just to take the de minimis level back from $800 down to $200. That was a sneak attack amendment. People weren’t paying attention. No one even thought through necessarily what it would mean. Now that we see the outcomes, it should be brought back. But that would require Congress to pass it, House and Senate, and the prospect of that happening anytime soon is not great. And not only because of the big express shipment lobbying operations and Amazon and Ebay and Walmart and all the companies that would object, all the retailers, Zara and everyone else who enjoys using this loophole, but also cause right now even as people are more and more reliant on e-commerce because of the COVID crisis, Congress’ bandwidth to do stuff that isn’t immediate urgent COVID disaster is more limited. So, in the interim, the Trump administration can fix this by executive order. They have it within their hands, the Buy America, Hire America alleged administration, to fix this major trade scam. And the way to do it is basically Section 321, the way it’s written, gives enormous discretion to the Treasury Secretary to decide how the program will be administered. So you can’t unilaterally change that $800 is the amount, but you can basically determine what should or shouldn’t be subject to the waiver. So for instance, it seems pretty obvious that every good that is on the Consumer Product Safety Commission’s High Risk List because they do a risk assessment, they know of products like the hoverboards that were blowing up, burning, and burning down people’s houses. That’s on the list. Car seats, because there have been so many dangerous fakes brought in, that’s on the list. Certain other sports equipment, like helmets, where there’s so many dangerous bicycle fake helmets, etc., that’s on the list. Lots of toys with magnets in them, which little kids will swallow then have their guts ripped up internally there are right this day things that have allegedly been taken off these websites, these e-commerce platforms, you can find all these things if you look on these websites because these third-party marketers keep popping back up. All of those products should just not be subject to de minimis. Zero of those products should be getting in through this loophole. And it’s easy because the Consumer Product Safety Commission has a specific list. And so all those goods should not be subject. Similarly, if you’re thinking about fairness just as far as brick-and-mortar stores, and you’re thinking about the income lost for the government, it makes a hell of a lot of sense to say something like, “no product subject to more than a pick your amount-ten, percent border tax should be subject to de minimis.” That way you’re not making a huge thumb on the scale against brick-and-mortar companies, and you’re making sure you’re not gutting out revenue. And you could say, you know, the standard of Section 321 is for the convenience and the efficiency. Alright, you could say it’s inconvenient or not very efficient to bother collecting tariffs if it’s less than a 10% tariff on an $800 value good. But when it’s actually $100 of revenue versus $80 or more, hm, that makes more sense. So you could limit the amount of the tariff category and you’d knock a bunch of stuff out. Those are some things you could do right away as well as reversing the customs order that allows the scam of having whole shipping crates of individual packages somehow pretend not to be the e-commerce platform’s import, but pretend to be the customer’s import. Those three changes right away would fix about 90% of the problem. So given those three things would fix 90% of the problem, and the executive branch, the Trump administration, can do it solo, and they claim to be standing up for American companies and American consumers and trade, guess the big question is, what the hell are they waiting for?

Ryan:

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

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Video: Sen. Bernie Sanders Discusses Impact of Hyperglobalization on COVID-19

To date, more than 100,000 people are dead in the United States, and more than 30 million Americans have lost their jobs. Decades of corporate-rigged trade deals – paired with Trump’s inability to coordinate an effective COVID-19 response – are making the pandemic’s effects more devastating. COVID-19 and the shortages of critical medical supplies and shattered supply chains spotlight everything wrong with both the Trump administration and the current rules for the global economy.

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Rethinking Trade - Season 1 Episode 6: As U.S. Pressures Mexico to Re-open NAFTA Factories, Workers Protest

COVID-19 deaths are still on the rise across Mexico. Despite government orders to close all non-essential firms, some U.S. factories have continued operating–with little consequence. Now the U.S. ambassador and hundreds of multinationals are demanding the country prioritize corporate interests over the safety of Mexican workers – by reopening factories now.

With the new NAFTA going into effect on July 1, how will the COVID-19 crisis impact the deal’s new worker-protection requirements and Mexico’s related labor reforms?

Transcribed by Lauren Martin

RYAN HARVEY: Welcome back to Rethinking Trade where we don’t just talk about trade policy, we fight to change it. I’m Ryan and I’m joined by our in house trade expert, Lori Wallach. Lori, we’ve all been seeing and consuming tons of news about the coronavirus, but one thing we’re not hearing too much about is Mexico. A lot of the products we use everyday are made in Mexico. What’s been going on in Mexico?

LORI WALLACH: Well, there is considerable spread of coronavirus there and COVID illness. It started a little bit later than the U.S. but there was widespread community spread by the beginning of March, on March 30th the progressive president of Mexico, AMLO, called for a basically shelter at home order and shut down all non-essential businesses. The sort of really gruesome story is that a lot of U.S. corporations that are producing in Mexico, many brand name companies that left the U.S. under NAFTA, have stayed open and particularly in the northern part of Mexico what’s often known as the maquiladora. So, in the border cities across from Texas and California and Arizona there have been considerable horrible outbreaks in factories where social distancing wasn’t respected, where personal protective equipment wasn’t given to workers, and where clearly the work was not essential. So, one of the stories that has gotten into the U.S. press (because most of it hasn’t) is the Lear company, they’re making car seats- obviously not essential- over a dozen workers there died after workers started showing up at the infirmary at the plant saying they had symptoms and they were sent back to work, etc. Unfortunately that is not unique, there have been in Honeywell plants, in [can’t tell what company she’s referencing 2:30] Motors plants, there have been a variety of episodes like that and there’s been a lot of activism which is, you know, powerful, inspired, where really workers saw the situation basically corporate greed, NAFTA corporate greed, versus their health and life. And a lot of workers-against really hard odds in Mexico because you can get beaten up at least, if not worse, for exercising your labor rights- workers protested. An inspiring story but unfortunately not the norm is workers at a factory called TPI Composite, they make the wind blades for electric generating windmills, five hundred workers went out on strike as someone in the plant had died and people were sick, and they got the company to basically furlough them all at full pay. And that is not typical- most of the places that are closing, it’s a struggle to get paid. And also, companies keep popping back up, they’re ignoring the order or they have sort of complicity with local officials. And if that weren’t enough, the U.S. and U.S. corporations have launched this really, really, intense pressure campaign for the Mexican government and those plants, the Mexican workers, to basically put these corporations interests ahead of the life and health of these Mexican workers. And the National Association of Manufacturers sent a letter, the U.S. ambassador to Mexico has just played a really evil role, he has been pressuring the  government with threats that the U.S. companies will just take off and produce elsewhere if they don’t reopen those companies regardless of the health complications. And maybe one of the most outrageous things he said was in a tweet: “There are risks everywhere,” said Chris Landau, “but we all don’t stay at home for fear we’re going to get in a car accident. The destruction of the economy is also a health threat.” As if somehow going to make non-essential goods, so a U.S. company can profit, at a time when the outbreak in Mexico is growing, growing, growing, is equivalent to the threat of a car accident. Versus industrial suicide by being forced into a dangerous situation. That is the situation of the Mexican government, it’s been uneven in it’s response in some respects it’s stood up to this pressure and in some instances it’s suggested that it will basically be reopening soon.

HARVEY: Speaking of labor laws in Mexico and labor standards in Mexico, one of the reasons we’re talking about this in our podcast about trade is because the new NAFTA is going into effect on July 1st, and in the new NAFTA there are new and somewhat significant labor standards that have also coalesced with a labor law reform in Mexico. Maybe you can talk about what those standards look like and what this current situation might mean for the new NAFTA’s implementation.

WALLACH: So the new NAFTA is slated to go into effect on July 1st in all three countries, and there could not be a less auspicious time. Because the improved labor standards and the really landmark enforcement system on paper in the agreement that the Congressional House Democrats forced the administration to add, so folks will remember in 2018 the NAFTA 2.0 text came out and the Democrats said “no!” The labor and environmental standards aren’t sufficient, nor their enforcement to stop outsourcing, it will just get worse, plus, there are outrageous new giveaways for pharma. The House Democrats basically drew a line in the sand and there was almost a year long stare down and ultimately the administration backed down and renegotiated the renegotiated NAFTA. So, the deal that’s going to go into effect on July 1 now has some useful improvements. But, like everything in life, there’s what’s on paper and then there’s what actually happens. So, there are at least 3 factors. And when I say it’s really inauspicious this is happening during COVID it’s because some of it’s going to be disrupted by the priority necessarily on the COVID response. So, number one, there are a bunch of court challenges against a new Mexican labor law that was passed to basically bring Mexican labor law into conformity with the obligations in the agreement. So, under the current Mexican labor law, there is what’s called a tripartite system where there is a lot of power in the state level in each Mexican state so that, for instance, if there are conservative governments that support the business perspective the tripartite system is one sort of, the decision is about whether contracts are legit, etc, it’s one union person, one business person, and one government person. So already, you’ve got a prospect of the business people and the government people on the wrong side of the workers. But then, under Mexican labor law, there really has not been under the old law, a way to ensure Mexican workers are actually voting to elect their own unions. So there’s this plague of what are called protection contracts, which are contracts typically signed for the first worker enters into the plant, between the boss and these sort of racket unions that are paid to do a contract, to satisfy the requirements of Mexican law, but the workers don’t get to vote on it, the function is to protect the boss and to have low wages. So there are 700,000 of those protection contracts and one of the things that’s in the Mexican new reformed labor law is revoting those and the NAFTA requires they are all reaffirmed over the period of four years. So that the fake contracts get dumped and people get real unions. And then how is it going to be decided if the contract has really been revoted and there’s no real union contract there, it’s more of the same fake stuff, there’s a bunch of new institutions that have to be set up. So the new Mexican labor law sets up the institutions, sets up those new rights, and it’s been challenged over four hundred lawsuits, some have been dismissed but a bunch are still going forward and they're not getting decided. Because, just like in the U.S., the courts are basically shut down for anything but urgent criminal matters. So the labor law itself is still a little bit up in the air and that is necessary for the reforms to go into effect. But then the second thing is, a whole bunch of new institutions need to get set up. And that involves the U.S. coming through with the funding it promised to help do that, and some additional staffing support, but also the Mexican government which promised to increase funding and promised to establish a bunch of new really national labor relations board type institutions which replace these state level tripartite bodies. And so the national system is still plugging ahead but obviously in the way of every country plugging ahead with resources diverted to COVID, with priorities of everyone, I mean obviously with all the worker safety issues the labor department is just focused on emergency labor worker safety issues and COVID as they can be on trying to set up these new institutions. And then the third piece of it has to do with, really, the kind of oversight and political and press really, if you will, spotlighting of what’s going on and pretty much everything is COVID, COVID, COVID. So even some of the high profile labor disaster situations like at Goodyear where a lot of workers were locked out to try to have an independent union and members of Congress who wanted to investigate got locked out, that’s not been resolved. Some of the outrageous conduct in call centers has not been resolved vis a vis contracts at least there’s been now a criminal case filed against a call center in Mexico City that was staying open even as workers were getting sick. But there’s just not the level of focus or attention by civil society, by parliamentarians here or in Mexico, by the press. So all of those things leave a slightly, you know, less auspicious likelihood of the kind of improvements we were hoping for and we’re all going to have to stay on it. 

HARVEY: It’s interesting because we’re actually watching in real time a labor law reform through a trade agreement happening and it’s pretty compelling so why is this something, do you think, that people should be paying close attention to, and what does it mean for the future of North American work?

WALLACH: So, we keep hearing in the context of COVID “we’re all in this together.” And that is an entirely true slogan with respect to workers wages, conditions, futures, in North America. Because we are so integrated after 25 years of NAFTA, for U.S. workers and the recovery that’s going to have to happen economically, given the wreckage being caused by the COVID disaster, as we think about both how jobs are going to be restored, what wage levels will be available, but also, we think about how we rebuild our resilience, our ability to make the basic things we desperately need to be safe, both the medical goods that we found ourselves unable to make or get, but also thinking forward to the next potential disaster be it, you know, infrastructure related or weather related, we are, thanks to the system of hyperglobalization, really, really not resilient in the face of any crisis. Part of the answer to that is a North American answer, to move some of that production out of China, obviously a bunch of it needs to come domestically to the U.S., but also with respect to what’s going to happen with workers here, and wages here, this NAFTA rewrite experiment with improved labor standards and enforcement has got to be made to work. Because, unless wages rise in Mexico, the prospect for U.S. workers having decent wages and, or manufacturing being situated in the U.S. for that, two thirds of the workforce that does not have a college degree, that many of whom had previously a middle class union manufacturing job, it is not an either or, it is not the jobs are in Mexico or the jobs are here. As we’ve seen with this crisi, we don’t have any redundancy. Everything’s been moved to one plant far away, if that plant goes down or we need a bigger supply we’re just stuffed. So this is a moment to think about how we rebuild our manufacturing sector in the U.S., but in North America as well, with redundancy and resilience and distribution of jobs in more countries. And so making sure that those hard-fought labor standards in NAFTA and their enforcement actually make a difference, is every damn person’s business in the United States, not just in Mexico. 

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

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

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

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

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

Transcribed by Lauren Martin

RYAN HARVEY: Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert Lori Wallach. So Lori, you just wrote this big piece in Le Monde Diplomatique called “The State Steps in To Save Global Economics,” and in the intro you say, "trying to respond to COVID-19 has essentially forced governments to override the rules and the ideological underpinnings that define corporate globalization, and that there are ways that this upheaval could be organized into structural change to the neo-liberal hyperglobalized order." And then finally you describe what the world looked like before this era and how there are already some models from before that could be resurrected. Do you want to explain the piece briefly? 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

By Melanie Foley

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Transcribed by Lauren Martin

RYAN HARVEY: Welcome back to Rethinking Trade where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert, Lori Wallach. Lori, today we’re going to be talking about a topic that’s been in the news recently, and that is this forecast that we might be looking at a shortage of medicines in the US sometime soon. What is all this about and what are some of the major issues at play in this forecast?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Introducing the “Rethinking Trade with Lori Wallach” Podcast

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

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

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

Give Rethinking Trade a listen and subscribe today.

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

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

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

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

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

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No Good Option on Implementation of New NAFTA

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

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

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

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

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

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

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

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

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

Transcribed by Lauren Martin

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Corporate Power and the Disappearing Face Mask

By Sarah Grace Spurgin

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I, for one, hope it’s the latter.

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

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

Transcribed by Lauren Martin

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hyperglobalization Undermines Response to COVID-19 Crisis

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

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

The current regime of hyperglobalization is undermining U.S. resilience against the COVID-19 crisis. The U.S. cannot make or get critical goods people need. More than 60,000 manufacturing facilities have been lost to 25 years of corporate-rigged U.S. trade policies that made it easier and less risky to move production overseas to pay workers less and avoid environmental protection costs.

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

With many critical goods now mainly made in one or two countries, when workers there fall ill or those governments prioritize their own people’s needs before exporting goods, a worldwide shortage of masks, gloves, medicine and more quickly develop. And it’s difficult to quickly increase production elsewhere. Long, thin globalized supply chains mean U.S. firms that seek to ramp up production cannot find inputs, parts and components. And monopoly patent protections in many trade agreements expose countries to trade sanctions if they produce medicine, ventilators and more without approval by and payment to pharmaceutical and other firms.

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

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

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

Transcribed by Kenya Juarez

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

LORI WALLACH: Hello!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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G-20 Ministers Say COVID-19 Emergency Responses Trigger WTO Exceptions: Most Press Reports Got Meaning of G-20 Trade Ministers’ Statement Wrong

By Lori Wallach

Many press reports are describing yesterday’s G-20 trade ministers’ statement as a commitment NOT to violate World Trade Organization (WTO) rules with emergency COVID-19 responses.

The actual statement says something quite different: The G-20 countries deem actions countries take to battle the crisis as subject to WTO exceptions, and thus permissible even if they do violate the WTO’s rules.

Those fluent in GATTese, the arcane technical language of trade wonkery, will have noticed the key words in yesterday’s G-20 Trade Ministers’ statement:

We agree that emergency measures designed to tackle COVID-19, if deemed necessary, must be targeted, proportionate, transparent, and temporary, and that they do not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules. [Emphasis added]

The statement says that G-20 countries agreed that COVID-19 emergency actions meet the requirements to trigger the WTO’s general exceptions, which are found in GATT Article XX.

These terms provide countries a justification for having policies that would otherwise violate WTO rules. As we’ve previously noted, WTO tribunals rarely allow countries to apply the exceptions. Usually, the tribunals rule that a domestic policy fails because it cannot meet the “chapeau” (the overarching initial paragraph) of the exceptions or that a policy is not “necessary” in a narrow WTO-required meaning that has been fabricated by tribunalists over decades of WTO rulings. Here are the relevant parts of GATT Art. XX:

Article XX (General Exceptions): Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: …
(b) necessary to protect human, animal or plant life or health;…
(j) essential to the acquisition or distribution of products in general or local short supply; Provided that any such measures shall be consistent with the principle that all contracting parties are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of the Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist.

The G-20 trade ministers statement provides a bridge over all three quicksand pits that normally sink the use of these exceptions.

As far as the chapeau language, the statement makes clear that COVID-19 emergency measures “do not create unnecessary barriers to trade.” To deal with clarifying what is “necessary” to satisfy GATT Art. XX(b), the statement makes clear that is a matter for countries to self-designate. And with respect to the principle of countries having equal shares of international supply in GATT Art. XX(j), the statement notes that emergency measures are not deemed to be a “disruption to global supply chains.”

And in case a reader is not fluent in GATTese and does not have “ah ha, Art. XX is in the house” bells going off in their heads, the last clause explicitly states that emergency measures “are consistent with WTO rules.” Understanding that requires only attentiveness to the grammar – that clause is attached with an “and” – separating it from the list of specific GATT Article XX satisfiers connected by “ors.”

Regardless, some press reports got it totally wrong – by taking part of the relevant G-20 ministers’ text as a quote, and then supplying their own meaning:

The trade ministers included additional language, promising any emergency measures would "not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules. -Politico (You can see a summary outside the paywall in G-20 calls for open trade, sort of,” Politico Pro-Morning Trade, March 31, 2020 or full story at “G-20 trade ministers pledge to help medical goods trade,” Politico, Doug Palmer, March 30, 2020.)

Trade ministers from G20 countries on Monday said any “emergency measures” to address the coronavirus pandemic must be temporary and consistent with World Trade Organization rules. - Inside U.S. Trade (“G20 trade leaders commit to WTO-consistent measures in response to COVID-19,” IUST, Isabelle Icso, March 30, 2020.)

Some news media got it right though. They understood what the statement actually meant and quoted the relevant sentence in context:

In their joint statement, the G-20 trade chiefs appeared to offer scope for such moves by saying they can be compatible with World Trade Organization rules. “We agree that emergency measures designed to tackle Covid-19, if deemed necessary, must be targeted, proportionate, transparent, and temporary, and that they do not create unnecessary barriers to trade or disruption to global supply chains, and are consistent with WTO rules,” the ministers said. – Bloomberg  (“G-20 Trade Chiefs Defend Open Supply Chains Amid Virus Fight, Bloomberg, Jonathan Stearns and Bryce Baschuk, March 30, 2020, updated March 31, 2020.)

Unlike much trade-related misreporting and spin, this instance does no favors to team trade-status-quo. It does not take great imagination to envision the thought bubble over the heads of most people who saw the wrong stories: ‘Meeting trade rules is a priority over saving lives? !@#$%^&* trade…’

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Friday’s WTO Development: Did They Think No One Would Notice?

By Lori Wallach

With everyone’s attention focused on the COVID-19 crisis, it’s understandable that a Friday trade announcement could be missed. You can find it filed under “throw fuel on the fire,” and it’s worth a look.

On March 27, a group of 16 World Trade Organization (WTO) members announced a new agreement to evade the U.S. shutdown of the WTO’s enforcement regime.

Sure, countries may be interested in mechanisms to finalize the settlement of trade disputes among themselves with the WTO’s system beached. And some may be looking for ways to try to poke the United States in response to its effective shutdown of the WTO’s enforcement regime.

The hitch is that this new “Multi-Party Interim, Appeal Arbitration Arrangement” presumes to use WTO staff and funding to do so. And, implementation of its terms effectively would alter various WTO legal authorities without recourse to the WTO’s amendment procedures and required approvals by the WTO’s signatory countries.

You can be a supporter of the WTO and still wonder: What were they thinking?!

Effectively, the proposed workaround doubles down on the sort of concerns that led the United States to finally say “enough” last year and block approval of new “judges” for the WTO’s highest review body, the Appellate Body (AB). That U.S. move shut down the WTO enforcement system; Rulings on disputes could no longer be finalized because the AB no longer had a quorum.

Starting with the second Bush administration through the Obama era and until today, U.S. officials have protested that the AB was operating outside the mandate actually agreed by member countries and making up new WTO obligations to be imposed on countries that never agreed to such terms. With the United States being the largest contributor to the WTO budget, GOP and Democratic administrations alike also have protested that U.S. funds were being squandered to support such malpractice.

Some other WTO member nations less well situated to lodge public criticisms share concerns about WTO dispute bodies stretching the actual rules, self-designating what should be one-off decisions on specific disputes as binding precedent and deciding issues not raised by the disputing parties.

For those of us who oppose the many WTO rules unrelated to trade – from new monopoly protections for pharmaceutical firms to limits on countries’ domestic food safety and financial regulation – having the WTO’s enforcement system out of business is not necessarily bad news.  WTO members are required to “ensure the conformity of their laws, regulations and administrative procedures” with WTO rules that impose limits on countries’ environmental, consumer and other protections while obliging countries to provide special protections for various privileged business sectors. When the WTO’s enforcement system is in full operation, it can authorize millions in trade sanctions against countries that do not comply with these dictates.

So, countries tend to roll back the laws attacked at the WTO. Developing countries sometimes do so at the mere threat of a challenge, so as to avoid allocating limited government resources to an expensive legal defense. The United States weakened Clean Air Act rules, dolphin protection laws and Endangered Species Act regulations after successful WTO attacks. As well, the country-of-origin labels on meat that consumers relied on in American grocery stores were gutted after the WTO classified them as “illegal trade barriers” and authorized $1 billion in sanctions.

Recently, WTO enforcement action have facilitated a circular firing squad over climate change efforts. The European Union and Japan successfully challenged Canadian incentives on renewable energy. The United States won a case against a solar power program in India. Then India successfully attacked renewable energy programs in several American states. Then China filed a case in 2018 against additional American renewable energy measures.

Clearly there are problems with the WTO. If you join me in believing that there should be good global trade rules and that those rules should be enforced in a fair and transparent way, then this latest enforcement workaround agreement – signed by the European Union, China, Brazil, Mexico, Canada, Australia, Singapore, Chile, Colombia, Costa Rica, Guatemala, Hong Kong, New Zealand, Norway, Switzerland and Uruguay – is deeply counterproductive.

Under this agreement, some WTO countries simply decide to alter the authority and roles of the WTO’s Director General, Secretariat and various bodies. And, the new agreement presumes that WTO funds will cover the costs of operating and providing arbitrators for the new system. The new agreement’s text is quite clear:

Article. 7:  The participating Members envisage that appeal arbitrators will be provided with appropriate administrative and legal support, which will offer the necessary guarantees of quality and independence, given the nature of the responsibilities involved. The participating Members envisage that the support structure will be entirely separate from the WTO Secretariat staff and its divisions supporting the panels and be answerable, regarding the substance of their work, only to appeal arbitrators. The participating Members request the WTO Director General to ensure the availability of a support structure meeting these criteria.  (Emphasis added.)

The WTO’s Director General and Secretariat also are assigned additional roles in screening the “judges” for the new system and providing various notices to countries and WTO bodies.

Annex 2, Article. 3: …this pre-selection process will be carried out by a pre-selection committee composed of the WTO Director General, and the Chairperson of the DSB, the Chairpersons of the Goods, Services, TRIPS and General Councils…

Article 6: …The WTO Director General will notify the parties and third parties of the results of the selection…  

Annex 1, Art. 5: The arbitration shall be initiated by filing of a Notice of Appeal with the WTO Secretariat…

Plus, the new text provides no mechanism for funding the new appellate arbitration system nor imposes any financial obligation on countries that opt in. But it does read in WTO provisions that require dispute settlement expenses be met from the WTO budget. For instance:

Article. 3: The appeal arbitration procedure will be based on the substantive and procedural aspects of Appellate Review pursuant to Article 17 of the DSU…; Annex 1, Art. 11: …the arbitration shall be governed, mutatis mutandis, by the provisions of the DSU and other rules and procedures applicable to Appellate Review; and Annex 2, footnote 12: … current or former Appellate Body members may be nominated as candidates.

Notably, the WTO Dispute Settlement Understanding’s provision most relevant to this funding question, namely DSU Article 17.8, ostensibly requires approval by the WTO’s General Council, i.e., the WTO member countries. Hum…

Ironically, the new agreement includes rhetoric about the countries’ commitment to finding a solution to problems with the WTO’s dispute settlement regime. It hardly seems like a winning strategy for an ad hoc group of 16 WTO members, following no rules whatsoever (not even WTO rules for plurilateral agreements) and without approval by most WTO member nations, to presume to create new authorities and roles for the WTO staff and new obligations for the expenditure of the funds other nations contribute to operate the WTO. 

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Online Retailers’ Abuse of Trade Loophole Endangers Consumers

By Melanie Foley

You do your research to find the safest infant car seat on the market and order it on Amazon. But the product that arrives at your door from China may be a knockoff. You might not even know, and the shipment almost certainly has not been inspected.

Or consider what happens when you order a high-end bicycle from Amazon. It is shipped with hundreds of others on a containership from China to an “unboxing” warehouse in Canada. There, your bike is put into its individual shipping box and sent to you. Why this seemingly useless and certainly wasteful extra step? Unlike the local shop offering the same bike, this maneuver allows Amazon to dodge border taxes and safety inspections.

Increasingly, counterfeiters and some of the world’s largest online retailers like Amazon are exploiting a loophole in U.S. trade law. Since 1938, U.S. residents have been allowed to bring into the country a “de minimis” amount of goods without paying border taxes or being subject to standard customs inspections or documentation.

The idea was for people making purchases while traveling abroad to avoid cumbersome paperwork and for customs officials to be able to focus on large-value commercial shipments. But the explosion of online retail changed the dynamic dramatically. Today, more than one million packages arrive daily via air alone from China for consignment to consumers who made purchases online.

Add to that a dramatic increase in the value of goods allowed to skirt normal inspections and other customs processes. The United States now has one of the highest de minimis levels in the world. European countries allow less than $200. Canada, Japan, Mexico and many other nations allow even less.

The online retailers also petitioned U.S. Customs and Border Protection (CBP) to consider the ultimate consumer as the official importer granted the daily $800 waiver, even though the retailers make the sale and bring in massive ocean containers of goods worth well over the $800 per day de minimis value to fulfill orders.

Anything from an Amazon fulfillment center in China could come in this way. But a primary method Amazon uses — and the new cottage industry of “third party logistics” firms that has emerged to teach companies how to take advantage of the system — is to have warehouses just across the border in Mexico or Canada to which they ship containers of products from China and other countries. The importers pay no duties when shipping to the warehouse because the good is deemed a “pass through,” as its final destination is the United States. When an order is received, warehouse staff pick, pack and put individual packages on a truck. The truck’s manifest lists them all as separate imports, so when the truck makes the short hop across the border, it clears customs using the de minimis entry process. No duties are paid or inspections done. Then the packages are dropped off at a U.S. post office or other shipper to be sent to online customers.

Customs officials are overwhelmed with the tsunami of small packages that makes it nearly impossible to effectively screen even for contraband in the form of illegal drugs or counterfeit products, much less to ensure imported products meet U.S. safety standards.

A 2019 intensified spot check operation by CBP found “discrepancies” — including spoiled food, opioids, street drugs, fake passports, gun parts and counterfeits — in 14% of parcels from China and Hong Kong.

The counterfeits are not just fake Gucci handbags. They include automotive parts that don’t meet consumer safety standards, such as airbags, brake pads and seatbelts. Packages have been found with fake prescription drugs lacking the active ingredients, children’s toys laced with lead and cosmetic products containing arsenic and human waste.

CBP reports that of the contraband products seized in 2016, 16% posed “direct and obvious threats to health and safety.”

This loophole is clearly a danger for consumers, but it also further tips the scales against brick-and-mortar stores, which, unlike the online retailers exploiting this loophole, must pay applicable tariffs on imports beyond the $800 per day and are the official importer responsible for ensuring products are legitimate and safe. Plus, the tax-dodging this system enables amounts to a significant revenue loss for the U.S. Treasury.

The Global Trade Watch (GTW) division of Public Citizen is raising this issue with Congress to pressure the Trump administration to fix the loophole. The administration has the authority to fix the problem with fairly straightforward regulatory changes. The question is, will it?

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Online Retailers Abuse of Trade Loophole Endangers Consumers

By Melanie Foley

You do your research to find the safest infant car seat on the market and order it on Amazon. But the product that arrives at your door from China may be a knockoff. You might not even know, and the shipment almost certainly has not been inspected.

Or consider what happens when you order a high-end bicycle from Amazon. It is shipped with hundreds of others on a containership from China to an “unboxing” warehouse in Canada. There, your bike is put into its individual shipping box and sent to you. Why this seemingly useless and certainly wasteful extra step? Unlike the local shop offering the same bike, this maneuver allows Amazon to dodge border taxes and safety inspections.

Increasingly, counterfeiters and some of the world’s largest online retailers like Amazon are exploiting a loophole in U.S. trade law. Since 1938, U.S. residents have been allowed to bring into the country a “de minimis” amount of goods without paying border taxes or being subject to standard customs inspections or documentation.

The idea was for people making purchases while traveling abroad to avoid cumbersome paperwork and for customs officials to be able to focus on large-value commercial shipments. But the explosion of online retail changed the dynamic dramatically. Today, more than one million packages arrive daily via air alone from China for consignment to consumers who made purchases online.

Add to that a dramatic increase in the value of goods allowed to skirt normal inspections and other customs processes. The United States now has one of the highest de minimis levels in the world. European countries allow less than $200. Canada, Japan, Mexico and many other nations allow even less.

The online retailers also petitioned U.S. Customs and Border Protection (CBP) to consider the ultimate consumer as the official importer granted the daily $800 waiver, even though the retailers make the sale and bring in massive ocean containers of goods worth well over the $800 per day de minimis value to fulfill orders.

Anything from an Amazon fulfillment center in China could come in this way. But a primary method Amazon uses — and the new cottage industry of “third party logistics” firms that has emerged to teach companies how to take advantage of the system — is to have warehouses just across the border in Mexico or Canada to which they ship containers of products from China and other countries. The importers pay no duties when shipping to the warehouse because the good is deemed a “pass through,” as its final destination is the United States. When an order is received, warehouse staff pick, pack and put individual packages on a truck. The truck’s manifest lists them all as separate imports, so when the truck makes the short hop across the border, it clears customs using the de minimis entry process. No duties are paid or inspections done. Then the packages are dropped off at a U.S. post office or other shipper to be sent to online customers.

Customs officials are overwhelmed with the tsunami of small packages that makes it nearly impossible to effectively screen even for contraband in the form of illegal drugs or counterfeit products, much less to ensure imported products meet U.S. safety standards.

A 2019 intensified spot check operation by CBP found “discrepancies” — including spoiled food, opioids, street drugs, fake passports, gun parts and counterfeits — in 14% of parcels from China and Hong Kong.

The counterfeits are not just fake Gucci handbags. They include automotive parts that don’t meet consumer safety standards, such as airbags, brake pads and seatbelts. Packages have been found with fake prescription drugs lacking the active ingredients, children’s toys laced with lead and cosmetic products containing arsenic and human waste.

CBP reports that of the contraband products seized in 2016, 16% posed “direct and obvious threats to health and safety.”

This loophole is clearly a danger for consumers, but it also further tips the scales against brick-and-mortar stores, which, unlike the online retailers exploiting this loophole, must pay applicable tariffs on imports beyond the $800 per day and are the official importer responsible for ensuring products are legitimate and safe. Plus, the tax-dodging this system enables amounts to a significant revenue loss for the U.S. Treasury.

The Global Trade Watch (GTW) division of Public Citizen is raising this issue with Congress to pressure the Trump administration to fix the loophole. The administration has the authority to fix the problem with fairly straightforward regulatory changes. The question is, will it?

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Any U.S.-Kenya FTA Must Build from Floor Set by New NAFTA

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

Note: At a meeting today at the White House, Kenyan President Uhuru Kenyatta and U.S. President Donald Trump announced that the two countries intend to launch negotiations for a bilateral Free Trade Agreement (FTA).

Any new U.S. trade agreement being negotiated from scratch – whether it is with Kenya, the United Kingdom, European Union or other nations – must build from the floor set by the new North American Free Trade Agreement (NAFTA).

Trying to fix an existing bad deal like NAFTA to reduce its ongoing damage is very different from creating a truly good trade deal that generates jobs, raises wages and protects the environment and public health.

Any new U.S. trade pact, including with Kenya, must build on the floor set by the new NAFTA, meaning no special protections for foreign investors or Big Pharma, stronger rules to stop race-to-the-bottom outsourcing of jobs and pollution, binding climate standards, enforceable rules against currency cheating and no limits on the protections needed to ensure that our food and products are safe, our privacy is protected, monopolistic online firms are held accountable and big banks do not crash the economy again.

One question is why Kenya would want to take on take on a raft of new obligations under a U.S. FTA when it already enjoys largely duty-free access to the U.S. market under the African Growth and Opportunity Act (AGOA).

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Trade Deficit in Trump’s Third Year Is 14% Higher Than When He Took Office, Not Quickly Eliminated as He Promised as a Candidate

Drop of $28 Billion in U.S. Goods and Services Deficit in 2019 Relative to 2018 Explained by $44 Billion Improvement in U.S. Energy Trade Balance

Contrary to candidate Donald Trump’s pledge he would quickly end the U.S. trade deficit, today’s release of annual 2019 trade data show the overall U.S. goods and services deficit in Trump’s third year in office is 14% ($77 billion) larger than the deficit in 2016, the last year of the Obama administration. (Figures are inflation-adjusted* In nominal terms, the overall 2019 goods and services deficit 22% ($109 billion) larger than in 2016.)

Given the trade deficit has increased during Trump’s presidency, today the administration is spotlighting the drop in the 2019 deficit relative to the deficit in 2018, but:

  • A $36 billion decline in U.S. oil imports and an $8 billion increase in oil and gas exports – a $44 billion improvement in the U.S. energy trade balance relative to 2018 – entirely explains the overall $43 billion decline in the U.S. goods trade deficit between 2018 and 2019. The improvement in the energy trade balance also is considerably larger than the decline in the overall U.S. goods and service deficit of $27 billion or 4% – from $646 billion in 2018 to $619 billion in 2019. The energy trade balance shift is not a sustainable way to decrease the U.S.-world trade deficit and poses serious climate change threats.
  • The 2019 non-energy goods trade deficit is up $1 billion relative to 2018 and up 17% ($122 billion) relative to the end of the Obama administration.
  • The 2019 manufacturing trade deficit in Trump’s third year is up 14% ($130 billion) relative to 2016, the last year of the Obama administration. Because these are the inflation adjusted terms, so they represent the growth in the deficit in constant December 2019 dollars.
  • The sizeable 2019 decline ($82 billion) in the goods trade deficit with China relative to 2018 was countered by a $39 billion increase in the goods trade deficit with the rest of the world. (The China goods deficit dropped from $432 billion in 2018 to $350 billion in 2019 while the rest of the world goods trade deficit increased from $469 billion in 2018 to $508 billion in 2019.) Economists note that such “trade diversion” is driven by imbalances in currency values: While tariffs on Chinese goods may promote a decline in Chinese imports to the United States, deficits with the rest of the world increase. This is likely to continue while the U.S. dollar remains unsustainably high in value, in part because countries such as China hold massive dollar reserves, while other countries’ currencies remain undervalued. Note: The U.S. goods trade deficit with China in 2018 was the largest ever recorded, at $432 billion, up from $396 billion in 2017. This compares to $373 billion in 2016, Obama’s last year.

“Donald Trump has not delivered on the trade promises so central to his 2016 victory in Midwest states: The U.S. trade deficit is up significantly during Trump’s presidency, U.S. job outsourcing has continued and the manufacturing sector’s four-year employment boom that started two years before he took office flatlined in 2019,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The U.S. goods trade deficit with North American Free Trade Agreement partners Mexico and Canada increased to $243 billion in 2019 – up 31% and $58 billion since the start of the Trump administration. As Trump stonewalled congressional Democrats for a year before reopening and rewriting the revised NAFTA that he signed in 2018 to remove giveaways to Big Pharma and strengthen anti-outsourcing terms, the deficit grew 10% ($23 billion) between 2018 and 2019.

*Data Note: Trade data is sourced from the U.S. Census Bureau. We present deficit figures adjusted for inflation to the base month of December 2019 and expressed the data in constant dollars so the figures represent actual changes in the trade balances. We also offer the “nominal” figure, which is the number you will see in the U.S. Census Bureau data for figures earlier than 2019. Some economists view the nominal data as more accurately reflecting the overvalued U.S. dollar. “Manufacturing” is defined by BEA’s scope for manufacturing trade flows.  

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Ongoing Job Outsourcing, Jump in Trade Deficit During Trump Era Clash With Expected Trade Triumphalism During SOTU

Trump Betrayed Additional Campaign Trade Promises: Serial Job-Outsourcing Firms Get New Federal Contracts, Manufacturing Sector Slides Into Recession

President Donald Trump is likely to focus on trade in his State of the Union address. Yet, he has not delivered on the pledges that were central to his 2016 victory in key Midwest swing states: U.S. job outsourcing has continued, the manufacturing sector’s four-year employment boom that started two years before he took office flatlined in 2019 and the U.S. trade deficit rose 19% in inflation-adjusted terms (25% in nominal terms) relative to the end of the Obama administration.

Trump is likely to tout what he calls a “phase 1” China deal and the new North American Free Trade Agreement (NAFTA), which finally passed after Democrats forced him to reopen and redo the deal he signed in 2018 to remove giveaways for Big Pharma that would have locked in high drug prices and strengthen terms to counter outsourcing. But for the wide swath of American voters outside Trump’s base of whatever-he-says believers – namely the voters he must persuade to support him – decisions will be made based on the factors that affect their daily lives, not the inside-the-Beltway news about  trade deals being completed. Thus, for instance, many people know they did not get the tax cuts they were promised and have seen more firms outsource jobs – whether or not they know that Trump’s tax bill incentivized more outsourcing by providing a major tax cuts for firms that move offshore.

  • Tens of thousands more U.S. jobs have been government-certified as lost to outsourcing during the Trump era. This includes outsourcing by General Motors, Boeing, Honeywell, Siemens, IBM, Hewlett Packard, United Technologies (the Carrier plant candidate Trump insisted would not leave), Caterpillar, Electrolux, General Electric, Harley-Davidson, Honeywell, Kohler, Intel, Thompson Reuters, AT&T, Dun & Bradstreet, Verizon and Ministry Health. Ford and Nabisco also have outsourced under Trump but have not yet been processed on the certified list.
    • The new NAFTA will not bring back hundreds of thousands of jobs: Nothing makes that clearer to voters than recent U.S. layoffs and new investment in Mexico by U.S. auto makers. GM is closing numerous U.S. plants while making popular models in Mexico. Ford is even making its new Mustang electric SUV in Mexico – the first Mustang not to be made here.
  • Manufacturing job growth hit a wall in 2019 as the sector slid into recession. Manufacturing job creation nearly stopped after a job growth boom that started two years before Trump was elected. December 2019 actually saw a contraction, with 12,000 manufacturing jobs lost compared to November 2019. Late last year, an important indicator of manufacturing sector health – the Purchasing Managers Index – registered its lowest reading (for December 2019) since the June 2009 financial crisis. The PMI is up slightly in January 2020, but excluding periods in 2013 and 2016 has not been so low since 2009. The U.S. manufacturing sector was in a technical recession for the last two quarters of 2019.
  • During the Trump administration, the overall U.S. goods and service trade deficit with the world rose 19% in inflation-adjusted terms (25% in nominal terms) relative to the last year of the Obama administration from $542 billion to $646 billion ($503 billion to $628 billion nominally). The U.S. trade deficit in goods increased from $792 billion in 2016 to $901 billion through 2018 in inflation adjusted terms (or $735 billion to $875 billion in nominal terms). When the annual 2019 trade data are released later this week, the 2019 manufacturing trade deficit is expected to be more than 12% above that in 2016. (The Census data is released Feb. 5, 2020.)

Year (11-month comparisons - 2019 data released on 2/5/2020)

U.S. Manufacturing Trade Deficit with World

2016

$853.9 billion

2017

$896.2 billion

2018

$968.5 billion

2019

$962.9 billion (12.8% higher than 2016)

  • Dramatically lower U.S. oil imports and growth in U.S. oil and gas exports will likely result in the overall 2019 U.S. trade deficit declining relative to 2018 even as it will remain significantly higher than in 2016. The increase in the U.S. oil and gas trade balance will be more than $41 billion – larger than entire 2018-2019 decline in the U.S. trade deficit with China, which will be around $39 billion. The energy trade balance shift is not a sustainable way to decrease the U.S.-world trade deficit and poses serious climate change threats.
  • The U.S. goods trade deficit with the rest of the world jumped 22% in real terms – from $323 billion in 2016 to $443 billion in 2019 during the 11-month period for which data is available even as the U.S. goods trade deficit with China is projected to decline from 2018 to 2019.
  • Economists note that imbalances in currency values drive this trade diversion phenomena. While tariffs on Chinese goods may promote a decline in Chinese imports to the United States, growing deficits with the rest of the world increase. This is likely to continue while the U.S. dollar remains unsustainably high in value, in part because countries such as China hold massive dollar reserves, while other countries’ currencies remain undervalued.
  • Contrary to his campaign promises, Trump has rewarded firms that outsourced jobs with lucrative government contracts. The list is sizable. Consider just the state Trump visited last week: In December 2018, the Siemens plant in Burlington, Iowa, closed after 148 years of operation. The plant closure eliminated 107 jobs, which was part of a nationwide loss to outsourcing of 1,800 jobs by Siemens. But during 2019, Siemens received $877,354,618 in federal contracts.

Firms That Have Caused TAA-Certified Job Losses in Iowa

Value of Federal Contracts Received in Last 12 Months

Siemens

$877,354,618

Verizon Communications

$754,077,723

United Parcel Service (UPS)

$637,292,359

Hewlett Packard

$265,824,579

Cummins

$255,917,252

Cargill

$184,535,591

Delta Air Lines

$141,014,806

John Deere

$18,517,349

Bayer Pharmaceuticals

$6,578,386

  • Many American did not get Trump’s promised tax cut. Will they connect Trump’s tax bill with continuing job outsourcing? If a firm shuts down production in the United States and moves to Mexico, its U.S. federal tax rate is cut in half. (A firm in the U.S. would pay a 21% corporate tax rate, while offshore income is taxed at a 10.5% rate.)
  • It remains to be seen if what the White House is selling as a “phase 1” China trade agreement will incentivize more job outsourcing or translate into positive changes in trade flows or Chinese policies.
    • The China agreement does not cover the mass subsidies or other “China 2025” policies that the White House has spotlighted as a threat to U.S. manufacturing and geopolitical interests. Indeed, policy changes China has made that are reflected in the agreement, including more access for foreign investors and protections for their intellectual property, may promote more outsourcing of U.S. investment and jobs.
  • China’s action since the deal’s announcement suggest the promise of one-time increased purchases of $50 billion in energy supplies, $35 billion in services, $32 billion in agricultural goods and $80 billion in manufactured goods may prove elusive.

# # #

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Trump to Visit Michigan, Iowa: His Zeal to Tout His Trade Agenda Complicated by Agricultural Export Declines, Ongoing Auto Sector Job Outsourcing and New Federal Contracts to Serial Job-Outsourcing Firms

President Donald Trump is very keen to talk trade to distract from his impeachment trial. Central to his victory in key Midwest swing states were his pledges to stop job outsourcing, rebuild American manufacturing and end the job-killing trade deficit. He’s off to Michigan and Iowa after yesterday’s signing ceremony for the new North American Free Trade Agreement (NAFTA) and last week’s preliminary China trade deal. But his impeachment-distraction trade mission is complicated by some inconvenient facts:  

  • Tens of thousands more U.S. jobs have been government-certified as lost to outsourcing during the Trump era. This includes outsourcing by General Motors, Boeing, Honeywell, Siemens, IBM, Hewlett Packard, United Technologies, Caterpillar, Electrolux, General Electric, Harley-Davidson, Honeywell, Kohler and Intel Thompson Reuters, AT&T, Dun & Bradstreet, Verizon and Ministry Health. Verizon, Ford and Nabisco also have outsourced under Trump, but have not yet been processed on the certified list.
  • Manufacturing sector job growth hit a wall in 2019, as the sector slid into recession. Manufacturing job creation nearly stopped after a job growth boom that started two years before Trump was elected, while an important indicator of manufacturing sector health – the Purchasing Managers Index – registered its lowest reading since the June 2009 financial crisis days. The U.S. manufacturing sector has been in a technical recession for the past two quarters.
  • The overall U.S. trade deficit increased 14% in Trump’s first two years. Despite expectations that the 2019 deficit will be smaller, the manufacturing sector deficit will be up again, while the overall decline reflects a jump in U.S. exports of oil and gas and lower oil imports. During the Trump administration, the NAFTA trade deficit has grown 30% relative to the year before Trump took office.
  • The new NAFTA will not bring back hundreds of thousands of jobs, as Trump nonsensically claims. Nothing makes this clearer than recent developments in the U.S. auto sector. Post-NAFTA renegotiation, U.S. auto companies have announced plans to expand production in Mexico. GM is closing numerous U.S. plants while making popular models in Mexico. Ford is even making its new Mustang electric SUV in Mexico – the first Mustang not to be made here. Over time, the labor standards and enhanced enforcement terms Democrats forced into the new NAFTA may help raise wages in Mexico, and this also may reduce U.S. corporations’ incentives to outsource more U.S. jobs to Mexico to pay workers less.
  • Contrary to his campaign promises, Trump has rewarded firms that have outsourced jobs with lucrative government contracts. Sadly there are many instances, but consider a state on today’s trip: In December 2018, the Siemens plant in Burlington, Iowa, closed after 148 years of operation. The plant closure eliminated 107 jobs, as part of a nationwide loss to outsourcing of 1,800 jobs by Siemens. During 2019, contracts for $877,354,618 were granted to Siemens.

Firms That Have Caused TAA-Certified Job Losses in Iowa

Value of Federal Contracts Received in Last 12 Months

Siemens

$877,354,618

Verizon Communications

$754,077,723

United Parcel Service (UPS)

$637,292,359

Hewlett Packard

$265,824,579

Cummins

$255,917,252

Cargill

$184,535,591

Delta Air Lines

$141,014,806

John Deere

$18,517,349

Bayer Pharmaceuticals

$6,578,386

 

  • Trump’s tax bill promotes more outsourcing. If a firm shuts production in the United States and moves to Mexico, their U.S. federal tax rate is cut in half. (A firm in the U.S. would pay a 21% corporate tax rate, while offshore income is taxed at a 10.5% rate.)
  • On the China front, it remains to be seen if what the White House is selling as a “phase 1” China trade agreement will translate into changes in trade flows or China policies, and the promise of one-time increased Chinese purchases of U.S. goods, including agricultural exports, that the administration is touting may provide elusive.
    • Chinese purchasing agency commodity orders in early January did not reflect a shift to U.S. purchases, while Chinese officials have said they will not increase agricultural import quotas.
    • The China agreement does not cover the mass subsidies or other “China 2025” policies that the White House has spotlighted as a threat to U.S. manufacturing and geopolitical interests. Indeed, policy changes China has made that are reflected in the agreement, including more access for foreign investors and protections for their intellectual property, may promote more outsourcing of U.S. investment and jobs.
  • The government has certified tens of thousands of Michigan workers as trade job-loss victims under just one narrow program called Trade Adjustment Assistance (TAA). This government program represents a significant undercount: Workers must know to apply and meet the TAA’s narrow criteria, which exclude many types of jobs lost to trade. The top five firms that the TAA certified for China job loss in Michigan are Yale Lift-Technologies, Lear Corporation, Chrysler, Ameriwood Industries, and A123 Systems LLC. The top five firms certified for NAFTA job loss in Michigan are Tyco Electronics, Lear Corporation, Copper Range Co., Collins and Aikman and Kraft Foods. As well, Chrysler, Ford and General Motors all have extensive Michigan TAA certifications for production relocation that do not specify to what country the work has been relocated.
  • The government has certified tens of thousands of Iowa workers as trade job-loss victims under TAA. The top five firms that the TAA certified for China job loss in Iowa are Maytag, Ocwen Loan Servicing, TMK-IPSCO, Lands’ End, and IMI Cornelius. The top five firms certified for NAFTA job loss in Iowa are Eaton Corporation, John Deere, GFSI, Intier Automotive Seating of America and International Automotive Components.

Data Notes: Deficit figures are adjusted for inflation to the base month of December 2019. Thus, the figures represent changes in trade balances expressed in constant dollars. So, for months prior to December 2019, the numbers are different than the data unadjusted for inflation that is provided by the U.S. Census Bureau. The U.S. Department of Labor certifies trade-impacted workplaces under its TAA program. This program provides a list of trade-related job losses and job retraining and extended unemployment benefits to workers who lose jobs to trade. The TAA is a narrow program, covering only a subset of workers who lose jobs to trade. It does not provide a comprehensive list of facilities or jobs that have been offshored or lost to import competition. Although the TAA data represent a significant undercount of trade-related job losses, the TAA is the only government program that provides information about job losses officially certified by the U.S. government to be trade-related. Public Citizen provides an easily searchable version of the TAA database. Please review our guide on how to interpret the data here and the technical documentation here. The federal contract data is sourced from usaspending.gov.

For more information visit State-by-State Outcomes of NAFTA.

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New NAFTA Signed Into Law Only After Democrats Force Trump to Rewrite His 2018 NAFTA 2.0 Deal to Remove Big Pharma Giveaways, Add Better Labor and Environmental Terms

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

Note: Today, President Donald Trump signed the implementing legislation for the revised North American Free Trade Agreement (NAFTA). This follows passage in the U.S. Senate by a margin of 89-10 and in the U.S. House of Representatives by a margin of 385-41 with 193 Democrats and 192 Republicans supporting. The White House did not invite any congressional Democrats to the 400-person signing event. By gaslighting the Democrats central role in creating a new NAFTA, Trump has generated new attention to the reality that the revised NAFTA deal he signed in 2018 was DoA in Congress and Democrats forced Trump to reopen that deal and rewrite it so that it might actually counteract some of NAFTA’s ongoing damage.

Donald Trump has a new NAFTA to sign into law today only because congressional Democrats forced him to reopen the NAFTA 2.0 deal he signed in 2018 to remove Big Pharma giveaways that would have locked in high medicine prices and to strengthen labor and environmental terms so a new NAFTA might counter outsourcing.

The corporate-rigged NAFTA 2.0 deal that Trump signed in 2018 betrayed his campaign promise to fix NAFTA and was “dead on arrival” in Congress. It included new Big Pharma giveaways that would have locked in high drug prices, making it worse than the original, and labor and environmental terms too weak to counteract NAFTA’s outsourcing of jobs and pollution.

Trump is desperate to pretend that this is his victory, but Public Citizen’s new Timeline of #ReplaceNAFTA Advocacy shows that the new NAFTA exists only thanks to relentless work by House Democrats, unions, consumer and faith groups, and activists nationwide who forced improvements to the 2018 deal Trump signed.

The unusually large, bipartisan congressional votes for the “revised revised” NAFTA show that to be politically viable, U.S. trade pacts no longer can include broad monopoly protections for Big Pharma or extreme corporate investor privileges and must have enforceable labor and environmental standards.

After congressional Democrats, unions and consumer groups forced Trump to remove Big Pharma giveaways and improve labor and environmental terms, the final revised deal is better than the original and might reduce some of NAFTA’s ongoing damage to workers and the environment.

But this new NAFTA won’t bring back hundreds of thousands of manufacturing jobs, as Trump nonsensically claims, despite U.S. auto manufacturers’ recent announcements that they plan to increase production in Mexico. This includes Ford’s decision to make its new Mustang electric SUV in Mexico. while GM has closed U.S. auto plants even as it has shifted production of its most popular vehicles to Mexico.

One important win for consumers, workers and the environment is the gutting of NAFTA’s Investor-State Dispute Settlement (ISDS) regime. ISDS empowers multinational corporations to go before panels of three corporate lawyers to demand unlimited compensation from taxpayers over claims that domestic policies or actions violate special investor privileges. The lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits. To date, corporations have extracted almost $400 million from North American taxpayers after attacks on energy, water, timber and toxics policies. Largely eliminating ISDS will foreclose numerous corporate attacks on environmental, health and other safeguards and bolster countries worldwide seeking to exit the illegitimate ISDS regime. 

The new NAFTA is not a template for future agreements; rather, it sets the floor from which we will fight for good trade policies that put working people and the planet first. Trying to fix an existing bad deal like NAFTA to reduce its ongoing damage is very different from creating a truly good trade deal that generates jobs, raises wages and protects the environment and public health.

Any new trade deals, including with the European Union and United Kingdom, must additionally include binding climate standards, even stronger rules to stop race-to-the-bottom outsourcing of jobs and pollution, and enforceable rules against currency cheating. And any new deals must not limit the protections needed to ensure our food and products are safe, our privacy is protected and monopolistic online firms are held accountable, and big banks do not crash the economy again.

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Broad Bipartisan Congressional Votes on Revised NAFTA Cement New Floor for Trade Pacts: Pharma Giveaways, Extreme Investor Rights in Past Pacts Are Out, Better Labor and Environmental Terms In After Democrats Forced Trump to Redo His 2018 NAFTA 2.0 Deal

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

Note: The U.S. Senate today passed the revised North American Free Trade Agreement (NAFTA) by a margin of 89 to 10. This follows passage in the U.S. House of Representatives by a margin of 385 to 41 in December 2019.

The unusually large, bipartisan votes in the Senate and House on the revised NAFTA set a new standard that to be politically viable, U.S. trade pacts no longer can include extreme corporate investor privileges or broad monopoly protections for Big Pharma and must have enforceable labor and environmental standards, in contrast to the 2016 Trans-Pacific Partnership, which never got close to congressional majority support.

Renegotiating the existing NAFTA to try to reduce its ongoing damage is not the same as creating a good trade agreement that creates jobs, raises wages and protects the environment and public health. That would additionally require climate provisions, stronger labor and environmental terms, and truly enforceable currency disciplines, and not limit consumer protections for food and product safety and labeling, the service sector, online platforms and more.

The NAFTA 2.0 deal that President Donald Trump initially signed in 2018 betrayed his campaign promise to fix NAFTA: It included new Big Pharma giveaways that lock in high drug prices, making it worse than the original, and its labor and environmental terms were too weak to counteract NAFTA’s outsourcing of jobs and pollution.

However, after congressional Democrats, unions and consumer groups forced Trump to remove Big Pharma giveaways and improve labor and environmental terms, the final revised deal is better than the original and might reduce some of NAFTA’s ongoing damage to workers and the environment. Although the new deal still includes problematic terms, the alternative is status quo NAFTA, not a more improved deal.

But this new NAFTA won’t bring back hundreds of thousands of manufacturing jobs, as Trump nonsensically claims. Nothing makes that clearer than U.S. auto manufacturers’ recent announcements that they plan to increase production in Mexico – from Ford’s decision to make its new Mustang electric SUV in Mexico to GM closing U.S. auto plants while expanding production in Mexico.

One clear and important win for consumers, workers and the environment is the gutting of NAFTA’s Investor-State Dispute Settlement (ISDS) regime. ISDS empowers multinational corporations to go before panels of three corporate lawyers to demand unlimited compensation from taxpayers over claims that domestic laws, regulations and court rulings violate special investor privileges. The lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits. To date, corporations have extracted almost $400 million from North American taxpayers after attacks on energy, water, timber and toxics policies. Largely eliminating ISDS will foreclose numerous corporate attacks on environmental, health and other public interest policies and send a signal worldwide to the many countries also eager to exit the illegitimate ISDS regime. 

The new NAFTA is not a template for future agreements; rather, it sets the floor from which we will fight for good trade policies that put working people and the planet first.

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Trump Visits Milwaukee: The Data on Wisconsin’s Ongoing Trade Job Loss, Decline in Ag Exports to China

With U.S. agricultural exports down, the White House touting a signing ceremony on a preliminary China trade text and the new North American Free Trade Agreement (NAFTA) up for a vote soon in the U.S. Senate, Trump is likely to talk trade during his Tuesday rally in Milwaukee. Below are key trade data points relating to Wisconsin.

On the China front, it remains to be seen if what the White House is selling as a “phase 1” China trade agreement will translate into changes in trade flows or China policies. The agreement does not cover the mass subsidies or other “China 2025” policies that the White House has spotlighted as a threat to U.S. manufacturing and geopolitical interests. Indeed, policy changes China has made that are reflected in the agreement, including more access for foreign investors and protections for their intellectual property, may promote more outsourcing of U.S. investment and jobs. Meanwhile, the promise of one-time increased Chinese purchases of U.S. goods, including agricultural exports, that the administration is touting may provide elusive. Chinese purchasing agency commodity orders last week did not reflect a shift to U.S. purchases while Chinese officials have said they will not increase ag import quotas.

  • U.S. Department of Agriculture data show that Wisconsin’s agricultural exports to China have decreased 22% this year relative to last year –from $106 million in the first 11 months of 2018 to $82.7 million in the first 11 months of 2019.

  • Wisconsin agricultural exports to China are down 27% in the 11 months of 2019 for which there is U.S. government data relative to the same 11 months of 2016, Obama’s last year in office. 

With respect to NAFTA, Donald Trump’s campaign promise to quickly replace the pact was stalled by his year-long refusal to remove new Big Pharma giveaways that would lock in high drug prices from the NAFTA 2.0 deal he signed in 2018. NAFTA 2.0 labor and environment terms also were too weak to counteract NAFTA’s outsourcing of jobs. Even after congressional Democrats and unions forced Trump to rewrite the 2018 deal, the new NAFTA won’t bring back hundreds of thousands of manufacturing jobs, as Trump claims. The recent announcements by U.S. automakers of increased production in Mexico make that clear.

  • The government has certified 83,047 Wisconsin workers as trade job-loss victims under just one narrow program called Trade Adjustment Assistance (TAA). This government program represents a significant undercount: Workers must know to apply and meet the TAA’s narrow criteria, which exclude many types of jobs lost to trade. The top five firms that TAA certified for trade-related job loss in Wisconsin are Briggs & Stratton, Honeywell, Master Lock, NewPage Corporation and Humana Insurance Company.

  • Some Wisconsin metro areas’ Department of Labor-certified trade jobs loss numbers:
    Milwaukee-Waukesha (22,856)                      Appleton (8,172)
    Green Bay (4,235)                                          Oshkosh-Neenah (3,722)
    Manitowoc (3,676)
  • During the Trump administration, the NAFTA trade deficit has grown 30% relative to the year before Trump took office.

  • Meanwhile, the manufacturing sector has hit a wall in 2019: Manufacturing job creation nearly stopped while an important indicator of manufacturing sector health – the Purchasing Managers Index – registered its lowest reading since June 2009 financial crisis days.

  • Tens of thousands more U.S. jobs have been government-certified as lost to NAFTA during the Trump era. Nationwide, the United States has had a net loss of 4.5 million manufacturing jobs – about 27% – since NAFTA and the WTO went into effect.

  • According to the U.S. Department of Labor, manufacturing workers who lose jobs and find reemployment are typically forced to take pay cuts. Two of every five rehired in 2018 were paid less in their new jobs. One in six lost greater than 20% of their income. That means a $8,955 pay cut for the median-wage worker earning $44,800.

  • During NAFTA’s 25 years in force, the U.S. goods trade deficit with Canada of $33.2 billion and the $2.9 billion surplus with Mexico in 1993 (the year before NAFTA) turned into a combined NAFTA goods trade deficit of $220 billion in 2018. Before NAFTA, the U.S. had a goods trade surplus with Mexico and Canada in the top 10 products that Wisconsin exports to the NAFTA nations. We now have a $146 billion deficit in trade of those goods to NAFTA nations.

  • The $2.5 billion U.S. agriculture trade surplus with Canada and Mexico before NAFTA reversed to a $9 billion deficit in 2018. Nearly 250,000 small- to medium-scale farmers have been driven out of agriculture since the original NAFTA went into effect. Nationwide, $15 billion has been lost in U.S. agriculture exports just to China in the past year. Trump’s new NAFTA cannot fix this or stop future erratic and unpredictable Trump trade actions. Months after the deal was signed, and boosters claimed it would lock in a new era of certainty in North American trade, Trump threatened to impose new tariffs on all Mexican imports for immigration-related reasons. Because the new NAFTA would simply continue NAFTA’s existing duty-free treatment with very modest increased access for U.S. dairy, poultry, eggs and wine to the Canadian market (around $400 million), it wouldn’t make a dent.

  • Growing NAFTA trade deficit under Trump: The nearly 10% growth in the NAFTA goods deficit over the past 11-month period compared to that same period in 2018 continues a Trump-era trend: The 2018 annual U.S. NAFTA goods deficit was up 11% relative to 2017, an increase from $197 billion to $218 billion, and up 19% ($34 billion) in 2018 relative to the U.S. annual NAFTA goods deficit in 2016.

Data Notes: Deficit figures are adjusted for inflation to the base month of November 2019. Thus, the figures represent changes in trade balances expressed in constant dollars. So, for months prior to November 2019, the numbers are different than the data unadjusted for inflation that is provided by the U.S. Census Bureau. The U.S. Department of Labor certifies trade-impacted workplaces under its TAA program. This program provides a list of trade-related job losses and job retraining and extended unemployment benefits to workers who lose jobs to trade. TAA is a narrow program, covering only a subset of workers who lose jobs to trade. It does not provide a comprehensive list of facilities or jobs that have been offshored or lost to import competition. Although the TAA data represent a significant undercount of trade-related job losses, TAA is the only government program that provides information about job losses officially certified by the U.S. government to be trade-related. Public Citizen provides an easily searchable version of the TAA database. Please review our guide on how to interpret the data here and the technical documentation here.

For more information visit State-by-State Outcomes of NAFTA.

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NAFTA Vote Reveals New Reality for Trade Deals: Passage Possible Only After Democrats Forced Trump to Cut Pharma Giveaways and Extreme Investor Rights Plus Strengthen Labor and Environmental Terms

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

Note: The U.S. House of Representatives today passed the revised North American Free Trade Agreement (NAFTA).

The unusually large, bipartisan vote on the revised NAFTA shows that to be politically viable, U.S. trade pacts no longer can include extreme corporate investor privileges or broad monopoly protections for Big Pharma and must have enforceable labor and environmental standards, in contrast to the 2016 Trans-Pacific Partnership, which never got close to majority House support.

Renegotiating the existing NAFTA to try to reduce its ongoing damage is not the same as creating a good trade agreement that creates jobs, raises wages and protects the environment and public health. That would additionally require climate provisions, stronger labor and environmental terms, and truly enforceable currency disciplines, and not limit consumer protections for food and product safety and labeling, the service sector, online platforms and more.

The NAFTA 2.0 deal that President Donald Trump initially signed in 2018 betrayed his campaign promise to fix NAFTA: It included new Big Pharma giveaways that lock in high drug prices, making it worse than the original, and its labor and environmental terms were too weak to counteract NAFTA’s outsourcing of jobs and pollution.

However, after congressional Democrats, unions and consumer groups forced Trump to remove Big Pharma giveaways and improve labor and environmental terms, the final revised deal is better than the original and might reduce some of NAFTA’s ongoing damage. Although the new deal still includes problematic terms, the alternative is status quo NAFTA, not a more improved deal.

But this new NAFTA won’t bring back hundreds of thousands of manufacturing jobs, as Trump nonsensically claims. Nothing makes that clearer than U.S. auto manufacturers’ recent announcements that they plan to expand production in Mexico – from Ford’s decision to make its new Mustang electric SUV in Mexico to GM closing U.S. auto plants while expanding production in Mexico.

One clear and important win for consumers, workers and the environment is the gutting of NAFTA’s Investor-State Dispute Settlement (ISDS) regime. ISDS empowers multinational corporations to go before panels of three corporate lawyers to demand unlimited compensation from taxpayers over claims that domestic laws, regulations and court rulings violate special investor privileges. The lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits. To date, corporations have extracted almost $400 million from North American taxpayers after attacks on energy, water, timber and toxics policies, largely eliminating ISDS will foreclose numerous corporate attacks on environmental, health and other public interest policies and send a signal worldwide to the many countries also eager to exit the illegitimate ISDS regime.

The new NAFTA is not a template for future agreements; rather, it sets the floor from which we will fight for good trade policies that put working people and the planet first.

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Lori Wallach Slams Trump Fake Out on Drug Prices

In response to the Trump Administration’s announcement today about allowing some prescription drug imports from Canada, Public Citizen’s Global Trade Watch Director Lori Wallach released the following statement:

“Trump is talking out of both sides of his mouth on this. Access to cheaper drugs from Canada won't help many Americans when Trump is also pushing Big Pharma giveaways that would push up the price of life saving drugs in Canada and lock in high prices here — including skyrocketing the prices of treatments for diabetes, osteoporosis, and heart failure. Ultimately — Trump cares far more about corporate profits than people."

Fast Facts on the revised NAFTA agreement Trump signed last year, but that is up for revision currently in Congress:

  • Requires signatory governments to guarantee pharmaceutical corporations monopoly powers to block generic competition.
  • Requires governments to guarantee 10 years of marketing exclusivity for biologic drugs and provide patent evergreening opportunities for all drugs, blocking competition to bring down prices. 
  • Locks the United States into policies that keep medicines, including critical cancer treatments, outrageously expensive. 
  • Exports our failed prescription drug pricing system to Mexico and Canada.
  • Provides longer monopoly benefits for medicines such as: diabetes treatments Victoza, Saxenda, Glucagon and Ozempic; osteoporosis treatment Forteo; heart failure treatment Natrecor; and short bowel syndrome treatment Gattex.

Public Citizen's Global Trade Watch has joined Congressional Democrats to demand these terms are eliminated before any vote is scheduled on the new deal.

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Key Findings of the ITC Report on the Revised NAFTA: Modest Projections Do Not Alter Pact’s Prospects in Congress

The April 18, 2019 release of the International Trade Commission (ITC) report on the revised North American Free Trade Agreement (NAFTA) does nothing to alter the reality that the fate of NAFTA 2.0 relies largely on whether the administration engages with congressional Democrats and then with Canada and Mexico to improve the text signed last year. That Democrats, unions and others who have opposed past pacts seek improvements – rather than the deal’s demise – reveals that a path exists to build broad support. But absent removal of new monopoly protections for pharmaceutical firms that lock in high drug prices and strengthened labor and environmental standards and enforcement, the deal is not likely to garner a majority in the U.S. House of Representatives. Indeed, all four of the trade deals Congress enacted in the past decade required changes to their texts after the pacts were signed in order to pass the House.

  • The official government projections of very small gains spotlight how Donald Trump has oversold the revised NAFTA, which he promised would “support many hundreds of thousands of American jobs,” “send cash and jobs pouring into the United States” and eliminate the large U.S. trade deficit with NAFTA countries. The modest findings reinforce congressional Democrats’ views that absent more improvements, the revised deal won’t stop NAFTA’s ongoing damage.
  • The ITC projects that after six years, the pact would add 175,800 jobs about the number created by the economy in a slow month and increase wages by 27/100 of one percent or an average of $2.58 per week. Almost 80 percent of projected job growth is for workers in the service sector without a college education, meaning many of these jobs are likely to be low-paid. Almost one million mainly U.S. manufacturing jobs have been lost to the original NAFTA according to Trade Adjustment Assistant certifications, which undercount trade-related job loss.
  • Only $1.8 billion in trade deficit reduction with NAFTA countries is projected over time, relative to a U.S. 2018 NAFTA goods deficit of $215 billion. Yet, based on past performance of ITC projections on trade pact deficits, the more likely outcome is a larger NAFTA deficit. Consider the ITC’s original assessment of NAFTA: Within 10 years, the goods trade deficit with Mexico had grown to almost 20 times the level the ITC had projected in its dimmest forecast.
  • Overall, the ITC projected minuscule gains from NAFTA 2.0: one-time gains of 35/100 of one percent in real GDP, 12/100 of one percent in employment and 27/100 of one percent in wages. In contrast to past reports, the agency somewhat obfuscated the time period of the projected GDP gain of $68.2 billion. It assumes a six-year implementation period, so if gains are realized steadily over that period, it means annual growth gains of only 6/100 of one percent for six years. That is smaller than a rounding error on the $19 trillion U.S. economy. The sum total effect of NAFTA 2.0 would be a GDP on January 1, 2025 that would be attained on March 6, 2025 without the deal.
    • Most of these economic gains are derived from a highly dubious new research methodology, which assigns an invented positive economic value to terms that reduce “policy uncertainty” by freezing in place environmental, consumer protection, financial and other safeguards. If the ITC had not done this, the report would have projected a negative outcome. All $68.2 billion of the deal’s supposed economic gains arise from simulating the impact of removing trade barriers that do not exist. In other words, the gains are generated not through the removal of trade barriers directly, but through the elimination of the possibility of new future regulatory policies, which are deemed to be potential trade barriers. Absent this fabrication, the revised NAFTA would have been projected to lower the United States’ GDP by $22.6 billion and reduce the number of jobs by 53,900. The very notion that “reducing policy uncertainty” generates economic benefits is questionable. But in this study, these imagined gains also are not balanced against foreseeable downsides, such as financial instability, lower worker productivity from injury or illness, and the like. Perversely, given the focus on “uncertainty” the ITC choose to simply not analyze the impact of one prominent new feature of the deal - its review and sunset provision - that industry attacks as creating new uncertainties to North American trade.
    • Absent methodological monkey business, how could a NAFTA revision that involves no major trade barrier elimination be projected to create almost 90 percent of the GDP gains as it predicted for the original NAFTA even though the first deal substantially cut tariffs? The study also projects almost 50 percent more economic gains than the Trans-Pacific Partnership (TPP), even though the revised NAFTA covers only two other countries with which the United States has had almost no tariffs and has been integrated with for 25 years under NAFTA, while the TPP included 11 nations and involved significant tariffs cuts with Japan, Malaysia and others.

 

ITC’s Projected Real GDP Gains (in 2017 dollars)

NAFTA

$77.9 billion

TPP

$42.7 billion

USMCA

$68.2 billion

 

  • The report then feeds these fabricated gains from the reduction of “policy uncertainty” into the same old computable general equilibrium (CGE) model that for decades has produced rosy ITC projections that have been systematically contradicted by trade pacts’ actual outcomes. The CGE model simply assumes away the very results that have often occurred under past pacts: long-term job loss, trade deficit increases and currency devaluations. By design, the CGE model assumes that the overall U.S. economy remains at full employment, that income inequality and the U.S. global trade balance does not change, and currency values are locked. These assumptions have systematically resulted in ITC trade-pact projections being entirely unrelated to actual outcomes.
    • IMF economists recently calculated negligible U.S. economic growth gains from the revised NAFTA relying on the same economic model as the ITC, but without the additional assumptions of gains from regulatory freeze. They found the United States would experience a welfare loss of $794 million, while Canada enjoys a small gain of $734 million and Mexico a gain of $597 million. The IMF study also found a zero percent change in real (inflation-adjusted) GDP for the United States, a 0.02 percent change for Canada and a -0.01 percent change for Mexico.
    • The ITC’s past trade-pact projections have been so entirely wrong – in direction, not just in scale – that findings of minuscule gains from the revised NAFTA would not have obtained as much attention had Donald Trump not set such a high bar by overselling this as a new species of trade deal that would miraculously reverse NAFTA’s decades of damage.

 

NAFTA: U.S.-Mexico Trade

1993 - Baseline

ITC Projection

Actual

$1.6 billion goods surplus

$2.3 billion goods deficit

$83.7 billion goods deficit

China-WTO: U.S.-China Trade

1998 - Baseline

ITC Projection

Actual

$57 billion goods deficit

$60 billion goods deficit

$281 billion goods deficit

U.S.-Korea FTA: Trade

2011 - Baseline

ITC Projection

Actual

$19 billion goods deficit

$16 billion goods deficit

$22 billion goods deficit

 

  • The ITC report projects that longer periods for patents and other intellectual property monopolies will deliver economic gains by reducing what the ITC describes as “trade costs,” while dismissing any economic losses (reduction in welfare) accruing from high medicine prices. The report explicitly admits that “originator [first-to-market] firms” will gain “from stronger IPR protections” while “follow-on or generic firms” will suffer “losses.” Not only do high medicine prices hit Americans directly, but extracting licensing payments from foreign consumers by imposing these rules on NAFTA partners can crowd out purchases of U.S. exports, entailing U.S. job loss.
  • Interestingly, for the first time the ITC considered the impact of investor protections and the related roll back of Investor-State Dispute Settlement (ISDS), concluding: “The Commission’s quantitative analysis also shows that the reduction in the scope of ISDS would have a small positive effect on the U.S. economy. In particular, U.S. domestic manufacturing and mining output is estimated to increase due to greater amount of capital available in the United States for investing in such industries because of reduced investment in Mexico.”
  • The ITC just assumes labor terms will be enforced, even though lack of enforceability is a core critique: “The USMCA labor provisions are expected to promote higher wages and improved labor conditions in member markets if these provisions are enforced.” (emphasis added) After noting that significant variable, which is not ensured in the current text, the report proceeds to project a 17.2 percent increase in Mexican union wages and then to feed that finding into the broader model to project U.S. employment and other gains. There is no alternative simulation based on non-enforcement despite the upside scenario relying on a course of action that is desirable, but far from certain: Mexico passes and implements labor law reform to comply with the agreement and the pact’s labor provisions remain enforced, which leads to more independent unions, which leads to successful collective bargaining, which leads to the replacement of thousands of low-wage “protection” contracts, which ultimately leads to higher wages. Second, if that happens, the projected gain is from $1.50-$3 an hour Mexican manufacturing wages to $1.76-$3.51 an hour wages, an increase that is too small to either improve Mexican workers’ lives or counter the low-wage pull factor to outsource U.S. jobs.
  • The ITC projects very small job gains in the auto sector from the deal’s tighter rules of origin and other auto-sector-specific terms, while the U.S. Trade Representative’s office projects more jobs in the auto parts supply chain based on data from car producers that remains confidential.
  • The ITC ignores the environmental chapter of the agreement, even as the administration claims it is the strongest such chapter of any trade agreement.
  • The ITC concludes the revised pact will have little benefit for the energy sector, contradicting industry claims. “Given the already very low most-favored-nation (MFN) tariffs for the parties, as well as the effects of recent reforms in Mexico’s energy sector, USMCA’s energy-related provisions are likely to have little impact on U.S. trade and production of energy-related products.”
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Modest Projections in Today’s ITC Assessment of the Revised NAFTA Do Not Alter Its Prospects in Congress

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

Note: The U.S. International Trade Commission (ITC) today released a study on the potential economic impact of the revised North American Free Trade Agreement (NAFTA) that projects minuscule economic gains in real GDP of $68.2 billion, or 35/100 of one percent. The highest projected gains in wages, employment and output are all less than one-half of one percent – with most figures much lower. Undergirding a large share of those tiny gains is an assumption that locking in lengthy intellectual property monopolies and freezing environmental and consumer safeguards leads to economic gains and no downsides. The report projects that over time, the agreement would add 175,800 jobs, which is less than one-fifth of what the U.S. government has certified as lost to the original NAFTA.  Public Citizen will soon release a detailed summary of findings. [UPDATE: findings available here]

 “The minuscule projected gains in this long-awaited official government assessment contradict Donald Trump’s grandiose claims that it will lead to ‘cash and jobs pouring into the U.S.’ and reinforces congressional Democrats’ views that absent more improvements, the revised deal won’t stop NAFTA’s ongoing damage.

The ITC’s past trade-pact projections have been so entirely wrong — in direction, not just in scale — that today’s findings of minuscule gains would have limited effect on the debate had Trump not set such a high bar by overselling this as a new species of trade deal that would miraculously reverse NAFTA’s decades of damage.

This report does nothing to alter the reality that the prospects for a NAFTA 2.0 vote rely largely on whether the administration engages with congressional Democrats and then with Canada and Mexico to improve the text signed last year. That congressional Democrats, unions and others who have outright opposed past pacts seek improvements rather than the deal’s demise reveals there is a path to build broad support. But absent removal of new monopoly protections for pharmaceutical firms that lock in high drug prices and strengthened labor and environmental standards and enforcement, the deal is not likely to garner a majority in the U.S. House of Representatives. Indeed, all four of the trade deals Congress enacted in the past decade required changes to their texts after the pacts were signed in order to pass the House.”

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Major USMCA Milestone Next Week: What Will International Trade Commission Report Show and Does It Matter?

It’s not just trade economists who are eager for the U.S. International Trade Commission’s (ITC) long-awaited analysis of the revised North American Free Trade Agreement (NAFTA). Publication of the statutorily required report usually signals that the congressional debate on a trade deal is nigh. But this ITC trade-pact report is not usual.

First, as political silly season looms this fall, whether there is a vote on NAFTA 2.0 anytime soon relies largely on whether the administration will engage with congressional Democrats and then with Canada and Mexico to resolve problems Democrats have identified with the text signed last year. That congressional Democrats, unions and others who have outright opposed past pacts seek improvements rather than the deal’s demise reveals there is a path to build broad support for it. But absent removal of new monopoly protections for pharmaceutical firms that lock in high drug prices and the addition of strengthened labor and environmental standards and enforcement, the deal is not likely to garner a majority in the U.S. House of Representatives. All of the trade deals Congress has enacted in the past decade required changes to their texts after the pacts were signed to get through the House.

Second, because the ITC has used a research methodology for decades that produces rosy projections that have been systematically contradicted by trade pacts’ actual outcomes, few people are willing to rely on the agency’s topline predictions. But the underlying assumptions in the study will be revealing, as they will reflect the agency’s sense of what is – and is not – different from the original NAFTA. 

We’ll post our initial analysis shortly after the ITC report is released.

Some Key Things We Will Look for in the ITC’s Assessment on the Revised NAFTA

  • Are any projected economic gains meaningful? For example, the ITC projection of a 0.23 percent gain in national income from the Trans-Pacific Partnership (TPP) over 15 years meant that the United States would be as wealthy on Jan. 1, 2032, with TPP as it would be six weeks later (Feb. 15, 2032) without it. Or, the ITC projected TPP gains to gross domestic product (GDP) of $47.2 billion over 15 years. But this large figure actually was equivalent to an additional 0.01 percentage point of annual growth. And relative to the U.S. economy’s size, it is tiny.
  • What about the trade balance? Though the magnitude of projected change likely will be small, does it affirm or contradict the administration’s talking points about United States-Mexico-Canada Agreement (USMCA) bringing about “more balanced, reciprocal trade” and/or Donald Trump’s campaign promises to bring down the NAFTA trade deficit?
  • What does the ITC think is a real change that merits inclusion in its modeling:
    • Were the new labor and environmental provisions considered “economically important” enough to model? If so, are a range of impact estimates provided based on the degree of compliance?
    • Will the ITC model the impact of the major rollback of investor-state dispute settlement (ISDS), inclusion of a new Labor Annex and the Labor Value Content wage rule, stronger rules of origin and other elements of the deal that have led opponents of past pacts to work to remove non-starter terms and improve others rather than launch a campaign to kill the revised deal?
    • Will the ITC continue to exclude from its core model chapters like those on intellectual property, even though the impact on consumers of locking in high medicine prices through longer patent monopolies should be weighed against other consumer welfare calculations?
  • With tariffs largely eliminated by the original NAFTA, how much of the economic gains from the revised NAFTA arise from cutting “non-tariff barriers”? In such models, health and environmental standards are labeled as non-tariff barriers and removal of them is falsely assigned an assumed positive value, while economic and social costs of eliminating such domestic policies are ignored.
  • Has the ITC inappropriately conflated projected effects of the removal of Section 232 steel and aluminum tariffs with the implementation of the NAFTA 2.0 agreement?

As Public Citizen and other organizations described last year in official ITC submissions for this report, the agency has historically overestimated the gains from previous free trade agreements (FTAs). Past ITC studies have systematically projected positive outcomes that were contradicted by the actual results, and the agency is unlikely to have overhauled its entire approach for this agreement.

International Monetary Fund (IMF) economists, using the same underlying model as the ITC, recently projected the USMCA would result in a larger U.S. trade deficit with NAFTA countries, a loss in overall welfare for the United States (alongside gains in overall economic welfare for Mexico and Canada) and zero U.S. real economic growth gains. The IMF study relied on the same economic model that the ITC uses, a so-called computable general equilibrium (CGE) model with the same underlying “GTAP” database. That model assumes away the negative outcomes that often have occurred under past FTAs – job loss, trade deficit increases and currency devaluations – and explicitly fails to model portions of the text that have negative impacts. The divergence between past ITC projections and actual outcomes means the factors not included in the model must be larger than the factors that are incorporated into the analysis.

Despite these questionable assumptions, the IMF projections based on the same methodology was that the United States would experience a welfare loss of $794 million, while Canada enjoys a small gain of $734 million and Mexico a gain of $597 million. The IMF study found a zero percent change in real (inflation-adjusted) GDP for the United States, a 0.02 percent change for Canada and a -0.01 percent change for Mexico.

As was detailed in Public Citizen’s ITC submission, the agency’s record in evaluating the economic impact of trade pacts has been abysmal. Gains to trade agreements have been consistently overestimated. After the original NAFTA was implemented, for example, the goods trade deficit with Mexico grew to almost 20 times the projected level within 10 years than even the dimmest forecast provided by the ITC (see graph).

Graph-for-itc

The use of the CGE model is even less reliable in the context of there being no significant tariff cuts in the USMCA. The CGE model originally was meant to focus on the impact of cutting tariffs. But NAFTA 2.0 cannot cut tariffs that already are zero.

So what could possibly be the basis for any findings of gains?

Will CGE modeling be used to find gains from the removal of so-called “non-tariff barriers,” otherwise known as food and product safety standards, service-sector regulations for financial stability and other public interest goals and more? Trying to guesstimate values for such changes introduce substantial uncertainty into the model, according to academic economists.

Will the ITC’s modeling take into consideration possible lack of compliance, given a proven record of just that with respect to past pacts’ ostensibly enforceable labor and environmental terms? The CGE model considers only an endpoint – a final outcome assuming full implementation – not whether other nations may not fully implement or enforce a pact’s terms. And, by design, the model assumes the trade balance does not change as a share of GDP and that overall employment levels remain constant – that workers who lose jobs simply obtain new jobs in other sectors where wages are presumed to increase.

Finally, if past practice holds, the ITC will not consider the effect of intellectual property rules that lock in high medicine prices. The most controversial component of the revised NAFTA’s intellectual property provisions are monopoly protections for drugs called biologics that comprise 70 percent of the skyrocketing growth in drug spending. Not only do these provisions hit American pocketbooks directly, but extracting licensing payments from foreign consumers by imposing these rules on NAFTA partners can crowd out purchases of U.S. exports, entailing U.S. job loss.

How the ITC handles these issues will be interesting to trade wonks. But the report is not likely to reveal much about either the pact’s probable effects or its prospect for congressional passage.

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Will the Administration’s Imminent Report to Congress on Trade Partners’ Currency Practices Once Again Fall Short of Its Mandate, Undermining a Key Trump Campaign Trade Reform Pledge?

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

Note: The Trump administration will release its latest report on trade partners’ currency practices imminently. Like the administration’s previous four iterations of this 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. Under the current criteria, set by the Obama administration, no country is again likely to be named. Public Citizen has recommended changes to the criteria that would use the authority granted by Congress to cover more countries and include broader data and thus actually identify countries that gain trade advantages using currency practices. The Trump Treasury Department has stuck with the old Obama administration criteria.

“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.

The Trump Treasury Department approach reflects a business-as-usual, wink-wink-nod-nod relationship with the multinational corporate job outsourcers who instead of making goods here can import products more cheaply back into the U.S. because of misaligned currencies. This situation that has contributed to the loss of millions of U.S. manufacturing jobs.

In the context of record-setting U.S. trade deficits, the administration must take full advantage of its opportunities to discipline countries that manage their currency values in a way that affects trade. 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 Trump administration must take full advantage of the authority Congress has provided the Treasury to influence the foreign exchange practices of any trading partner through the semi-annual reporting process.”

Background: Large U.S. structural trade deficits consistent with misaligned currencies have grown in recent years. Data released on March 6 by the U.S. Census Bureau show record-setting U.S. goods trade deficits, increasing each year since Trump came into office. The U.S. goods trade deficit with China of $419 billion in 2018 is the highest ever recorded while the U.S. goods trade deficit with the world in 2018 reached $879 billion, the highest in the decade since before the 2008-09 financial crisis.

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2018 Annual Trade Data Show Highest-Ever U.S. Deficit with China, Highest NAFTA Deficit in a Decade

Grim Trade Balance Data Spotlights Imperative for Trump to Not Cave on China Trade Talks and to Work with House Democrats to Improve NAFTA Deal

The 2018 annual trade data released by the U.S. Census Bureau last week show record-setting U.S. goods trade deficits of $879 billion with the world, $419 billion with China and $215 billion with NAFTA countries, capping two years of steadily rising trade deficits for the Trump administration that contrast with candidate Donald Trump’s promises to quickly reduce them.  The rate of growth in the trade deficit has increased during the Trump era, with the increase from 2017 to 2018 greater than the change from 2016 to 2017. (All figures below are adjusted for inflation to a base year of 2018. Figures represent trade balances expressed in constant dollars, so, for years prior to 2018, the numbers are different than the data unadjusted for inflation that is provided by Census.)

“More important than Trump failing on the trade-deficit-reduction benchmark for success he set on trade is that he focus on addressing the root causes by securing a China trade deal that’s not about short-term soy and gas sales but addresses structural issues fueling the deficit and by working with congressional Democrats to improve the NAFTA so it has a chance to pass,” said Lori Wallach, director of Public Citizen's Global Trade Watch. “The growth of the trade deficit is accelerating in part because of early enactment of government policies like Trump’s tax package that incentivized production and job outsourcing while the major trade reforms are just now coming to a head.”

The annual 2018 trade data show the highest-ever recorded U.S. trade deficit with China. The U.S. deficit with China has grown during both years of the Trump administration, spotlighting why many China trade and foreign policy experts are urging the president not to cave in and accept a quick and meaningless China trade deal that fails to secure fundamental reforms necessary to reduce the deficit.

The data also show additional imports from Mexico during the Trump administration, especially in the auto sector, driving up the trade deficit with North American Free Trade Agreement (NAFTA) partners to its highest level since 2008. The data bolster congressional Democrats’ calls for the revised NAFTA deal that Trump signed to be improved, including by ensuring swift and certain enforcement of strong labor and environmental standards to reduce the incentive to outsource jobs to Mexico.

The annual data is also available on our Trump trade deficit tracker. The following major trends were observed through 2018:

Major Trends From Census’ 2018 Trade Data Release

Trade-Deficit-Annual-2018-chart
Source: U.S. Census Bureau. All figures adjusted for inflation. NAFTA trade balance excludes re-exports of imported goods.

 

  • The U.S. trade deficit with China has set another all-time record. The goods trade deficit with China was the highest ever recorded – a 16 percent increase over 2016 – the last year of the Obama administration. The China goods trade deficit in 2018 was $419 billion, a 9 percent increase over a $384 billion deficit in 2017, which came after a 6 percent increase over $361 billion in 2016, President Barack Obama’s last year in office.
  • The U.S. goods trade deficit with NAFTA partners is the highest in the decade since the financial crisis – a 20 percent increase over 2016 – with auto leading the growth. The U.S. trade deficit with NAFTA partners during 2018 increased 10 percent to $215 billion from $196 billion in 2017, which was an increase of 9 percent from $180 billion in 2016. The previous record NAFTA trade deficit came in 2007 before the effect of the 2008-09 financial crisis when it reached a record $235 billion before falling to $146 billion in 2009. Three-fifths of the $43 billion growth in Mexican imports to the United States since 2016 is accounted for by the automotive (HS 87) and machinery sectors (HS 84). This comes before GM’s closures of four plants and opening of a new Mexico plant.
  • The overall U.S. goods trade deficit with the world is set to be the highest since the financial crisis – up 15 percent over 2016. The U.S. trade deficit with the world in 2018 increased 8 percent to $879 billion in 2018 from $814 billion in 2017, which was up 6 percent from $766 billion in 2016. The previous record annual deficit was prior to the 2008-09 financial crisis when it reached $1 trillion in 2006 before falling to $586 billion in 2009.

U.S. Trade Deficit is Worse Than It Looks

U.S. energy exports are masking deepening manufacturing deficits. In 2008, oil and gas made up a greater share of the U.S. trade deficit than all other products combined. Since then, the deficit in oil products has plummeted and now makes up only 5 percent of the deficit with the United States projected to be a net energy exporter next year. Meanwhile, the deficit in manufactured goods has expanded and the surplus in agricultural products has declined. But for the boom in domestic energy production and exports, the overall trade deficit would have been much worse.

The growth of the trade deficit is accelerating under Trump. The trade deficit is not just growing larger, but quickening its pace of growth under Trump. For the world deficit over the 11-month period, after a 6 percent bump between 2016 and 2017, the deficit increased 8 percent from 2017 to 2018. And, as the trade deficit is growing twice as fast as GDP, now almost reaching record pre-financial crisis levels as a share of GDP, it’s not simply the strong U.S. economy that is driving the trade deficit, contrary to what some experts claim. Rather, there are structural trade problems.

Breathless coverage this past year of the impact of Chinese tariffs on U.S. soybeans, the second-largest export to China (after aerospace equipment) betrays the depletion of the U.S. export base. Not only do we now import $4 worth of goods for every $1 we sell to China, but low-value-added commodities like soybeans, cotton, oil, gas, metal scrap, wood pulp and paper waste make up most of the top 15 U.S. export products to China. In fact, the latest data available from 2017 on this measure show that 43 percent of our exports to China are low-value-added products, while only 6 percent of imports from China are in low-value-added categories. If more high-value-added products are produced offshore, our structural trade deficit will persist.

NOTE: We provide comparison data for cumulative deficits for 2018 relative to past years because this offers a clearer picture of trade trends than changes in month-to-month numbers. Monthly trade figures are volatile, and Census’ “seasonal adjustment” of it cannot control for unpredictable factors, such as exporters shifting shipment dates to avoid imposition of various countervailing tariffs. We focus on goods trade balances because services data by country lags the goods data and won’t be available until April 2019. The value of goods trade is also more than triple that of services trade, so has more impact on overall trends.

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2018 Annual Trade Data to Be Released Wednesday Likely to Show Highest-Ever U.S. Deficit with China, Highest NAFTA Deficit in a Decade

Grim Trade Balance Data Spotlights Imperative for Trump to Not Cave on China Trade Talks and to Work with House Democrats to Improve NAFTA Deal 

The 2018 annual trade data to be released by the U.S. Census Bureau on Wednesday will likely show record-setting U.S. goods trade deficits, capping two years of steadily rising trade deficits for the Trump administration that contrast with candidate Donald Trump’s promises to quickly reduce them.  The rate of growth in the trade deficit has increased during the Trump era, with the increase from 2017 to 2018 greater than the change from 2016 to 2017.

“More important than Trump failing on the trade-deficit-reduction benchmark for success he set on trade is that he focus on addressing the root causes by securing a China trade deal that’s not about short-term soy and gas sales but addresses structural issues fueling the deficit and by working with congressional Democrats to improve the NAFTA so it has a chance to pass,” said Lori Wallach, director of Public Citizen's Global Trade Watch. “The growth of the trade deficit is accelerating in part because of early enactment of government policies like Trump’s tax package that incentivized production and job outsourcing while the major trade reforms are just now coming to a head.”

Based on 11-month 2018 data trends, the annual 2018 trade data is likely to show the highest-ever recorded U.S. trade deficit with China. The U.S. deficit with China has grown during both years of the Trump administration, spotlighting why many China trade and foreign policy experts are urging the president not to cave in and accept a quick and meaningless China trade deal that fails to secure fundamental reforms necessary to reduce the deficit.

The data also will likely show additional imports from Mexico during the Trump administration, especially in the auto sector, driving up the trade deficit with North American Free Trade Agreement (NAFTA) partners to its highest level since 2008. The data will bolster congressional Democrats’ calls for the revised NAFTA deal that Trump signed to be improved, including by ensuring swift and certain enforcement of strong labor and environmental standards to reduce the incentive to outsource jobs to Mexico.

When Wednesday’s data is released, Public Citizen will post updated annual data, which also will be available on our Trump trade deficit tracker. Annual trends for 2018 will likely be in line with the following major trends observed through the first 11 months of the year:

What to Look for When Census Releases the Annual 2018 Trade Data on Wednesday

Deficit chart
Source: U.S. Census Bureau. All figures adjusted for inflation. NAFTA trade balance does not include re-exports of imported goods.

  • The U.S. trade deficit with China is on pace to set another all-time record. The goods trade deficit with China was the highest first 11 months ever recorded – a 15 percent increase over 2016 – the last year of the Obama administration. The China goods trade deficit during the first 11 months of 2018 was $382 billion, a 9 percent increase over a $352 billion deficit in 2017, which came after a 6 percent increase over $332 billion in 2016, President Barack Obama’s last year in office.

  • The U.S. goods trade deficit with NAFTA partners is on pace to be the highest in the decade since the financial crisis – a 20 percent increase over 2016 – with auto leading the growth. The U.S. trade deficit with NAFTA partners during the first 11 months of 2018 increased 10 percent to $198 billion from $179 billion in 2017, which was an increase of 9 percent from $164 billion in 2016. The previous record 11-month NAFTA trade deficit came in 2008 before the effect of the 2008-09 financial crisis when it reached a record $220 billion before falling to $130 billion in 2009. Three-fifths of the $40 billion growth in Mexican imports to the United States since 2016 is accounted for by the automotive (HS 87) and miscellaneous machinery sectors (HS 84). This comes before GM’s closures of four plants and opening of a new Mexico plant.

  • The overall U.S. goods trade deficit with the world is set to be the highest since the financial crisis – up 14 percent over 2016. The U.S. trade deficit with the world over the first 11 months of 2018 increased 8 percent to $806 billion in 2018 from $749 billion in 2017, which was up 6 percent from $707 billion in 2016. The previous record 11-month deficit was prior to the 2008-09 financial crisis when it reached $949 billion in 2006 before falling to $531 billion in 2009.

The U.S. Trade Deficit is Worse Than It Looks

U.S. energy exports are masking deepening manufacturing deficits. In 2008, oil and gas made up a greater share of the U.S. trade deficit than all other products combined. Since then, the deficit in oil products has plummeted and now makes up only 7 percent of the deficit with the United States projected to be a net energy exporter next year. Meanwhile, the deficit in manufactured goods has expanded and the surplus in agricultural products has declined. But for the boom in domestic energy production and exports, the overall trade deficit would have been much worse.

The growth of the trade deficit is accelerating under Trump. The trade deficit is not just growing larger, but quickening its pace of growth under Trump. For the world deficit over the 11-month period, after a 6 percent bump between 2016 and 2017, the deficit increased 8 percent from 2017 to 2018. And, as the trade deficit is growing twice as fast as GDP, now almost reaching record pre-financial crisis levels as a share of GDP, it’s not simply the strong U.S. economy that is driving the trade deficit, contrary to what some experts claim. Rather, there are structural trade problems.

Breathless coverage this past year of the impact of Chinese tariffs on U.S. soybeans, the second-largest export to China (after aerospace equipment) betrays the depletion of the U.S. export base. Not only do we now import $4 worth of goods for every $1 we sell to China, but low-value-added commodities like soybeans, cotton, oil, gas, metal scrap, wood pulp and paper waste make up most of the top 15 U.S. export products to China. In fact, 43 percent of our exports to China are low-value-added products, while only 6 percent of imports from China are in low-value-added categories. If more high-value-added products are produced offshore, our structural trade deficit will persist.

NOTE: We provide comparison data for cumulative deficits over 11 months for 2018 relative to past years because this offers a clearer picture of trade trends than changes in month-to-month numbers. Monthly trade figures are volatile, and Census’ “seasonal adjustment” of it cannot control for unpredictable factors, such as exporters shifting shipment dates to avoid imposition of various countervailing tariffs. We focus on goods trade balances because services data by country lags the goods data and won’t be available until April 2019. The value of goods trade is also more than triple that of services trade, so has more impact on overall trends. All figures are adjusted for inflation, representing changes in trade balances expressed in constant dollars.

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Trump SOTU Trade Message: An Advance Fact-Check

Donald Trump is likely to misrepresent the facts and inflate his record on trade as he hits the midpoint of his presidential term and delivers his second State of the Union address. We offer this handy guide to help sort fiction from fact. While the administration’s trade reform effort includes some key steps in the right direction, it remains a work in progress with uncertain outcomes.

 

Past Trump Mischaracterization

Reality

 

UNFAIR TRADE: President Trump says he has “turned the page on decades of unfair trade deals.”

(a claim made in last year’s address)

 

Transformation of U.S. trade policy remains a work in progress, with uncertain outcomes. The signing of the North American Free Trade Agreement (NAFTA) 2.0 text on November 30 was the first step in a long process, and further improvements are necessary for a final package to pass Congress much less for revisions to stop NAFTA’s ongoing damage to workers and the environment. Only very limited revisions were made to the U.S.-Korea Free Trade Agreement. There is still a danger that the ongoing trade battle with China could end in one-time purchases of U.S. exports that would do nothing to address China’s underlying unfair trade practices and deliver the necessary structural changes to alter long-term trends. Contrary to his promises to do something about trade imbalances, the trade deficit is up 13 percent under Trump. By the time Trump announced he would formally shelve the Trans-Pacific Partnership (TPP) agreement, it was a moldering corpse that could never muster a majority in Congress, meaning his role was in the pact’s burial, not in authoring its demise.

 

 

TRADE DEFICIT: Trump says that U.S. trade relationships are more “balanced” and “reciprocal,” but he has yet to fulfill his campaign promise to bring down the trade deficit: “We have a massive trade deficit with China, a deficit we have to find a way quickly, and I mean quickly, to balance.”

 

On the one clear measure that Trump set for himself as a benchmark for success – bringing down the U.S. trade deficit – he is failing – with the largest China deficit ever recorded and a 13 percent increase in the U.S. trade deficit with the world during the Trump administration. As our Trump trade deficit tracker shows, the U.S. trade deficit has grown significantly under Trump. The latest quarterly government data (released in November – the 2018 annual data is a shutdown victim and a new release date has not been announced) reveals the highest U.S. goods trade deficit in a decade for the first three-quarters of 2018, up 13 percent since the start of the Trump administration. During Trump’s presidency, the U.S. trade deficit with China has risen (also 13 percent) to the highest ever recorded, while the deficits with the world and with NAFTA nations specifically have steadily grown.

 

 

USMCA V. NAFTA: Despite an effort to rebrand NAFTA with a new name, Trump’s renegotiation has not fixed the problems of original NAFTA.  

 

Trump’s claim to have created a totally different kind of agreement is a deceitful sales pitch, similar to those used for decades by US presidents to hawk previous trade deals. After a year of renegotiations, the NAFTA 2.0 text signed on November 30 revealed improvements for which progressives have long campaigned, the addition of damaging terms that we oppose, and critical unfinished business. Unless the administration works with congressional Democrats on critical changes to the signed agreement, the pact is unlikely to be passed. One way in which NAFTA 2.0 is dramatically worse than the original is the addition of a slew of new monopoly rights for pharmaceutical companies that would help them avoid competition from generic products and keep medicine prices high. While the NAFTA 2.0 labor provisions are an improvement over previous U.S. trade agreements, unless strong labor and environmental standards are subject to swift and certain enforcement—which is not the case with the NAFTA 2.0 text—U.S. firms will continue to outsource jobs, pay Mexican workers poverty wages, and dump toxins in Mexico.

 

 

JOB OUTSOURCING: Trump says he has slowed outsourcing and is succeeding on “Buy America, Hire American,” but the data do not support this claim. 

 

Outsourcing of American jobs has continued and not only the high-profile GM and Carrier mass job losses while Trump’s corporate tax policies create incentives for more outsourcing and his promised Buy American reforms lag. GM’s factory closures at the end of 2018 spotlights the ongoing loss of American manufacturing jobs. One of the first companies that Trump met with once taking office, GM closed five plants affecting thousands of workers after expanding production in Mexico. Because of the outsourcing incentives in trade agreements like NAFTA as well as the pro-outsourcing tax bill signed by President Trump, firms will continue to outsource jobs. Even tax dollars that could be used to boost U.S. production continue to be offshored. A government-wide assessment on procurement spending President Trump requested never saw the light of day. Various new “Buy American” executive orders include recommendations but not requirements to expand the policy, making Trump’s “Buy American, Hire American” promises mainly rhetoric without policy action. Case in point: the NAFTA 2.0 text maintains the old NAFTA rules that require the waiver of Buy American procurement preferences with respect to Mexico.

 

 

CHINA TRADE: Trump may tout his actions to try to address China’s unfair trade practices, but whether he stays on track, adds the missing elements of a China trade plan and delivers remains to be seen.

 

 

Six months after the first set of U.S. tariffs on China, bilateral discussions have yielded little concrete progress. Meanwhile, Trump has failed to take action against trade advantages gained through misaligned currency values nor limit investment by Chinese-government-related entities in the United States. Though one of Trump’s campaign promises was to declare China a currency manipulator on Day One, four semi-annual reports by Trump’s Treasury Department have failed to name any country a currency manipulator. Trump has chosen to rely on criteria created by the previous administration that ensure no action is taken.

 

 

USMCA PAYS FOR BORDER WALL - NOT: Though Trump may claim the opposite, NAFTA 2.0 will NOT pay for the border wall between the United States and Mexico.

 

There are no provisions in NAFTA 2.0 that would directly or indirectly fund the border by putting money into the U.S. Treasury from the Mexican government. When trade generates money for a government’s treasury, it is via payment of border taxes, called tariffs. But even if NAFTA 2.0 raised tariffs, which it does not, that money would not go into a Trump-wall-fund. So, the same issue that caused the showdown would remain: Congress must allocate general revenue to the wall. But there is no such tariff revenue to be had. U.S.-Mexico trade has been duty-free under NAFTA for more than a decade. When NAFTA went into effect in 1994, Mexico agreed to duty-free treatment of everything with a 15-year phase-in. The revised deal does not add new tariffs. Moreover, perhaps the strongest evidence that nothing in NAFTA 2.0 forces Mexico to pay for Trump’s border wall is that Mexico, which has made clear it will not pay, signed the deal.

 

 

NAFTA 2.0 FATE IN CONGRESS: Trump says that NAFTA 2.0 can pass easily, but that is not what the vote count suggests.

 

Thanks to the midterm elections, only a revised NAFTA deal that can win significant Democratic support will get through Congress. Democrats in Congress are insisting that NAFTA 2.0’s  giveaways to Big Pharma are eliminated. And also that tougher labor and environmental standards are added, because the deal Trump signed  won’t stop corporations from outsourcing American jobs. Trump’s deal is not the transformational replacement of corporate-rigged NAFTA that Americans need. But if the administration works with congressional Democrats on needed improvements, there is a path to passing the revised NAFTA with a broad bipartisan vote.

 

NAFTA WITHDRAWAL: Trump says he could just withdraw from NAFTA if Congress doesn’t act on the renegotiated deal.

 

 

While Trump has the authority to withdraw, neither withdrawing from NAFTA nor maintaining NAFTA 1.0 will raise wages in Mexico (where average annual Mexican wages are down 2 percent with Mexican manufacturing wages now 40 percent lower than in China) that will stop the offshoring that transforms middle-class jobs into sweatshop jobs, or reverse NAFTA’s destruction of nearly a million American middle class jobs.

 

 

MEXICO V. U.S. IN NAFTA: Trump says the United States was a victim of the original NAFTA.

 

Trump’s notion of NAFTA as a plot by Mexico to hurt U.S. workers is absurd. NAFTA was the brainchild of U.S. presidents, was negotiated with input from hundreds of U.S. corporate trade advisors, and has been devastating to working people in both Mexico and the United States alike. Since NAFTA was signed, U.S. real wages are flat and real wages have actually declined in Mexico.

 

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More Than 70 U.S. Health, Consumer and Other Groups Demand Elimination of NAFTA 2.0 Terms That Would Lock in High U.S. Medicine Prices

Letter to Congress: Giveaways to Big Pharma Must Be Removed From Revised NAFTA

WASHINGTON, D.C. – After overwhelming public demand to reduce medicine prices helped propel Democrats to a majority in the U.S. House of Representatives, today more than 70 U.S. organizations launched an effort to remove new monopoly protections for pharmaceutical firms added to the revised North American Free Trade Agreement.

In a letter to Congress, the groups – representing tens of millions of Americans – demand that the pact’s giveaways to Big Pharma that would keep medicines unaffordable be removed before the pact is sent to Congress

The diverse group of patient advocacy, faith, consumer, labor and other public interest organizations that signed the letter took aim at NAFTA 2.0 terms that would “lock in place existing U.S. policies that have led to high medicine prices, undermining the authority of this and future Congresses to implement important reforms to expand generic and biosimilar competition, lower medicine prices and expand access.”

Among other dangerous requirements is that each NAFTA country guarantee a minimum of 10 years of marketing exclusivity – that is, longer monopoly protections – for cutting-edge biologics, which includes many new cancer treatments and even vaccines. This would lock the United States into its current system that keeps prices for biologics sky-high and export it to Mexico, which does not mandate a special exclusivity period for biologics, and to Canada, which now has an eight-year period.

Some of the signatory organizations have identified ways in which the NAFTA 2.0 text improves on the original NAFTA and are calling for strengthened enforcement of the revised pact’s new labor and environmental terms. But one way in which NAFTA 2.0 is dramatically worse than the original is the addition of a slew of new monopoly rights for pharmaceutical corporations that would help them avoid competition from generic and biosimilar products and keep medicines unaffordable.

The letter notes that a decade ago, congressional Democrats and then-President George W. Bush agreed on a standard for trade-pact intellectual property terms that strove to promote innovation and access to affordable medicines. That standard is not met in the NAFTA 2.0 text.

With one in five people in the United States failing to fill prescriptions due to their cost, the letter signers urge the new Congress to demand “that the administration eliminate the provisions in the NAFTA 2.0 text that undermine affordable access to medicines.” Focus on widespread public anger over health care costs helped propel the Democrats to victory in the midterm elections.

The full letter and list of signing organizations are available here.

Please see below for quotes from representatives of Consumer Reports, Doctors Without Borders, NETWORK Lobby for Catholic Social Justice, Social Security Works, the AFL-CIO and Public Citizen.

  • “Prescription drugs are priced out of reach for too many Americans. But, there are provisions in the NAFTA 2.0 proposal that would lock in prolonged monopoly pricing for prescription drugs. These provisions do not belong in any trade agreement that is supposed to benefit American consumers and workers. We urge Congress to insist on taking these provisions out. We should all be working to make prescription drugs more affordable, and this proposal would just further tighten the monopoly grip of drug makers.” – Dena Mendelsohn, senior policy counsel at Consumer Reports

  • “It’s absolutely reckless and counterproductive for the U.S. government to support this deal despite evidence that it keeps drug prices high and further reduces access to lifesaving medicines. This agreement is not only a threat to patients in the United States, Mexico and Canada, it also sets a dangerous precedent for future trade deals involving countries all over the world, including many in which Médecins Sans Frontières works.” – Leonardo Palumbo, advocacy adviser at the Médecins Sans Frontières (Doctors Without Border) Access Campaign

  • “Pope Francis says that to be faithful, the economy must serve people first, not wealthy corporations. NAFTA 2.0 does not meet the mandate because it preferences giveaways for powerful drug companies that will harm patients. This new trade deal bars Congress from reducing drug prices, putting American lives at risk. Nearly one in four Americans report they or a family member have not filled a recent prescription because of costs, and prices continue to skyrocket. This needs to change. There is new bipartisan interest in Congress to begin tackling the issue of drug pricing. We cannot allow “big pharma lobbyists” to undermine the needs of our people. The profits of big pharma should not be prioritized over the health of people. Trade deals should not endanger the health of Americans. The Trump administration must eliminate these immoral provisions of NAFTA 2.0.” – Sister Simone Campbell, executive director of the NETWORK Lobby for Catholic Social Justice

  • “It is unacceptable that provisions in the NAFTA 2.0 (USMCA) prioritize profits and protect special interests over high-quality health care and affordable medicines. America’s working families deserve better. We will continue to fight for fair trade rules that protect their wages, their rights on the job and their access to affordable medicines.” – Cathy Feingold, director of the International Department at the AFL-CIO

  • “NAFTA 2.0 contains massive handouts to big pharma that will raise our drug prices. We need to smash pharmaceutical monopolies in the United States, not allow these corporations to use trade deals to make it impossible for us to lower our prices. Many members of Congress in both parties claim they want to take on big pharma and bring down prescription drug prices. But they will all be liars if they don’t also demand changes to NAFTA 2.0 to eliminate the handouts to drug corporations.”  – Alex Lawson, executive director of Social Security Works

  • “With consumer anger mounting, Big Pharma aims to use NAFTA 2.0 to lock in the government-granted monopolies that give drug corporations their power to price gouge consumers in the United States and around the world. The idea was to sneak a provision into the trade deal that would prevent the United States, Canada or Mexico from reducing monopoly terms in their domestic law for cancer and other important medicines. But here’s the bad news for Big Pharma: Congress is aware of the pharmaceutical corporations’ sneaky effort to lock in high drug prices using NAFTA 2.0, and if those terms are not eliminated, it’s hard to imagine how a deal gets through Congress. – Robert Weissman, president of Public Citizen
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The Revised NAFTA Deal Will NOT Fund Trump’s Border Wall, Directly or Indirectly

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

Note: In his Oval Office address, Donald Trump again falsely claimed that somehow his revised North American Free Trade Agreement (NAFTA 2.0) will fund his border wall.

Donald Trump keeps repeating the ludicrous claim that somehow the revised NAFTA will fund his wall even though it remains unclear if the deal will be enacted and if it is, the text does not include border wall funding directly nor would it generate new government revenue indirectly given it cuts the very few remaining tariffs, not raises them.

A back of the envelope calculation reveals a new 20 percent tariff would have to be imposed on all imports from Mexico to put the money  to construct the wall into the U.S. Treasury and that money would come from importers, not the Mexican government. All imports into the United States from Mexico have been duty free for more than a decade, meaning that NAFTA trade does not generate money from Mexican importers for U.S. government coffers and nothing in the NAFTA 2.0 changes that.

So much for Trump’s great negotiating skills, given its obvious that trying to connect NAFTA to funding for his wall decreases the likelihood Congress passes the revised NAFTA, even if Trump’s NAFTA-wall-funding claims are entirely without merit.

Perhaps the strongest evidence that nothing in NAFTA 2.0 forces Mexico to pay for Trump’s border wall is that Mexico, which has made clear it will not pay, signed the deal.

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New Report on 25 Years of NAFTA’s Damaging Outcomes Underscores the High Stakes for Next Year’s Battle Royale Over NAFTA 2.0

On NAFTA’s Quarter-Century Mark, Data Reveal a Wide Gap Between 1993 Rosy Promises and 2019 Realities

As the North American Free Trade Agreement (NAFTA) marks a quarter century in effect (Jan. 1, 2019) and the congressional battle over a renegotiated deal heats up, Public Citizen today released a user-friendly analysis that documents the chasm between the reality of NAFTA’s negative outcomes and the rosy promises made by its proponents. Those promises included major U.S. jobs gains, higher wages in Mexico and thus less U.S. migration, an improved U.S. trade balance with Canada and Mexico, and environmental improvements.

“NAFTA proved so damaging that its fallout ended decades of U.S. bipartisan congressional consensus in favor of trade agreements,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The NAFTA 2.0 text signed on Nov. 30 would not stop NAFTA’s ongoing job outsourcing, downward pressure on our wages and attacks on environmental safeguards, but there is a clear path to improving it so a final NAFTA package could win wide support next year.

“The status quo of NAFTA helping corporations outsource more U.S. jobs to Mexico every week after nearly one million have been government-certified as lost to NAFTA is not acceptable, nor are the ongoing Investor-State Dispute Settlement (ISDS) attacks against environmental and health safeguards or corporations’ exploitation of Mexican workers, who today face $1.50 per hour manufacturing wages that are lower in real terms than before NAFTA,” said Wallach. “Neither withdrawing from NAFTA nor maintaining NAFTA 1.0 will raise wages in Mexico, which is necessary to stop NAFTA offshoring that transforms middle-class jobs into sweatshop jobs.”

Key highlights of the data-packed analysis, which provides data tables, graphics and links to original sources, include:

  • Almost one million American jobs have been government-certified as lost to NAFTA, contrary to promises that one million American jobs would be gained in NAFTA’s first five years.
  • Real wages in Mexico have decreased since NAFTA, which generated growing incentives to outsource U.S. jobs. Mexican gross domestic product per capita has barely risen. Labor conditions in Mexico did not improve, nor have Mexican standards of living come closer to those in the U.S. as promised.
  • Instead of increasing U.S. wages as promised, NAFTA’s elimination of high-wage manufacturing jobs has put downward pressure on the wages of the two-thirds (66 percent) of American workers without college degrees. And wages in growing non-offshorable service sectors also have been held down as displaced manufacturing workers sought new employment.
  • Contrary to promises that NAFTA would not threaten consumer and environmental safeguards, U.S. truck safety and meat labeling policies were rolled back, hundreds of millions have been paid to corporations that have successfully attacked environmental and health laws, and imports of meat that do not meet U.S. safety rules soared while border inspection declined.
  • A large NAFTA trade deficit composed mainly of manufactured goods emerged, contrary to proponents’ promises that the U.S. trade balance with Canada and Mexico would improve.
  • Instead of environmental conditions improving in Mexico, they have deteriorated. And not one of the 91 enforcement actions brought under NAFTA’s environmental rules led to action.
  • The U.S. agricultural trade surplus before NAFTA became a deficit, as U.S. agricultural exports have lagged and agricultural imports have surged, with small farms hardest hit – contrary to promises that NAFTA would be a boon to U.S. farmers.
  • Mexico turned into an export platform for China and other Asian companies seeking duty-free access into the U.S. market, and the share of Chinese imports into Mexico grew, displacing U.S. market share, despite promises to the contrary.
  • NAFTA destroyed Mexican livelihoods and displaced millions of people in rural Mexico, creating a powerful push factor for migration, contrary to claims that NAFTA would reduce unauthorized immigration from Mexico.

The new analysis is available here.

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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.”

GTW_Latinos-and-NAFTA-Charts-02

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.

Graph-Third-Quarter-Trade-Deficit-oct-2018

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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