Fact-Checking the Fact-Checker: Washington Post Gets It Wrong on Bogus Trade-Pact Jobs Claims

As the Obama administration seeks to Fast Track the controversial Trans-Pacific Partnership (TPP) through Congress over public and congressional opposition, it has resorted to a familiar tactic – promising job gains from the deal on the basis of unfounded assumptions. We have repeatedly warned against dubious TPP jobs claims by spotlighting the inaccuracy of the administration’s job claims for the last major trade pact – the 2012 Korea “free trade” agreement (FTA). The Korea FTA was used as the U.S. template for the TPP.

The White House promised that the Korea FTA would create 70,000 jobs based on a report issued by the U.S. International Trade Commission that projected an increase in U.S. goods exports and a decrease in the U.S. goods trade deficit with Korea. In contrast, in the first three years of the Korea pact, U.S. goods exports to Korea have fallen while our goods trade deficit with Korea has surged.

We have shown that, plugging the actual U.S. government trade data into the ratio that the administration used to project job gains from the pact, the first three years of the Korea FTA’s outcomes defy the administration’s “more exports, more jobs” slogan for the deal, providing a cautionary tale for the job claims the administration is currently using to sell the TPP.

The Washington Post’s Fact Checker columnist Glenn Kessler has similarly taken on the administration’s TPP job claims, describing them as a baseless fabrication. But in today’s Post, Kessler takes issue with our fact-checking of the administration’s Korea FTA jobs promise.

Kessler seems to think that we are producing our own jobs projection for the Korea FTA, when we are actually fact-checking the administration’s jobs projection – a projection that Kessler acknowledges “would have earned Pinocchios if it had come to our attention at the time.” It is unclear why Kessler is now assigning Pinocchios to us for calling out the administration’s bogus Korea FTA jobs claim, rather than to those who actually made the claim.

In our recent press release on the third anniversary of the Korea FTA, we stated:

The U.S. goods trade deficit with Korea has ballooned an estimated 84 percent, or $12.7 billion, in the first three years of the Korea FTA (comparing the year before the FTA took effect to the projected third full year of implementation)…The surge in the U.S. trade deficit with Korea under the FTA equates to the loss of nearly 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal.

Kessler’s primary critique of this statement appears to be that we did not replicate the administration’s flawed methodology of only counting exports and disregarding imports when debunking the administration’s jobs projection. Such a misleading approach – ignoring half of the trade equation – contradicts standard economics and empirical data showing the job-displacing impacts of imports, which Kessler even acknowledges in his column today.

As an example of the administration’s one-sided trade accounting, the Office of the U.S. Trade Representative’s (USTR) factsheet on the third anniversary of the Korea FTA touted that 21,255 additional vehicles were exported to Korea under the FTA. It made no mention of the 461,408 additional vehicles imported from Korea during the same time period (using the administration’s same cut of the automotive trade data). That is, for every additional vehicle the United States exported to Korea under the FTA, it imported more than 21 additional vehicles from Korea. The net effect has clearly been a loss for U.S. auto workers. It is not only contrary to mainstream economics, but common sense, to only look at exports and ignore imports when assessing trade’s impact on jobs.

Indeed, when Kessler did a Fact Checker column in January debunking the administration’s “concocted” claim that the TPP would create 650,000 U.S. jobs, he stated that the study used as the basis for that claim actually showed that “the net number of new jobs [projected for the TPP] is zero” because the study “found that imports would increase by virtually the same amount as exports.” That is, Kessler presumed that $1 in imports had a job-displacing effect equivalent to the job-supporting effect of $1 in exports, which matches the calculation used in our press release. (For what it’s worth, respected economists estimate the dollar-for-dollar job-displacing effect of imports may be even greater than the job-supporting effect of exports.)

But even if we were to abandon the common-sense approach that Kessler presumed in January, defy standard trade accounting, and only count exports, U.S. goods exports to Korea fell by more than $2 billion in the first three years of the FTA. Were we to replicate the administration’s exports-only approach, then our fact-check of the administration’s Korea FTA promises would need to say something to the effect of:

The estimated $2.6 billion decline in U.S. goods exports to Korea in the FTA’s first three years equates to the loss of 17,400 American jobs, according to the trade-jobs ratio and exports-only methodology that the administration used to promise job gains from the deal. That methodology ignores the impact of imports and the significant increase in the U.S. trade deficit with Korea since the FTA was implemented. Including imports, the surge in the U.S. trade deficit with Korea under the FTA equates to the loss of 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal. 

The takeaway is the same. Any (reasonable) way you slice it, the administration’s job gains promise for the Korea FTA is the opposite of the deal’s outcome thus far. Indeed, over the Korea FTA’s first three years, the actual results have been consistently the opposite of the specific export growth and job gain figures that the Obama administration used to sell the Korea FTA. And that gets back to our main point: rely on similar promises now being made for the TPP to your own peril.

Kessler also takes issue with our time frame, implying that we should have counted the trade data from January and February of 2012 as part of the results of the Korea FTA, despite the fact that the FTA actually took effect on March 15, 2012. Our measurement compares U.S. trade with Korea in the 12 months before the Korea FTA took effect (April 2011 to March 2012) with the third full year of the FTA’s implementation (April 2014 to March 2015).

Kessler dislikes this approach, which he criticizes as “trying to be very precise.” Instead, he states it would be more “appropriate” to compare calendar years. But the selective timeframe for which Kessler advocates would errantly count pre-FTA months as occurring since the FTA, while eliminating the most recent months of actual Korea FTA data.

The Fact Checker column also bizarrely faults us for adjusting for inflation. Typically, trade flow studies are criticized if they fail to perform the standard adjustment for inflation, since this would misleadingly count price increases as export or import increases. Nonetheless, Kessler considers the adjustment for inflation as “an effort to manipulate the data further.” Why?  Because “the price of goods could decrease.” It is precisely because the price of goods could decrease (or increase) that it is important to adjust for inflation. We do so by using a standard inflation adjustment from the U.S. Bureau of Labor Statistics, thereby eliminating the effect of shifts in goods prices. (And, for what it’s worth, if we were trying to “manipulate” the data rather than be scrupulous with it, we would not be the ones controlling for inflation. Failing to adjust for inflation would make the increase in the U.S. goods trade deficit with Korea during the FTA’s first three years appear even larger than it is in real terms, not smaller.)

After deciding to replicate the administration’s usual data distortions of not counting imports, counting non-FTA months as occurring since the FTA, and not adjusting for inflation, Kessler then performs his own assessment of the Korea FTA outcome, claiming that U.S. exports increased by $2.3 billion in the FTA’s first three years.

This claim is in need of a fact check, as we have not been able to replicate it with any cut of the data. If you use the selective timeframe preferred by Kessler (comparing calendar years 2011 and 2014) and skip the inflation adjustment, you get a $750,000 increase in U.S. exports, not a $2.3 billion increase. (And that "increase" owes entirely to price increases - after a standard inflation adjustment, it becomes a real export decline of more than $1 billion.) Even if you misleadingly count foreign-produced goods as “U.S. exports,” as the administration often does, you get a $1 billion increase in exports – still less than half of Kessler’s claim (and still a real decline in U.S. exports merely by properly accounting for inflation).

The only way we see to get a $2.3 billion increase in U.S. exports to Korea is by mistakenly axing an entire year of the FTA and comparing 2014 with 2012 (as if the FTA did not take effect until 2013 – one year later than its actual implementation date). Even with this blunt error, you would still need to use the arbitrary calendar year timeframe, fail to adjust for inflation, count foreign-produced goods as “U.S. exports,” and ignore imports altogether.

Using the accurate FTA time period and excluding foreign-made goods, our total goods exports to Korea actually have fallen since the Korea FTA took effect (whether or not one properly controls for inflation). Rather than acknowledge this aggregate outcome, the Fact Checker column highlights a few specific products as having “shown real gains in the past three years” of the Korea FTA. This is another common  maneuver of USTR: while overall U.S. agricultural exports to Korea increased an estimated zero percent in the FTA’s first three years, for example, USTR focuses on a $78 million gain in cherry exports. The cherry-picking in today’s Fact Checker column, however, includes products, such as apparel, that have actually not seen export gains. U.S. apparel exports to Korea actually have fallen $43 million, or 37 percent, in the Korea FTA’s first three years.

Unfortunately, this exports decline has been more the rule than the exception under the Korea FTA, as overall U.S. goods exports to Korea have fallen. Meanwhile, imports from Korea have risen, and the U.S. trade deficit with Korea has surged. The point that we have repeatedly made stands: the outcome of the FTA thus far is a far cry from the administration’s promise of “more exports, more jobs.” We would do well to keep that failed promise in mind as we now hear its echoes in the administration’s sales pitch for the TPP. 

TPP Leak Reveals Extraordinary New Powers for Thousands of Foreign Firms to Challenge U.S. Policies and Demand Taxpayer Compensation

Unveiling of Parallel Legal System for Foreign Corporations Will Fuel TPP Controversy, Further Complicate Obama’s Push for Fast Track

The Trans-Pacific Partnership’s (TPP) Investment Chapter, leaked today, reveals how the pact would make it easier for U.S. firms to offshore American jobs to low-wage countries while newly empowering thousands of foreign firms to seek cash compensation from U.S. taxpayers by challenging U.S. government actions, laws and court rulings before unaccountable foreign tribunals. After five years of secretive TPP negotiations, the text – leaked by WikiLeaks –proves that growing concerns about the controversial “investor-state dispute settlement” (ISDS) system that the TPP would extend are well justified.

Enactment of the leaked chapter would increase U.S. ISDS liability to an unprecedented degree by newly empowering about 9,000 foreign-owned firms from Japan and other TPP nations operating in the United States to launch cases against the government over policies that apply equally to domestic and foreign firms. To date, the United States has faced few ISDS attacks because past ISDS-enforced pacts have almost exclusively been with developing nations whose firms have few investments here.

The leak reveals that the TPP would replicate the ISDS language found in past U.S. agreements under which tribunals have ordered more than $3.6 billion in compensation to foreign investors attacking land use rules; water, energy and timber policies; health, safety and environmental protections; financial stability policies and more. And while the Obama administration has sought to quell growing concerns about the ISDS threat with claims that past pacts’ problems would be remedied in the TPP, the leaked text does not include new safeguards relative to past U.S. ISDS-enforced pacts. Indeed, this version of the text, which shows very few remaining areas of disagreement, eliminates various safeguard proposals that were included in a 2012 leaked TPP Investment Chapter text.

“With the veil of secrecy ripped back, finally everyone can see for themselves that the TPP would give multinational corporations extraordinary new powers that undermine our sovereignty, expose U.S. taxpayers to billions in new liability and privilege foreign firms operating here with special rights not available to U.S. firms under U.S. law,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “This leak is a disaster for the corporate lobbyists and administration officials trying to persuade Congress to delegate Fast Track authority to railroad the TPP through Congress.”

Even before today’s leak, U.S. law professors and those in other TPP nations, the U.S. National Conference of State Legislatures, the Cato Institute and numerous members of Congress and civil society groups have announced opposition to the ISDS system, which would elevate individual foreign firms to the same status as sovereign governments and empower them to privately enforce a public treaty by skirting domestic courts and “suing” governments before extrajudicial tribunals. The tribunals are staffed by private lawyers who are not accountable to any electorate, system of legal precedent or meaningful conflict of interest rules. Their rulings cannot be appealed on the merits. Many ISDS lawyers rotate between roles – serving both as “judges” and suing governments for corporations, creating an inherent conflict of interest.

The TPP’s expansion of the ISDS system would come amid a surge in ISDS cases against public interest policies that has led other countries, such as South Africa and Indonesia, to begin to revoke their ISDS-enforced treaties. While ISDS agreements have existed since the 1960s, just 50 known ISDS cases were launched worldwide in the regime’s first three decades combined. In contrast, foreign investors launched at least 50 ISDS claims each year from 2011 through 2013. Recent cases include Eli Lilly’s attack on Canada’s cost-saving medicine patent system, Philip Morris’ attack on Australia’s public health policies regulating tobacco, Lone Pine’s attack on a fracking moratorium in Canada, Chevron’s attack on an Ecuadorian court ruling ordering payment for mass toxic contamination in the Amazon and Vattenfall’s attack on Germany’s phase-out of nuclear power.

“By definition, only multinational corporations could benefit from this parallel legal system, which empowers them to skirt domestic courts and laws, and go to tribunals staffed by highly paid corporate lawyers, where they grab unlimited payments of our tax dollars because they don’t want to comply with the same laws our domestic firms follow,” Wallach said.

Public Citizen’s analysis of the leaked text is available here. 

Unhappy Third Birthday for Korea FTA Drags Down Obama Push for Fast Track

U.S. Exports Down, Imports from Korea Up and Job-Killing Trade Deficit With Korea Balloons 84 Percent on Third Anniversary of Korea Pact, Which Is TPP Template

Three years after implementation of the U.S.-Korea Free Trade Agreement (FTA), government data reveal that the administration’s promises that the pact would expand U.S. exports and create American jobs proved to be the opposite of the pact’s actual outcomes. The post-Korea FTA decline in U.S. exports to Korea and a new flood of imports from Korea have resulted in a major surge in the U.S. trade deficit with Korea that equates to nearly 85,000 lost U.S. jobs. The abysmal FTA record deals a fresh blow to the administration’s controversial bid to Fast Track the Trans-Pacific Partnership (TPP), for which the Korea FTA served as the U.S. template.

“Three years ago we heard the same ‘more exports, more jobs’ sales pitch for the Korea FTA that the administration is making for the TPP, but the reality is that tens of thousands of U.S. jobs have been lost as exports have fallen and trade deficits have surged,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The only silver lining of the Korea FTA debacle is that it further cripples the administration’s push to Fast Track the TPP, which was literally modeled on the Korea deal, perhaps saving us from more of the same pacts that offshore jobs and push down middle-class wages.”

Contrary to the administration’s promise that the Korea FTA would mean “more exports, more jobs,” U.S. International Trade Commission and U.S. Department of Agriculture data reveal that:

• The U.S. goods trade deficit with Korea has ballooned an estimated 84 percent, or $12.7 billion, in the first three years of the Korea FTA (comparing the year before the FTA took effect to the projected third full year of implementation). In January 2015, the monthly U.S. goods trade deficit with Korea topped $3 billion – the highest level on record.

• The surge in the U.S. trade deficit with Korea under the FTA equates to the loss of nearly 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal.

• U.S. goods exports to Korea have fallen an estimated 5 percent, or $2.2 billion, in the first three years of the Korea FTA. 

• Had U.S. exports to Korea continued to grow at the rate seen in the decade prior to the Korea FTA’s implementation, U.S. exports to Korea in the FTA’s third year would have been 24 percent, or $9.8 billion, higher than they are actually projected to be.

• Imports of goods from Korea have risen an estimated 18 percent, or $10.5 billion, in the Korea FTA’s first three years.

• U.S. exports to Korea of manufactured goods have stagnated under the Korea FTA, growing an estimated zero percent in the first three years of the deal. U.S. manufactured imports from Korea, meanwhile, have grown an estimated 18 percent under the FTA. As a result, the U.S. manufacturing trade deficit with Korea has grown an estimated 44 percent, or $10.1 billion, since the FTA’s implementation.

• U.S. exports to Korea of agricultural goods have stagnated under the Korea FTA, growing an estimated zero percent in the first three years of the deal – even as U.S. agricultural exports to the world increased 6 percent during the same period. U.S. agricultural imports from Korea, meanwhile, have grown an estimated 28 percent under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined an estimated 1 percent, or $72 million, since the FTA’s implementation.

Given the bleak data, the Office of the U.S. Trade Representative (USTR) may repeat past efforts to try to obscure bad Korea FTA results. Congressional upset about the pacts is fueling opposition to the administration’s push to Fast Track the TPP through Congress. Typical USTR data omissions and distortions regarding the Korea FTA include:

• The USTR likely will count foreign-produced goods as “U.S. exports,” falsely inflating the export figures that can be reported. It is by using this raw Census Department data versus the corrected official U.S International Trade Commission (USITC) trade data that USTR falsely claims that U.S. exports to Korea have grown and were at a record level in 2014.  Despite congressional demands to stop using the distorted data, USTR continues to report export figures that include “foreign exports,” also known as “re-exports.” These are goods made abroad that pass through the United States before being re-exported to other countries. By U.S. Census Bureau definition, foreign exports undergo zero alteration in the United States, and thus support no U.S. production jobs. Each month, the UCITC removes foreign exports from the raw data gathered by the U.S. Census Bureau. But the USTR regularly uses the uncorrected data, inflating the actual U.S. export figures and deflating U.S. trade deficits with FTA partners like Korea. In the first three years of the Korea FTA, foreign exports to Korea have risen an estimated 13 percent, or $284 million, which the USTR may errantly count as an increase in “U.S. exports.”

• The USTR might misrepresent the relatively small increase in U.S. exports to Korea of passenger vehicles under the FTA as a large percentage increase, while omitting both that the touted increase amounts to an estimated 23,000 more passenger vehicles exported from a base of fewer than 15,000 and that imports of passenger vehicles from Korea have surged by an estimated 450,000 vehicles – from about 863,000 to more than 1.3 million in the first three years of the FTA. This trick was included in the USTR’s press release on the FTA’s second anniversary. While U.S. automotive exports to Korea have increased an estimated $686 million in the FTA’s first three years, U.S. automotive imports from Korea have ballooned an estimated $6.4 billion. As a result, the U.S. automotive trade deficit with Korea has increased an estimated 36 percent, or $5.7 billion, in the FTA’s first three years.

• The USTR also may claim, as it did in its press release on the Korea FTA’s second anniversary, that the decline in U.S. exports to Korea under the FTA is due to decreases in exports of fossil fuels and corn. But even after removing fossil fuels and corn products, U.S. exports to Korea still have declined by an estimated $1.4 billion, or 4 percent, in the first three years of the FTA. Product-specific anomalies cannot explain away the broad-based drop in U.S. goods exports to Korea under the FTA.

• The USTR also may try to dismiss the decline in U.S. exports to Korea under the FTA as due to a weak economy in Korea – another claim made in the USTR’s press release on the FTA’s second anniversary. But the Korean economy has grown each year since the FTA passed, even as U.S. exports to Korea have shrunk. Korea’s gross domestic product in 2014 is projected to be 9 percent higher than in the year before the FTA took effect, suggesting that U.S. exports to Korea should have expanded, with or without the FTA, as a simple product of Korea’s economic growth. Instead, U.S. exports to Korea have fallen an estimated 5 percent in the first three years of the FTA. 

Forthcoming TPP Sales Pitch So Predictable, We Decided to Predict It

In the coming days, the U.S. Trade Representative (USTR) will release its annual report on the Obama administration’s trade policy agenda.  We know that you can’t wait to see what it will say. 

Good news.  You don’t have to.  Below we present the world’s first look at the report’s contents. 

How do we know in advance what the annual trade report will say?  No, we don’t have a mole at USTR (though if any of our USTR readers would like to volunteer…). 

We have a pretty good idea of the report’s contents, given that these reports tend to recycle the same old sales pitches that the administration has been disseminating ad nauseam (figuratively and, sometimes, literally). 

Since the status quo trade platitudes have become predictable, we thought we might as well predict them. 

So, you heard it here first – below are some of the administration's standard TPP-related talking points likely to be rehashed in USTR’s forthcoming report, followed by an explanation of why they do not bear repeating:

95 percent of the world’s consumers live outside our borders.

[But our trade pacts have not helped us reach them.]

Yes, this statistic shows a basic understanding of geography and population.  But it shows little else.  The official government trade data reveal that past trade deals have not been successful in helping U.S. firms reach consumers who live abroad.  In fact, U.S. goods exports to our “free trade” agreement (FTA) partners have grown 20 percent slower than U.S. exports to the rest of the world over the last decade.

The TPP would grant U.S. firms greater access to the world's fastest-growing region.

[But the relevant TPP countries have been growing one-fourth as fast as that region.]

The United States already has FTAs with six of the 11 TPP negotiating partners.  The combined GDP of the other five countries (the ones that could offer “greater access”) has been growing at a paltry 1 percent annually over the last decade – one fourth of the growth rate of the Asia-Pacific region overall.  Yes, the region has been growing quickly.  That just happens not to be relevant to the TPP. 

Exporters tend to pay their workers higher wages.

[But jobs displaced by imports pay even higher.]

What this talking point fails to mention is that jobs lost to imports under unfair trade deals tend to pay even higher wages than jobs in exporting industries, according to new data unveiled by the Economic Policy Institute (EPI).  If a manufacturing worker making $1,020 per week loses her job to imports under a raw trade deal and gets re-hired in an exporting firm where she gets paid less than $870 per week (the actual numbers from EPI’s analysis), it’s probably small consolation that she could be making even less in a non-traded sector like restaurants.  But that is the very argument – that exporting industries pay more than non-traded industries – that the administration has been using to push for the TPP’s expansion of the trade status quo.

Their pitch omits the fact that far more jobs have been lost in the higher-paying import-competing industries than have been gained in exporting sectors under existing trade deals, judging by the burgeoning U.S. trade deficit with FTA partners, which has grown 427 percent since the deals took effect. It also does not mention that most trade-displaced workers do not actually get rehired in exporting industries, but in non-traded sectors, spelling an even bigger pay cut than the example given above.

China wants to write the rules for commerce in Asia. Instead, we should write the rules.

[We didn’t write the TPP’s rules – multinational corporations did. The TPP would hurt our national interests while failing, like past FTAs, to affect China’s influence.]

Ah yes, the boogeyman tactic.  When the economic sales pitch for a controversial new FTA falters on the existing FTA record of lost jobs, lower wages and increased trade deficits, FTA proponents frequently resort to raising the specter that without the controversial pact, the influence of a foreign opponent will rise further.  But the notion that the establishment – or not – of any specific U.S. trade agreement would affect China’s rising influence is contradicted by the record.  Proponents of the North American Free Trade Agreement (NAFTA) and NAFTA expansion pacts similarly warned that those deals were necessary to prevent rising foreign influence in Latin America.  But in the first 20 years of NAFTA, the share of Mexico’s imported goods coming from China increased from 1 to 16 percent, while the U.S. share dropped from 69 percent to 49 percent.  And from 2000 to 2011, a period in which U.S. FTAs with eight Latin American countries took effect, the share of Latin America’s imported goods coming from China increased from 1 percent to 7 percent, while the U.S. share fell from 25 percent to 16 percent.  Why should we believe the recycled pitch that another FTA would keep China’s economic influence in check?  

And the attempt to paint the TPP as a battle between “our rules” and China’s rules is absurd.  “We” did not write these rules.  The draft TPP text was crafted in a closed-door process that granted privileged access to more than 500 official U.S. trade advisors, nine out of ten of them explicitly representing corporations.  It is little surprise then that leaked TPP terms include new monopoly patent rights for pharmaceutical companies that would increase healthcare costs, limits on efforts to reregulate Wall Street, a deregulation of U.S. gas exports that could increase domestic energy prices, maximalist copyright terms that could thwart innovation and restrict Internet freedom, and new investor protections that incentivize offshoring.  Good luck selling that as advancing U.S. interests. 

The TPP is a 21^st-century agreement with strong labor and environmental standards.

[Government reports show that those standards have proven ineffective.]

The vaunted inclusion in the TPP of labor and environmental provisions that were hatched in a May 10, 2007 deal is nothing new. These provisions have been included in existing FTAs, but have proven ineffective. The George W. Bush administration, for example, included "May 10" terms in the FTA with Colombia, where anti-union violence and repression remain rampant. Indeed, a U.S. Government Accountability Office report released in November 2014 found broad labor rights violations across five surveyed FTA partner countries, regardless of whether or not the FTA included the “May 10” labor provisions. As for environmental standards, the TPP would empower foreign corporations (e.g. oil/gas companies) to demand taxpayer compensation before extrajudicial tribunals for new environmental protections in TPP countries (e.g. rejection of a proposed controversial pipeline). 

And despite recent claims to the contrary, the evidence shows no correlation between an FTA’s inclusion of the “May 10” standards and its trade balance impact. Though the Korea FTA, the U.S. template for the TPP, included the “May 10” standards, the U.S. trade deficit with Korea has grown more than 70 percent in the three years since the deal’s passage. According to the administration’s trade-jobs ratio, that equates to the loss of more than 70,000 U.S. jobs – the same number of jobs that the administration promised would be gained under the deal. 

98 percent of U.S. exporters are small or medium-sized enterprises (SMEs).

[The few small businesses that export have endured slow and falling exports under FTAs.]

Only 3 percent of U.S. SMEs export any good to any country. In contrast, 38 percent of large U.S. firms are exporters. Even if FTAs actually succeeded in boosting exports, which government data show they do not, exporting is primarily the domain of large corporations, not small businesses.

The relatively few small businesses that do actually export have endured even more disappointing export performance under FTAs than large firms have experienced.  U.S. small businesses have watched their exports to Korea decline even more sharply than large firms under the Korea FTA (a 14 percent vs. 3 percent decrease).  And small firms’ exports to Mexico and Canada under NAFTA have grown less than half as much as large firms’ exports. Indeed, small firms’ exports to all non-NAFTA countries has exceeded by more than 50 percent the growth of their exports to NAFTA partners.

Exports Lag 20%, Trade Deficits Surge 427% under "Free Trade" Deals

A recent parade of reports from corporate lobbies and think tanks has played a familiar but discordant refrain, alleging that more of the same "free trade" agreements (FTAs) would boost U.S. exports and reduce the U.S. trade deficits that displace U.S. jobs.  It sounds nice.  But this tired promise is simply not supported by the data.  

According to the official government trade data from the U.S. International Trade Commission, the aggregate U.S. goods trade deficit with FTA partners is more than five times as high as before the deals went into effect, while the aggregate trade deficit with non-FTA countries has actually fallen. The key differences are soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations.

Why do we keep hearing arguments that more of the same will produce different results?  Well, if you (or your corporate backers) wanted to Fast Track through Congress the controversial Trans-Pacific Partnership (TPP), which would expand the status quo FTA model, you might also find it convenient to parrot the standard FTA sales pitch of higher exports and lower trade deficits.  In doing so, you would need to ignore these facts:

• Growth of U.S. goods exports to FTA partners has been 20% lower than U.S. export growth to the rest of the world over the last decade (annual average growth of 5.3 percent to non-FTA nations vs. 4.3 percent to FTA nations from 2004 to 2014). 

• The aggregate U.S. goods trade deficit with FTA partners has increased by about $144 billion, or 427 percent, since the FTAs were implemented. In contrast, the aggregate trade deficit with all non-FTA countries has decreased by about $95 billion, or 11 percent, since 2006 (the median entry date of existing FTAs). See the chart below. Using the Obama administration’s net exports-to-jobs ratio, the FTA trade deficit surge implies the loss of about 780,000 U.S. jobs.

• The North American Free Trade Agreement (NAFTA) contributed the most to the widening FTA deficit – under NAFTA, the U.S. trade deficit with Canada has ballooned and a U.S. trade surplus with Mexico has turned into a nearly $100 billion deficit.

• More recent deals have produced similar results. Since the 2011 passage of the Korea FTA, the U.S. template for the TPP, the U.S. trade deficit with Korea has already surged 72 percent.

“Higher Standards” Have Failed to Alter FTA Legacy of Ballooning Trade Deficits

Some proponents of status quo trade have claimed that post-NAFTA FTAs have included higher standards and thus have yielded trade balance improvements. But the Korea FTA included the higher labor and environmental standards of the May 10, 2007 deal, and still the U.S. trade deficit with Korea has grown over 70 percent in the three years since the deal’s passage. Meanwhile, most post-NAFTA FTAs that have resulted in (small) trade balance improvements did not contain the “May 10” standards. The evidence shows no correlation between an FTA’s inclusion of “May 10” standards and its trade balance impact. Reducing the massive U.S. trade deficit will require a more fundamental rethink of the core status quo trade pact model extending from NAFTA through the Korea FTA, not more of the same.

Corporate FTA Boosters Omit Imports, Use Errant Methods to Claim Higher Exports under FTAs

Members of Congress will invariably be shown data by defenders of our status quo trade policy that appear to indicate that FTAs have generated an export boom. Indeed, to promote congressional support for new NAFTA-style FTAs, the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) have funded an entire body of research designed to create the appearance that the existing pacts have both boosted exports and reversed trade deficits with FTA partner countries. This work relies on several methodological tricks that fail basic standards of accuracy:

• Ignoring imports: U.S. Chamber of Commerce studies regularly omit mention of soaring imports under FTAs, instead focusing only on exports. But any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under FTAs.

• Counting “foreign exports”: NAM has errantly claimed that the United States has a manufacturing surplus with FTA nations by counting foreign-made goods as “U.S. exports.” NAM’s data include “foreign exports” – goods made elsewhere that pass through the United States without alteration before being re-exported abroad. Foreign exports support zero U.S. production jobs and their inclusion distorts FTAs’ impacts on workers.
  

• Omitting major FTAs: The U.S. Chamber of Commerce has repeatedly claimed that U.S. export growth is higher to FTA nations that to non-FTA nations by simply omitting FTAs that do not support their claim. One U.S. Chamber of Commerce study omitted all FTAs implemented before 2003 to estimate export growth. This excluded major FTAs like NAFTA that comprised more than 83 percent of all U.S. FTA exports. Given NAFTA’s leading role in the 427 percent aggregate FTA deficit surge, its omission vastly skews the findings.

• Failing to correct for inflation: U.S. Chamber of Commerce studies that have claimed high FTA export growth have not adjusted the data for inflation, thus errantly counting price increases as export gains.

• Comparing apples and oranges: The U.S. Chamber of Commerce has claimed higher U.S. exports under FTAs by using two completely different methods to calculate the growth of U.S. exports to FTA partners (an unweighted average) versus non-FTA partners (a weighted average). This inconsistency creates the false impression of higher export growth to FTA partners by giving equal weight to FTA countries that are vastly different in importance to U.S. exports (e.g. Canada, where U.S. exports exceed $260 billion, and Bahrain, where they do not reach $1 billion), despite accounting for such critical differences for non-FTA countries.

2014 Trade Data Deal Further Blows to the Push for Fast Track

2014 Trade Data Reveal Surging U.S. Trade Deficits Under Korea FTA and NAFTA, and a Dramatic Failure to Meet Obama’s Export-Doubling Goal

Today’s release of the corrected 2014 annual trade data from the U.S. International Trade Commission reveal that President Barack Obama’s goal of doubling exports has failed dramatically, with a growing trade deficit with Korea under the U.S.-Korea Free Trade Agreement (FTA) and a burgeoning non-fossil fuel trade deficit with North American Free Trade Agreement (NAFTA) partners. Even as overall U.S. exports increased slightly due to growing U.S. fuel exports, manufacturing exports stagnated, according to projections. The data show that continuing with more-of-the-same trade policies would kill more middle-class jobs, dampen wages and increase income inequality – outcomes contrary to Obama’s “middle-class economics” agenda. The abysmal trade data are likely to reinforce congressional opposition to Obama’s bid to expand the status quo trade model by Fast Tracking the Trans-Pacific Partnership (TPP). 

• Obama’s Five-Year Export-Doubling Plan Failed, in Part Thanks to His 2011 Korea FTA: The context for Obama’s 2015 State of the Union ask for Fast Track for the TPP is the abysmal failure
  of his 2010 State of the Union trade initiative – a plan to double U.S. exports in five years. The 2014 data show U.S. goods exports over those five years have increased by just 36 percent, falling more than $660 billion short. U.S. goods exports grew by less than 1 percent in 2014 – the same average rate of the prior two years. (The first two years of stronger export growth represented recovery from the worldwide crash in trade flows after the global financial crisis.) At the paltry 2012-2014 annual export growth rate, which is a fraction of the 4 percent average annual export growth seen in the decade before the Obama administration, Obama’s export-doubling goal would not be reached until 2057 – 43 years behind schedule.

• U.S. Exports Declined Under the Korea FTA, While Imports and the U.S. Trade Deficit with Korea Soared: Today’s data release also reveals a 14 percent increase in the U.S. goods trade deficit with Korea in 2014, marking the third consecutive year of substantial growth in the U.S. trade deficit with Korea since the 2011 passage of the Korea FTA, which U.S. negotiators used as the template for the TPP. The 2014 U.S. goods trade deficit with Korea topped $26 billion, a 72 percent increase over the trade deficit in 2011 before the FTA took effect. U.S. exports remain lower than the level before the FTA went into effect, as imports have increased 17 percent. Had U.S. exports to Korea continued to grow at the rate seen in the decade before the FTA’s implementation, exports would be about 18 percent, or $7 billion, higher in 2014 than they actually were. The resulting trade deficit increase represents more than 70,000 lost American jobs, according to the ratio the Obama administration used to project gains from the deal. Ironically, 70,000 is the number of jobs the Obama administration promised would be gained from the Korea FTA.

• Non-Fuel NAFTA Trade Deficit Grows: The 2014 trade data are also projected to show a more than 12 percent, or $10 billion, increase in the non-fossil fuel U.S. goods trade deficit with NAFTA partners Canada and Mexico. The overall U.S. goods trade deficit with NAFTA partners, which also increased in 2014, has ballooned $155 billion, or 565 percent, under 21 years of the pact, reaching $182 billion in 2014.

• Contrary to the Administration’s TPP Sales Pitch That More FTAs Would Boost U.S. Exports, U.S. Exports to FTA Partners Have Grown More Slowly Than U.S. Exports to the Rest of the World Over the Past Decade. Taking into account the data for 2014, average annual U.S. export growth to all non-FTA partners in the past 10 years outpaced that to FTA partners by 24 percent.

• The United States Has a Large Trade Deficit with FTA Partners: Overall, the aggregate U.S. trade deficit with all U.S. FTA partners topped $177 billion in 2014, marking a more than $143 billion, or 427 percent, increase in the aggregate U.S. FTA trade deficit since the pacts were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $95 billion, or 11 percent, since 2006 (the median entry date of existing FTAs). Despite this, U.S. Trade Representative (USTR) Michael Froman testified to Congress last month that we have a trade surplus with the group of FTA nations.

Heads Up for Distorted Data…

Given that the record of lagging U.S. exports and surging trade deficits under U.S. FTAs jeopardizes Obama’s prospects for obtaining Fast Track, the administration may try to obscure the results with distorted data. The USTR has taken to lumping foreign-made products in with U.S.-produced exports, which artificially inflates U.S. export figures and deflates U.S. trade deficits with FTA partners.

“Foreign exports,” also known as “re-exports,” are goods made abroad, imported into the United States, and then re-exported without undergoing any alteration in the United States. Foreign exports support zero U.S. production jobs. Each month, the U.S. International Trade Commission (USITC) reports trade data with foreign exports removed, providing the official government data on made-in-America exports. But the USTR likely will choose to use the uncorrected raw data, as it has in the past, that the U.S. Census Bureau released last Thursday, which counts foreign-made goods as U.S. exports. Our figures are based on the corrected data.

By using the distorted data, the USTR may errantly claim an aggregate trade surplus with all U.S. FTA partners, though the actual 2014 U.S. goods trade balance with FTA partners is a more than $177 billion trade deficit. By counting foreign exports as “U.S. exports,” the USTR can artificially eliminate more than two-thirds of this FTA deficit, shrinking it to less than $57 billion. The USTR may misleadingly claim an FTA trade surplus by then adding services trade surpluses with FTA partners, which pale in comparison to the massive FTA trade deficit in goods when properly counting only American-made exports.

The USTR also may repeat its bogus claim that the United States has a trade surplus with its NAFTA partners by errantly including foreign exports as “U.S. exports,” removing fossil fuels and adding services trade data. But even after removing fossil fuels (coal, oil and natural gas) and adding services trade surpluses, the United States still had a projected NAFTA trade deficit of $50 billion in 2014. Indeed, the fossil fuels share of the NAFTA trade deficit declined in 2014, and U.S. exports of services to NAFTA partners fell, according to projections. The USTR can make its errant claim of a “NAFTA surplus” only by including foreign exports, which artificially reduces the NAFTA goods trade deficit to less than half of its actual size.

The USTR also may boast about an increase in U.S. exports to Korea in 2014, while ignoring the much larger increase in imports from Korea. While U.S. goods exports to Korea in 2014 increased by $2.3 billion, imports from Korea have risen by $5.6 billion, spelling a $3.3 billion increase in the U.S. goods trade deficit with Korea in the third calendar year of the Korea FTA.

Moreover, U.S. exports to Korea have declined since the FTA went into effect and did not return to the pre-FTA level in 2014. Monthly imports from Korea repeatedly broke records in 2014, such as in October when imports from Korea topped $6.3 billion – the highest level on record.

Expect the administration to repeat the same data trick it employed last year with respect to U.S. auto sector exports to Korea. Exports to Korea of U.S.-produced Fords, Chryslers and General Motors vehicles increased by fewer than 3,100 vehicles per year in the first two years of the Korea FTA. But given that exports of “Detroit 3” vehicles before the FTA were also tiny – fewer than 8,200 vehicles per year – the USTR expressed the small increase as a significant percentage gain in a press release. The USTR did not mention that more than 184,000 additional Korean-produced Hyundais and Kias were imported and sold in the United States in each of the Korea FTA’s first two years, in comparison to the two years before the FTA, when Hyundai and Kia imports already topped 1 million vehicles per year.

If Pinocchio Were Trying to Sell a Controversial Trade Deal

Four Pinocchios.  That’s the rating, reserved only for the biggest whoppers, that The Washington Post has given to the Obama administration’s most recent assertion of truthiness about the controversial Trans-Pacific Partnership (TPP) - that the deal could boost income and “support 650,000 new jobs” in the U.S. 

How far off was the administration’s claim that the deal could create 650,000 jobs?  By about 650,000 jobs. 

As Glenn Kessler, Washington Post fact-checker, explained, “the correct number is zero (in the long run), not 650,000, according to the very study used to calculate this number.”

That’s right – the study itself, from the Peterson Institute for International Economics, did not produce an estimate of job growth from the TPP.  Indeed, the study used an assumption of full employment, under which projected job gains would be precisely zero. 

The Peterson Institute has been hesitant to project employment impacts of controversial trade pacts since inaccurately predicting that NAFTA would create jobs, on the basis that the U.S. trade surplus with Mexico would rise.  Just two years into NAFTA, the $3 billion trade surplus with Mexico turned into a $26 billion trade deficit.  At that point, one of the study’s authors told The Wall Street Journal, “the lesson for me is to stay away from job forecasting.”

The Obama administration has yet to learn that lesson, apparently.  But how did the administration get a jobs number from a study that did not produce one?  (If this sounds familiar, the Chamber of Commerce pulled this same trick last year.)

The administration took the study’s projection that the TPP might yield a 0.4% increase in aggregate income in 2025 and used a back-of-the-envelope calculation to determine how many jobs could be created if that income went to new jobs instead. But then they claimed that the TPP not only could create these jobs, but simultaneously could create the income gains that they had just exhausted to produce their jobs prediction. 

In short, they double-counted, taking the Peterson Institute’s projection for the TPP’s economic impact and multiplying by two.

It’s hard to blame them – the study’s projection for the deal’s economic impact amounts to less than 40 cents per person per day in 2025 (at present value).  If you were selling the TPP, you’d want to double that too.  (Not that “less than 80 cents per day” is a great motto for a deal likely to make medicines more expensive, offshore jobs, and undermine health, environmental and financial protections.) 

But, you may say, let’s set aside the administration’s fast-and-loose numbers – don’t the Peterson Institute results still mean income gains from the TPP, however meager?  

That depends – do you make more than $88,330 per year?  If not, you’d be more likely to see income losses from the deal - not gains. 

The Peterson study made no attempt to determine the impact that the TPP would have on inequality, despite an academic consensus that trade flows under such deals have exacerbated U.S. income inequality.  So, in a study in 2013, the Center for Economic and Policy Research (CEPR) took the projected TPP gains from the Peterson Institute study and added an analysis of how the TPP would affect income inequality.  Taking the Peterson Institute's income projections as given, CEPR used the empirical evidence on the trade-inequality relationship to show that even with the most conservative estimate of trade's contribution to inequality (that trade is responsible for just 10 percent of the recent rise in inequality), the losses from projected TPP-produced inequality would wipe out the tiny projected gains for the median U.S. worker.  

If one assumes the still-conservative estimate that recent trade flows have been responsible for 15 percent of the rise in inequality, then CEPR calculates that the TPP would mean wage losses for all but the richest 10 percent of U.S. workers.  So if you're making less than $88,330 per year (the current 90th percentile wage), the TPP would mean a pay cut.  

And that’s probably still too kind to the TPP, given that it requires accepting the array of outsized assumptions that the Peterson Institute used to produce its small income gain projection.  Nearly half of the study’s projected income gains come from what the study presumes will be a surge in foreign investment resulting from the TPP. But a raft of studies has produced, at best, contradictory evidence as to whether or not TPP-like investment protections included in past trade and investment agreements have actually had any impact on foreign investment.  Indeed, the most recent studies have concluded that such terms have failed to boost foreign investment.  If the Peterson study reflected this reality, the projected aggregate income gain (which would only reach the pockets of the wealthiest) would be halved.

The study also assumes that the workers who the TPP would displace would be able to rapidly find new jobs and that these new jobs would be just as high-paying as the old jobs, meaning no negative impact on consumer demand.  This runs counter to U.S. government data.  According to the Bureau of Labor Statistics, three out of every five displaced workers in the manufacturing sector (where we could expect significant TPP-induced displacement) were forced to take a lower paying job upon being rehired last year.  For one third, the pay cut was more than 20%.  Why should we assume that the same losses would not befall TPP-displaced manufacturing workers?   

The Peterson study itself projects that during the final years of TPP implementation, about 100,000 U.S. workers would be displaced each year, and that’s only counting those who take jobs in entirely new sectors.  It’s unreasonable to assume that job replacements for all these workers would be immediate, that pay cuts would be nonexistent, and that there would be zero resulting impact on demand.  Back in reality, the hit to consumer demand would depress further the tiny aggregate income gain projected from the deal, spelling even tinier gains for the richest and even steeper income losses for the rest of us. 

So yes, the administration’s claim of 650,000 jobs from the TPP definitely deserves its four Pinocchios.  Or, to borrow a card from the administration, let’s call it eight.  

10 Tall Tales on Trade: Fact-Checking Obama’s Top Trade Official

Yesterday was a difficult day for U.S. Trade Representative (USTR) Michael Froman.  He had to go before Congress and explain how the administration’s plan to expand a trade model that has offshored U.S. manufacturing jobs and exacerbated middle class wage stagnation fits with President Obama’s stated “middle class economics” agenda.

Inconveniently for Mr. Froman, it does not.

That did not stop Froman from trying to paint the last two decades of Fast-Tracked, pro-offshoring trade deals – and the administration’s plan for more of the same – as a gift to the middle class. 

The facts he cited to support this depiction actually sounded great.  They just didn’t have the added advantage of being true. 

Here’s a rundown of the top 10 fibs and half-truths that Froman uttered before the Senate Finance Committee and House Ways and Means Committee yesterday in his sales pitch for the administration’s bid to expand the NAFTA “trade” pact model by Fast-Tracking through Congress the controversial Trans-Pacific Partnership (TPP).

1. Fast Track Puts Congress in the Driver’s Seat (of a Runaway Car, without Brakes or a Steering Wheel)

Froman: “[Fast Track] puts Congress in the driver’s seat to define U.S. negotiating objectives and priorities for trade agreements.”

Okay, let’s go with this analogy.  If reviving Fast Track puts Congress in the driver’s seat, it also removes the brakes and steering wheel.  Reviving Fast Track would empower the administration to negotiate and sign a sweeping “trade” pact like the TPP – implicating everything from the cost of medicines to the safety of food to the reform of Wall Street – before Congress had any enforceable say over the deal’s contents, even if they contradicted Congress’ stated negotiating objectives.  Goodbye steering wheel.  Congress’ role would be relegated to an expedited, no-amendments, limited-debate vote on the already-signed deal.  Goodbye brakes. 

Also, if we’re talking about Fast Tracking the TPP, the car is already going 60mph.  As a couple of members of Congress pointed out to Froman, the administration has been negotiating the TPP for more than five years, and Froman himself stated that TPP negotiations are in their endgame.  Even if Froman’s assertion were true that Fast Track allows Congress to define priorities for trade agreements (rather than ensuring that such priorities are not enforceable), it’s a little late for members of Congress to be naming priorities for a deal that has been under negotiation since 2009 and that Froman hopes to close in the coming months.

2. A Trade Surplus with Our FTA Partners (Does Not Appear in Official Government Data)

Froman: “You take all of our FTA partners as a whole, [and] we have a trade surplus. And that trade surplus has grown.”  Froman also claimed that the United States has a trade surplus in manufactured goods with its FTA partners.  And he tried to use red herrings to explain away the surging U.S. trade deficit with Korea under the Korea FTA.

These claims defy official U.S. government data.  Data from the U.S. International Trade Commission show that the United States has a $180 billion U.S. goods trade deficit with all free trade agreement (FTA) partners (in 2013, the latest year on record).  In manufactured goods, the United States has a $51 billion manufacturing trade deficit with all FTA partners.  Froman claimed otherwise, in part, by counting billions of dollars’ worth of "foreign exports" – goods produced abroad that simply pass through the United States without alteration before being “re-exported.”  These goods, by definition, do not support U.S. production jobs.

Contributing to our FTA deficit is the 50 percent surge in the U.S. goods trade deficit with Korea in just the first two years of the Korea FTA, which literally was used as the U.S. template for the TPP. This deficit increase, owing to a drop in exports and rise in imports, spells the loss of more than 50,000 American jobs in the FTA's first two years, according to the ratio used by the administration to claim the pact would create jobs. Froman tried to explain away the ballooning U.S. trade deficit under the Korea FTA as due to decreases in corn and fossil fuel exports.  But even if discounting both corn and fossil fuels, U.S. annual exports to Korea still fell under the FTA, and the annual trade deficit with Korea still soared.  Product-specific anomalies cannot explain away the broad-based downfall of U.S. exports to Korea under the FTA, which afflicted nine of the top 15 U.S. sectors that export to Korea. The disappointing results also cannot be blamed on low growth in Korea since the FTA.  Though Korea's growth rates in the last several years have not been spectacular, the economy has still grown since the FTA (3 percent in 2013), as has consumption (2.2 percent, adjusted for inflation, in 2013). Koreans are buying more goods, just not U.S. goods. 

 

3.  We Wish to Ensure Access to Affordable Medicines in the TPP (but Big Pharma Won’t Let Us)

Froman: “In negotiations, like TPP, we are working to ensure access to affordable life-saving medicines, including in the developing world, and create incentives for the development of new treatment and cures that benefit the world and which create the pipeline for generic drugs.”

These words play politics with people’s lives. They cloak the tragic reality that if the TPP would take effect as USTR has proposed, with leaks showing even greater monopoly protections for pharmaceutical corporations than in prior pacts, people would needlessly die for lack of access to affordable medicines. A new study finds, for example, that the TPP would dramatically reduce the share of Vietnam’s HIV patients who have access to life-saving antiretroviral medicines.  The study reveals that while 68 percent of Vietnam’s eligible HIV patients currently receive treatment, U.S.-proposed monopoly protections for pharmaceutical corporations in the TPP would allow only 30 percent of Vietnam’s HIV patients to access antiretrovirals.  As a result, an estimated 45,000 people with HIV in Vietnam who currently receive antiretroviral treatment would no longer be able to afford the life-saving drugs.

Froman also indicated in the Senate hearing that USTR is pushing to include a special monopoly protection for pharmaceutical firms that contradicts the Obama administration’s own stated objectives for reducing the cost of medicines in the United States. President Obama’s budget proposes to reduce a special monopoly protection for pharmaceutical firms with regard to biologic medicines – drugs used to combat cancer and other diseases that cost approximately 22 times more than conventional medicines.  To lower the exorbitant prices and the resulting burden on programs like Medicare and Medicaid, the Obama administration’s 2015 budget would reduce the period of Big Pharma's monopoly protection for biologics from 12 to seven years. The administration estimates this would save taxpayers more than $4.2 billion over the next decade just for federal programs. However, Froman suggested yesterday that USTR continues to push for the 12 years of corporate protection in the TPP, which would lock into place pharmaceutical firms’ lengthy monopolies here at home while effectively scrapping the administration’s own proposal to save billions in unnecessary healthcare costs.

4. Most Exporters are Small Businesses (that Have Endured Slow and Falling Exports under FTAs)

Froman: “15,600 firms export from Pennsylvania. Almost 90 percent of them are small and medium sized businesses. And the question is whether with these trade agreements we can create more opportunities for these kinds of businesses.”

Implying that exporting is mainly the domain of small businesses because they make up most exporting firms is like implying that the NBA is a league of short people because most NBA players are shorter than 7 feet tall.  The reason small and medium enterprises (defined as 500 employees or less) comprise most U.S. exporting firms is simply because they constitute 99.7 percent of U.S. firms overall (in the same way that those of us below 7 feet constitute more than 99 percent of the U.S. population).  The more relevant question is what share of small and medium firms actually depend on exports for their success. Only 3 percent of U.S. small and medium enterprises export any good to any country. In contrast, 38 percent of large U.S. firms are exporters.  Even if FTAs actually succeeded in boosting exports (which they don’t, per the government data noted below), exporting is primarily the domain of large corporations, not small businesses.

As for whether “with these trade agreements we can create more opportunities” for small firms, the record of past FTAs suggests not. Under the Korea FTA, U.S. small businesses have seen their exports to Korea decline even more sharply than large firms (a 14 percent vs. 3 percent downfall in the first year of the FTA). And small firms’ exports to Mexico and Canada under NAFTA have grown more slowly than their exports to the rest of the world. Small businesses’ exports to all non-NAFTA countries grew over 50 percent more than their exports to Canada and Mexico (74 percent vs. 47 percent) during a 1996-2012 window of data availability. The sluggish export growth owes in part to the fact that small businesses’ exports grew less than half as much as large firms’ exports to NAFTA partners (47 percent vs. 97 percent from 1996-2012).

5. We Try to Be Transparent (with the Corporate Advisors Who Can Access Secret Texts)

Froman: “And to ensure these agreements are balanced, we seek a diversity of voices in America’s trade policy. The Administration has taken unprecedented steps to increase transparency… We have held public hearings soliciting the public’s input on the negotiations and suspended negotiating rounds to host first-of-a-kind stakeholder events so that the public can provide our negotiators with direct feedback on the negotiations.”

“A diversity of voices” is an odd way to describe the more than 500 official trade advisors with privileged access to secretive U.S. trade texts and U.S. trade negotiators.  About nine out of ten of these advisors explicitly represent industry interests. Just 10 of the more than 500 advisors (less than 2 percent) represent environmental, consumer, development, food safety, financial regulation, Internet freedom, or public health organizations.  It’s little wonder that so many of these groups, excluded from setting the content of the TPP, have denounced leaked TPP texts as presenting threats to the public interest.  And as for the claim of “unprecedented steps to increase transparency,” the reality is closer to the opposite. When the Bush administration negotiated the last similarly sweeping trade pact – the Free Trade Area of the Americas – USTR published the negotiating text online for anyone to see amid negotiations. In a step backwards from the degree of transparency exhibited by the Bush administration, the Obama administration has refused repeated calls from members of Congress and civil society organizations to release TPP texts. This secrecy limits the utility of the public hearings and stakeholder events that Froman touts, as it is difficult to opine on a text you are prohibited from seeing.

6. Supporting Manufacturing and Higher Wages (Is a Goal in Spite of Our Trade Policies)

Froman: “In 2015, the Obama Administration will continue to pursue trade policies aimed at supporting the growth of manufacturing and associated high-quality jobs here at home and maintaining American manufacturers’ competitive edge.”

The only objectionable word in this sentence is “continue.” Since NAFTA, we have endured a net loss of nearly 5 million manufacturing jobs – one out of every four – and more than 57,000 manufacturing facilities. While not all of those losses are due to NAFTA, the deal’s inclusion of special protections for firms that relocate abroad certainly contributed to the hemorrhaging of U.S. manufacturing. The U.S. manufactured goods trade balance with Canada and Mexico in NAFTA’s first 20 years changed from a $5 billion surplus in 1993 to a $64.9 billion deficit in 2013. The U.S. Department of Labor has certified (under one narrow program) more than 845,000 specific U.S. workers – many of them in manufacturing – as enduring “trade-related” job losses since NAFTA due to the offshoring of their factories to Mexico or Canada, or import competition from those countries. And under just two years of the Korea FTA, U.S. manufacturing exports to Korea have fallen. Overall, the United States has a $51 billion trade deficit in manufactured goods with its 20 FTA partners. Reviving manufacturing and reviving Fast Track for the NAFTA-expanding TPP are incompatible.

Froman: “At a time when too many workers haven't seen their paychecks grow in much too long, these jobs typically pay up to 18% more on average than non-export related jobs.” 

Froman neglects to mention a key reason that too many workers haven’t seen their paychecks grow: NAFTA-style deals have not only incentivized the offshoring of well-paying U.S. manufacturing jobs, but forced these workers to compete for lower-paid service sector jobs, which has contributed to downward pressure on wages even in non-offshoreable sectors.  According to the U.S. Bureau of Labor Statistics, about three out of every five displaced manufacturing workers who were rehired in 2014 experienced a wage reduction. About one out of every three displaced manufacturing workers took a pay cut of greater than 20 percent. As increasing numbers of American workers, displaced from better-paying jobs by current trade policies, have joined the glut of workers competing for non-offshoreable jobs in retail, hospitality and healthcare, real wages have actually been declining in these growing sectors. A litany of studies has produced an academic consensus that such trade dynamics have contributed to the historic increase in U.S. income inequality – the only debate is the degree to which trade is to blame. The TPP would not only replicate, but actually expand, NAFTA’s extraordinary privileges for firms that relocate abroad and eliminate many of the usual risks that make firms think twice about moving to low-wage countries like Vietnam – a TPP negotiating partner where minimum wages average less than 60 cents an hour, making the country a low-cost offshoring alternative to even China.

7. The TPP Supports an Internet that Is Open (to Lawsuits for Common Online Activity)

Froman: "We will continue to support a free and open Internet that encourages the flow of information across the digital world."

Repetition of this platitude has failed to assuage the concerns of Internet freedom groups that point out that leaked TPP texts do not support Froman’s assurances. In a July 2014 letter, an array of Internet service providers, tech companies, and Internet freedom groups wrote to Froman about leaked TPP copyright terms, some of which resemble provisions in the defeated Stop Online Piracy Act (SOPA), which could “significantly constrain legitimate online activity and innovation.”  Noting the deal’s terms on Internet service provider liability, the groups stated, “We are worried about language that would force service providers throughout the region to monitor and policy their users’ actions on the internet, pass on automated takedown notices, block websites and disconnect Internet users.”

8. Our Exports Have Grown (More Quickly to Non-FTA Countries)

Froman: “Our total exports have grown by nearly 50 percent and contributed nearly one-third of our economic growth since the second quarter of 2009. In 2013, the most recent year on record, American exports reached a record high of $2.3 trillion...” “By opening rapidly expanding markets with millions of new middle-class consumers in parts of the globe like the Asia-Pacific, our trade agreements will help our businesses and workers access overseas markets...”

U.S. goods exports grew by a grand total of 0 percent in 2013.   The year before that, they grew by 2 percent.  As a result, the administration utterly failed to reach President Obama’s stated goal to double U.S. exports from 2009 to 2014. Most of the export growth Froman cites – which is less than half of the administration’s stated objective – came early in Obama’s tenure as a predictable rebound from the global recession that followed the 2007-2008 financial crisis.  At the abysmal export growth rate seen since then, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule.  

Froman ironically uses this export growth drop-off to argue for more-of-the-same trade policy (e.g. the TPP).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  In the first two years of the Korea FTA, U.S. exports to Korea have fallen 5 percent.  Overall, growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  That’s not a solid basis from which to argue, in the name of exports, for yet another FTA. 

And if we’re seeking to export to those countries that are growing the fastest, then the TPP is the wrong trade pact.  Of the TPP countries with which we do not already have an FTA, all but one are actually growing more slowly than the per capita growth rate of the East Asian and Pacific region overall.     

9. Increases in Food Exports (Have Been Swamped by a Surge in Food Imports)

Froman: “In 2013, U.S. farmers and ranchers exported a record $148.7 billion of food and agricultural goods to consumers around the world.”

Yes, U.S. food exports have increased, but not nearly as much as food imports. In 2013, the total volume of U.S. food exports stood just 0.5 percent higher than in 1995, while imports of food into the United States had more than doubled (growing 115 percent since 1995). Existing FTAs have contributed to the imbalanced food trade. The average annual U.S. agricultural deficit with Canada and Mexico under NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. And under the first two years of the Korea FTA, U.S. agricultural exports to Korea plummeted 34 percent. Smaller-scale U.S. family farms have been hardest hit. About 170,000 small U.S. family farms have gone under since NAFTA and NAFTA expansion pacts have taken effect, a 21 percent decrease in the total number.

10. The TPP Takes Heed of NAFTA’s Mistakes (and Builds on Them)

Froman: “I think the President has made clear that as we pursue a new trade policy, we need to learn from the experiences of the past and that’s certainly what we’re doing through TPP and the rest of our agenda. For example, when he was running for President, he said we ought to renegotiate NAFTA. What that meant was to make labor and environment not side issues that weren’t enforceable, but to bring labor and environment in the core of the agreement and make them enforceable just like any other provision of the trade agreement consistent with what Congress and the previous administration worked out in the so-called May 10^th agreement.”

When candidate Obama said in 2008 that he would renegotiate NAFTA – a pact that had become broadly unpopular for incentivizing the offshoring of U.S. manufacturing jobs – most people probably didn’t imagine that he meant expanding those offshoring incentives further. But the TPP would extend further NAFTA’s extraordinary privileges for firms that relocate abroad to low-wage countries (like TPP negotiating partner Vietnam).  Most people also probably would not expect “learning from the experiences of the past” to lead to an expansion of the monopoly protections that NAFTA gave to pharmaceutical corporations, thereby reducing the availability of generics and increasing the cost of medicines. But Froman himself stated yesterday that such corporate protections – antithetical to textbook notions of “free trade” – are part of the TPP’s NAFTA-plus provisions.

And though Froman touts the May 10 deal as an improvement over NAFTA for labor rights, a recent government report has shown the May 10 provisions to be ineffective at curbing labor abuses in FTA partner countries. A November 2014 report from the U.S. Government Accountability Office found broad labor rights violations across all five surveyed FTA partner countries, regardless of whether or not the FTA included the labor provisions of the vaunted May 10 deal, including unionist murders in Colombia and impunity for union-busting in Peru.  Several of the TPP negotiating partners are notorious labor rights abusers – four of them were cited in a recent Department of Labor report for using child and/or forced labor. Vietnam, meanwhile, outright bans independent unions. Why would incorporation of the same terms that have failed to curb labor abuses in existing FTAs be expected to end the systematic labor rights abuses of TPP partners? 

And despite the May 10 deal’s environmental provisions, the TPP’s extraordinary investment provisions would empower thousands of foreign firms to bypass domestic courts, go before extrajudicial tribunals, and challenge new domestic environmental protections as "frustrating their expectations." Corporations have already used such foreign investor privileges under existing U.S. FTAs to attack a moratorium on fracking, renewable energy programs, and requirements to clean up oil pollution and industrial toxins.  Tribunals comprised of three private attorneys have already ordered taxpayers to pay hundreds of millions to foreign firms for such safeguards, arguing that they violate sweeping FTA-granted investor privileges that the TPP would expand.  Provisions, such as those in the May 10 deal, that call for countries to enforce their environmental laws sound hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement. 

Obama vs. Obama: The State of the Union's Self-Defeating Trade Pitch

In his State of the Union address tonight, President Obama called for job creation, reduced income inequality, more affordable healthcare and better regulation of Wall Street. 

He also called for Fast Tracking the Trans-Pacific Partnership (TPP) – a controversial “trade” deal that would undermine all of the above.

Here's a side-by-side analysis of how Obama's push to Fast Track the TPP contradicts his own State of the Union agenda:

Obama’s Agenda	The TPP’s Counter-Agenda
Income Inequality: “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”	An “economy where only a few of us do spectacularly well” is actually the projected outcome of the TPP. A recent study finds that the TPP would spell a pay cut for all but the richest 10 percent of U.S. workers by exacerbating U.S. income inequality, just as past trade deals have done.
Manufacturing revival: “More than half of manufacturing executives have said they’re actively looking at bringing jobs back from China. Let’s give them one more reason to get it done.”	The TPP would give manufacturing firms a reason to offshore jobs to Vietnam, not bring them back from China. The TPP would expand NAFTA’s special protections for firms that offshore American manufacturing, including to Vietnam, where minimum wages are a fraction of those paid in China. Since NAFTA, we have endured a net loss of more than 57,000 U.S. manufacturing facilities and nearly 5 million manufacturing jobs.
American jobs: “So no one knows for certain which industries will generate the jobs of the future. But we do know we want them here in America.”	TPP rules would gut the popular Buy American preferences that require government-purchased goods to be made here in America, preventing us from recycling our tax dollars back into our economy to create U.S. jobs.
Exports: “Today, our businesses export more than ever, and exporters tend to pay their workers higher wages.”	Those who wish for more exports should wish for a different trade agenda. U.S. exports to countries that are part of TPP-like deals have actually grown slower than exports to the rest of the world, according to government data. Under the Korea deal that literally served as the template for the TPP, U.S. exports have actually fallen.
Small businesses: “21st century businesses, including small businesses, need to sell more American products overseas.”	Small businesses have endured declining exports and export shares under pacts serving as the model for the TPP. Small businesses suffered a steeper downfall in exports than large firms under the Korea trade pact, and small businesses’ export share has declined under NAFTA.
Economic growth: “Maintaining the conditions for growth and competitiveness. This is where America needs to go.”	An official U.S. government study finds that the economic growth we could expect from the TPP is precisely zero, while economists like Paul Krugman have scoffed at the deal’s economic significance.
Middle class wages: “Of course, nothing helps families make ends meet like higher wages.”	The TPP would put downward pressure on middle class wages, just as NAFTA has, by offshoring the jobs of decently-paid American manufacturing workers and forcing them to compete for lower-paying, non-offshoreable jobs.
Legacy of past trade deals: “Look, I’m the first one to admit that past trade deals haven’t always lived up to the hype, and that’s why we’ve gone after countries that break the rules at our expense.”	Past trade deals have resulted in massive trade deficits and job loss not because the pacts’ rules have been broken, but because of the rules themselves. The TPP would double down on NAFTA’s rules – the opposite of Obama’s promise to renegotiate the unpopular pact – by expanding NAFTA’s offshoring incentives, limits on food safety standards, restrictions on financial regulation and other threats to American workers and consumers.
Affordable medicines: “…middle-class economics means helping working families feel more secure in a world of constant change. That means helping folks afford …health care…”	The TPP would directly contradict Obama’s efforts to reduce U.S. healthcare costs by expanding monopoly patent protections that jack up medicine prices and by imposing restrictions on the U.S. government’s ability to negotiate or mandate lower drug prices for taxpayer-funded programs like Medicare and Medicaid.
Wall Street regulation: “We believed that sensible regulations could prevent another crisis…Today, we have new tools to stop taxpayer-funded bailouts, and a new consumer watchdog to protect us from predatory lending and abusive credit card practices…We can’t put the security of families at risk by…unraveling the new rules on Wall Street…”	Senator Warren has warned that the TPP could help banks unravel the new rules on Wall Street by prohibiting bans on risky financial products and “too big to fail” safeguards while empowering foreign banks to “sue” the U.S. government over new financial regulations.
Internet freedom: “I intend to protect a free and open internet…”	The TPP includes rules that implicate net neutrality and that would require Internet service providers to police our Internet activity – rules similar to those in the Stop Online Piracy Act (SOPA) that was rejected as a threat to Internet freedom.
National interests: “But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and businesses at a disadvantage. Why would we let that happen?”	With the TPP, multinational corporations want to write the rules that would put our workers at a disadvantage and undermine our national interests. TPP rules, written behind closed doors under the advisement of hundreds of official corporate advisers, would provide benefits for firms that offshore American jobs, help pharmaceutical corporations expand monopoly patent protections that drive up medicine prices, give banks new tools to roll back Wall Street regulations, and empower foreign firms to “sue” the U.S. government over health and environmental policies. Why would we let that happen?

Obama’s Legacy: Middle-Class Jobs, Affordable Medicine and Financial Stability, or Fast-Tracked Trade Agreements – But Not Both

New Report ‘Prosperity Undermined’ Fact Checks Administration, Corporate Lobbyists and GOP Leadership With 20 Years of Data on Jobs, Economy

Fast Tracked trade deals have exacerbated the income inequality crisis, pushed good American jobs overseas, driven down U.S. wages, exploded the trade deficit and diminished small businesses’ share of U.S. exports, a new report from Public Citizen’s Global Trade Watch shows. The report, “Prosperity Undermined,”compiles and analyzes 20 years of trade and economic data to show that the arguments again being made in favor of providing the Obama administration with Fast Track trade authority have repeatedly proved false.

President Barack Obama is expected to push Fast Track for the Trans-Pacific Partnership (TPP). The pact, initiated by George W. Bush, literally replicates most of the job-offshoring incentives and wage-crunching terms found in the North American Free Trade Agreement (NAFTA) and would roll back Obama administration achievements on health, financial regulation and more. 

“It’s not surprising that Democrats and Republicans alike are speaking out against Fast Track because it cuts Congress out of shaping trade pacts that most Americans believe cost jobs while empowering the president to sign and enter into secret deals before Congress approves them,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “In their speeches and commentary, the administration, corporate interests and GOP leadership disregard the real, detrimental impacts that previous fast tracked trade deals – which serve as the model for the Trans-Pacific Partnership – have had on America’s middle class over the past 20 years.”

With unprecedented unity among Democratic members of Congress, there will be a handful of Democratic House votes in favor of Fast Track. Last year, seven of 201 House Democrats  supported Fast Track legislation. Meanwhile, a sizable bloc of GOP House members oppose Fast Track, which would grant the president extensive new executive powers and delegate away core congressional constitutional authorities.

The new report shows a 20-year record of massive U.S. trade deficits, American job losses and wage suppression. More specifically, data show that:

• Trade Deficits Have Exploded: U.S. trade deficits have grown more than 440 percent with Fast Tracked U.S. FTA countries since the pacts were implemented, but declined 16 percent with non-FTA countries during the relevant period. Since Fast Track was used to enact NAFTA and the World Trade Organization, the U.S. goods trade deficit has more than quadrupled, from $216 billion to $870 billion. Small businesses’ share of U.S. exports has declined, while U.S. export growth to countries that are not FTA partners has exceeded U.S. export growth to FTA partners by 30 percent over the past decade.  ‘

• Good American Jobs Were Destroyed: Nearly 5 million U.S. manufacturing jobs – one in four – were lost since the Fast Tracking of NAFTA and various NAFTA-expansion deals. Since NAFTA, more than 845,000 U.S. workers have been certified under just one narrow U.S. Department of Labor (DOL) program for Americans who have lost their jobs due to imports from Canada and Mexico and offshored factories to those countries.

• U.S. Wages Have Stagnated, Inequality Soared: Three of every five manufacturing workers who lose jobs to trade and find reemployment take pay cuts, with one in three losing greater than 20 percent, according to DOL data. Overall, U.S. wages have barely increased in real terms since 1974 – the year that Fast Track was first enacted – while American worker productivity has doubled. Since Fast Track’s enactment, the share of national income captured by the richest 10 percent of Americans has shot up 51 percent, while that captured by the richest 1 percent has skyrocketed 146 percent. Study after study has revealed an academic consensus that status quo trade has contributed to today’s unprecedented rise in income inequality.

• Food Exports Flat, Imports Soared: Under NAFTA and the WTO, U.S. food exports have stagnated while food imports have doubled. The average annual U.S. agricultural deficit with Canada and Mexico under NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. Approximately 170,000 small U.S. family farms have gone under since NAFTA and WTO took effect.

• Damaging Results of Obama’s “New and Improved” Korea Trade Deal: Since the Obama administration used Fast Track to push a trade agreement with Korea, the U.S. trade deficit with Korea has grown 50 percent – which equates to 50,000 more American jobs lost. The U.S. had a $3 billion monthly trade deficit with Korea in October 2014 – the highest monthly U.S. goods trade deficit with the country on record. After the Korea FTA went into effect, U.S. small businesses’ exports to Korea declined more sharply than large firms’ exports, falling 14 percent.

“Big dollars for big corporations and special interests calling the shots – that’s what the American people hear when only the country’s top corporate lobbyists are shaping America’s trade agreements,” said Wallach. “With such high stakes, we cannot let the Fast Track process lock Congress and the public out of negotiations that will have lasting impacts on the livelihoods, rights and freedoms of American families, workers and businesses.”

Read the report.          

Congressional Leaders Reject Wall Street’s Push for Deregulatory “Trade” Pacts

The Obama administration needs to stop negotiating so-called “trade” deals with deregulatory rules pushed by the likes of Citigroup that would undermine the re-regulation of Wall Street. 

That’s the message that Senator Elizabeth Warren – champion of financial reform and member of the Senate Banking Committee, Congresswoman Maxine Waters – Ranking Member of the House Financial Services Committee, and other congressional leaders have delivered to the administration in recent letters.  

The members of Congress warn against expanding the deregulatory strictures of pre-financial-crisis trade pacts, crafted in the 1990s under the advisement of Wall Street firms, via two pacts currently under negotiation: the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA, also known as TTIP). 

As proposed, both pacts would include controversial foreign investor privileges that would empower some of the world’s largest banks to demand U.S. taxpayer money for having to comply with U.S. financial stability policies.  

Yesterday, Sen. Warren and Sens. Tammy Baldwin and Edward Markey sent U.S. Trade Representative Michael Froman a letter calling for such “investor-state dispute settlement” (ISDS) provisions, which have sparked global controversy, to be excluded from the TPP.  The letter states:

Including such provisions in the TPP could expose American taxpayers to billions of dollars in losses and dissuade the government from establishing or enforcing financial rules that impact foreign banks. The consequence would be to strip our regulators of the tools they need to prevent the next crisis.

Earlier this month, Rep. Waters and Reps. Lacy Clay, Keith Ellison, and Raúl Grijalva sent a similar letter to Froman that called for ISDS to be excluded from TAFTA to safeguard financial stability, stating:

Private foreign investors should not be empowered to circumvent U.S. courts, go before extrajudicial tribunals and demand compensation from U.S. taxpayers because they do not like U.S. domestic financial regulatory policies with which all firms operating here must comply. 

TPP and TAFTA negotiators are also contemplating pre-crisis rules that would threaten commonsense prudential regulations such as restrictions on derivatives and other risky financial products, measures to keep banks from becoming “too big to fail,” firewalls to protect our savings accounts from hedge-fund-style bets, capital controls to prevent financial crises, and a Wall Street tax to counter speculative and destabilizing bubbles.  

Senators Warren, Baldwin, and Markey made clear in their letter that such anachronistic rules must not be inserted into a binding pact:

To protect consumers and to address sources of systemic financial risk, Congress must maintain the flexibility to impose restrictions on harmful financial products and on the conduct or structure of financial firms. We would oppose including provisions in the TPP that would limit that flexibility.

So did Representatives Waters, Clay, Ellison, and Grijalva:

TTIP should also not replicate rules from past trade agreements that restrict the use of capital controls, which the International Monetary Fund and leading economists have endorsed as legitimate policy tools for preventing and mitigating financial crises. Nor should TTIP include provisions that could limit Congress’ prerogative to enact a financial transaction tax to curb speculation while generating revenue.

Similar warnings were recently issued by more than 50 of the largest civil society organizations concerned with financial stability on both sides of the Atlantic – including Americans for Financial Reform, which itself represents 250 organizations.  In a letter to Froman and other TAFTA negotiators in October, the groups wrote:

We believe it is highly inappropriate to include terms implicating financial regulation in an industry-dominated, non-transparent “trade” negotiation. Financial regulations do not belong in a framework that targets regulations as potential “barriers to trade.” Such a framework could chill or roll back post-crisis efforts to re-regulate finance on both sides of the Atlantic whereas further regulation of the sector is much needed.

While governments across the world strive to rein in risk-taking by the financial firms that brought us the worst economic crisis since the Great Depression, U.S. trade negotiators (advised by many of those same firms) appear to be moving in the opposite direction.  We cannot afford to insert into binding “trade” pacts more deregulatory constraints pushed by Wall Street.  We cannot afford the TPP or TAFTA. 

The recent letter from civil society organizations made this clear:

We are only now implementing the lessons of the last financial crisis. Let us not lay the groundwork for the next one.

At Export Council, Obama Expected to Urge Corporate Interests to Help Him Obtain New Fast Track Powers to Expand the Status Quo U.S. Free Trade Pact Model That Congressional Democrats, Obama’s Base Oppose

At today’s meeting of the President’s Export Council, President Barack Obama is expected to urge yet another audience dominated by the corporate interests that opposed his election to help him obtain broad new Fast Track trade powers. Obama’s Fast Track request faces opposition by most Democratic members of Congress and base organizations as well as a bloc of conservative Republicans.

Obama also is likely to tout the Trans-Pacific Partnership (TPP), a pact that would expand the status quo U.S. trade agreement model that has led to staggering U.S. trade deficits, job loss and downward pressure on wages. When Obama picked up TPP negotiations from former President George W. Bush in 2009, consumer and environmental organizations, unions and congressional Democrats urged him to use the process to implement his 2008 election campaign promises to replace the old U.S. trade model based on the North American Free Trade Agreement (NAFTA). Instead, the administration has sided with the corporate interests that represent the majority of the approximately 600 official U.S. trade advisors and has replicated many of NAFTA’s most damaging provisions in the TPP.

“With the TPP, Obama is doubling down on the old, failed NAFTA trade pact status quo and even expanding on some of the NAFTA provisions that promoted American job offshoring, flooded us with unsafe imported food and increased medicine prices,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Given the TPP terms that would newly empower thousands of foreign firms to attack American health and environmental laws in foreign tribunals, incentivize even more U.S. job offshoring and ban the use of Buy American and Buy Local preferences, most Americans would be better off with no deal than what is in store with the TPP.”

Obama’s efforts to obtain Fast Track in the 113^th Congress were rebuffed, as almost all House Democrats and a bloc of House GOP members indicated opposition.

Obama’s efforts to push more-of-the-same trade policies have been sidelined by the dismal outcomes of his 2011 U.S.-Korea FTA: The trade deficit with Korea in the first two years of the pact. In fact, the record shows that U.S. export growth with U.S. Free Trade Agreement (FTA) partners lags behind the rate of export growth with non-FTA nations. In addition, the aggregate U.S. trade deficit with the group of 20 countries with which the U.S. has FTAs has increased more than fivefold since the FTAs took effect, due in part to a massive NAFTA trade deficit.

Outside of TPP Negotiations, Protestors Declare "No Fast Track Ever!"

As negotiators gather in Washington, D.C. this week for closed-door meetings on the Trans-Pacific Partnership (TPP), hundreds of activists from labor, environmental, consumer, human rights, public health, Internet freedom, faith and family farm activists joined concerned citizens to loudly make their voices heard outside of the secretive negotiations on Monday.  (Meanwhile, a select group of official trade “advisors,” largely representing corporations, enjoys unprecedented access to the TPP negotiators meeting behind closed doors).

The rallying cry from the activists, who gathered in front of the United States Trade Representative’s office, was loud and clear: "No Fast Track now, No Fast Track ever!  The TPP is a lost endeavor!"  

Fast Track was a controversial maneuver that allowed past presidents to railroad through Congress unpopular deals like the North American Free Trade Agreement (NAFTA).  Corporations have called for Fast Track to be revived to empower the Obama administration to unilaterally negotiate and sign the TPP before Congress gets an expedited vote, with no amendments allowed and debate strictly limited.

Fast Track faces widespread opposition in the U.S. Congress and among the U.S. public.  Though a Fast Track bill was tabled about one year ago, it has gone nowhere due to massive opposition from most Democrats and a sizeable bloc of Republicans.  This past September, nearly 600 organizations sent a letter opposing Fast Track to Chair Ron Wyden.  A poll earlier this year found that 62 percent of U.S. voters oppose Fast Tracking the TPP.  

Civil society and lawmakers have good reason to reject corporations' push to Fast Track the TPP. Although it’s impossible to know the full scope of the secret deal, leaks have confirmed some of the worst speculations: the TPP would empower corporations to offshore jobs, increase the price of medicines, weaken environmental standards, and chill domestic interest laws by "suing" the government for public interest policies that frustrate their "expectations." 

Given the stakes, the energy of the rally was high.  Protestors circled the building carrying signs and chanting the death knell of Fast Track and TPP: “Fast Track is a sneak attack -- we’re taking our democracy back! Good paying jobs are what we need, but TPP spells corporate greed!"

If you weren't able to make it to the rally, you can still make your voice heard by writing to your member of Congress to urge them to voice their opposition to Fast Tracking the TPP.

Obama Laments Inequality, Calls for Another Inequality-Spurring Trade Deal

Yesterday President Obama, speaking to a room full of corporate executives, tried to downplay the contribution of corporate-pushed trade deals to the historic rise in U.S. income inequality.  

Obama knew his audience -- corporate representatives eager to expand the status quo trade model by Fast Tracking through Congress the controversial Trans-Pacific Partnership (TPP) are probably keen to deny that this model has been exacerbating inequality.  

But such denial defies a consensus position among economists that recent trade flows have indeed contributed to today's yawning gap between rich and poor -- the only debate is how big of a role status quo trade has played.  

It also defies U.S. public opinion -- in a recent Pew poll, a mere 17 percent of the U.S. public thought that trade has boosted U.S. wages, while 45 percent, across the political spectrum, saw trade as contributing to falling wages for U.S. workers.

Obama acknowledged yesterday that TPP proponents will have a tough time arguing that this time is different -- that reviving Fast Track authority in attempt to push through Congress another more-of-the-same trade pact would not fuel further inequality growth. Fast Track was the Nixon-created maneuver that allowed the executive branch to railroad through Congress controversial, inequality-spurring pacts like the North American Free Trade Agreement (NAFTA) by negotiating and signing the pacts before Congress got an expedited, no-amendments, limited-debate vote.  A study by the Center for Economic and Policy Research finds that were the TPP to be Fast Tracked through Congress, all but the wealthiest among us would lose more to inequality increases than we would gain in cheaper goods, spelling a pay cut for 90 percent of U.S. workers.

Recognizing the unpopularity of Fast Track and the TPP, Obama told the business executives: “There are folks in my own party and in my own constituency that have legitimate complaints about some of the trend lines of inequality, but are barking up the wrong tree when it comes to opposing TPP, and I’m going to have to make that argument.”

Having to make that argument is not an enviable position -- it requires explaining away decades of evidence that Fast-Tracked deals have fostered greater U.S. income inequality.  Here's a sampling of that evidence:

U.S. Wages Stagnate, Despite Doubled Worker Productivity

• U.S. wages barely increased in real terms since 1974, the year before Fast Track was first enacted, even as American worker productivity doubled.In 1974, the average hourly wage for American workers in today’s dollars was $19.24, while in 2014 it is up only 7 percent to $20.56. Over the same period, U.S. workers’ productivity more than doubled. Economists now widely name “increased globalization and trade openness” as a key explanation for the unprecedented failure of wages to keep pace with productivity, as noted in recent Federal Reserve Bank research. Even economists who defend status-quo trade policies attribute much of the wage-productivity disconnect to a form of “labor arbitrage.” 

• Trade agreement investor privileges promote offshoring of production from the United States to low-wage nations. Today’s “trade” agreements contain various investor privileges that reduce many of the risks and costs previously associated with relocating production from developed countries to low-wage developing countries. Thus, many imports now entering the United States come from companies originally located in the United States and other wealthy countries that have moved production to low-wage countries. For instance, nearly half of China’s exports are now produced by foreign enterprises, not Chinese firms. Underlying this trend is what the Horizon Project called the “growing divergence between the national interests of the United States and the interests of many U.S. multinational corporations which, if given their druthers, seem tempted to offshore almost everything but consumption.” American workers effectively are now competing in a globalized labor market where some poor nations’ workers earn less than 10 cents per hour.
  

• Manufacturing workers displaced by trade have taken significant pay cuts. The United States has lost millions of manufacturing jobs during the Fast Track era, but overall unemployment has been largely stable (excluding recessions) as new low-paying service sector jobs have been created. Proponents of status quo trade raise the quantity of jobs to claim that Fast Tracked deals have not hurt U.S. workers. But what they do not mention is that the quality of jobs available, and the wages most U.S. workers can earn, have been degraded. According to the U.S. Bureau of Labor Statistics, about three out of every five displaced manufacturing workers who were rehired in 2014 experienced a wage reduction. About one out of every three displaced manufacturing workers took a pay cut of greater than 20 percent. For the average manufacturing worker earning more than $47,000 per year, this meant an annual loss of at least $10,000.
  

• Trade policy holds back wages even of jobs that can’t be offshored. Economists have known for more than 70 years that all workers with similar skill levels – not just manufacturing workers – will face downward wage pressure when U.S. trade policy creates a selective form of “free trade” in goods that non-professional workers produce. When workers in manufacturing are displaced and seek new jobs, they add to the supply of U.S. workers available for non-offshorable, non-professional jobs in hospitality, retail, health care and more. As increasing numbers of American workers, displaced from better-paying jobs by current trade policies, have joined the glut of workers competing for these non-offshorable jobs, real wages have actually been declining in these growing sectors. 

• The bargaining power of American workers has been eroded by threats of offshoring. In the past, American workers represented by unions were able to bargain for their fair share of economic gains generated by productivity increases. But the investor protections in today’s trade agreements, by facilitating the offshoring of production, alter the power dynamic between workers and their employers. For instance, a study for the North American Commission on Labor Cooperation – the body established in the labor side agreement of NAFTA – showed that after passage of NAFTA, as many as 62 percent of U.S. union drives faced employer threats to relocate abroad, and the factory shut-down rate following successful union certifications tripled.
  

• Even accounting for Americans’ access to cheaper imported goods, the current trade model’s downward pressure on wages outweighs those gains, making most Americans net losers.  Trade theory states that while those specific workers who lose their jobs due to imports may suffer, the vast majority of us gain from trade “liberalization” because we can buy cheaper imported goods. But when the non-partisan Center for Economic and Policy Research (CEPR) applied the actual data to the trade theory, they discovered that when you compare the lower prices of cheaper goods to the income lost from low-wage competition under current policies, the trade-related losses in wages hitting the vast majority of American workers outweigh the gains in cheaper goods from trade. U.S. workers without college degrees (63 percent of the workforce) have lost an amount equal to 12.2 percent of their wages, even after accounting for the benefits of cheaper goods. That means a net loss of more than $3,400 per year for a worker earning the median annual wage of $28,000.

Income Inequality Increases in America

• The inequality between rich and poor in America has jumped to levels not seen since the robber baron era. The richest 10 percent of Americans are now taking more than half of the economic pie, while the top 1 percent is taking more than one fifth. Wealthy individuals’ share of national income was stable for the first several decades after World War II, but shot up 51 percent for the richest 10 percent and 146 percent for the richest 1 percent between 1974 and 2012 – the Fast Track era. Is there a connection to trade policy?

• Longstanding economic theory states that trade will increase income inequality in developed countries. In the 1990s a spate of economic studies put the theory to the test, resulting in an academic consensus that trade flows had indeed contributed to rising U.S. income inequality. The pro-“free trade” Peterson Institute for International Economics (PIIE), for example, found that nearly 40 percent of the increase in U.S. wage inequality was attributable to U.S. trade flows. In 2013, when the Economic Policy Institute (EPI) updated an oft-cited 1990s model estimate of trade’s impact on U.S. income inequality, it found that using the model’s own conservative assumptions, one third of the increase in U.S. income inequality from 1973 to 2011 – the Fast Track era – was due to trade with low-wage countries. The role of trade escalated rapidly from 1995 to 2011 – a period marked by a series of Fast-Tracked “free trade” deals – EPI found that 93 percent of the rise in income inequality during this period resulted from trade flows. Expressed in dollar terms, EPI estimates that trade’s inequality-exacerbating impact spelled a $1,761 loss in wages in 2011 for the average full-time U.S. worker without a college degree.
  

• Changes in technology or education levels do not fully account for American wage pressures. Some have argued that advances in computer technology explain why less technologically-literate American workers have been left behind, asserting that more education – rather than a different trade policy – is how America will prosper in the future. While more education and skills are desirable for many reasons, these goals alone will not solve the problems of growing inequality. First, as documented in a Federal Reserve Bank paper, inequality started rising as systematic U.S. trade deficits emerged, in the early Fast Track period, far before most workers reported using computers on the job. Second, college-educated workers have seen their wage growth stagnate, even in technologically sophisticated fields like engineering. Thus, addressing trade policy, not only better educating American workers, will be an essential part of tackling rising income inequality.

U.S. Workers Should Not Be Pitted against Child Labor in Vietnam

by Global Trade Watch intern Allie Gardner

You’ve likely heard about the proposed Trans-Pacific Partnership (TPP), a sweeping deal under negotiation that would expand the North American Free Trade Agreement (NAFTA) model of trade across the Pacific.  And you probably know of the damaging effects the TPP would have on American jobs, public health, food safety, and Internet freedom.  But have you heard what the TPP would mean for labor rights? 

Vietnam, one of the countries negotiating the TPP, is notorious for its labor rights abuses.  Today, the Department of Labor issued a report declaring Vietnam as one of just four countries in the world that uses both child labor and forced labor in the apparel sector.

Through the use of such unethical labor practices, in addition to union repression and abysmal wages, Vietnam has been able to keep its production costs low. Under the TPP, U.S. businesses and workers would be forced to directly compete with Vietnamese firms on this uneven playing field.

A report last year by the Worker Rights Consortium found the Vietnamese apparel industry guilty of “the trafficking of persons as young as twelve years old from rural areas to work in ‘slave labor factories’… in Ho Chi Minh City.”  In another recent report on Vietnam, the International Labour Organization revealed that more than nine out of ten Vietnamese factories it audited were violating the legal overtime limit for workers, who still did not earn a living wage. The average minimum wage in Vietnam is 52 cents per hour, half of the average minimum wage in China

Given Vietnam’s labor abuses, in addition to human rights violations such as an increased crackdown on political dissidents, voices ranging from the Washington Post editorial board to Human Rights Watch have lambasted the Obama administration’s plan to sign the TPP with Vietnam.  

You can add your voice to this chorus of support for labor and human rights: ask your congressional representatives to say no to Fast Tracking the TPP. Tell them that U.S. workers should not be pitted against workers in Vietnam whose basic rights are being violated.

While telling Congress to say no to unfair trade, you can also say yes to fair trade. Tomorrow is “Fair Tuesday,” an opportunity to support workers by buying fairly traded products that respect their rights.  Because the apparel and textile industries are part of buyer-driven commodity chains, consumers have the power to influence production practices by selectively buying from only those brands and companies that choose to treat their workers well. 

Just as consumer activism means telling companies we do not support unethical labor practices, political activism means telling Congress that we do not support trade deals with countries in which such labor abuses are rampant.  As this year’s holiday shopping season gets underway, say yes to workers’ rights by saying no to the TPP. 

Activists Worldwide Rally Against the TPP

While leaders from the 12 countries negotiating the controversial Trans-Pacific Partnership (TPP) agreement met around the margins of the Asia-Pacific Economic Cooperation (APEC) summit in China to discuss the agreement, activists and civil society from across the globe decided to stage some events of their own.

Throughout the week, rallies, creative actions, meetings, and town halls were planned in a number of countries to draw attention to the secret deal that threatens to limit domestic policies that promote food safety, access to medicine, internet freedom, and environmental protection. The deal would also empower corporations to sue governments in extrajudicial foreign tribunals, challenging public interest laws that they claim frustrate their expectations. (And that’s just what we know based on leaked texts, because the negotiations are taking place entirely in secret).

 

 Over 700,000 petitions against Fast Track are delivered to U.S. Congress

In the United States, a broad coalition of labor unions, environmental, consumer, faith, online, and other groups assembled on Capitol Hill to deliver 713,674 petition signatures opposing “Fast Track,” the Nixon-era procedure that would empower President Obama to sign the deal before Congress is able to vote on it. Corporations are trying to revive Fast Track to railroad the TPP through Congress, as it would greatly limit lawmakers’ oversight over the content of the agreement by only allowing 20 hours of debate and forcing an up or down vote (with no opportunity for amendments).

The groups also launched an online campaign resulting in thousands of calls and hundreds of thousands of e-mails to Members of Congress urging them to vote “No” on Fast Track. Across the country, 20 rallies and town halls brought the anti-Fast Track message to lawmakers’ home districts.

  Thousands protest against the TPP in New Zealand

More than 10,000 New Zealanders took to the streets in 17 locations to protest the TPP, gaining national news attention and social media buzz, and pushing the #TPPANoWay hashtag to number 2 worldwide. Protesters were joined by lawmakers from a number of political parties, including leaders from the Green Party and Labour Party. Participants rallied against the secrecy of the negotiating process and TPP's inclusion of the controversial Investor-State Dispute Settlement (ISDS) mechanism, among other issues.

Meanwhile in Japan, 50 activists staged an action outside of Prime Minster Shinzō Abe’s official residence in opposition to the TPP. More than 100 individuals representing farmers, labor groups, consumer organizations, medical advocates, lawyers, and university professors met with Japanese lawmakers to discuss concerns related to the TPP.

A number of flash mobs were organized around Australia. Opposition to the TPP was heard in Sydney, Canberra, Perth, Hobart, Adelaide, and Melbourne. A few days later, concerns about the TPP were represented during G-20 educational forums and protests which attracted thousands.

    Australian protestors rally against the TPP in Perth, Hobart, and Sydney

While negotiators and corporate advisors are hiding their agenda in confidential documents, activists worldwide are spreading their concerns on the Internet, Twitter, Facebook, and e-mail blasts. While leaders and trade ministers are meeting behind closed doors in undisclosed locations, thousands of citizens are responding by gathering on the streets, in libraries, town halls, and their lawmakers’ offices.

The message of citizens across the globe is clear: we are not willing to accept a "trade" deal negotiated in secret in the interest of corporations and at the expense of our rights to safety, democracy, and health.  

A Letter to Fair Trade Activists: While They Play Poker, Let’s Play Chess

Is President Obama really going to sell us out on trade? Did Sen. McConnell have a full or half smile in the last press conference where he talked about Fast Track? Is Rep. Boehner really going to have a showdown with President Obama over immigration and how will that impact Fast Track? What about the news stories stating that TPP will be signed next month? Oh, and how do the XL pipeline and deal with China on carbon emissions factor in?

Comrades, don’t let the results of the elections, and the political posturing that’s happened since, drive you crazy, distract you, or cause you to lose hope. We have a path to victory! Democrats lost control of the Senate, but we did not lose control over our campaign to stop corporate-driven, job-offshoring, democracy-stifling “free trade” agreements by stopping President Obama from getting Fast Track trade authority. In fact, we have a chance to bury Fast Track once and for all.

Don’t mistake my resolve and optimism as a suggestion that our victory is inevitable. Nothing can be further from the truth. We’re going to have to dig deep and fight harder than we ever have. There’s a giant corporate lobby fighting for Fast Track because they want the Trans-Pacific Partnership (TPP) more than they’ve wanted any other trade deal. All their hopes and dreams for a global race to the bottom are wrapped up in the TPP. I live in Washington, D.C. and see the lobbying firsthand. Our opponents are out in full force. But over the past two years I’ve seen a bigger force. I’ve seen the power of us.

Truth be told, President Obama could have had Fast Track a long time ago. But we’ve been on the case day in and day out and we’ve stopped Fast Track thus far. This past Saturday, November 15, marked the one year anniversary of the game-changing letter to President Obama that Reps. Rosa DeLauro and George Miller released in which 151 Democratic members of the House of Representatives stated that, “…we will oppose ‘Fast Track’ Trade Promotion Authority or any other mechanism delegating Congress’ constitutional authority over trade policy that continues to exclude us from having a meaningful role in the formative stages of trade agreements and throughout negotiating and approval processes.” And just three days prior, on November 12 a block of Republican members of the House of Representatives sent their own letters voicing their opposition to Fast Track to President Obama. Can you believe that it’s already been a year?! Our work together has been extraordinary, truly. We’ve been steady and consistent and we surely can’t stop and won’t stop now.

While the President and some congressional leaders sit in backrooms on Capitol Hill playing poker with the lives of over 800 million people across the world, let’s play chess. The fight to stop Fast Track has always been and will continue to be won or lost in the U.S. House of Representatives. Learning about the history of Fast Track will give you insightful perspective. Above all, don’t let the opposition distract us from our strategic path to victory. The corporate lobby is hard at work spinning a narrative of the inevitability of Fast Track because Republicans gained control of the Senate. That’s simply not reflective of reality. They’re trying to psych us out. In fact, here’s what Lori Wallach thinks:

“…a close look at the interplay of the actual politics and policy on Fast Track and the TPP show that the GOP election sweep may, counterintuitively, actually not promote the corporate trade agenda.”

Our strategy must remain sharp and vision focused on stopping Fast Track in this current Lame Duck session of Congress and in 2015 by demanding that our representatives vote NO on Fast Track. House, House, House!

Over the past few years, I’ve had the pleasure and honor of working with activists from all over the country. I’ve been lucky to reconnect with folks who were a part of the historic Battle in Seattle and Free Trade Area of the Americas (FTAA) protests. Wow, we’ve been at this a long time! But back to my point, the World Trade Organization protests in Seattle in 1999 and the FTAA protests in Miami in 2003 remind us that we indeed do have the power to shut these “free trade” agreements down! But here’s the thing, we don’t need another Seattle to stop the TPP and Trans-Atlantic Free Trade Agreement (TAFTA). All we have to do is stop Fast Track. That’s our greatest contribution to the international campaign to stop the TPP and TAFTA. So, keep up the great work!

Gather your comrades, build your resources, stay focused on the House of Representatives and steel yourself for the fight of a lifetime. Stopping Fast Track and the Trans-Pacific Partnership is so much more than a victory for fair trade. Stopping Fast Track now is about putting business-as-usual to rest and building a space for us to shape the future and world we all want to live in. Almost every issue that we care about (good-paying jobs, food safety, access to affordable medicines, environmental protections, Internet freedom, democracy, workers’ rights and much more) will be significantly negatively impacted if Congress gives President Obama the authority to ram TPP through congress and down the throats of people across the world.

Ring the alarm, my friends! It’s time and this time is ours. Stay strong. Keep focused. Stop Fast Track!

In solidarity,

Alisa

P.S. Help spread the word! Share this great new video about the dangers of the TPP and tell everyone you know about www.ExposeTheTPP.org. It’s up to us!

176 Million Workers Call to Stop TPP Negotiations

Opposition to the Trans-Pacific Partnership (TPP), the controversial trade pact being secretly negotiated between 12 Pacific Rim nations, continues to balloon. This week 176 million workers from the world’s largest trade union added their voice to the growing list of organizations and individuals speaking out against the trade pact.

On Tuesday, the International Trade Union Confederation (ITUC) released a statement calling on governments to halt TPP negotiations. The ITUC’s opposition to the TPP is significant not only because of the union's size, but also its breadth of representation: the ITUC has 325 affiliates in 161 countries and territories, including major labor unions in 9 of the 12 TPP countries.

Sharan Burrow, ITUC General Secretary, explained the confederation's declaration of TPP opposition: “This secretive trade deal is good for some multinational corporations, but deeply damaging to ordinary people and the very role of governments. Corporate interests are at the negotiating table, but national parliaments and other democratic actors are being kept in the dark. What we do know, much of it through leaks, is that this proposed deal is not about ensuring better livelihoods for people, but about giving multinational companies a big boost to profits. Governments should shut down the negotiations, and not re-open them unless they get genuine and transparent public mandates at home that put people’s interest in the centre.”

ITUC's concerns are widely shared: the pact is being negotiated in secret, excluding the input of civil society, experts, and lawmakers, while providing significant access to corporate interests. Also addressed in ITUC's statement is the TPP's inclusion of investor-state dispute settlement, a provision which empowers corporations to "sue" national governments before extrajudicial tribunals and demand compensation for "expected future profits" if they feel a country's domestic policies have undermined special rights for foreign firms. The statement also mentions that the TPP would likely increase the cost of life-saving medicines (a worry validated by the recent leak of the Intellectual Property chapter).

Despite these concerns, TPP negotiators are moving ahead quickly to try to finish the beleaguered deal. Earlier this week, TPP country leaders met around the margins of the Asia-Pacific Economic Cooperation (APEC) forum to discuss the TPP. U.S. President Obama urged leaders to work to "break some of the remaining logjams" of the agreement. Those "logjams" include environmental protections, policies ensuring affordable medicine, and safeguards on sovereignty and democracy.

While negotiators continue to miss deadlines to close the deal, opposition continues to grow among labor unions, activists, lawmakers, environmental advocates, consumer organizations, economists, and a wide-array of other individuals and groups. Negotiators and governments should heed ITUC's call, halt the TPP negotiations, and take a moment to reflect on exactly what why there is so much disapproval of the TPP.  

What the 2014 Election Results Mean for Trade Policy

Fast Track’s Chances Diminished by GOP Senate Sweep; Obama Flexibility on Japan Agriculture Market Access in TPP Reduced; Bipartisan Campaigning Against Status Quo Trade Policy Heightens Public Awareness

The GOP takeover of the U.S. Senate probably reduces the chances that President Barack Obama gets Fast Track at all before his presidency is over or that a deal is completed on the Trans-Pacific Partnership (TPP). There has been a major corporate PR campaign to push the opposite narrative. However, a close look at the interplay of the actual politics and policy on Fast Track and the TPP show that the GOP election sweep may, counterintuitively, actually not promote the corporate trade agenda.

Fast Track: The issue is not who is Senate Majority leader. The fight over trade authority is always won or lost in the U.S. House of Representatives. Recall that second-term Democratic President Bill Clinton lost a bid for Fast Track in 1998 in the GOP-controlled House with 171 Democrats and 71 GOP members voting “no.” (Clinton had Fast Track for only two of his eight years. Indeed, in the past two decades, the only president to obtain Fast Track was President George W. Bush, and winning that five-year grant required a two-year effort at the start of Bush’s first term and a lot of political capital, after which Fast Track passed by one vote in a GOP-controlled House in 2002.)

The reason that the GOP controlling the Senate could make Fast Track’s passage less likely is related to who will now be writing a trade authority bill. The old Fast Track trade authority mechanism faces a significant bloc of GOP House opposition and virtually no House Democratic support. Outgoing Senate Finance Committee Chairman Ron Wyden (D-Ore.) had undertaken an inclusive process to get input to write his own version of trade authority, which he dubbed Smart Track. That process and its outcome could have broken the bipartisan House opposition to the old Fast Track system.

But neither incoming Finance Committee Chair Orrin Hatch (R-Utah) nor the likely GOP Ways and Means Committee leader supports major changes to the old Fast Track authority delegation process. Indeed, the Camp-Baucus-Hatch bill to establish trade authority was finally introduced in January 2014 only because GOP Finance and Ways and Means leaders opposed even modest changes to the actual authority delegation process from the 2002 bill. Changes to the actual terms delegating congressional authorities are also opposed by the business lobby. Nor do Hatch or the Ways and Means GOP leaders have the inclination or the relationships to widen the base of support for a bill.

But altering the way in which Congress’ authority is delegated, to provide Congress with a more fulsome role throughout the process and with more accountability over negotiators, is necessary to build bipartisan House support for a new delegation of trade authority. Updates to negotiating objectives or the level of transparency required cannot overcome the issues at the core of the House allergy to Fast Track.

A significant bloc of House GOP does not want to delegate more power to Obama, especially as the GOP has been attacking him as the “imperial president” who grabs legislative authority for his own. Tea party activists oppose Fast Track per se and anything that empowers Obama, which leaves GOP lawmakers who support Fast Track exposed to the dreaded tea party primary threat. To make political matter worse, House GOP lawmakers know that even if the GOP votes were available to pass Fast Track on a party line vote, almost no Democrats will vote to give their own president such authority, so any fallout from future trade pacts would be owned solely by the GOP.

As a policy matter, many GOP conservatives think the lump sum delegation of various authorities granted to Congress in the Constitution busts vital checks and balances. (It empowers a president to “diplomatically legislate” by negotiating binding non-trade terms to which U.S. law must be conformed; to sign and enter into a trade pact before Congress approves it; to write legislation not subject to committee mark-up and force a vote on it within 90 days of submission; and to pre-set the rules for floor consideration.)

That is why, when Senate Majority Leader Harry Reid (D-Nev.) indicated no floor time would be provided for Fast Track this year, the Camp-Baucus-Hatch Fast Track bill (introduced Jan. 9, 2014) was already dead on arrival in the House:

• There were literally only a handful of House Democrats who supported the bill: eight out of 201 members. And three of those eight conditioned their “yes” votes on the bill also extending Trade Adjustment Assistance (TAA), which Hatch viscerally opposes.  

• The House GOP leadership could not count more than 100 members as “yes” votes on the Camp-Baucus-Hatch bill. They had a bloc of members with solid “no” votes – some of whom signed letters against Fast Track in 2013 – and a large bloc who could not commit to vote “yes.” That is why the House GOP leadership never marked up the Camp-Baucus-Hatch bill or moved it toward a floor vote. And that is why House Speaker John Boehner (R-Ohio) said in May he needed to see 50 firm Democrat votes before he would move the bill.

Reid’s announcement in January certainly made it more certain that the Camp-Baucus-Hatch Fast Track bill would not be moving. But even without Reid’s opposition, Boehner could never find the 50 Democrats he needed to make up for the GOP members he could not count as “yes” votes on the Camp-Baucus-Hatch bill.

And, the House election results do not appear to fix Boehner’s math problem. To fully assess what the new House makeup means for Fast Track, the dust will have to settle on the results to see whether it is a wash, slightly harder for Fast Track to pass (e.g., if a number of Fast Track-opposing tea party GOP candidates replaced GOP members who were for Fast Track) or slightly easier (e.g., if a lot of “Wall Street” GOP candidates replaced no-on-Fast-Track Democrats.)

One more way in which GOP control of the Senate complicates the path for trade authority: Hatch also hates TAA while Wyden supported expanding it. Adding TAA to the old Fast Track process does not add new Democratic support, but not having TAA could result in literally no House Democratic support. For instance, the House’s leading Democratic Fast Track boosters, U.S. Reps. Ron Kind (D-Wis.) and Gregory Meeks (D-N.Y.) – among the eight House Democrats who supported the Camp-Baucus-Hatch Fast Track bill – said absent a TAA extension, they would not support it.

Thus, not having Wyden as Senate Finance Committee chairman actually decreases the chances that Obama will ever get a delegation of trade authority. But that would not be such a shocker anyway. Since Congress woke up to what Fast Track really means with the Fast-Tracked passage of the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) almost 20 years ago, Congress has allowed Fast Track to be in effect for only five of the 20 years.

TPP: The election results may also complicate Obama’s goal of signing a Trans-Pacific Partnership (TPP) deal. As the TPP misses yet another do-or-die deadline – this time a November date announced by Obama in June that was related to the imminent Asia-Pacific Economic Partnership (APEC) meeting – to get a deal, any deal, the administration might be ready to step back from its position regarding Japan and agriculture market access in the TPP. Except, the demand that the TPP include the zeroing of all agricultural tariff comes mainly from the Republicans, as does the call to throw Japan out of the TPP talks unless Japan concedes to this demand.

Both Parties Competed to Highlight Rejection of Unfair Trade in Competitive Races, Heightening Public Awareness and Further Complicating Obama’s Bid for Fast Track: Analysis of the most-watched races of the 2014 elections reveals bipartisan competition to align campaign positions with the American public’s opposition to current U.S. trade policies and the job offshoring they cause. A raft of ads spotlighting the damage caused by status quo trade policies has heightened constituents’ anger about damaging trade deals and the expectation that their newly elected representatives will reject the administration’s attempt to Fast Track more of the same deals.

Some of 2014’s most high-profile races featured both candidates competing to portray themselves as the greater opponent of unfair trade. Republican challengers sought to outdo the fair-trade voting records of Democratic incumbents by proclaiming their own rejection of existing Free Trade Agreements (FTAs), while the incumbents touted their votes against the FTAs and their opposition to Fast Track.

Incumbents who could not themselves claim a fair trade record still campaigned with the trade frame by attacking their opponents on offshoring, voicing opposition to tax policies that incentivize offshoring or citing instances of being “tough on China.” Even Senate Minority Leader Mitch McConnell (R-Ky.), with a 100 percent record of supporting unfair trade deals, was obliged to create and air an ad claiming he “fought against unfair foreign trade” after multiple ads attacked him for supporting damaging trade deals and costing American jobs.

Closely watched races in which both candidates vied to portray themselves as a stronger opponent of unfair trade included:

• Minnesota’s 8^th Congressional District – Nolan vs. Mills: In the closely fought race for Minnesota’s eighth district seat – one of the most competitive races in this election cycle – incumbent U.S. Rep. Rick Nolan (D-Minn.) turned around a likely GOP pick-up after vying with Republican Stewart Mills to declare greater opposition to status quo trade. This race spotlights the difficulty Obama’s quest for Fast Track authority will face in the next Congress, as conservative GOP members campaigned against the trade status quo and thus will be expected by their voters to stop more-of-the-same trade policies. In one ad, Mills tried to convert popular rejection of existing FTAs into rejection of incumbents, blaming “politicians like Rick” for “trade deals that reward outsourcers, while killing Minnesota jobs.” Nolan, who was not in office during the votes for any existing FTAs, touted his own opposition to unfair deals. Nolan’s campaign website stated that he “has fought against ‘fast-tracking’ the ongoing TPP trade negotiations, and will continue to stand up for fair trade.” Nolan was one of 151 House Democrats to sign a letter last year against Fast Tracking the TPP. Voters opted for Nolan, who trumped Mills.

• U.S. Senate in Michigan – Peters vs. Land: In the competitive Michigan U.S. Senate race between U.S. Rep. Gary Peters (D-Mich.) and Terri Lynn Land (R), both candidates competed to make known their opposition to unpopular trade deals. Competing against Peters’ 100 percent record of opposition to FTAs, Land sought to flaunt her own anti-FTA position, stating in an ad, “My plan will save Michigan jobs by ending unfair foreign trade deals and developing new agreements that open up markets for Michigan exports.” Michigan has lost more than 250,000 manufacturing jobs (about one out of every three) since NAFTA was enacted. Peters’ campaign website touted his own fair trade record, stating, “He has stood up for Michigan manufacturers and opposed any new trade deal that does not require our foreign trading partners play by the same rules as American companies.” In the end, Peters beat Land handily although the race had long been deemed a tossup.

• U.S. Senate in Kentucky – McConnell vs. Grimes: Trade loomed large in this headline-grabbing race between McConnell and his Democratic challenger Alison Lundergan Grimes. The Senate Majority PAC launched an ad that showed video footage of McConnell expressing support for NAFTA, and stated, “Mitch McConnell’s been tragically wrong about foreign trade deals. They’ve cost America over half a million jobs.” Another Senate Majority PAC ad criticized McConnell for “pushing foreign trade deals that send Kentucky jobs to new homes far away.” As his numbers plummeted in the early fall, McConnell’s campaign ultimately was forced to respond by adopting the same frame used against him, claiming in an ad that McConnell “fought against unfair foreign trade,” despite having cast 20 out of 20 votes in favor of unfair trade since 1991. McConnell beat Grimes after running against his own voting record. 

A Trade Storm Is Brewing

At the beginning of the year, we warned you about the upcoming trade tsunami. Well hold on to your hats everyone, because another “trade” storm is heading our way.

Trans-Pacific Partnership (TPP) negotiators are meeting in Australia this month and are aiming to finish the massive 12-country “trade” agreement.

Despite mounting evidence that the TPP should not be completed — including the leak of another part of the top-secret text earlier this week — President Barack Obama wants the TPP done by November 11. That is when he will be meeting with other TPP-country heads of state in China at the Asia-Pacific Economic Conference.

With the TPP’s threats to food safety, Internet freedom, affordable medicine prices, financial regulations, anti-fracking policies, and more, it’s hard to overstate the damage this deal would have on our everyday lives.

But the TPP isn’t the only threat we currently face. We are also up against the TPP’s equally ugly step-sisters: TAFTA and TISA. And Obama wants to revive the undemocratic, Nixon-era Fast Track trade authority that would railroad all three pacts through Congress.

The Trans-Atlantic Free Trade Agreement (TAFTA) is not yet as far along as the TPP, but TAFTA negotiations recently took place in Washington, D.C., and more are set for a few weeks from now in Brussels. The largest U.S. and EU corporations have been pushing for TAFTA since the 1990s. Their goal is to use the agreement to weaken the strongest food safety and GMO labeling rules, consumer privacy protections, hazardous chemicals restrictions and more on either side of the Atlantic. They call this “harmonizing” regulations across the Atlantic. But really it would mean imposing a lowest common denominator of consumer and environmental safeguards.

The Trade in Services Agreement (TISA) is a proposed deal among the United States and more than 20 other countries that would limit countries’ regulation of the service sector. At stake is a roll back of the improved financial regulations created after the global financial crisis; limits on energy, transportation other policies needed to combat the climate crisis; and privatization of public services — from water utilities and government healthcare programs to aspects of public education.

TPP, TAFTA and TISA represent the next generation of corporate-driven “trade” deals. Ramming these dangerous deals through Congress is also Obama’s impetus to push for Fast Track. Fast Track gives Congress’ constitutional authority over trade to the president, allowing him to sign a trade deal before Congress votes on it and then railroad the deal through Congress in 90 days with limited debate and no amendments. Obama opposed Fast Track as a candidate. But now he is seeking to revive this dangerous procedural gimmick.

Because of your great work, we’ve managed to fend off Fast Track so far. This time last year, the U.S. House of Representatives released a flurry of letters showing opposition to Fast Track from most Democrats, and a wide swath of Republicans. This is something the other side was not expecting, and they were shocked. We won that round, but Obama and the corporate lobby are getting ready for the final push.

Because Fast Track is so unpopular in the House, Speaker John Boehner has a devious plan to force the bill through Congress in the “lame duck” session after the November elections. We need to make sure our “ducks” are in a row before that.

Some members of Congress are working on a replacement for Fast Track. U.S. Sen. Ron Wyden (D-Ore.) says he will create what he calls “Smart Track.” It is not yet clear if this will be the real Fast Track replacement we so desperately need, or just another Fast Track in disguise.

Sen. Wyden will want to be ready to introduce his Smart Track bill right as the new Congress starts in January 2015. This means we have only a couple of months left to make sure his replacement guarantees Congress a steering wheel and an emergency brake for runaway “trade” deals.

With all these deadlines drawing near, it’s clear that a knock-down, drag-out fight is imminent. But we will be ready. The TPP missed deadlines for completion in 2011, 2012, and 2013 — if we keep up the pressure, we can add 2014 to that list as well. That’s why there will be a TPP/TAFTA/TISA international week of action Nov 8-14 — more details coming soon!

The TPP Would Enroll More Online Spies

By Alberto Cerda, founding member of the Chilean organization Derechos Digitales (Digital Rights)

This article was published this morning (in Spanish) on the Derechos Digitales website here: https://www.derechosdigitales.org/7990/el-tpp-recluta-mas-espionaje-electronico/.

As if we don’t have enough spying on Internet users, the proposed Trans-Pacific Partnership (TPP) includes draft rules that would increase significantly the role of online service providers in keeping an eye on their users, under the pretext of combatting copyright piracy. Even if you are not an infringer, your Internet service provider (ISP) will be watching you, just in case.

The TPP is a so-called trade agreement being negotiated by the U.S. and eleven countries around the Pacific Rim. The TPP would establish binding rules for domestic policies in several fields, from agricultural goods and services to investment and public procurement. The agreement also includes new rules for enforcing intellectual property on the Internet, modeled to some extent on current U.S. law, but in an unbalanced way that fails to incorporate crucial safeguards or allow for policy evolution in the digital environment.

Draft rules under negotiation would impose on Internet service providers a legal obligation to fight against online copyright infringement. This obligation is embodied in several provisions, which would require, for example, ISPs to communicate to their users any supposed infringement committed through their accounts, take down from the Internet information that supposedly infringes on copyright, and collect information that allows identification of users that supposedly have infringed the law.[1]

For most non-American users, these rules are new and raise a number of significant concerns about their potential abuse and misuse by the government, corporations and the big content industry.

For American users, these rules may look similar to the heavily criticized Digital Millennium Copyright Act (DMCA). But the difference is that these rules may go beyond current U.S. law – and as part of a trade agreement they would be much more difficult to overturn, because of being enforceable under international trade law – if U.S. citizens opposed the new rules, Congress wouldn’t be able to repeal them without exposing the country to possible trade sanctions.

Under current U.S. law, companies that provide Internet services are required to participate in enforcing copyright law or risk being held liable for their users’ infringement. This means that companies like AT&T, Comcast, Time Warner Cable and Verizon are required to help enforce the copyrights of the recording and motion picture industries, for example, against their own users who are purported to have infringed upon a copyright. The TPP would take this a step further by enrolling new groups to spy on us by collecting online data about their users.

First, the TPP includes provisions that would extend spying obligations not only to entities that provide Internet services, but to “any person,” thus, not only Internet-related companies would be required to enforce the law, but “any person,” whether human or otherwise.[2] Rights holders would likely interpret this obligation as applying to the manager of a free-wifi zone at Starbucks or your favorite neighborhood cafe, to public libraries and schools, as well as to that neighbor of yours who shares her wifi by keeping it accessible and open.

Second, TPP provisions do not seem to limit this spying to the Internet. Instead they refer to online providers,[3] which may extend the scope of the law to other digital networks, such as intranets and private networks. What does this mean? It means that not only ISPs would be spying on you by collecting user data to protect Hollywood’s copyrights, but also other providers of online services, like the private network you use at your workplace, at your university, or even at your kid’s school, even if those networks do not provide actual access to or from the Internet.

Although the TPP states that Internet service providers would not be required by law to “monitor” users, it encourages this practice.[4] Therefore, the TPP would leave open the door for private agreements between copyright holders (such as the Recording Industry Association of America and the Motion Picture Association of America) and Internet companies for enforcing the law against Internet users (for example, see the Center for Copyright Information).[5] This raises concerns about powerful content industry players working together to promote abusive practices to enforce their interests against supposed infringers, since, in order to prevent any liability, online service providers may collaborate with rights holders to enforce copyrights beyond what is required by the law.[6]

In sum, the TPP would impose new obligations for spying on Internet users under the guise of enforcing copyright. This should raise concerns not only among countries that currently lack such regulations, but also among U.S. citizens, because the TPP would expand the online spy network at home.

 

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[1] TPP, Intellectual Property [Rights] Chapter, Addendum III, number  4.

[2] TPP, Intellectual Property [Rights] Chapter, Addendum III, footnote 237.

[3] TPP, Intellectual Property [Rights] Chapter, Addendum III, footnote 237.

[4] TPP, Intellectual Property [Rights] Chapter, Addendum III, number 5.

[5] http://www.copyrightinformation.org/about-cci/

[6] TPP, Intellectual Property [Rights] Chapter, Addendum III, number 1.

Chamber of Commerce Uses “Weird Facts” to Claim a $106 Billion Trade Deficit Isn’t There

The Chamber of Commerce is a place of magic.  For its latest trick, the corporate alliance tried to make a $106 billion trade deficit disappear.

The Chamber took to its blog last week to highlight for readers “One Weird Fact About the Trade Deficit No One Has Noticed.”  Here’s the claimed “fact”: “in 2012 — for the 20 countries with which the United States has entered into a free-trade agreement (FTA) — the trade deficit vanished.”

A disappearing U.S. trade deficit with our FTA partners?  That’s not just weird – it’s incredible.  As in, not credible. 

Want to know why “no one has noticed” this oddity?  Because it didn’t happen. 

In 2012 the U.S. trade deficit with FTA partners topped $106 billion.  That includes trade in goods and services.  (If you just count goods, the deficit was $178 billion.) 

And that mammoth FTA trade deficit is not “vanishing.”  The estimated U.S. trade deficit with FTA partners in 2013 is exactly the same: $106 billion. 

Indeed, the aggregate U.S. goods trade deficit with FTA partners has actually increased by more than $147 billion since the FTAs were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $130 billion since 2006 (the median entry date of existing FTAs).

The Chamber goes on to claim, “The United States has recorded a trade surplus in manufactured goods with its FTA partner countries for each of the past five years.”  The opposite is true.  The U.S. has run a major trade deficit in manufactured goods with its FTA partners in each of the last five years.  The average FTA manufacturing trade deficit during this period exceeded $48 billion. Last year, it topped $51 billion.

How does the Chamber claim to not see glaring FTA trade deficits?  By using some “weird facts” of its own. 

The Chamber distorts the data by counting “foreign exports” as “U.S. exports.”  Foreign exports are foreign-made goods that pass through the United States without alteration before being re-exported abroad.  Along the way, they support zero U.S. production jobs.  And yet, the Chamber includes foreign-made exports alongside U.S.-made exports as if they had the same value for U.S. workers.

Doing so dramatically deflates the size of the actual U.S. trade deficit with FTA partners.  By errantly including foreign exports, the 2012 goods trade deficit with FTA partners can be made to look less than 40 percent of its actual size ($71 billion vs. the true deficit of $178 billion).  The distortion was even worse in 2013, when the actual FTA goods trade deficit was nearly three times as large as the distorted deficit with foreign exports included ($67 billion vs. the true deficit of $180 billion). 

The graph below shows how this single data trick allows the Chamber to claim that a $106 billion FTA trade deficit has disappeared.  As the administration contemplates expanding the old deficit-ridden FTA model via the controversial Trans-Pacific Partnership, it seems that we should be looking at the actual evidence from past FTAs, not illusions. 

A footnote on data availability: services data are not available for some FTA countries, particularly the smaller economies.  The missing data were not included in either the Chamber’s figures or those reported above.  Also, while the Chamber did not report figures for 2013 due to a claimed lack of available services data for that year, 2013 services data is actually available for all but two of the FTA partners for which 2012 data were available.  For those two countries, services data for 2013 has been extrapolated based on observed growth trends.

Sachs on TPP: "This is a NAFTA Treaty Writ Large"

"These are largely industry- and lobby-driven activities. They are not yet in any way proved to be in the interest of American people, and this is a matter of significant concern.  I don’t understand how something of such vast significance for billions of people could even presume to be treated in this manner." 

That's the take on the controversial Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA) from Jeffrey Sachs -- prominent economist, Columbia University professor, and Earth Institute director.

Prof. Sachs lambasted the proposed deals on Wednesday at a Forum on Free Trade Agreements, hosted by Congresswoman Rosa DeLauro. Other speakers who criticized the pacts and called for a new trade agreement model included Maine Attorney General Janet Mills, K.J. Hertz of AARP, Jared Bernstein of the Center on Budget and Policy Priorities, Thea Lee of the AFL-CIO, and Debbie Barker of the Center for Food Safety.  

Check out this video of their incisive critiques of hte TPP and TAFTA.  Excerpts from Prof. Sachs' remarks follow. 

  

 Excerpts from Prof. Jeffrey Sachs on the TPP and TAFTA (also known as TTIP): 

TRANSPARENCY: The fact that the public is not engaged means that we should worry because we do know that when things are managed in secret, as these negotiations have been, it’s the organized and powerful interests that by far dominate the proceedings. These are largely industry- and lobby-driven activities. They are not yet in any way proved to be in the interest of American people, and this is a matter of significant concern.  I don’t understand how something of such vast significance for billions of people could even presume to be treated in this manner. One could imagine that negotiations over very specific tariff rates or very specific numerical clauses in some of these chapters could be held privately. But the idea that the main text around issues as broad as investor protection, dispute settlement, taxation, financial flows, intellectual property, would be done secretly, is shocking actually to me. But we’re talking about the basic rules of the international economy for the three major regions of the world. There is no reason in the world I can see for this text not to be public, not to be publically vetted, and not to be updated over time.

WRONG TRADE AGREEMENT MODEL: [W]hen President Obama talks about TPP and TTIP being 21^st century trade agreements, the starting point should be that the phenomena of globalization more generally, the extent of financial crises, the growing environmental catastrophe worldwide of climate change and loss of biodiversity, the crises of international disease (such as we now have with Ebola in West Africa) need to be not only considered as footnotes. And they’re not even that in any way. They need to be in the forefront of our international economic relations…And in that sense I can’t support either of these negotiations with what I see now. I think that they would distract us from the more important global issues. I don’t think they rise close to the standard of being 21^st century trade and investment agreements, not even close. They are very much 20^th century agreements which were already out of date by the time they were negotiated. This is a NAFTA treaty writ large, or this is the same negotiation that we’ve had in many other cases.

TPP AND TTIP AS INVESTEMT PROTECTION AGREEMENTS, NOT TRADE PACTS: [T]these proposed agreements are mostly investor protection agreements, rather than trade agreements. There are trade elements in them, but this is mostly about investor protection: investor protection of property rights of investors, of prerogatives of investors, of IP of investors, of the regulatory environment of investors, and so forth. Recognizing that, we have some reasons to support some of these issues, but a lot of reasons for worry, because it’s not true that everything that is in the investor’s interest is in the worker’s interest. Its’ not true that everything that’s in the investor’s interest is in the broad interest of the American people or the people in host countries where the American investment may be going, or in the same way, investment that could be coming into this country. So we’re talking about mainly investment rules. And trade, which is already quite liberalized in the straightforward trade manner, doesn’t change all that much from what we know of these treaties. These are basically not trade agreements. They are investment agreements.

INVESTOR-STATE: [T]he whole issue of investor-state dispute settlement:  to my mind, it is quite alarming that the administration seems until this day to be pushing something which more and more observers, participants, legal scholars view as out of control…And the problem with this is that it creates an extra-legal venue for arbitration that has proven in many investment treaties in recent years to be highly deleterious for basic government regulatory processes and especially around issues of health, safety, environment, and other issues. The mechanism proposed here which is already part of many bilateral treaties and some multilateral investment treaties — is giving more and more power to investors to challenge general government regulatory actions. Not breach of specific investment contracts, but general regulatory and legislative actions on the claim that those general regulatory or legislative actions are against the interests of the investors and somehow therefore violate the implicit standards or guarantees that these investors have vis-à-vis the host countries. In other words, standards of general applicability against smoking or for environmental protection, or for taxation of natural resources and so forth are now coming under challenge in these investor-state dispute arbitration panels and forcing governments — the host governments — to back down or rescind or, in the face of a lost arbitration, to cancel laws of general applicability, and therefore to lose the sovereign right to pursue national interest at the face of investor interest. …As far as I know the United States government continues to press this clause today.  I regard that alone as reason to oppose both of these treaties. If this remains in place, it is absolutely in the wrong direction. And, these clauses have proven to be increasingly dangerous and I’ve seen publicly no response to this at all. 

TPP: Limiting the U.S. Government’s Ability to Control Rising Drug Costs

This is the third post in a three-part series on how the Trans-Pacific Partnership (TPP) could increase medicine prices in the United States.  Click here for the first post's introduction to the problem, and here for the second post's outline of new rights that the TPP would give to Big Pharma. 

A leaked draft TPP annex with the Orwellian title “Transparency and Procedural Fairness for Healthcare Technologies” would set broad limits on governments’ prerogatives to negotiate or mandate lower drug prices, including for taxpayer-funded programs such as Medicare, Medicaid and veterans’ and military health programs. Pushed by U.S. negotiators, these proposed TPP rules would conflict with existing and proposed policies to reduce healthcare costs for seniors, military families and the poor.

Rolling back medicine cost savings for U.S. veterans:

The U.S. government uses automatic price reductions to secure lower drug costs for U.S. veterans who benefit from health programs administered by VA. U.S. law allows VA to access drug prices at 24 percent below average market prices, and requires drug companies to offer these reduced prices for VA-administered programs as a condition for their medicines being included in other government health programs.

However, this cost-saving mechanism could run afoul of the proposed TPP annex, which requires government drug reimbursements to be based on “competitive, market-derived prices,” or on a system that “appropriately recognizes[] the value” of the drugs. The government-mandated price-setting system for VA programs would be subject to challenge as not being “competitive” and “market-derived.” VA-secured prices that fall significantly below the prices of patented drugs also could be challenged under the TPP as not “appropriately recognizing” drugs’ value. These TPP provisions, if enacted, could expose the U.S. government to challenges before international tribunals for not rolling back policies that cut healthcare costs for veterans and taxpayers.

Threatening policies that make medicines more affordable for the poor:

U.S. federal and state governments currently use several methods to tamp down the prices of drugs provided to low-income families through Medicaid. For example, the U.S. federal government requires drug corporations, as a condition for having their drugs covered by Medicaid, to sign discount agreements that oblige the firms to provide the state and federal governments with rebates to lower the cost of the drugs. These rebates have resulted in a 45 percent reduction in Medicaid spending for brand-name drugs.

State governments can further cut costs by, for example, negotiating lower prices with drug companies in return for placing their medicines on a Preferred Drug List (PDL) – a list of medicines that the state’s Medicaid program will cover without requiring prior authorization from a doctor. States have calculated substantial cost savings from usage of PDLs: New York saved an estimated $381 million in one recent year, while Texas saved an estimated $115 million and Utah saved an estimated $434 million.

Such Medicaid cost containment measures could be challenged under the TPP. Leveraging the government’s buying power to set prices could be attacked as not being “market-derived” or as “appropriately recognizing” the value of patented drugs. Some argue that the TPP provisions would primarily target federal policies, while Medicaid is administered by state governments. But even if limited to federal policies, the pact’s proposed terms directly contradict Medicaid’s federal cost control efforts, such as requiring drug firms to sign discount agreements. And state-level tools like PDLs could still be challenged under the TPP as part of a program created and controlled by the federal government.

Challenging Obamacare cost reductions for seniors:

Before implementation of the landmark Patient Protection and Affordable Care Act of 2010, seniors faced a gap in Medicare drug coverage. After passing a given threshold of drug costs, Medicare beneficiaries went from having to pay 25 percent of a drug’s cost to having to pay 100 percent out of pocket, until reaching a second threshold at which Medicare again covered most costs. Closing this “doughnut hole” was a key objective of the Affordable Care Act, which required drug manufacturers to offer a 50 percent drug price discount to Medicare beneficiaries within the coverage gap if they wanted their drugs to continue being covered under Medicare. As a result of this discount and a gradual increase in Medicare coverage, Medicare beneficiaries within the coverage gap were only responsible for 47.5 percent of brand-name drug costs in 2013 and will be responsible for only 25 percent by 2020.

But under the TPP, the requirement for drug companies to halve the price of their drugs within the coverage gap could be challenged for neither reflecting “competitive market-derived” prices nor “appropriately recognizing[] the value” of patented drugs. The Obama administration’s TPP healthcare annex thus threatens the cost savings that the administration’s own signature health law has provided to seniors.

Chilling future reforms that could further reduce healthcare costs for retirees:

Governments in countries ranging from New Zealand to Japan have kept healthcare costs in check by leveraging the government’s large purchasing power for taxpayer-funded public health programs to negotiate lower drug prices with pharmaceutical corporations. In contrast, for Medicare, which covers more than 50 million Americans, the U.S. government is barred by law from directly negotiating drug prices with pharmaceutical corporations.

Many policymakers, healthcare professionals and even President Obama have called for changes to this law so that the government could ask drug companies to provide lower prices in exchange for getting subsidized access to millions of Medicare recipients. Other reform proposals, including legislation now pending, would have the federal government set maximum prices for drugs covered by Medicare (as it does for health programs provided to veterans) or require that drug companies provide drug rebates (similar to the rebates required under Medicaid). Indeed, the White House itself has proposed requiring drug companies to pay Medicaid-like rebates to providers for treating low-income Medicare beneficiaries. The administration estimates this would deliver $117 billion in savings over 10 years.

However, the TPP presents an obstacle to these proposals to control soaring Medicare costs. All of the above-mentioned policies involve direct government intervention in price setting, conflicting with the TPP requirement for market-derived prices, and inviting challenges for failing to “appropriately recognize” the value of patented drugs. 

Undermining drug discounts for underserved communities:

Under a program known as 340B, the U.S. federal government enables nongovernmental health centers – including migrant health centers, homeless health centers, children’s hospitals and family planning centers – to offer their diverse constituencies more affordable drugs. The federal government requires pharmaceutical firms to offer discounted drug prices to 340B-covered health centers via rebates, as a condition for having their drugs covered by Medicaid.

As a federally-run program that mandates below-market prices, the program could be challenged as a violation of the proposed TPP rules requiring drug prices to be market-derived or to reflect the value of patented drugs. In addition, the leaked TPP annex would require the U.S. government to allow pharmaceutical corporations to appeal drug pricing decisions such as the rebate amounts set under the 340B program, though they have very limited appeal rights for such decisions under U.S. domestic law. The TPP would thus give pharmaceutical corporations a new means of challenging 340B policies that reduce drug prices for underserved populations. 

TPP: Expansive Rights for Big Pharma, Expensive Medicines for U.S. Consumers

This is the second in a three-part series on how the Trans-Pacific Partnership (TPP) could increase medicine prices in the United States.  Click here for the first post's introduction to the problem. 

Leaked draft intellectual property texts for the TPP reveal broad monopoly protections for pharmaceutical corporations, which elevate the costs of medicines and medical procedures. Inserting these sweeping corporate privileges into the pact would undermine U.S. efforts to make healthcare more affordable.

Some of the leaked TPP monopoly protections for Big Pharma could require scrapping the Obama administration proposal to save more than $4 billion on biologic medicines. Biologics – the latest generation of drugs to combat cancer, rheumatoid arthritis and other diseases – are exceptionally expensive, costing approximately 22 times more than conventional medicines.

Under U.S. law, pharmaceutical corporations enjoy monopoly protections for biologic drugs, even in the absence of a patent, for a 12-year period of “exclusivity.” During these 12 years, the Food and Drug Administration is prohibited from approving more affordable versions of the drugs, inflating the cost of these life-saving medicines as pharmaceutical firms accrue monopoly profits.

To lower the exorbitant prices and the resulting burden on programs like Medicare and Medicaid, the Obama administration’s 2015 budget would reduce the exclusivity period for biologics from 12 to seven years. The administration estimates this would save taxpayers more than $4.2 billion over the next decade just for federal programs.

However, at the request of Big Pharma, U.S. trade negotiators are demanding the 12-year exclusivity requirement for biologics in the TPP. This would lock into place pharmaceutical firms’ lengthy monopolies here at home. That is, Obama administration negotiators would effectively scrap the administration’s own proposal to save billions in unnecessary healthcare costs and lock in rules that would forbid future presidents or Congresses from doing so.

Investor Privileges: Empowering Big Pharma to Directly Attack U.S. Health Policies

Another TPP text - the leaked draft investment chapter - reveals that the deal would grant foreign firms the power to skirt domestic courts, drag the U.S. government before extrajudicial tribunals, and directly challenge patent laws and medicine cost containment policies as violations of their new TPP foreign investor “rights.”

The tribunals, comprised of three private attorneys, would be authorized to order unlimited taxpayer compensation for domestic policies perceived as undermining pharmaceutical corporations’ “expected future profits.” Effectively, this system would elevate individual pharmaceutical firms to the same status as the countries that may sign the TPP, empowering such firms to privately enforce the public agreement.

Such extreme “investor-state” rules have been included in past U.S. “free trade” agreements, forcing taxpayers to pay firms more than $430 million for toxics bans, land-use rules, water and timber policies and more. Just under U.S. pacts, more than $38 billion is pending in corporate claims against patent policies, pollution cleanup requirements, climate and energy laws, and other public interest polices.

This includes a $500 million claim that U.S. pharmaceutical corporation Eli Lilly launched in 2013 against Canada’s legal standard for granting patents. The firm is demanding compensation because Canadian courts enforcing Canadian patent law ruled that two of Eli Lilly’s medicines failed to meet the Canadian standard to obtain a patent, which requires demonstrating a drug’s promised utility. This is the first attempt by a patent-holding pharmaceutical firm to use the extraordinary investor privileges provided by U.S. “trade” agreements as a tool to push for greater monopoly patent protections.

The TPP would vastly expand the investor-state threat to U.S. public health policies, given the thousands of corporations based in TPP countries that would be newly empowered to launch cases against U.S. laws on behalf of any of their more than 14,000 U.S. subsidiaries. 

Stay tuned for post #3 on yet another way that the TPP could limit the U.S. government's ability to control rising drug costs. 

TPP: The “Trade” Deal that Could Inflate Your Healthcare Bill

Much has been said about how the Trans-Pacific Partnership (TPP) threatens to raise medicine prices in TPP developing countries, thanks to the deal's proposed expansion of monopoly protections for pharmaceutical corporations.  

Less has been said about the proposed TPP rules that could increase medicine prices in the United States.  

Americans pay far more for healthcare than people in any other developed country, even though U.S. life expectancy falls below the average for developed countries. A major contributor to our bloated healthcare costs is the high prices for medicines in the United States. According to the Government Accountability Office, U.S. drug prices increased more than 70 percent faster than prices for other healthcare goods and services over 2006-2010. As a result, millions of Americans cannot afford the medicines they need to live healthy lives.

Soaring drug prices also drive up the amount that taxpayers must pay to fund public health programs such as Medicare, Medicaid and programs covering the U.S. military and veterans. Indeed, rising healthcare costs are the number one contributor to the U.S. government’s projected long-term budget deficits.

To try to combat the twin problems of unaffordable healthcare and unsustainable deficits, U.S. federal and state governments already use several tools to tamp down the cost of drugs – for Medicare, Medicaid and for military healthcare under TRICARE and the Department of Veterans Affairs (VA). Many more such cost containment policies have been proposed.

Yet, the TPP threatens to chill such proposals and even roll back existing policies to rein in exorbitant medicine prices. Leaked draft TPP texts – an intellectual property chapter, investment chapter and healthcare annex – contain expansive rules that would constrain the ability of the U.S. government to reduce medicine prices. Getting these terms into the TPP was a key objective of large U.S. pharmaceutical corporations that stand to reap monopoly profits from expansive patent terms and restrictions on government cost containment efforts. This incentive may explain why pharmaceutical corporations have lobbied Congress for the TPP more than any other industry.

The TPP’s threats to the affordability of U.S. healthcare have spurred major groups that have not traditionally taken part in trade policy debates to warn against the TPP’s provisions. For example, AARP – representing more than 37 million Americans over the age of 50 – joined unions and consumer groups in a November 2013 letter to President Obama to express “deep concern” that texts proposed for the TPP would “limit[] the ability of states and the federal government to moderate escalating prescription drug, biologic drug and medical device costs in public programs.” The groups concluded that the TPP could “undermine[] access to affordable health care for millions in the United States and around the world.”

Stay tuned for post #2 on specific TPP threats to affordable U.S. healthcare: Expansive Rights for Big Pharma, Expensive Medicines for Consumers.

Corporate America’s Mysterious Affinity for the Number 700,000

The Chamber is at it again.  As negotiations drag and support flags for the controversial Trans-Pacific Partnership (TPP), the U.S. Chamber of Commerce has come up with a new number to sell the controversial deal to a skeptical Congress and U.S. public: 700,000. 

That’s the number of U.S. jobs that the corporate alliance claims could be created by the sweeping pact opposed by a diverse array of members of Congress, small businesses, and labor organizations for its threats to, well, U.S. jobs. 

How did the Chamber get this number?  They don’t say. 

The Chamber blog post proclaiming the six-digit figure simply says it is “based on the methodology and outcomes” of a Peterson Institute study that used outsized assumptions to produce miniscule projections for the TPP’s economic impact.  Under the most optimistic scenario the authors could envision, the study projected a 0.13 percent increase in U.S. GDP under the deal –- a fraction of the estimated GDP contribution of the latest version of the iPhone. 

But the Peterson Institute study did not project what this tiny economic impact would mean for jobs.  It is unclear how the Chamber pulled a jobs number from a study that did not produce a jobs number. 

We called them to ask.  We were told that no one was there who could answer our question.  Multiple calls and emails later, and we still have no response from the Chamber to solve the mystery of the unsubstantiated statistic.

Here’s one theory on the steps the Chamber took to derive its estimate of the TPP’s prospective impact:

1. Copy
2. Paste

This is not the first time the Chamber has used the number 700,000. Indeed, the Chamber appears to have an uncanny affinity for the number when pushing a retrograde, anti-worker agenda. 

When some states raised their minimum wage laws and increased workers’ benefits after the Great Recession, the Chamber commissioned a study finding that such labor laws had cost U.S. jobs.  How many?  700,000. 

When the Obama administration proposed a tax increase on the wealthy in 2012, the Chamber commissioned a study finding that the proposal would eliminate U.S. jobs…700,000 jobs, to be precise. 

Perhaps it should not come as a surprise that the Chamber is using its lucky number once again to push a regressive deal like the TPP. 

But hey, if the copy/paste method works…

Maybe we should take a cue from the Chamber and start using whatever numbers we have lying around.  Let’s see…how many U.S. jobs have been lost under NAFTA to Mexico alone?  Well I’ll be -– the answer is 700,000. 

Borrowing a card from the Chamber, we hereby project that the TPP will cost U.S. workers 700,000 jobs. 

Okay, obviously it would be ridiculous to pull such projections out of thin air.  And let’s hope that’s not what the Chamber is doing to arrive at its unsubstantiated claim. 

But without an explanation from the Chamber, we are left to speculate.  Maybe they somehow converted Peterson’s miniscule projected GDP gain projection into a much larger jobs gain, errantly ignoring the impact of TPP-spurred inequality.  (The Center for Economic and Policy Research found that the likely increase in inequality resulting from the TPP would swamp the small gains projected by the Peterson Institute, spelling a pay cut for 90 percent of U.S. workers.)  

Or maybe the Chamber extrapolated a jobs figure from the study’s export calculations, errantly ignoring the impact of TPP-spurred imports.  (Any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation –- in the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under existing U.S. pacts.) 

In the end, we don’t know how the corporate alliance generated the mystery number behind its TPP cheerleading.  Until we see some evidence, we’re going to take the Chamber’s statistic with about 700,000 grains of salt.  

Chamber Resorts to Cartoonish Analogies to Defend Corporations’ ‘Right’ to Attack Policies

What do you do when you lose an argument on the basis of, you know, facts?  

You use fantastical analogies to substantiate your battered claims.  At least, that appears to be the game plan of the U.S. Chamber of Commerce. 

In a blog post yesterday, the corporate conglomerate tried once again to defend a system that empowers foreign corporations to bypass our courts, go before three private lawyers unaccountable to any electorate, and demand that the U.S. Treasury hand over our tax dollars for policies ranging from Wall Street reforms to climate change initiatives.  “Trade” deals currently under negotiation, such as the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA), would vastly expand this extraordinary “investor-state” system. 

How did the Chamber address widespread concerns over the proposed empowerment of tens of thousands of foreign corporations to have a go at our domestic laws?  By comparing them to childhood fears of a monster in the closet. 

(See, there are no monsters in your closet.  By the rule of analogies, there is therefore no problem with enabling corporations to more easily attack our health and environmental protections.  Got it?)  

The Chamber’s post concludes with this kicker: “The next time someone comes peddling fear of ISDS [investor-state dispute settlement], ask this simple question: ‘Can you cite an ISDS case where the investor won but didn’t deserve compensation?’ Expect to hear silence in return.” 

“Silence” is a creative way to characterize academics’ and advocates’ years of detailed analysis of case after case in which corporations have extracted taxpayer compensation for public interest policies.  On the basis of such cases, voices ranging from former NYC mayor Michael Bloomberg to the National Council of State Legislatures to the CATO Institute to thousands of concerned citizens have warned of the threats that expansion of the extreme investor-state regime via the TPP and TAFTA would pose to public health, a clean environment, rule of law, and taxpayers’ wallets.  (Oh, and the nation’s largest labor, environmental, health, privacy, Internet freedom, financial, development, family farmer, faith and consumer groups have also spotlighted the record of investor-state damage.)  Chamber’s claim of “silence” is deaf to these warnings from across the political spectrum.

To answer Chamber’s question –- whether we can cite an “investor-state” case where a three-person tribunal unjustly ordered a government to pay a foreign corporation for a policy enacted in the public’s interest –- indeed, we can.  The main difficulty is choosing from the panoply of available cases. 

What about the case where a tribunal ordered Canadian taxpayers to pay millions to a waste treatment corporation for preventing the firm from exporting to Ohio a hazardous waste that the U.S. Environmental Protection Agency has found to be harmful to humans and toxic to the environment?

Or the one where an investor-state tribunal ordered Mexico to pay a corporation more than $16 million for not allowing the firm to build a toxic waste facility until it cleaned up existing toxic waste problems?

Or take the case that Occidental Petroleum won against Ecuador in 2012. The tribunal in that case acknowledged that the oil corporation had broken an Ecuadorian law governing oil exploration in the Amazon.  But then the tribunal concocted a new governmental obligation to Occidental, decided the government had violated this unwritten obligation despite adhering to Ecuadorian law, and ordered Ecuador’s taxpayers to hand $2.3 billion to the oil company.  One of the three lawyers in the tribunal dissented, describing the decision as “egregious.”  That didn’t remove the penalty imposed on Ecuador by her two colleagues. 

The Chamber tries to downplay the amounts that taxpayers have to shell out to foreign firms when governments lose investor-state cases, arguing that the corporations often get “a fraction” of what they ask for.  But when corporations ask for billions, a “fraction” is no chump change.  In the Occidental case, the $2.3 billion penalty imposed on Ecuador’s taxpayers is equivalent to the amount the government spends on health care each year for half the population. 

The Chamber’s post also tried to minimize the investor-state system’s costly legacy by wrongly stating that “governments comfortably win in the vast majority of [investor-state] cases.”  The U.N. Conference on Trade and Development (UNCTAD) reports that in 57 percent of all public, concluded investor-state cases, the government has either lost the case to the investor or has been pushed to settle with the investor, typically resulting in the extraction of millions of taxpayer dollars and/or the overturning of the policy that the corporation challenged.  In recent cases, governments have been outright losing most of the time.  In seven out of eight public decisions handed down by investor-state tribunals last year, the government lost.  That’s hardly a “comfortable” record.

And those are only the cases that have already been decided.  Investor-state claims have surged in recent years, resulting in pending cases that target everything from Australia’s anti-smoking policies to Germany’s decision to phase out nuclear power after the Fukushima nuclear disaster.  While the Chamber tries to claim that “relatively few” cases have been launched in the “nearly half a century” of the investor-state regime, that argument requires closing one’s eyes to the recent wave of cases.  While no more than 15 cases were launched in any given year in the first four decades of the “nearly half a century” of investor-state treaties, more than 50 cases have been launched in each of the last three years.  Pending cases include:

• Chevron v. Ecuador: in response to Chevron’s attempt to evade a $9.5 billion domestic ruling for Amazon pollution, an investor-state tribunal has directed Ecuador’s government to violate its Constitution, has cast aside two decades of court rulings, and has declared that rights granted to Ecuadorians no longer exist.

• Eli Lilly v. Canada: a U.S. pharmaceutical corporation has challenged Canada’s legal standard for patents and pushed for greater monopoly patent protections, which increase the cost of medicines for consumers and governments. 

• Renco v. Peru: a U.S. corporation has tried to evade its contractual commitment to clean up its metal smelter contamination in one of the world’s most polluted towns.

The flood of recent investor-state attacks on domestic safeguards owes largely to the fact that tribunals are interpreting ever more broadly the vague investor-state “rights” granted to foreign corporations.  Contrary to the Chamber’s assertions, these rights extend beyond those afforded to domestic firms.  Under U.S. law, a coal corporation, for example, could not invoke a right to government compensation for new carbon emissions controls –- such as those the administration plans to roll out on Monday –- on the basis that the new policy frustrated the firm’s “expectations.”  But investor-state tribunals have repeatedly decided that foreign firms, under investor-state pacts, indeed enjoy a “right” to a static regulatory framework that does not thwart their expectations.  

And of course, if a U.S. firm takes issue with a new U.S. environmental or financial or health regulation, the corporation cannot skirt the entire U.S. domestic legal system and take its case to a private three-person extrajudicial tribunal empowered to order the U.S. Treasury to compensate the firm, with limited option for appeal.  But that is precisely the privilege granted to foreign corporations under the investor-state system’s extraordinary terms. 

Comparing this system to fictitious beasts inhabiting one’s closet will not make it go away.  To highlight the dangers posed by this regime and its proposed expansion via the TPP and TAFTA, we need not resort to far-fetched analogies.  The damage already wrought will suffice. 

WTO Final Ruling: European Ban on Products from Inhumane Seal Harvest Violates WTO Rules

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

The WTO today added fuzzy white baby seals clubbed to death on bloody ice flows to dolphins and sea turtles as animals that the WTO has declared cannot be protected by domestic laws because they  violate “trade” rules, which will just fuel public and policymaker skepticism about these so-called trade deals. 

As a technical matter, today’s ruling confirms the uselessness of the WTO exceptions, allegedly designed to protect countries’ domestic public interest laws, that are now being touted as the way to safeguard environmental, health and safety policies in proposed pacts such as the Trans-Pacific Partnership (TPP). This is the 39^th time out of 40 attempted uses that the exception has been rejected by WTO tribunals when raised to safeguard a domestic public interest law.

BACKGROUND: In this final ruling, the WTO Appellate Body acknowledged that the European Union’s ban on the importation and sale of seal products resulted from concerns about “inhumane” hunts with “inherent animal welfare risks,” but concluded the EU failed to satisfy the litany of conditions required to defend public interest policies under the WTO’s “general exception” provisions. Specifically, the Appellate Body ruled against use of the WTO exception for policies “necessary” to protect public morals. Only one out of 40 government attempts to use the the WTO General Exceptionse, found in Article XX of the WTO’s General Agreement on Tariffs and Trade (GATT) and Article XIV of the General Agreement on Trade in Services (GATS), has ever succeeded.

In its ruling today, the Appellate Body also rebuffed arguments made by the U.S. government as a third party observer to the case demanding that the WTO evaluate whether policies that appear to have a discriminatory effect stem from a “legitimate regulatory distinction.” The Appellate Body ruled against this U.S. government position, concluding that WTO panels do not need to consider under GATT whether a challenged domestic policy stems from a legitimate policy objective.

Today’s ruling follows a string of WTO rulings against popular U.S. environmental and consumer policies. In May 2012, for example, the WTO ruled against voluntary “dolphin-safe” tuna labels that, by allowing consumers to choose to buy tuna caught without dolphin-killing fishing practices, have helped to dramatically reduce dolphin deaths. Today’s decision will again spur public ire over WTO rules that extend beyond “trade” to target domestic environmental and consumer safeguards.

On Eve of ‘Check In’ Ministerial, Top 10 Signs That Obama Administration Should Call It Quits on TPP Negotiations

Twenty-one Multilateral TPP Meetings Since ‘Final’ August 2013 Brunei Negotiating Round, All Without Even a Facade of Stakeholder Input Process 

The office of the U.S. Trade Representative (USTR) worked to spin down expectations for a May 19-20 ministerial-level meeting on the Trans-Pacific Partnership (TPP) even before last week’s TPP chief negotiators meeting in Vietnam that failed to resolve deadlocks on the myriad outstanding TPP issues.

While 600 official U.S. trade advisors, mainly comprised of corporate representatives, have continued to obtain information and give input on TPP negotiations, the last opportunity for official “stakeholder” input into the TPP took place August 24–31, 2013, during the 19^th round of negotiations in Brunei. However, heads of state, negotiators and ministers have continued to meet in an attempt to finalize a TPP. Without even the pretense of providing opportunities for civil society to engage in the process, in the past nine months, TPP countries have had at least one heads-of-state summit, two ministerials, four meetings of chief negotiators, 14 so-called “intersessionals,” four Obama bilateral heads of state meetings and endless U.S.-Japan bilateral negotiations and ministerials. And these are only the meetings that have been reported.

Meanwhile, the U.S. government continues to use large sums of taxpayer money to push negotiations to obtain a TPP agenda favored by corporate interests that remains stalled in the face of growing opposition in the United States and throughout TPP countries. The U.S. government was the official host of the Vietnam meeting this week and will be the official host of the upcoming ministerial meeting in Singapore.

Following are the top 10 indicators of why the USTR has decided to tamp down expectations once again for a negotiation that has supposedly been in an “end game” since last year:

1)     U.S. and Japanese officials have offered conflicting versions of the outcomes of their bilateral “breakthrough”-but-not-a-deal non-deal from Obama’s Japan visit when briefing their TPP colleagues. Indeed, Japan was among the countries arguing that the state of U.S.-Japan market access negotiations was not sufficiently advanced to merit another TPP ministerial meeting.

2)     An LDP bloc in Japan’s Diet adopted another resolution last week, while TPP chief negotiators met in Vietnam, reiterating the ruling party’s requirement that the TPP must protect a list of “sacred” agricultural commodities. The Japanese parliamentary action by Prime Minister Shinzo Abe’s own political party, making clear it will not support a TPP that zeroes out agricultural tariffs, is seen as a direct response to U.S. congressional and agribusiness statements that only a TPP that does so is politically acceptable.

3)     Vietnam’s former trade minister, who is a current senior advisor on TPP negotiations, recently declared that Vietnam would not accept a TPP requirement that workers be allowed to establish independent labor unions.Former MinisterTruong Dinh Tuyen said Vietnam instead would accept a compromise that devolved some power to local unions.

4)     U.S. trade officials announced that Japan would advance market access talks with other TPP nations at the Vietnam lead negotiators meeting and that this was a sign of a new stage in negotiations – except that is not what Japan intended or did. Other countries are unlikely to even consider high-stakes tradeoffs relating to U.S. demands that could raise drug prices, extend the scope of investor-state dispute liability, limit financial regulation, discipline state-owned enterprises, and enforce labor and environmental standards without knowing what prospective market access opportunities might be forthcoming.

5)     On May 1, the Sultan of Brunei implemented a new Sharia-law-based penal code that calls for jail terms for the wearing of immodest clothing, pregnancies outside marriage and abortion, with death by stoning for adulterers, gays and lesbians to be phased in later. The move prompted new U.S. constituencies to join the anti-TPP effort.

6)     The USTR’s concern that the optics of not having a TPP ministerial when all of the countries’ trade ministers are together for a pre-scheduled APEC meeting overcomes opposition by other TPP nations to meeting when there is nothing ready for ministers to decide. Thus, the announcement of a “check-in” ministerial, which ministers from at least three TPP nations do not plan to attend.

7)     Japanese officials or press are creating a series of red herring stories. Reports of near-deals on intellectual property, new U.S. proposals and more do not relate to what happened on the ground in Vietnam. Indeed, the Japanese press has run a series of follow-up stories speculating about who is generating the misdirects and why. There is no indication that key areas of controversy that existed in previous ministerials in the areas of intellectual property, investment, environment, labor, state-owned enterprises and more are much closer to resolution, even after the expense of the past months of negotiations. The U.S. ambassador to Malaysia recently expressed hope that the deal might be concluded by 2017.

8)     The USTR continues to avoid raising currency issues at chiefs or ministerial levels, even though it is increasingly clear that a TPP without enforceable currency rules is dead on arrival in the U.S. Congress. If negotiations were nearing a final deal, this issue would have to be raised; Congress’ outspoken position has made clear to the other TPP nations that either this issue will be raised in negotiations or it will be raised later as an additional demand after ‘final’ concessions have been made, as was seen in the Korea Free Trade Agreement renegotiation four years after signing.

9)     The prospect of passage of any form of trade authority in 2014 is dimming. Indeed, some congressional Fast Track proponents are already talking about the prospect that President Barack Obama may never obtain trade authority, so they are setting their sights on 2017.As the other TPP countries recognize the lack of congressional support for Fast Track and TPP, their willingness to make U.S.-negotiator-demanded concessions on issues with high political costs at home also dims.

10)  In April, Chile’s Trade Ministry under recently elected President Michelle Bachelet confirmed that it is conducting a comprehensive review of the scope of the TPP and what its impact could be for Chile, noting that it is initiating a process of transparency and openness in the negotiations to include civil society input into their review. The website states, “We consider that there are many issues that are still open, the negotiation still has a ways to go.”

For more information about the TPP, please visit http://citizen.org/tpp. 

Second Anniversary of Colombia Pact Spotlights Administration's Failed Promise of Labor Rights Improvements, Now Recycled to Defend TPP Negotiations with Vietnam amid Worker Riots

Today, as foreign-owned factories in Vietnam lie smoldering after protesting Vietnamese workers burnt them to the ground, Obama administration officials are in Vietnam negotiating a Trans-Pacific Partnership (TPP) pact that would place U.S. workers in direct competition with their Vietnamese counterparts. 

While politics provided the spark for Vietnam’s recent worker riots, the country’s notorious working conditions fanned the flames.  According to the U.S. government, the International Labour Organization, and workers' rights groups, those conditions include “children working nine to 12 hours per day for low pay in hazardous working conditions,” forced labor, discrimination against pregnant women, blocked fire exits, prohibition of independent unions, and minimum wages dwarfed by those paid in China.

Members of Congress, U.S. labor unions and human rights groups have made clear that the U.S. government should not be contemplating a pact with a country where workers’ rights are systematically violated. 

That same argument motivated widespread opposition to the U.S.- Colombia “free trade” agreement (FTA), which took effect two years ago today. 

The Colombia pact was implemented despite warnings from Congress and labor groups that U.S. workers should not be pitted against workers in a country consistently listed as the world’s most dangerous place to be a unionist.  The Obama administration helped push the FTA through the U.S. Congress over record Democratic opposition with promises that the gross workers’ rights violations in Colombia would wane under the FTA.  The administration declared that a Labor Action Plan (LAP) signed with Colombia in 2011 as a fig leaf for the FTA would “lead to greatly enhanced labor rights in Colombia.”

After two years of FTA implementation, that promise rings hollow as Colombia’s unionists face persistent murders, death threats, and repression. 

Now, in response to growing opposition to the notion of a TPP pact with Vietnam, the Obama administration is conjuring up the same failed promise, asserting that working conditions in Vietnam will improve under the pact. 

Members of Congress are not likely to buy the recycled pitch, as the two-year anniversary of the Colombia FTA spotlights the harrowing violence still faced by Colombia’s union workers. Colombia’s National Union School, recognized by the LAP as an authoritative source of monitoring data, reports that:

• In the three years since the LAP was unveiled, 73 Colombian unionists have been murdered.  There were four more unionist murders in 2013 than in 2012.

• Colombia’s union workers have endured 31 murder attempts and 953 death threats since the LAP was announced.  These crimes have not resulted in any captures, trials, or convictions.

• More than 3,000 unionists have been murdered in Colombia since 1977. The overall impunity rate for these murders is 87%.

• Since 1977, Colombian unionists have received 6,262 recorded death threats.  Only 4 of these threats have been punished, meaning that impunity for anti-union death threats stands at 99.9%.

Undeterred by the ongoing repression of Colombian workers, U.S. trade negotiators are in Vietnam at this very moment in attempt to negotiate via the TPP an expansion of the FTA model to Vietnam, despite the country’s widespread labor abuses.  Under the TPP, U.S. workers would be placed into direct competition with Vietnamese workers facing these on-the-ground realities:

• Child labor:  According to the Vietnam government’s own estimates, more than 25,000 Vietnamese children work in hazardous conditions.  The U.S. State Department reports that Vietnam government inspectors have found “children working nine to 12 hours per day for low pay in hazardous working conditions (including poor lighting, dusty environments, and the operation of heavy machinery)…”

• Forced labor:  Individuals detained, but not convicted, for drug offenses are required to work for little to no pay in government detention centers as part of their “treatment,” according Human Rights Watch and the State Department.  Vietnam is one of just four countries in the world cited by the U.S. Department of Labor for using both forced labor and child labor in apparel production.

• Low wages:  Vietnam’s average minimum wage is 52 cents per hour.  That’s a fraction of minimum wages even in China.  And it’s one-fourteenth of the earnings of U.S. minimum wage workers who would be pitted against their Vietnamese counterparts. 

• Unsafe working conditions:  The International Labour Organization reports that even after inspecting Vietnamese garment factories on three occasions for fire hazards, 41% of the inspected factories still had inaccessible or blocked fire exits. 

• Violations of women’s rights:  Vietnamese factories have employed several discriminatory methods to try to avoid the legal obligation to provide paid maternity leave to pregnant workers. Last year the Vietnamese press revealed that one factory required female workers to sign a contract vowing not to get pregnant for their first three years of employment. 

• Union repression:  Vietnam bans independent unions.  Workers wishing to organize for their rights must affiliate their union with the Vietnam General Confederation of Labor, a self-described “member of the political system under the leadership of the Communist Party of Vietnam.”  The Worker Rights Consortium reports that Vietnamese workers attempting to form independent unions have been “subjected to sustained campaigns of prosecution and imprisonment.” 

In the face of such entrenched labor abuses, it is incredible that the administration is trotting out the same message used for the Colombia FTA: “Don’t worry –- workers’ conditions will improve once the FTA is in place.”  After two years of the Colombia deal, Colombia’s workers sadly beg to differ.  

Release of Two Years of Korea FTA Data Throws More Cold Water on Obama TPP and Fast Track Efforts After Asia Trip Fails to Change Dynamic

U.S. Exports to Korea Down 5 Percent, Imports from Korea Up and Trade Deficit With Korea Swells 50 Percent, Contradicting Obama Claims of U.S. Export and Job Growth

The just-released official  U.S. government trade data covering the first two years of the U.S.-Korea “free trade” agreement (FTA) further chills the prospects for the Trans-Pacific Partnership (TPP) and Fast Track trade authority. Today’s release of the U.S. International Trade Commission (USITC) data likely will intensify congressional antipathy toward Fast Track and concerns about the TPP. The USITC data, corrected to remove re-exports not produced in the United States, show falling U.S. exports to Korea and a ballooning U.S. trade deficit under the Korea FTA, which served as the U.S. template for the TPP.

U.S. goods exports to Korea have dropped 5 percent  under the Korea FTA’s first two years, compared to the two years before FTA implementation, in contrast to the Obama administration’s promise that the Korea FTA would mean “more exports, more jobs” and recent claims that the agreement has shown “strong results.” Imports into the United States from Korea have climbed 8 percent under the FTA (an increase of $4.7 billion per year).

From the year before the FTA took effect to its second year of implementation, the U.S. goods trade deficit with Korea swelled 50 percent (a $7.6 billion increase). In 23 out of 24 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly level seen in the two years before the deal. The trade deficit increase under the FTA indicates the loss of more than 50,000 U.S. jobs, according the trade-jobs ratio that the Obama administration used to project gains from the deal. 

“The fact that the Korea deal has resulted in a worse trade deficit and more lost jobs has had a very chilling effect on public and congressional support for the TPP and Fast Track, and the Obama administration’s dishonest claims that the pact has expanded exports has only hardened that opposition,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “While most Democrats and a sizeable bloc of Republicans in Congress have already voiced opposition to Fast Tracking the TPP, both the negative outcomes of the Korea FTA and the administration’s dishonest claim that the pact is a success are adding more converts daily.” 

Rather than acknowledge that the Korea pact has resulted in declining U.S. exports and a larger trade deficit, the administration’s Office of the U.S. Trade Representative (USTR) has relied on data omissions and distortions in press materials that attempt to paint failure as success. For a full response to the USTR’s litany of data errors, visit http://www.citizen.org/documents/Korea-FTA-USTR-data-debunk.pdf. 

The USTR’s biggest distortion is counting foreign-made products that are simply shipped through the United States en route to Korea as “U.S. exports” to Korea. Rather than use the official U.S. government trade data provided by the USITC that counts only U.S.-made exports, USTR cites data that treat the 14 percent rise in foreign-made exports to Korea under the FTA as a boost to U.S. exports, artificially diminishing the dramatic U.S. export downfall.

The USTR relies on a series of other data errors in attempt to hide the dismal Korea FTA record, including:

• Failing to account for inflation: By treating a rise in prices as a rise in exports, the USTR mistakenly claims that the observed decrease in U.S. exports to Korea in manufactured goods under the FTA is an increase.

• Ignoring aggregate losses to cherry-pick tiny winning sectors: TheUSTR does not mention the overall 34 percent downfall in U.S. agricultural exports to Korea under the FTA’s first two years. Instead, the USTR boasts export increases in products like fruit and wine. The combined annual export gains in fruit and wine amount to $69 million, less than 6 percent of the more than $1.2 billion aggregate annual export loss in agricultural products.

• Using a selective timeframe: The USTR’s assessment of the Korea FTA record ignores 12 months of available data under the FTA and fails to include in the pre-FTA baseline of comparison the three months of data immediately prior to the deal’s implementation. This selective timeframe, combined with the decision to incorporate foreign-made exports, allows the USTR to claim that the U.S. export downfall under the FTA is entirely because of diminished exports in corn and fossil fuels. But even after discounting both corn and fossil fuels, the full set of data shows that U.S. exports to Korea have still fallen under the FTA, and the U.S. trade deficit with Korea has still ballooned.

“The USTR’s resort to major data deceptions to try to play down the debacle of the Korea FTA indicates just how desperate the administration is to shake the mounting evidence that the FTA model it now seeks to expand with the TPP costs U.S. jobs,” said Wallach. “But using data tricks to try to cover up the failure of the largest Obama trade deal, like treating foreign-made products as U.S. exports, is likely to backfire, and members of Congress do not take kindly to deception.”

The decline in U.S. exports to Korea under the FTA’s first two years was broad-based; of the 15 U.S. sectors that export the most to Korea, nine of them have experienced export declines under the FTA. Export shifts under the FTA have been larger for losing sectors than for winning sectors. Of the 15 top export sectors, eight have seen declines in exports to Korea of greater than 5 percent while only three have seen growth of exports to Korea of greater than 5 percent.

Many of the sectors that the administration promised would be the biggest beneficiaries of the FTA have been among the largest losers, including U.S. meat producers. U.S. poultry exports to Korea have plummeted 31 percent under the FTA, while U.S. beef and pork exports have fallen 10 and 19 percent respectively. 

The U.S. automotive industry, another promised winner under the deal, has endured a surge in automotive imports from Korea that has swamped a marginal increase in U.S. automotive exports to Korea since the FTA took effect. While U.S. average annual automotive exports to Korea under the pact have been $294 million higher than before the deal, average annual automotive imports from Korea have soared by $4.9 billion under the deal, spurring a 32 percent increase in the U.S. automotive trade deficit with Korea.

Overall, U.S. export growth to countries with pacts like the Korea FTA has been particularly lackluster. Growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to FTA partners by 30 percent over the past decade.

For further analysis of the outcomes of the Korea FTA’s first two years, visit http://www.citizen.org/documents/Korea-FTA-USTR-data-debunk.pdf.  

Froman Takes Heat from Senators for a TPP that Does Not Promote "Our Values"

“Done right, trade policy promotes not only our interests, but also our values.”  Those were the words of U.S. Trade Representative Michael Froman in his testimony today before the Senate Finance Committee. Froman proceeded to defend the Trans-Pacific Partnership (TPP) – the sweeping deal mired in deadline-missing negotiations with 11 countries – as trade policy “done right.”

If the TPP promotes our values, what does that say about our values?  Do we value the ability of pharmaceutical corporations to reap monopoly profits during extended patent periods over the ability of cancer and HIV patients to access affordable medicines?  Do we value the ability of banks to engage in high-risk trading over the financial stability of a nation?  Such threats are manifest in the leaked texts of the TPP. 

Or what about the Obama administration's oft-touted value of transparency?  The administration has kept TPP texts under a remarkable degree of secrecy, providing limited access to members of Congress and zero access to the U.S. public, despite repeated congressional calls for transparency. When Senator Wyden (D-Ore.) specifically asked Froman if he would release a copy of the TPP text before President Obama signed and sealed the deal, Froman refused to answer.

Another instance of congressional defiance arose when Senator Schumer (D-N.Y.) asked Froman whether the administration's TPP negotiators have complied with the demand expressed by a majority of both houses of Congress to include currency manipulation disciplines in the deal.  Froman admitted that they have not.

Senators at the hearing called out Froman for such non-compliance and openly cast doubt on the notion that the TPP could gain congressional approval.

At one point in the hearing, Senator Thune (R-S.D.) asked whether there was a risk that the U.S. government could be challenged under the North American Free Trade Agreement (NAFTA) for not approving the highly-controversial proposed Keystone XL pipeline. Such a challenge is possible under the extraordinary provisions in NAFTA, slated for expansion in the TPP, that empower foreign corporations to circumvent our domestic courts and directly challenge the U.S. government before extrajudicial tribunals over environmental and health policies.

Senator Thune’s question was not hypothetical. Yesterday the Canadian press reported that TransCanada – the Canadian corporation behind Keystone XL – may be considering using NAFTA’s foreign investor privileges to demand that the U.S. government provide compensation for delaying approval of the polemical pipeline. 

That’s right. TransCanada is reportedly contemplating using a “trade” pact to argue that U.S. taxpayers owe the corporation money because the Obama administration has not okayed a widely-opposed project that environmental groups project would increase carbon emissions and oil spills.

How could such a claim be substantiated?  Apparently TransCanada could argue that the pipeline delay violates its NAFTA-protected right to “fair and equitable treatment.”  On the basis of this same claim, tribunals have ordered governments to pay foreign firms hundreds of millions of dollars under NAFTA and related pacts for natural resource policies, environmental protections, and health and safety measures. TPP would expand these corporate privileges even further, empowering thousands more foreign firms to join TransCanada in contemplating extrajudicial attacks on public interest policies. 

Froman, of course, did not dwell on such threatening core provisions of the TPP.  What did he say about the pact?  Unsurprisingly, he recycled the tired pitch that the controversial deal would boost U.S. exports. He stated, “The Obama Administration has a strong record of success in promoting U.S. exports…” -- a claim ostensibly intended as a credit to the status quo trade policy that the TPP would expand. 

Actually, U.S. exports grew by zero percent in 2013, rendering virtually impossible Obama’s stated goal to double exports by the end of 2014. (At the export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054.) That’s hardly a success story upon which to promote a more-of-the-same TPP. 

But perhaps the dismal export record of late is due to exports to countries with which we don’t have a “free trade” agreement (FTA) not keeping up with exports to our FTA partners? 

Nope.  U.S. goods exports to our 20 FTA partners actually fell slightly from 2012 to 2013, while exports to the rest of the world increased slightly.  This greater export growth to non-FTA partners than to FTA partners is not an anomaly. Growth in U.S. goods exports to non-FTA partners has actually been 30 percent higher than growth in exports to FTA partners over the last decade. 

Froman particularly singled out agriculture and manufacturing as two sectors on whose behalf the administration is pushing the TPP and similar deals. On manufacturing, he stated:

In 2013, the United States exported nearly $1.4 trillion in manufactured goods, which accounted for 87 percent of all U.S. goods exports and 61 percent of U.S. total exports. To support the growth of manufacturing and associated high-quality jobs here at home, the Obama Administration will continue to pursue trade policies aimed at keeping American manufacturers competitive with their global peers.

Last year, the United States ran a trade deficit in manufactured goods with its 20 FTA partners that topped $52.4 billion.  This represented an 8 percent increase from the $48.7 billion manufacturing trade deficit with FTA partners in 2012.  In contrast, the U.S. manufacturing trade deficit with non-FTA countries declined by 3 percent from 2012 to 2013.  Supporting U.S. manufacturing requires rethinking status quo trade policies, not “continuing to pursue” them. 

On agriculture, Froman stated:

Agriculture is vital to the American economy. In 2013, U.S. farmers and ranchers exported a record $148.4 billion of food and agricultural goods to consumers around the world. In 2014, the Administration aims to help them build on that record performance.

The U.S. agricultural trade balance with U.S. FTA partners last year was a $7.7 billion deficit, which represented a doubling of the U.S. agricultural trade deficit with FTA partners from 2012.  That's hardly a “record performance” for the trade policy model that the TPP would expand.

Froman was right to say that trade policy can promote our values when “done right.” Based on the evidence, we must not be doing it right.

On the U.S.-Japan Summit Statement, Regarding TPP

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

“The U.S.-Japan summit was viewed as the do-or-die moment to revive TPP negotiations after years of missed deadlines, unbending opposition by other nations to many U.S. proposals, deadlocks on scores of TPP issues, and Congress’ refusal to grant President Obama trade authority.

A decision whether to hold another high-level TPP ministerial meeting tentatively slated for May was riding on the United States and Japan resolving a subset of market access issues. Shortly before President Obama left Japan, the country’s economy minister, Akira Amari, announced that the outcome was "not a basic accord although there was progress.”

Bizarrely, the official Summit Statement called the non-deal a “milestone in the TPP negotiations” and called on other TPP countries “to take the necessary steps to conclude the agreement.”  

Without knowing what market access gains they may achieve in return, other TPP nations have been loath to even consider high-stakes tradeoffs relating to U.S. demands in TPP to extend medicine patents, limit financial regulations,  discipline state-owned enterprises, enforce labor and environmental standards, limit financial regulation and more that are animating growing public and legislator opposition in many TPP nations.  

After months of non-stop U.S-Japan bilateral TPP negotiations and now President Obama and Prime Minister Abe not announcing a breakthrough, TPP should be ready for burial. Instead, like some horror movie monster that will not die, TPP is being animated by a broad coalition of powerful corporate interests and we are told talks will continue but it remains unclear when and how.”

A checklist of all of the unresolved TPP issues can be viewed here. 

As Obama Visits TPP Countries, New Obama Administration Report Targets Their Public Interest Policies as “Trade Barriers” to be Eliminated

As President Obama leaves on his Asia tour today to try to paper over the deep divisions that have bewitched the Trans-Pacific Partnership (TPP) negotiations, he will likely refrain from reiterating the criticisms his administration recently levied against the sensitive domestic policies of the TPP governments he will be visiting.  

The 2014 National Trade Estimate Report, published earlier this month by the Office of the U.S. Trade Representative (USTR), targets financial, privacy, health, and other public interest policies of each TPP nation as "trade barriers" that the U.S. government seeks to eliminate. The report offers unusual insight into why negotiations over the sweeping, 12-nation deal are contentious and have repeatedly missed deadlines for completion.

The policies of other TPP nations criticized by the 384-page USTR report include New Zealand’s popular health programs to control medicine costs, an Australian law to prevent the offshoring of consumers’ private health data, Japan’s pricing system that reduces the cost of medical devices, Vietnam’s post-crisis regulations requiring banks to hold adequate capital, Peru’s policies favoring generic versions of expensive biologic medicines, Canada’s patent standards requiring that a medicine’s utility should be demonstrated to obtain monopoly patent rights, and Mexico’s “sugary beverage tax” and “junk food tax.”

The Obama administration also targets seven of the 11 TPP partners, including majority-Muslim countries like Malaysia and Brunei, for restricting the importation or sale of alcohol, takes issue with several TPP countries’ restrictions on the importation of tobacco, and laments Vietnam’s restriction on the importation of “a variety of hazardous waste items.”

The Obama administration report calls for some TPP nations to adopt copyright enforcement measures akin to those proposed under the Stop Online Piracy Act (SOPA), which was defeated in the U.S. Congress. For example, the report notes that the Obama administration “has also urged Chile … to amend its Internet service provider liability regime to permit effective action against any act of infringement of copyright and related rights.” The report also criticizes data privacy policies, describing Canadian privacy rules as too “restrictive” and Japan’s Privacy Act as “unnecessarily burdensome.”

The report attacks six TPP nations’ rules requiring foreign takeovers of major domestic firms, including banks, to be vetted by the government. Also listed as “investment barriers” are Malaysia and New Zealand’s requirements that foreign investors obtain permission before acquiring land, and Peru and Mexico’s prohibitions on foreign acquisition of land along their national borders.

The report also critiques government procurement rules in several TPP nations that are similar to the U.S. Buy American policy in giving preference to domestic producers. This includes Malaysia’s bumiputera policies, preferences for domestically produced medicines in Vietnam’s hospitals and Japan’s preferences for local companies when contracting major taxpayer-funded construction projects.

The USTR report further accuses some TPP governments of broad corruption or even incompetence. For example, the report states that two of Peru’s three federal branches of government lack the “impartiality” or “expertise” required to fulfill their responsibilities.

Here are some of the domestic policies in Malaysia and Japan -- the two TPP nations that Obama will soon be visiting -- that the report singles out for criticism: 

Administration Desperate to Announce Breakthrough on TPP in Japan, But Congress not Buying Economic or Foreign Policy Sales Pitch and Won’t Give Obama Fast Track

Public Citizen Publishes Updated List of TPP Issues That Require Resolution for a Deal to Be Made; List Largely Unchanged Since 2/14 Singapore TPP Ministerial

A major goal of President Barack Obama’s Asia trip is to revive the Trans-Pacific Partnership (TPP) after four years of negotiations have resulted in talks deadlocked over scores of issues and growing U.S. congressional and public opposition. 

Whether or not any real deal is made, a “breakthrough” almost certainly will be announced because the U.S-Japan summit is viewed as a do-or-die moment to inject momentum into the TPP process. Familiarity with kabuki theatre may be useful in interpreting the summit outcomes on TPP.

Obama arrives in Asia without trade authority and with TPP partners Japan and Malaysia aware that the U.S Congress, which has exclusive constitutional authority over trade policy, is increasingly skeptical about the TPP. January 2014 legislation to enact Fast Track authority was dead on arrival in the U.S. House of Representatives. Already in late 2013, 180 House members had announced they would never authorize the Fast Track process again; more announced opposition when the bill was submitted.

The prospect that Obama cannot deliver on whatever “compromises” he may make was heightened by a congressional sign-on letter circulating last week calling for Japan to be thrown out of TPP negotiations unless it agreed to eliminate its agricultural tariffs and major U.S. agribusiness interests calling for the same.

But at the same time, there is enormous pressure for Obama and Prime Minister Shinzo Abe to announce a breakthrough. Months of non-stop U.S-Japan bilateral TPP negotiations and ministerial-level meetings have failed to overcome sensitive agricultural and auto market access issues. Without knowing what market access gains they may achieve in return, other TPP nations have been loath to consider high-stakes tradeoffs relating to U.S. demands in TPP to extend medicine patents, limit financial regulations,  discipline state-owned enterprises, enforce labor and environmental standards, limit financial regulation.  

A checklist of these unresolved issues is included at the bottom of this memo. Despite the unprecedented secrecy surrounding the TPP negotiations, leaks of TPP documents are fueling opposition in many TPP countries as the pact’s prospective threats are revealed.  As a result, the other TPP nation governments face considerable domestic political liability for acceding to various U.S. TPP demands.

Finally, as the economic sales pitch for the TPP has faced increasing incredulity in Congress, TPP proponents have shifted to the foreign policy arguments-of-last-report used to sell flagging trade deals. The president’s Asia trip is the best possible platform to make arguments that distract from the TPP’s merits and shift the focus to broad brush narratives that connect to congressional and public anxieties about a rising China.

A report released last week by Public Citizen reveals that nearly identical foreign policy arguments have consistently proven baseless when used to sell trade deals over the past two decades. The report reviews foreign policy claims made to promote the TPP, ranging from the absurd to the counterfactual, to those that repeatedly have been disproved by the actual outcomes of similar claims made for past pacts. Repeatedly, Congress has approved trade deals based on dire predictions that failure to do so would mean diminished U.S. power,  the takeover of important markets by competitors or foreign instability, only to find that many of those predictions came true in spite of, and sometimes even because of, pacts’ enactment.

Among the report’s findings, echoed last week in a call with members of Congress and Asia policy expert Clyde Prestowitz:

• Past free trade agreements (FTAs) failed to counter the rising economic influence of China (or Japan): From 2000 to 2011, U.S. FTAs with eight Latin American countries were sold as bulwarks against foreign economic influence in the hemisphere. The U.S. pacts were implemented and China’s exports to Latin America soared more than 1,280 percent, from $10.5 billion to more than $145 billion, while the U.S. saw only modest export growth. The U.S.-produced share of Latin America’s imported goods fell 36 percent, while China’s share increased 575 percent. Similarly, under the North American Free Trade Agreement’s (NAFTA) first 20 years, the U.S.-produced share of Mexico’s imported goods dropped from almost 70 percent to less than 50 percent, while China’s share rose more than 2,600 percent. Similarly, after hysterical claims that Japan would seize U.S. market share in Latin America by signing its own free trade agreements unless the United States approved NAFTA and other FTAs, such Japanese FTAs were signed anyway.

• The TPP will not “contain” or isolate China: U.S. officials have repeatedly welcomed China as a prospective TPP member. How can the TPP isolate China if China can become a member? Administration officials note that China could join only if it agreed to the TPP’s rules, but those rules would give Chinese products duty-free access to the U.S. market and new foreign investor rights and privileges that would enhance China’s relative economic might within the United States. This may explain China’s statements of increased interest in joining the TPP. The TPP will not empower Pacific allies to act as a bulwark against Chinese influence, given that many of those nations see China as a partner. The report cites officials from TPP countries stating that if the TPP were to become a China-containment tool, they would no longer participate in TPP negotiations. 

• The TPP is not a vehicle to impose “our” rules vs. China imposing “theirs”: The TPP’s actual terms undercut the false, but conveniently scary, dichotomy posed as a choice between using TPP to impose “our” rules internationally or living with rules set by China. This argument presumes the TPP to represent “our” rules, but in fact many of the TPP’s terms reflect the narrow special interests of the 600 official U.S. corporate trade advisors that have shaped them. TPP investment rules would promote more U.S. job offshoring and further gut the U.S. manufacturing base that is essential for our national security and domestic infrastructure. TPP procurement rules would ban Buy American policies that reinvest our tax dollars to create economic growth and jobs at home. TPP service sector rules would raise our energy prices and undermine our energy independence and financial stability. TPP drug and copyright terms would raise health care costs and thwart innovation. The study summarizes a recent U.S. Department of Defense report that concludes that U.S. deindustrialization poses a threat to national security and our nation’s economic wellbeing.

TPP deal vs. kabuki checklist - to actually have a TPP deal, these issues must be resolved:

TPP Foreign Policy Arguments Mimic False Claims Made for Past Pacts

New Report Debunks Notion of the Trans-Pacific Partnership as a Bulwark Against China, Catalogues Outcomes of Similar Geopolitical Claims Made About Pacts Since NAFTA 

As President Barack Obama’s Asia trip looms and proponents of the Trans-Pacific Partnership (TPP) increasingly pitch the deal as a bulwark against China’s rising influence, a report released today by Public Citizen reveals that nearly identical foreign policy arguments have consistently proven baseless when used to sell trade deals over the past two decades. The report reviews foreign policy claims made to promote the TPP, ranging from the absurd to the counterfactual, to those that repeatedly have been disproved by the actual outcomes of similar claims made for past pacts.

“The same old foreign policy arguments get trotted out to sell trade agreements after the economic case fails,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Repeatedly, Congress has approved bad deals based on dire predictions that failure to do so would mean diminished U.S. power,  the takeover of important markets by competitors or foreign instability, only to find that many of those predictions came true in spite of, and sometimes even because of, pacts’ enactment.”

While U.S. concerns about the implications of China’s rising economic power and influence are legitimate, the notion that the establishment – or not – of any specific U.S. trade agreement would control this process is contradicted by the record. Public Citizen’s study examines the outcomes of claims that past trade pacts would counter economic gains by Japan, Europe and China in trade-partner markets; strengthen U.S. foreign policy allies or thwart enemies; and improve U.S. national security.

Among the report’s findings:

• Past free trade agreements (FTAs) failed to counter the rising economic influence of China (or Japan): From 2000 to 2011, U.S. FTAs with eight Latin American countries were sold as bulwarks against foreign economic influence in the hemisphere. The U.S. pacts were implemented and China’s exports to Latin America soared more than 1,280 percent, from $10.5 billion to more than $145 billion, while the U.S. saw only modest export growth. The U.S.-produced share of Latin America’s imported goods fell 36 percent, while China’s share increased 575 percent. Similarly, under the North American Free Trade Agreement’s (NAFTA) first 20 years, the U.S.-produced share of Mexico’s imported goods dropped from almost 70 percent to less than 50 percent, while China’s share rose more than 2,600 percent. Similarly, after hysterical claims that Japan would seize U.S. market share in Latin America by signing its own free trade agreements unless the United States approved NAFTA and other FTAs, such Japanese FTAs were signed anyway.

• The TPP will not “contain” or isolate China: The report cites repeated statements by U.S. officials welcoming China as a prospective TPP member. How can the TPP isolate China if China is welcome to become a member? Administration officials note that China could join only if it agreed to the TPP’s rules, but those rules would give Chinese products duty-free access to the U.S. market and new foreign investor rights and privileges that would enhance China’s relative economic might within the United States. This may explain China’s statements of increased interest in joining the TPP. The TPP will not empower Pacific allies to act as a bulwark against Chinese influence, given that many of those nations see China as a partner. The report cites officials from TPP countries stating that if the TPP were to become a China-containment tool, they would no longer participate in TPP negotiations. 

• The TPP is not a vehicle to impose “our” rules: The proposed TPP rules undercut the false, but conveniently scary, dichotomy used to sell the TPP: that we have a choice between using the pact to impose “our” rules internationally or living with rules set by China. This argument presumes the TPP to represent  “our” rules, but in fact many of the TPP’s terms reflect the narrow special interests of the 600 official U.S. corporate trade advisors that have shaped them. TPP investment rules would promote more U.S. job offshoring and further gut the U.S. manufacturing base that is essential for both our national security and domestic infrastructure. TPP procurement rules would ban Buy American policies that reinvest our tax dollars to create economic growth and jobs at home. TPP service sector rules would raise our energy prices and undermine our energy independence and financial stability. TPP drug and copyright terms would raise health care costs and thwart innovation. The study summarizes a recent U.S. Department of Defense report that concludes that U.S. deindustrialization poses a threat to national security and our nation’s economic wellbeing.

“Some politicians and pundits seem to hope that raising geopolitical issues that the TPP cannot affect will activate Americans’ anxieties about a rising China and distract from the real issue: Would the TPP benefit most Americans?” Wallach said. 

The report also catalogues decades of trade-pact foreign policy claims, revealing that recent administration arguments for the TPP echo, nearly word-for-word, the sales pitches used for past pacts. For example, Vice President Joe Biden recently called the TPP “a symbol of American staying power,” mirroring the 1993 NAFTA pitch by then-U.S. Rep. Dan Glickman (D-Kan.): “NAFTA has become a critical and yes, symbolic test of U.S. leadership.”

The many unfounded foreign policy claims that repeatedly have been used to push past FTAs and that are being recycled today to pitch the TPP include:

• NAFTA: In 1993, then-U.S. Sen. John Kerry (D-Mass.) advocated for NAFTA, saying it would “contribute to the growth and the maturity of the Mexican economy and thereby alleviate some of the potential for social and political explosions which could set back progress.” But after 20 years of NAFTA, Mexico’s average growth rate ranked 18th out of the 20 Latin America nations. Indeed, NAFTA contributed to significant poverty and instability within Mexico by enabling a flood of subsidized U.S. corn that eliminated the livelihoods of 2.5 million Mexican farmers and agricultural workers. The mass dislocation contributed to a doubling of migration to the United States in NAFTA’s first seven years and fueled the violence of Mexico’s spiraling drug war. NAFTA failed to prevent the “social and political explosions” Kerry feared; if anything, it contributed to them.

• CAFTA: In 2005, then-U.S. Sen. Bill Frist (R-Tenn.) argued for the Central America Free Trade Agreement (CAFTA) by saying: “Hugo Chavez moves Venezuela closer and closer to Castro every day. These regimes tend to work to spread their brutal methods and totalitarian philosophies, trying to infect the rest of Latin America and we simply cannot let them succeed. … By linking [Central America’s] economies with democratic capitalism, CAFTA will help gird these nations against the threats at their door.” Soon after CAFTA took effect, most CAFTA nations established close economic and political ties with Venezuela – the Dominican Republic, Honduras, Guatemala and Nicaragua all signed pacts with Venezuela to receive subsidized oil soon after CAFTA took effect.

• Colombia FTA: In 2011, then-U.S. Rep. Geoff Davis (R-Ky.) pushed for passage of the Colombia FTA by arguing, “The trade agreement with Colombia will advance our national security interests by providing Colombians with alternatives to the drug trade.” Davis’ argument directly contradicts that of Colombia’s own Minister of Agriculture. Before the FTA was passed, the minister predicted that if the deal took effect, Colombian farmers would be unable to compete with an FTA-enabled influx of subsidized U.S. crops and “would have no more than three options: migration to the cities or other countries (especially the United States or bordering countries), leaving to work in drug cultivation zones, or affiliating with illegal armed groups.” In August 2013, thousands of Colombian farmers, facing falling incomes and displacement, blocked highways, launched a national strike and called for the repeal of the FTA.

“The TPP should be debated on the merits of its actual provisions and their likely outcomes, not on the basis of rehashed foreign policy talking points and national security hyperbole that have proved false in the past and that bear little connection to the actual TPP text,” said Wallach. 

Data Debunk for USTR Froman’s Thursday Committee Hearing

In recent weeks, U.S. Trade Representative Michael Froman has begun making outlandish claims about past U.S. trade agreements. These claims are not supported by the official  U.S. government trade data. The Office of the U.S. Trade Representative’s (USTR) recent assertions that the North American Free Trade Agreement (NAFTA) has led to a U.S. trade surplus with Mexico and Canada and that the U.S.-Korea Free Trade Agreement (FTA) has increased U.S. manufacturing exports to Korea have been met with incredulity. These pacts’ recent anniversaries have spotlighted how the trade pact model on which the Trans-Pacific Partnership (TPP) is premised has led to massive trade deficits.

The premise that NAFTA would improve our trade balance was the basis for NAFTA proponents’ promises that the pact would create U.S. jobs. Many of the same government and industry sources made the same claims to sell the 2011 U.S.-Korea FTA. These pacts’ dismal outcomes – slow or even negative export growth, rising imports and burgeoning trade deficits – are intensifying congressional opposition to Fast Track authority for the TPP.

Rather than altering the trade agreement model to avoid repeating these outcomes, USTR appears intent on trying to change the data. To generate the outlandish claims about NAFTA and the Korea FTA, USTR employs a smorgasbord of data tricks to look out for in Froman’s testimony Thursday before the House Ways and Means Committee:

USTR’s Biggest Distortion: Counting Foreign-Made “Transshipped” Products as U.S. Exports

USTR’s primary data distortion is the decision not to use the official U.S. government trade data provided by the U.S. International Trade Commission (USITC).^[i] Instead, USTR cites data that include what are called “re-exports.” These are goods made abroad that are simply shipped through the United States en route to a final destination. (The USTR figures would include as U.S. exports goods taken off a truck from Canada in California’s Port of Long Beach then shipped to their final destination in Korea, or goods shipped from China, unloaded in a California port and trucked to Mexico.) Each month, USITC removes re-exports, which do not support U.S. production jobs, from the raw data gathered by the Census Bureau.^[ii] But USTR uses the uncorrected data, inflating the actual U.S. export figures.

• Using the official USITC data, U.S. export growth to countries with which we do not have FTAs has been 30 percent faster than to our FTA partners over the past decade.^[iii]

• The USITC data show U.S. average monthly goods exports to Korea are down 11 percent, imports from Korea have increased and the U.S. average monthly trade deficit with Korea has swelled 47 percent since the enactment of the Korea FTA.^[iv] The total U.S. trade deficit with Korea under the FTA’s second year is projected to be $8.6 billion higher than in the year before the deal.^[v]  Using the administration’s current export-to-job ratio, this drop in net exports represents the loss of more than 46,000 U.S. jobs.^[vi] However since the FTA, foreign-made re-exports passing through the United States en route to Korea are up 13 percent on a monthly average basis.^[vii] By counting these foreign goods as U.S. exports, USTR artificially diminishes the dramatic drop in actual U.S. exports to Korea, and errantly claims gains in some sectors.

• Using the USITC data, the 2013 U.S. goods trade balance with NAFTA nations was a deficit of $177 billion. The combined U.S. goods and services deficit with Mexico and Canada rose (in real, inflation-adjusted terms) from $9.7 billion in 1993 to $139.3 billion in 2012 (the year of comparison used by USTR).^[viii] This NAFTA deficit increase of $129.5 billion, or 1,330 percent, represents hundreds of thousands of lost U.S. jobs.^[ix]  But adding re-exports has had an increasingly distortionary effect on the true NAFTA deficit, allowing NAFTA proponents to make the 2013 NAFTA goods deficit of $177 billion look less than half as large. By incorporating re-exports, USTR claims in recent press materials: “U.S. total goods and private services trade balance with Canada countries (sic) shifted from a deficit of $2.9 billion in 1993 to roughly balance in 2012 (surplus of $37 million).” But after removing re-exports and adjusting for inflation, the actual total U.S. goods and services trade deficit with Canada increased from $16.9 billion in 1993 to $49.1 billion in 2012. That’s a deficit increase of $32.2 billion, or 191 percent. Similarly, USTR claims: “U.S. total goods and private services trade balance with Mexico countries shifted from a surplus of $4.6 billion in 1993 to a deficit of $49.4 billion in 2012.” But after removing re-exports and adjusting for inflation, the actual total U.S. goods and services trade deficit with Mexico changed from a $7.2 billion surplus in 1993 to a $90.1 billion deficit in 2012. That’s a $97.3 billion decline in the U.S. goods and services trade balance with Mexico.

We Still Have Big Deficits Without Fossil Fuels (And Corn Doesn’t Explain Korea Export Crash)

Despite USTR’s claim that our NAFTA deficit is all about fuel imports, the share of the U.S. NAFTA goods trade deficit that is comprised of petroleum, petroleum products and natural gas has declined under NAFTA, from 77 percent in 1993 to 53 percent in 2013, as we have faced a surge of imported manufactured and agricultural goods.^[x] Even if one removes all of these “oil” categories from the balance, the remaining 2013 NAFTA goods trade deficit was $82.9 billion. The combined NAFTA goods and services deficit in 2012 minus oil was $38.3 billion. 

Similarly, with respect to the Korea FTA, USTR claims“[O]ur trade balance has been affected by decreases in corn and fossil fuel exports, changes that are due to the U.S. drought in 2012 and change in Korea’s energy mix.”^[xi] But even discounting both corn and fossil fuels, U.S. monthly exports to Korea still fell under the FTA, and the monthly trade deficit with Korea still ballooned.^[xii] USTR claims that corn and fossil fuels explain the entirety of the export downfall largely by using an ill-suited 2011 versus 2013 timeframe that omits 10 months of available data and relies on a less relevant pre-FTA baseline. Usage of this less accurate timeframe produces a greater drop in corn and fossil fuel exports, and a smaller decline in exports of all other goods, than has actually occurred under the FTA when comparing the year immediately preceding the FTA with the full set of available post-FTA data. It is not surprising that the dismal FTA record remains without these products, given that of the 15 U.S. sectors that export the most to Korea, 11 of them have experienced export declines under the FTA.^[xiii] No product-specific anomalies can explain away what has been a broad-based downfall of U.S. exports to Korea since the pact went into effect.

Not Adjusting for Inflation Counts Increased Prices as an Increase in U.S. Exports

USTR also inflates U.S. exports to Korea by failing to adjust for price inflation. For instance, in its recent Korea FTA news release, USTR claims: “In the two years that this landmark agreement has been in effect … exports of U.S. manufactured goods to Korea have increased … Made-in-America manufactured goods still grew their sales in Korea by 3 percent.”^[xiv] Simply adjusting for inflation alone completely erases USTR’s claim of growth in exports of U.S. manufactured goods to Korea under the FTA. That is, even if one includes the distortion of re-exports and uses USTR’s timeframe, U.S. exports to Korea of manufactured goods fell slightly under the FTA after properly accounting for price increases.^[xv] If one removes the re-exports (i.e., uses the official USITC data) and looks at the actual months that the FTA has been in effect, U.S. monthly exports to Korea of manufactured goods have fallen 5 percent on average relative to the year before the deal took effect. The United States has lost an average of more than $150 million each month in manufactured goods exports to Korea under the FTA. Manufacturing sectors that provide critical shares of U.S. exports to Korea, such as machinery and computers/electronics, have experienced steep export declines under the FTA (11 percent and 12 percent respectively). In contrast, of the four critical manufacturing sectors that have seen increases in average monthly exports to Korea under the FTA, none has experienced an increase of greater than 2 percent.^[xvi]

Cherry-Picking Small-Dollar Winning Sectors, Omitting Major Losers to Distract from Net Losses

In its Korea FTA press release, USTR claims: “U.S. exports of a wide range of agricultural products have seen significant gains. … There were also dramatic increases in U.S. exports of key agricultural products that benefit from reduced tariffs under KORUS, including dairy, wine, beer, soybean oil, fruits and nuts, among many others.”^[xvii] But the losses in U.S. meat exports to Korea under the pact alone nearly cancel out the combined export gains for all agricultural sectors that USTR touts as winners (a monthly average loss of $20.1 million in meat exports versus a combined $24.7 million monthly average gain in exports of dairy, wine, beer, soybean oil, fruits and nuts).^[xviii]Average monthly exports of all U.S. agricultural products to Korea have fallen 41 percent under the FTA in comparison to the year before the deal. Ignoring this overall result, USTR singles out fruit as a winning agricultural sector under the FTA. But U.S. monthly average exports to Korea of all fruits have increased by just $312,120 under the FTA. This 1 percent increase could hardly be described as “dramatic.” USTR also highlights wine, but U.S. monthly average exports of wine to Korea have increased by just $370,378 under the FTA.^[xix] The amount of wine sold in an average six minutes in the United States is worth more ($402,415) than the gain in U.S. wine exports to Korea in an average month under the Korea FTA.^[xx]

Such paltry gains pale in comparison to the more than $20 million lost on average under each month of the FTA in U.S. exports to Korea of meat – one of the sectors that the administration promised would be among the biggest beneficiaries of the Korea deal.^[xxi] Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $442 million in poultry, pork and beef exports to Korea in the first 22 months of the FTA.^[xxii]Since the FTA, U.S. average monthly exports of poultry to Korea have fallen 39 percent below the pre-FTA monthly average. U.S. poultry exports to Korea have been lower than the pre-FTA monthly level in every single month since the FTA’s implementation. U.S. average monthly exports of pork to Korea since the FTA have fallen 34 percent below the pre-FTA monthly average, and U.S. average monthly exports of beef to Korea have fallen 6 percent below the pre-FTA monthly average.^[xxiii]

Omissions and Data Tricks to Hide Massive Auto Sector Deficit Growth Under the Korea FTA

The USTR data on U.S. automotive trade with Korea under the FTA is based on a series of tricks. USTR claims: “Since the Korea agreement went into effect, U.S. exports to Korea are up for our manufactured goods, including autos … overall U.S. passenger vehicle exports to Korea increased 80 percent compared to 2011, and sales of ‘Detroit 3’ vehicles are up 40 percent.”^[xxiv] In fact, exports to Korea of U.S.-produced Fords, Chryslers and General Motors vehicles increased by just 3,400 vehicles from 2011 to 2013.^[xxv]  But given that pre-FTA exports of “Detroit 3” vehicles was also tiny – 8,252 vehicles – USTR can express the small increase of 3,400 cars as a “40 percent” gain. Meanwhile, 125,000 more Korean-produced Hyundais and Kias were imported and sold in the United States in 2013 (after the FTA) than in 2011 (before the FTA), when Hyundai and Kia imports already topped 1.1 million vehicles.^[xxvi]

And USTR’s claim of an “80 percent” rise in passenger vehicle exports, in addition to being inflated by increases in re-exports and prices, omits the export of auto parts, which constitute the majority of the value of U.S. automotive exports to Korea. U.S. average monthly exports of auto parts to Korea have fallen 12 percent under the FTA, offsetting much of the rise in passenger vehicle exports.^[xxvii] After including auto parts, excluding foreign-made re-exports, using the more FTA-relevant timeframe and adjusting for inflation, U.S. average monthly automotive exports to Korea have increased by only 12 percent under the FTA, while average monthly automotive imports from Korea have risen by 19 percent.

The disparity is even starker in dollar terms: While U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, average monthly automotive imports from Korea have soared by $263 million under the deal. The tiny gains in U.S. exports have been swamped by a surge in auto imports from Korea that the administration promised would not occur because of its additional FTA auto sector measure negotiated in 2011. In January 2014, monthly automotive imports from Korea topped $2 billion for the first time on record. The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea.^[xxviii]

Using a Selective Time Frame to Measure the Outcomes of the Korea FTA

Rather than compare the post-Korea-FTA period to the 12 months prior to the FTA’s implementation (i.e., April 2011 through March 2012), USTR uses calendar year 2011 as a baseline. This means that USTR omits data from the three months immediately prior to the FTA’s 2012 implementation (January through March 2012) and replaces it with data from the same three months in 2011. This difference matters, since U.S. exports to Korea in the first three months of 2011 were 9 percent lower than in the first three months of 2012, giving USTR a lower baseline of comparison that makes the downfall in U.S. exports look less severe than if using the three most recent pre-FTA months.^[xxix] In addition, USTR uses only calendar year 2013 to assess the FTA’s record, omitting 10 months of available post-FTA data (April through December 2012 and January 2014). While a comparison between 2011 and 2013 could serve as a second-best approximation in the absence of more precise data, the more FTA-relevant monthly data is readily available.

 

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[i] USITC data can be found at U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb.” Available at: http://dataweb.usitc.gov/.

[ii] Census Bureau data can be found at U.S. Census Bureau, “U.S. International Trade Data,” U.S. Department of Commerce. Available at: http://www.census.gov/foreign-trade/data/.

[iii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed February 11, 2014. Available at: http://dataweb.usitc.gov/. The statistic is a comparison of the average annual growth rate of the combined inflation-adjusted exports of all non-FTA partner countries versus that of all FTA partner countries from 2004 through 2013 (adjustments have been made to account for the changes in these two categories as  non-FTA partners have become FTA partners). All data in this memo is inflation-adjusted according to the CPI-U-RS index of the U.S. Bureau of Labor Statistics (which provides indices up through 2012) and the online inflation calculator of the U.S. Bureau of Labor of Statistics (which provides an approximate index for 2013). U.S. Bureau of Labor Statistics, “Consumer Price Index Research Series Using Current Methods (CPI-U-RS),” U.S. Department of Labor, updated March 29, 2013. Available at: http://www.bls.gov/cpi/cpiursai1978_2012.pdf.  U.S. Bureau of Labor Statistics, “CPI Inflation Calculator,” U.S. Department of Labor, accessed March 10, 2014. Available at: http://www.bls.gov/data/inflation_calculator.htm.

[iv] In this paragraph and throughout, figures concerning average monthly trade levels with Korea compare data from the year before the FTA’s implementation and from the 22 post-implementation months for which data are available. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[v] The projection for export losses under the FTA’s first two years assumes that trends during the FTA’s first 22 months continue for the remaining two months for which data are not yet available. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[vi] Michael Froman, “2014 Trade Policy Agenda and 2013 Annual Report of the President of the United States on the Trade Agreements Program,” Office of the U.S. Trade Representative, March 2014, at 2. Available at: http://www.ustr.gov/sites/default/files/2014%20Trade%20Policy%20Agenda%20and%202013%20Annual%20Report.pdf.    

[vii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[viii] Goods trade data in this bullet point come from U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed February 20, 2014. Available at: http://dataweb.usitc.gov. Services trade data in this bullet point come from U.S. Bureau of Economic Analysis, “International Data: Table 12: U.S. International Transactions, by Area,” accessed February 20, 2014. Available at: http://www.bea.gov/iTable/iTable.cfm?ReqID=6&step=1#reqid=6&step=1&isuri=1.

[ix] See Robert Scott, “Heading South: U.S.-Mexico trade and job displacement after NAFTA,” Economic Policy Institute, May 3, 2011. Available at: http://www.epi.org/publication/heading_south_u-s-mexico_trade_and_job_displacement_after_nafta1/.

[x] Trade in petroleum, petroleum products and natural gas is defined as NAICS 2111 and 3241 for data since 1997 – when NAICS replaced the SIC classification system – and SIC 131, 291, 295, and 299 for data before 1997.

[xi] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xii] Corn is defined as NAICS 111150 and fossil fuels are defined as NAICS 211111, 211112, 212112 and 212113. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xiii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xiv] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xv] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xvi] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xvii] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xviii] “Meat” includes beef (defined as SITC 011), pork (defined as SITC 0122, 0161 and 0175) and poultry (defined as SITC 0123 and 0174). Dairy is defined as NAICS 2111511, 311512, 311513, 311514 and 311520. Wine is defined as NAICS 312130. Beer is defined as NAICS 312120. Soybean oil is defined as NAICS 311222 and 311224. Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Nuts are defined as NAICS 111335 and 111992. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 21, 2014.  Available at: http://dataweb.usitc.gov/.

[xix] Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Wine is defined as NAICS 312130. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xx] The statistic is based on an estimated $34.6 billion in wine sales in the United States in 2012, adjusted for inflation. The Wine Institute, “2012 California and U.S. Wine Sales,” 2013, accessed March 21, 2014. Available at: https://www.wineinstitute.org/resources/statistics/article697.

[xxi] “Meat” includes beef (defined as SITC 011), pork (defined as SITC 0122, 0161 and 0175) and poultry (defined as SITC 0123 and 0174). Dairy is defined as NAICS 2111511, 311512, 311513, 311514 and 311520. Wine is defined as NAICS 312130. Beer is defined as NAICS 312120. Soybean oil is defined as NAICS 311222 and 311224. Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Nuts are defined as NAICS 111335 and 111992. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 21, 2014.  Available at: http://dataweb.usitc.gov/.

[xxii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxiii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxiv] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xxv] Korea Automobile Importers & Distributors Association, “New Registration,” 2014, accessed March 10, 2014. Available at: http://www.kaida.co.kr/en/statistics/NewRegistList.do.

[xxvi] Timothy Cain, “Hyundai-Kia Sales Figures,” GoodCarBadCar.net, 2014, accessed March 10, 2014. Available at: http://www.goodcarbadcar.net/2012/10/hyundai-kia-group-sales-figures.html.

[xxvii] Passenger vehicles are defined as code 300 and 301 in the one-digit End Use classification system, while auto parts are defined as 302. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxviii] Total automotive exports and imports are defined as code 3 in the one-digit End Use classification system. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxix] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

U.S. Trade Deficits Have Grown More Than 440% with FTA Countries, but Declined 16% with Non-FTA Countries

The aggregate U.S. goods trade deficit with Free Trade Agreement (FTA) partners is more than five times as high as before the deals went into effect, while the aggregate deficit with non-FTA countries has actually fallen. The key differences are soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations. Incredibly, the U.S. Chamber of Commerce website states, “For those worried about the U.S. trade deficit, trade agreements are clearly the solution – not the problem.” Their pitch ignores the import surges contributing to growing deficits and job loss, while their export “data” is inflated, using tricks described below.

The aggregate U.S. trade deficit with FTA partners has increased by more than $147 billion (inflation-adjusted) since the FTAs were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $130 billion since 2006 (the median entry date of existing FTAs). Two reasons: a sharp increase in imports from FTA partners and significantly lower export growth to FTA partners than to non-FTA nations over the last decade. Using the Obama administration’s net exports-to-jobs ratio, the FTA trade deficit surge implies the loss of about 800,000 U.S. jobs. Trade with Canada and Mexico (our first and third largest trade partners, respectively) contributed the most to the widening FTA deficit. Under the North American Free Trade Agreement (NAFTA), the U.S. deficit with Canada ballooned and the small U.S. surplus with Mexico turned into a nearly $100 billion deficit. The trend persists under new FTAs – two years into the Korea FTA, the U.S. trade deficit with Korea has jumped more than 51 percent. Reducing the massive trade deficit requires a new trade agreement model, not more of the same.

U.S. Export Growth Falters under FTAs

Growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade. Between 2003 and 2013, U.S. goods exports to FTA partner countries grew by an annual average rate of only 4.9 percent. Goods exports to non-FTA partner countries, by contrast, grew by 6.3 percent per year on average. Since 2006, when the number of FTA partner countries nearly doubled with the implementation of the Central America Free Trade Agreement (CAFTA), the FTA export growth “penalty” has only increased. Since then, average U.S. export growth to non-FTA partner countries has topped average export growth to FTA partners by 47 percent.

Corporate FTA Boosters Use Errant Methods to Claim Higher Exports under FTAs

Members of Congress will invariably be shown data by defenders of our status quo trade policy that appear to indicate that FTAs have generated an export boom. Indeed, to promote congressional support for new NAFTA-style FTAs, the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) have funded an entire body of research designed to create the appearance that the existing pacts have both boosted exports and reversed trade deficits with FTA partner countries. This work relies on several methodological tricks that fail basic standards of accuracy:

• Ignoring imports: U.S. Chamber of Commerce studies regularly omit mention of soaring imports under FTAs, instead focusing only on exports. But any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under FTAs.

• Counting “re-exports:” NAM has misleadingly claimed that the United States has a manufacturing surplus with FTA nations by counting as U.S. exports goods that actually are made overseas – not by U.S. workers. NAM’s data include “re-exports” – goods made elsewhere that are shipped through the United States en route to a final destination. Determining FTAs’ impact on U.S. jobs requires counting only U.S.-made exports.

• Omitting major FTAs: The U.S. Chamber of Commerce has repeatedly claimed that U.S. export growth is higher to FTA nations that to non-FTA nations by simply omitting FTAs that do not support their claim. One U.S. Chamber of Commerce study omitted all FTAs implemented before 2003 to estimate export growth. This excluded major FTAs like NAFTA that comprised more than 83 percent of all U.S. FTA exports. Given NAFTA’s leading role in the 443 percent aggregate FTA deficit surge, its omission vastly skews the findings.

• Failing to correct for inflation: U.S. Chamber of Commerce studies that have claimed high FTA export growth have not adjusted the data for inflation, thus errantly counting price increases as export gains.

• Comparing apples and oranges: The U.S. Chamber of Commerce has claimed higher U.S. exports under FTAs by using two completely different methods to calculate the growth of U.S. exports to FTA partners (an unweighted average) versus non-FTA partners (a weighted average). This inconsistency creates the false impression of higher export growth to FTA partners by giving equal weight to FTA countries that are vastly different in importance to U.S. exports (e.g. Canada, where U.S. exports exceed $251 billion, and Bahrain, where they do not reach $1 billion), despite accounting for such critical differences for non-FTA countries.

Chart: U.S. Trade Deficit Rises by $147 Billion with FTA Partners, Falls by $131 Billion with Rest of the World

On 2nd Anniversary of Korea FTA, U.S. Exports Down, Imports Up and Trade Deficit Balloons, Fueling Congressional TPP Skepticism

Export Decline Hits U.S. Farmers and Auto Workers Particularly Hard, Dismal Outcomes of Pact Used as TPP Template Will Bolster Opposition to Obama Bid for Fast Track Authority

Two years after the implementation of the U.S.-Korea Free Trade Agreement (FTA), government data reveal that the Obama administration’s promises that the pact would expand U.S. exports and create U.S. jobs are exactly opposite of the actual outcomes: a downfall in U.S. exports to Korea, rising imports and a surge in the U.S. trade deficit with Korea. Using the administration’s export-to-job ratio, the estimated drop in net U.S. exports to Korea in the FTA’s first two years represents the loss of more than 46,600 U.S. jobs.

The damaging Korea FTA record, detailed in a new Public Citizen report, undermines the administration’s attempt to use the same failed export growth promises to sell an already skeptical Congress on Fast Track authority for the Trans-Pacific Partnership (TPP), a sweeping deal for which the Korea FTA was the template.

Contrary to the administration’s promise that the Korea FTA would mean “more exports, more jobs”:

• U.S. goods exports to Korea have fallen below the pre-FTA average monthly level for 21 out of 22 months since the deal took effect.  See graph below.

• The United States has lost an average of $385 million each month in exports to Korea, given an 11 percent decline in the average monthly export level in comparison to the year before the deal.

• The United States lost an estimated, cumulative $9.2 billion in exports to Korea under the FTA’s first two years, compared with the exports that would have been achieved at the pre-FTA level.

• Average monthly exports of U.S. agricultural products to Korea have fallen 41 percent.

• The average monthly U.S. automotive trade deficit with Korea has grown 19 percent.

The U.S. exports downfall is particularly concerning given that Korea’s overall imports from all countries increased by 2 percent over the past two years (from 2011 to 2013).

The average monthly trade deficit with Korea has ballooned 47 percent in comparison to the year before the deal. As U.S. exports to Korea have declined under the FTA, average monthly imports from Korea have risen four percent. The total U.S. trade deficit with Korea under the FTA’s just-completed second year is projected to be $8.6 billion higher than in the year before the deal, assuming that trends during the FTA’s first 22 months continue for the remaining two months for which data is not yet available.

Meanwhile, U.S. services exports to Korea have slowed under the FTA. While U.S. services exports to Korea increased at an average quarterly rate of 3 percent in the year before the FTA took effect, the average quarterly growth rate has fallen to 2.3 percent since the deal’s enactment – a 24 percent drop.

“Most Americans won’t be surprised that another NAFTA-style deal is causing damage, but it’s stunning that the administration thinks the public and Congress won’t notice if it recycles the promises used to sell the Korea pact – now proven empty – to push a Trans-Pacific deal that is literally based on the Korea FTA text,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The new evidence of the Korea FTA’s damaging record is certain to make it even more difficult for the Obama administration to get Congress to delegate its constitutional trade authority via Fast Track for the TPP.”

The decline in U.S. exports under the Korea FTA contributed to an overall zero percent growth in U.S. exports in 2013, rendering virtually impossible Obama’s stated goal to double exports by the end of 2014. At the export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054. While the Korea pact is the only U.S. FTA that has led to an actual decline in U.S exports, the overall growth of U.S. exports to nations that are not FTA partners has exceeded combined U.S. export growth to U.S. FTA partners by 30 percent over the past decade.

“The data simply do not support the Obama administration’s tired pitch that more FTAs will bring more exports,” said Wallach. “Faced with falling exports and rising, job-displacing deficits under existing FTAs, the administration needs to find a new model, not to repackage an old one that patently failed.”

The Korea FTA has produced very few winners; since the FTA took effect, U.S. average monthly exports to Korea have fallen in 11 of the 15 sectors that export the most to Korea, relative to the year before the FTA (see graph below). And while losing sectors have faced relatively steep export declines (e.g. a 12 percent drop in computer and electronics exports, a 30 percent drop in mineral and ore exports), none of the winning sectors has experienced an average monthly export increase of greater than two percent. Ironically, many sectors that the administration promised would be the biggest beneficiaries of the Korea FTA have been some of the deal’s largest losers.

AGRICULTURE: While the administration argued for passage of the FTA in 2011 by claiming, “The U.S.-Korea trade agreement creates new opportunities for U.S. farmers, ranchers and food processors seeking to export to Korea’s 49 million consumers,” average monthly exports of U.S. agricultural products to Korea have fallen 41 percent under the FTA.

• U.S. average monthly poultry exports to Korea have fallen 39 percent.

• U.S. average monthly pork exports to Korea have fallen 34 percent.

• U.S. average monthly beef exports to Korea have fallen 6 percent.

Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $442 million in poultry, pork and beef exports to Korea in the first 22 months of the Korea deal – a loss of more than $20 million in meat exports every month.

AUTOS AND AUTO PARTS: The administration also promised the Korea FTA would bring “more job-creating export opportunities in a more open and fair Korean market for America’s auto companies and auto workers,” while a special safeguard would “ensure… that the American industry does not suffer from harmful surges in Korean auto imports due to this agreement.” The U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, but the average monthly automotive imports from Korea have soared by $263 million under the deal – a 19 percent increase. So while U.S. auto exports have risen very modestly under the FTA, those tiny gains have been swamped by a surge in auto imports from Korea that the administration promised would not occur under the FTA.

• In January 2014, monthly auto imports from Korea topped $2 billion for the first time on record.

• About 125,000 more Korean-produced Hyundais and Kias were imported and sold in the United States in 2013 (after the FTA) than in 2011 (before the FTA).

• Sales of U.S.-produced Fords, Chryslers and Cadillacs in Korea increased by just 3,400 vehicles.

The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea. The Obama administration has sought to distract from this dismal result by touting the percentage increase in U.S. auto sales to Korea. This allows the sale of a small number of cars beyond the small pre-FTA base of sales to appear to be a significant gain when in fact it is not.

Read the new Public Citizen report on the Korea FTA record.

The 2014 Trade Agenda: What Hole? Keep Digging.

The President’s 2014 Trade Policy Agenda, released today by the Office of the U.S. Trade Representative (USTR), violates the first law of holes: when you are in one, stop digging. Instead, it sticks to the first rule of PR, when the data is against you (e.g. when export growth under last year's trade agenda amounted to zero percent), distract. 

In the face of large U.S. trade deficits with Free Trade Agreement (FTA) partners, the report declines to count imports and counts exports when convenient. It tries to camouflage the damaging track record of past deals (“forget about the hole”) to sell to the U.S. Congress and public yet another round of FTAs (“just keep digging”). 

The report states that the administration is “working with Congress” to gain Fast Track authority to enact two sweeping and controversial new FTAs – the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA). It neglects to mention that, having seen the hole created by past Fast Tracked FTAs, members of Congress have stated in overwhelming, bipartisan fashion that they have no interest in handing the administration another shovel labeled “Fast Track.”

Much of the 2014 agenda is a copy and paste of the 2013 agenda, reiterating USTR’s stock set of talking points, such as the tired, counterfactual promise that a more-of-the-same trade policy will boost exports. In 2013, this is how USTR put it: “The Obama Administration’s trade policy helps U.S. exporters gain access to billions of customers beyond our borders to support economic growth in the United States and in markets worldwide.” This year they invert the sentence: “We seek to…strengthen our economy by…negotiating high standard agreements that help U.S. exporters gain access to billions of customers beyond our borders.”

But repetition does not make the argument any truer. Under the array of FTAs that have served as a template for the Obama administration’s trade policy agenda, U.S. exports grew by a grand total of 0% last year. The year before that, they grew by 2%.  At the abysmal export growth rate seen in the last two years, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule. (The authors of this year’s Trade Policy Agenda opt not to highlight the ill-fated goal.)  

Also omitted is the inconvenient fact that the overall growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  

Even more glaring is the report's lack of any mention of how exports to Korea have fared under the Korea FTA, which has its second anniversary in less than two weeks, despite detailing export performance to other countries. Under the Korea FTA, which served as the administration’s opening offer for the TPP negotiations, U.S. goods exports to Korea have fallen below the average monthly level seen before the FTA for 20 out of 21 months. Rather than deal with this reality, the report tries to hide it.

The data simply do not support the oft-parroted pitch that more-of-the-same FTAs are the ticket to boosting exports. 

But data is not the report’s strong suit. In defending existing deals like the North American Free Trade Agreement (NAFTA) and the Korea FTA so as to advocate for expanding on their model via the TPP and TAFTA, the report simply ignores the deals' track records. For example, on manufacturing, the report states: “to support the growth of advanced manufacturing and associated high-quality jobs here at home, in 2014 the Obama Administration will continue to pursue trade policies aimed at keeping American manufacturers competitive with their global peers.”

But official government data show that our manufacturing trade deficits have increased dramatically under the very trade policies that the administration vows to “continue to pursue.” Last year, we had a $52.4 billion manufacturing trade deficit with our 20 FTA partners. In 1993, before NAFTA was implemented and before 18 of these 20 countries had an FTA with the United States, we had a $30.1 billion manufacturing trade surplus with these same trade partners.  In the intervening 20 years, during which the United States implemented FTAs with all of these countries, the U.S. manufacturing trade balance with these trade partners fell by $82.6 billion. According to the administration’s own figures, that amounts to a loss of more than 446,000 U.S. jobs in manufacturing alone.

When directly addressing NAFTA, the report chooses to ignore one half of the trade flow equation and focus only on exports. It fails to mention that imports from Mexico and Canada under NAFTA have swamped exports, causing the NAFTA trade deficit to soar 556 percent, reaching $177 billion last year.

And while the report claims that “the agricultural sector has been a bright spot for exports,” that has not been the case under recent FTAs. The average annual U.S. agricultural deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million last year, almost three times the pre-NAFTA level. Over the last decade, U.S. food exports to Mexico and Canada actually fell slightly while U.S. food imports from Mexico and Canada more than doubled.

Food exports have fared even worse under the Korea FTA – in the first year of the deal, U.S. beef, pork, and poultry exports to Korea fell by 8 percent, 24 percent, and 41 percent respectively. 

While ignoring the sluggish exports and deep deficits occurring under existing FTAs (“what hole?”), the 2014 Trade Policy Agenda advocates for the TPP by claiming it would deliver where its predecessors have failed. The report states, “TPP will expand U.S. trade with dynamic economies throughout the rapidly growing Asia-Pacific region.” 

Even if one ignores the disappointing export legacy of the deals serving as the TPP’s template, this sales pitch comes across as hollow. The United States already has FTAs with six of the 11 TPP negotiating countries, for which increased market access is largely not up for negotiation. Of the remaining five TPP countries, Japan is the only major economy, and its growth rate last year was a tepid one percent – hardly the sought-after “dynamism.” The remaining four countries include Vietnam (with an annual per capita income of $1,550), Malaysia (with an annual per capita income of $9,820), New Zealand (with a population the size of metro D.C.), and Brunei (with a population the size of Huntsville, Alabama). Are these the markets on which the administration’s history-defying promise of TPP-led export growth hinge? 

Members of Congress aren’t buying it. Most House Democrats and a sizeable bloc of House Republicans have said no to Fast Tracking the TPP. House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid have also voiced their opposition. So has 62% of the U.S. voting public. Their message to the administration is simple: we’re in a hole. Stop asking for shovels. Find a ladder. 

TPP Talks Fizzle Again under Broad Opposition

Another high-level Trans-Pacific Partnership (TPP) meeting has fizzled with no deal.  The talks have missed a succession of deadlines due to opposition from negotiating countries to corporate-backed U.S. demands that would increase the cost of medicines, restrict financial stability measures, and empower corporations to challenge health and environmental safeguards.  Back at home, the administration's attempt to Fast Track the TPP through Congress suffers from overwhelming congressional and public opposition.  

Facing international and domestic resistance, and having already missed deadlines to seal a deal last October and December, TPP trade ministers refrained from naming another deadline after finishing negotiations in Singapore today, stating only that they hope for a deal "as soon as possible."   

Below are statements from members of Congress, Public Citizen, and the Teamsters on the reasons behind the mounting opposition to the beleaguered attempt to Fast Track the TPP. 

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Statement of Reps. Louise Slaughter (D-NY), Rosa DeLauro (D-CT) and George Miller (D-CA) 

“To borrow terminology being used by the negotiators in Singapore, there is a “considerable gap” between what is being proposed in the TPP and what the American people and their elected representatives in Congress will allow. Members of Congress were elected to create and protect jobs – not send them overseas by fast-tracking another flawed trade agreement. Twenty years and a million lost jobs after NAFTA, members of Congress and their constituents are skeptical of another trade agreement negotiated in secret that threatens American manufacturing jobs. Recent polling shows that three out of five Americans oppose granting the administration fast-track authority to push through new trade deals.”                                                                         

.                                                             

 Statement of Rep. Charles Rangel (D-NY) 

Congressman Charles B. Rangel, Ranking Member of the Ways and Means Subcommittee on Trade, issued the following statement in response to the Camp, Baucus, Hatch Trade Promotion Authority (TPA) proposal:  "The Trade Promotion Authority Bill introduced by Senators Baucus and Hatch and Representative Camp falls far short of adequately replacing the failed 2002 TPA model.  In 2007, I worked to develop the "May 10 Agreement" which included the negotiating objectives of labor, environmental and access to medicine provisions. This was not included in the Baucus, Hatch, and Camp proposal.  I will not support their proposal.  As the Ranking Member on the Ways and Means Trade Subcommittee, I have expressed my concerns to the Administration and directly to the U. S. Trade Representative Ambassador Michael Froman regarding the outstanding issues, which include labor rights, environmental protections, access to medicines in developing Countries, currency manipulation, food safety measures, Japan's agriculture and automotive sector, and state owned enterprises, to name just a few.  Globalization has intensified dramatically; its impact on American businesses and workers has been profound and major new issues have proliferated.  We must develop legislation that addresses these issues, and the proposed TPA  clearly fails to do this."   

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

“The spotlight on the Japan-U.S. market access deadlock is obscuring the broader reality that deep divides remain on many TPP chapters while opposition to TPP and Fast Track authority is growing steadily in the U.S. Congress and public.

Other TPP countries remain opposed to outrageous U.S. demands on behalf of corporate interests to extend medicine patents and other terms that would raise medicine costs, ban the use of capital controls and other financial safeguards, limit Internet freedom and expand the scope of the investor-state extrajudicial tribunal system where domestic public interest laws can be attacked by foreign firms. If such terms were included, it would further increase U.S. public and congressional opposition to TPP.

U.S. proposals for enforceable labor and environmental standards and disciplines on state owned enterprise face continuing opposition from other TPP nations, but the absence of such terms would make U.S. congressional approval of the TPP improbable.

U.S. negotiators have not even raised the demand from 60 U.S. Senators and 230 Representatives that TPP must include enforceable disciplines against currency manipulation, yet a TPP without this will be dead on arrival in Congress whether or not there is Fast Track.”

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 Statement of James P. Hoffa, General President of the International Brotherhood of Teamsters

Latest TPP News Is Nothing to Celebrate for U.S. Workers 

Any Agreements Struck Won’t Help Save American Jobs, Reduce Trade Deficits

The following is a statement from Teamsters General President James P. Hoffa on the ministerial declaration made today in the wake of the latest Trans-Pacific Partnership (TPP) meetings concluding in Singapore:

“While negotiators want to tout minor progress made during these latest TPP negotiations, the fact is it’s really just Groundhog Day,” Hoffa said. “We’ve heard this story before, and none of it will help create more Americans jobs, stop currency manipulation or keep our food and environment safe. Workers would be no better off from the TPP today than they would’ve been yesterday.

“If negotiators are actually close to closing the deal on TPP, now would be a good time to release the full text of the agreement to the media and the public,” he continued. “It’s time to lay this deal on the table so all can see it.”

Administration Desperate to Announce Deal at TPP Ministerial, But What Is a Real Deal?

What Is a Real TPP Deal Versus Kabuki Aimed at Reviving Obama’s Fast Track Push and Framing His Asia Visit?  Public Citizen Publishes Checklist of Outstanding TPP Issues That Require Resolution for a Deal to Be Made

Familiarity with kabuki theatre may be useful in interpreting the outcomes of the  high-level Trans-Pacific Partnership (TPP) meeting that starts Feb. 22 in Singapore as U.S. officials push for an announcement of a “deal” with the hope of reviving the administration’s quest for Fast Track trade authority and setting the stage for President Barack Obama’s April 2014 Asia trip, Public Citizen said today.

“There is a sense that whether or not any real deal is finalized, there may be an announcement of one, if only to portray the talks as not unraveling despite growing opposition to the TPP in some of the countries involved,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “An announcement also could be a ploy to try to pressure Congress on trade authority and maximize President Obama’s leverage when he visits Japan.”

A bilateral U.S-Japan ministerial meeting last weekend failed to break a deadlock on sensitive agricultural and auto market access issues. Other TPP nations are loath to consider tradeoffs relating to U.S. demands on medicine patents, copyright, state-owned enterprises, financial regulation and other issues on which they face considerable domestic political liability without knowing what market access gains they may achieve in return. A TPP ministerial slated for January was postponed because of the market access deadlock.

“People who follow the TPP closely are baffled about why this meeting is happening,” said Wallach. “Either it is an attempt to improve the optics surrounding the beleaguered talks by announcing some deal, whether or not one is done, or they are afraid that already having postponed this ministers’ meeting once, canceling it would signal that the talks were unraveling.”

Deal vs. kabuki checklist: To actually have a TPP deal, these issues must be resolved:

• Disciplines Against Currency Manipulation

A TPP without binding currency provisions could be dead on arrival in Congress. The other TPP nations know this but still oppose such terms. While 230 members of the U.S. House of Representatives and 60 U.S. senators have written to Obama demanding currency manipulation disciplines in the TPP, U.S. negotiators haven’t initiated negotiations on this, much less secured terms. Among others, U.S. Sen. Lindsey Graham (R-S.C.), a prominent supporter of past pacts, announced he would oppose the TPP if it does not include enforceable currency disciplines.

• Enforceable Labor and Environmental Standards

As a January text leak revealed, all other TPP nations oppose many TPP Environment Chapter terms that the United States demands. This includes obligations that, if nations fail to enforce certain environmental agreements that they have signed, they will face TPP enforcement and trade sanctions. Other U.S. bottom lines that face unified opposition are a ban on trade in illegally harvested timber and endangered species, with violations subject to trade sanctions, and enforceable disciplines on fisheries subsidies. Among the TPP countries are those that have led unwavering opposition to disciplines on fishery subsidies, including in the context of the World Trade Organization. More broadly, the other countries have to date rejected the U.S. demand that both the environment and labor chapters be enforceable and subject to the same dispute resolution system as other TPP chapters. These are terms that Congress forced President George W. Bush to include in his pacts. If the Obama administration rolls back the labor and environmental terms included in Bush-signed agreements, it will lose almost all Democratic congressional support for the TPP. In addition, if the labor standards were enforceable, it remains unresolved how the TPP could include Vietnam, one of four countries cited by the Department of Labor for using both child and forced labor in apparel production.

Fact-checking Froman: The Top 10 Myths Used by Obama’s Top Trade Official

U.S. Trade Representative Michael Froman tried in a speech yesterday to defend the Obama administration’s beleaguered trade policy agenda: the controversial Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA) pacts and an unpopular push to Fast Track those sweeping deals through Congress.  The list of those publicly opposing the Fast Track push includes most House Democrats, a sizeable bloc of House Republicans, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid, and 62% of the U.S. voting public. 

In attempt to justify the administration’s polemical pacts, Froman resorted to some statements of dubious veracity, ranging from half-truths to outright mistruths.  To set the record straight, here are the top 10 Froman fables, followed by inconvenient facts that undercut his assertions and help explain the widespread opposition to TPP, TAFTA, and Fast Track.

1. Access to affordable medicines

• Froman:  “[In TPP] we’re working to find better ways to foster affordable access to medicines…” 

• Fact:  This is one of the bigger whoppers to escape Froman’s mouth during the speech.  Leaked negotiating texts reveal that U.S. proposals for the TPP go beyond prior U.S. pacts in handing large pharmaceutical corporations unprecedented monopoly patent protections that would restrict the availability of life-saving generic medicines and raise healthcare costs in TPP countries.  The U.S. TPP proposals would empower pharmaceutical firms to extend medicine patents beyond what the World Trade Organization allows, to patent even the methods for treating patients, and to re-patent existing medicines without actually inventing anything new.  A broad array of public health groups have condemned the overreaching U.S. TPP proposals, warning that they would “jeopardize many, if not millions, of lives.” 

2. Income inequality

• Froman:  “Our trade policy is a major lever for encouraging investment here at home in manufacturing, agriculture and services, creating more high-paying jobs and combating wage stagnation and income inequality.”

• Fact:  First, study after study has shown no correlation between a country’s willingness to sign on to TPP-style pacts and its ability to attract foreign investment, casting doubt on Froman’s promise of a job-creating investment influx.  But more importantly, Froman opted to ignore a big part of why U.S. workers are currently enduring such acute levels of “wage stagnation and income inequality.”  He did not mention the academic consensus that status quo U.S. trade policy, which the TPP would expand, has contributed significantly to the historic rise in U.S. income inequality.  The only debate has been the extent of trade’s inequality-exacerbating impact.  A recent study estimates that trade flows have been responsible for more than 90% of the rise in income inequality occurring since 1995, a period characterized by trade pacts that have incentivized the offshoring of decently-paid U.S. jobs and forced U.S. workers to compete with poorly-paid workers abroad.  How can the TPP, a proposed expansion of the trade policies that have exacerbated inequality, now be expected to ameliorate inequality? 

3. Internet freedom

• Froman:  “I’ve heard some critics suggest that TPP is in some way related to SOPA [the Stop Online Piracy Act].  Don’t believe it.  It just isn’t true….”

• Fact:  Froman’s attempt to assuage fears of a TPP-provided backdoor to SOPA-like limits on Internet freedom would be more convincing if a) he offered details beyond “it just isn’t true,” or b) if his statement didn’t directly contradict leaked TPP texts.  A November leak of the draft TPP intellectual property chapter revealed, for example, that the U.S. is proposing draconian copyright liability rules for Internet service providers that, like SOPA, threaten to curtail Internet users’ free speech.  Indeed, while nearly all other TPP countries have agreed to a proposed provision to limit Internet service providers’ liability, the United States is one of two countries to oppose such flexibility.

4. Corporate trade advisors

• Froman:  “Our cleared advisors do include representatives from the private sector… [but] they [also] include representatives from every major labor union, public health groups…environmental groups…as well as development NGOs...” 

• Fact:  About 90% of the members of the official U.S. trade advisory system explicitly represent industry interests.  These “advisors” are granted privileged access to U.S. negotiators and secretive trade negotiating texts.  Less than 9% of the advisors represent the union, public health, consumer, or development organizations that Froman touts.  And most of those non-industry representatives are cloistered into just two of the advisory system’s 28 committees, while 16 of the committees have zero non-business representatives.  These industry-only committees meet with administration representatives three times as often as the system’s single labor committee, as highlighted by AFL-CIO president Richard Trumka in a recent letter criticizing the lack of TPP consultation with union representatives who ostensibly serve as “advisors.”  

• Froman:  “I’m pleased to announce that we are upgrading our advisory system to provide a new forum for experts on issues like public health, development and consumer safety.  A new Public Interest Trade Advisory Committee, or PTAC, will join the Labor Advisory Committee and the Trade and Environment Policy Advisory Committees to provide cross-cutting platforms for input in the negotiations.”

• Fact:  Froman’s announcement of a new “public interest” committee – a response to the outcry over the vast imbalance of this corporate-dominated advisory system – offers too little, too late. Amid a slew of advisory committees exclusively devoted to narrow industry interests, the “public interest” now gets a single committee?  And how much influence will this committee have in changing the many core TPP provisions that threaten the public interest, now that the administration hopes to conclude TPP negotiations, which have been going on for four years, in the coming months?  Proposed as a TPP afterthought, this new committee comes across as window-dressing, not a genuine restructuring of a system that gives corporations insider access to an otherwise closed trade negotiation process.

5. Fast Track

• Froman:  Fast Track is “the mechanism by which Congress has worked with every administration since 1974 to define its marching orders on what to negotiate…”  We can use Fast Track to “require[] future administrations to require labor, environmental and innovation and access to medicines [standards]…”

• Fact:  Under Fast Track, Congress has not given the administration “marching orders” so much as marching suggestions.  Though Congress inserted non-binding “negotiating objectives” for U.S. pacts into past Fast Track bills – a model replicated in the unpopular current legislation to revive Fast Track for the TPP and TAFTA – Democratic and GOP presidents alike have historically ignored negotiating objectives included in Fast Track.  For example, Froman stated that Fast Track could be used to require particular labor standards.  But while the 1988 Fast Track used for the North American Free Trade Agreement (NAFTA) and the establishment of the World Trade Organization (WTO) included a negotiating objective on labor standards, neither pact included such terms.  The history shows that Fast-Tracked pacts that ignore Congress’ priorities can still be signed by the president (locking in the agreements’ contents) before being sent to Congress for an expedited, ex-post vote in which amendments are prohibited and debate is restricted. 

6. Currency manipulation

• Froman:  In response to a question of whether currency manipulation is being addressed in the TPP: “We take the issue of exchange rates or currency manipulation very seriously as a matter of policy…”

• Fact:  U.S. TPP negotiators have not even initiated negotiations on the inclusion of binding disciplines on currency manipulation, much less secured other countries’ commitment to those disciplines.  The U.S. inaction on currency in the TPP contrasts with letters signed by 230 Representatives (a majority) and 60 Senators (a supermajority) demanding the inclusion of currency manipulation disciplines in the TPP.  Unless U.S. negotiators take currency manipulation more “seriously,” the TPP may be dead on arrival in the U.S. Congress. 

7. Labor rights

• Froman:  “In TPP we’re seeking to include disciplines requiring adherence to fundamental labor rights, including the right to organize and to collectively bargain, protections from child and forced labor and employment discrimination.” 

• Fact:  The TPP includes Vietnam, a country that bans independent unions.  And Vietnam was recently red-listed by the Department of Labor as one of just four countries that use both child labor and forced labor in apparel production.  While Froman acknowledged such “serious challenges,” he did not explain how they would be resolved.  Is Vietnam going to change its fundamental labor laws so as to allow independent unions?  Is the government going to revamp its enforcement mechanisms so as to eliminate the country’s widespread child and forced labor?  Barring such sweeping changes, will the U.S. still sign on to a TPP that includes Vietnam?  

8. Environmental protection

• Froman:  “We’re asking our trading partners to commit to effectively enforce environmental laws…”

• Fact:  While Froman touted several provisions in the draft TPP environment chapter as requiring enforcement of domestic environmental laws, he didn’t mention the draft TPP investment chapter that would empower foreign corporations to directly challenge those laws before international tribunals if they felt the laws undermined their expected future profits.  Corporations have been increasingly using these extreme “investor-state” provisions under existing U.S. “free trade” agreements (FTAs) to attack domestic environmental policies, including a moratorium on fracking, renewable energy programs, and requirements to clean up oil pollution and industrial toxins.  Tribunals comprised of three private attorneys have already ordered taxpayers to pay hundreds of millions to foreign firms for such safeguards, arguing that they violate sweeping FTA-granted investor privileges.  Froman’s call for countries to enforce their environmental laws sounds hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement.

9. TPP secrecy

• Froman:  “Let me make one thing absolutely clear: any member of Congress can see the negotiating text anytime they request it.”

• Fact:  For three full years negotiations, members of Congress were not able to see the bracketed negotiating text of the TPP, a deal that would rewrite broad swaths of domestic U.S. policies.  Only after mounting outcry among members of Congress and the public about this astounding degree of secrecy did the administration begin sharing the negotiating text with members of Congress last June.  Even so, the administration still only provides TPP text access under restrictive terms for many members of Congress, such as requiring that technical staff not be present and forbidding the member of Congress from taking detailed notes or keeping a copy of the text.  Meanwhile, the U.S. public remains shut out, with the Obama administration refusing to make public any part of the TPP negotiating text.  Such secrecy falls short of the standard of transparency exhibited by the Bush administration, which published online the full negotiating text of the last similarly sweeping U.S. pact (the Free Trade Area of the Americas). 

10. Exports under FTAs

• Froman:  “Under President Obama, U.S. exports have increased by 50%...”  “Today the post-crisis surge in exports we experienced over the last few years is beginning to recede.  And that’s why we’re working to open markets in the Asia-Pacific and in Europe...”

• Fact:  U.S. exports grew by a grand total of 0% last year under the current “trade” pact model.   The year before that, they grew by 2%.  Most of the export growth Froman cites came early in Obama’s tenure as a predictable rebound from the global recession that followed the 2007-2008 financial crisis.  At the abysmal export growth rate seen since then, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule.  Froman ironically uses this export growth drop-off to argue for more-of-the-same trade policy (e.g. the TPP and TAFTA).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  Indeed, the overall growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  That’s not a solid basis from which to argue, in the name of exports, for yet another FTA. 

New York Times: Obama's TPP-Promoting Mexico Visit Is "Politically Fraught"

A New York Times story today on Obama's trip to Mexico tomorrow underscores a point we made last week: Obama's visit with the leaders of Mexico and Canada shines a spotlight on NAFTA's 20-year legacy of damage, casting a long shadow on Obama's unpopular attempt to Fast Track through Congress the Trans-Pacific Partnership (TPP), a sweeping pact built on the NAFTA model.  The Times reports:

The whirlwind visit...will offer Mr. Obama a chance to reassure his counterparts about his capacity to deliver at a time when he faces significant hurdles at home. Senator Harry Reid of Nevada and Representative Nancy Pelosi of California, the Democratic leaders in Congress, oppose legislation giving him authority similar to that of his predecessors to negotiate trade deals.

That ill-favored legislation is an attempt to revive Fast Track, the Nixon-era maneuver that empowered the executive branch to unilaterally negotiate and sign sweeping "trade" deals, locking in the contents before Congress got an expedited, no-amendments, limited-debate vote.  In addition to Pelosi and Reid, most House Democrats, a bloc of House Republicans, and about two out of three U.S. voters oppose the administration's current push to renew Fast Track so as to skid the controversial TPP through Congress. 

Among the reasons for the broad opposition to a Fast-Tracked TPP is the 20-year legacy of NAFTA.  For many people throughout North America, NAFTA's damage has been tangible: job losses, wage stagnation, displaced livelihoods, unsafe food, and exposure to toxins.  The Times cited our comprehensive report, released last week, that details the empirical record of NAFTA's damaging first twenty years: 

But even two decades after Nafta, debate still rages about its merits or drawbacks. Ms. Wallach’s group released a report last week compiling government data to argue that not only did Nafta’s promised benefits not materialize, but that many of the results were the opposite of what was promised, citing lost jobs, slower manufacturing and large trade deficits.

It is the lived experience of NAFTA, not an abstract ideology, that has prompted 53 percent of the U.S. public to say that we should “do whatever is necessary” to “renegotiate” or “leave” NAFTA.  Seeing such opposition, Obama promised to renegotiate NAFTA as a presidential candidate in 2008.  His current push to Fast Track the TPP represents a stunning flip-flop that threatens to replicate the very NAFTA-style damage that Obama criticized on the campaign trail.  Incredibly, Obama administration officials are now trying to sell the TPP as honoring Obama's renegotiation promise -- an Orwellian move that our own Lori Wallach has been quick to counter.  The Times reports: 

Michael B. Froman, the president’s trade representative, tried to reassure Democrats on Tuesday that the administration would be sensitive to their concerns about workplace and environmental standards in putting together the new trade pact, the Trans-Pacific Partnership, or TPP. He noted that as a candidate, Mr. Obama promised to renegotiate the North American Free Trade Agreement, known as Nafta.

“And that’s exactly what we’re doing in TPP, upgrading our trading relationships not only with Mexico and Canada but with nine other countries as well,” Mr. Froman said in a speech at the Center for American Progress, a liberal research group in Washington.

That assertion drew scorn from critics. “I don’t think that expanding on the Nafta model and extending it to nine more nations was what the unions, environmental groups or Democratic Party activists had in mind when Obama said he would renegotiate Nafta,” said Lori Wallach, a trade expert at Public Citizen, a liberal advocacy group.

The administration's TPP sales pitch is unlikely to convince the broad majority of the U.S. public that wants to renegotiate NAFTA and halt a NAFTA-expanding TPP.  If NAFTA's two-decade legacy of tumult and hardship makes it politically impossible to Fast Track through Congress the TPP, it would constitute a unique benefit of an otherwise damaging deal.

Obama Mexico Visit Spotlights 20-Year Legacy of Job Loss from NAFTA, the Pact on Which Obama’s TPP Is Modeled

New Public Citizen Report Catalogs the Negative NAFTA Outcomes That Are Fueling Opposition to Obama Push to Fast Track TPP

The 20-year record of job loss and trade deficits from the North American Free Trade Agreement (NAFTA) is haunting President Barack Obama’s efforts to obtain special trade authority to fast track the Trans-Pacific Partnership (TPP), said Public Citizen as it released a new report that comprehensively documents NAFTA’s outcomes. Next week’s presidential trip to Mexico for a long-scheduled “Three Amigos” U.S.-Mexico-Canada summit will raise public attention to NAFTA, on which the TPP is modeled, which is not good news for Obama’s push for the TPP and Fast Track.

Numerous polls show that opposition to NAFTA is among few issues that unite Americans across partisan and regional divides. Public ire about NAFTA’s legacy of job loss and policymakers’ concerns about two decades of huge NAFTA trade deficits have plagued the administration’s efforts to obtain Fast Track trade authority for the TPP. The TPP would expand the NAFTA model to more nations, including ultra-low-wage Vietnam. In the U.S. House of Representatives, most Democrats and a bloc of GOP have indicated opposition to Fast Track, as has Senate Majority Leader Harry Reid (D-Nev.).

Public Citizen’s new report, "NAFTA’s 20-Year Legacy and the Fate of the Trans-Pacific Partnership", compiles government data on NAFTA outcomes to detail the empirical record underlying the public and policymaker sentiment. It also shows that warnings issued by NAFTA boosters that a failure to pass NAFTA would result in foreign policy crises – rising Mexican migration and a neighboring nation devolving into a troubled narco-state – actually came to fruition in part because of NAFTA provisions that destroyed millions of rural Mexican livelihoods.

“Outside of corporate boardrooms and D.C. think tanks, Americans view NAFTA as a symbol of job loss and a cancer on the middle class,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “If you are a president battling to overcome bipartisan congressional skepticism about giving you special trade authority to fast track a massive 12-nation NAFTA expansion, it is really not helpful to be visiting Mexico for a summit of NAFTA-nation leaders.”

The Public Citizen report shows that not only did projections and promises made by NAFTA proponents not materialize, but many results are exactly the opposite. Such outcomes include a staggering $177 billion U.S. trade deficit with NAFTA partners Mexico and Canada, one million net U.S. jobs lost in NAFTA’s first decade alone, slower U.S. manufacturing and services export growth to Mexico and Canada, a doubling of immigration from Mexico, larger agricultural trade deficits with Mexico and Canada, and more than $360 million paid to corporations after “investor-state” tribunal attacks on, and rollbacks of, domestic public interest policies.

“The data have disproved the promises of more jobs and better wages, so bizarrely now NAFTA defenders argue the pact was a success because it expanded the volume of U.S. trade with the two countries without mentioning that this resulted in a 556 percent increase in our trade deficit with those countries, with a flood of new NAFTA imports wiping out hundreds of thousands of American jobs,” said Wallach.

The study tracks specific promises made by U.S. corporations like Chrysler, GE and Caterpillar to create specific numbers of American jobs if NAFTA was approved, and reveals government data showing that instead, they fired U.S. workers and moved operations to Mexico.

“The White House and the corporate lobby sold NAFTA with promises of export growth and job creation, but the actual data show the projections were at best wrong,” said Wallach. “The gulf between the gains promised for NAFTA and the damage that ensued means that the public and policymakers are not buying the same sales pitch now being made for theTPP and Fast Track.”

The report also documents how post-NAFTA trade and investment trends have contributed to middle-class pay cuts, which in turn contributed to growing income inequality; how since NAFTA, U.S. trade deficit growth with Mexico and Canada has been 50 percent higher than with countries not party to a U.S. Free Trade Agreement, and how U.S. manufacturing and services exports to Canada and Mexico have grown at less than half the pre-NAFTA rate.

Among the study’s findings:

• Rather than creating in any year the 200,000 net jobs per year promised by former President Bill Clinton on the basis of Peterson Institute for International Economics projections, job loss from NAFTA began rapidly:

• American manufacturing jobs were lost as U.S. firms used NAFTA’s foreign investor privileges to relocate production to Mexico, and as a new flood of NAFTA imports swamped gains in exports, creating a massive new trade deficit that equated to an estimated net loss of one million U.S. jobs by 2004. A small pre-NAFTA U.S. trade surplus of $2.5 billion with Mexico turned into a huge new deficit, and a pre-NAFTA $29.6 billion deficit with Canada exploded. The 2013 NAFTA deficit was $177 billion, representing a more than six-fold increase in the NAFTA deficit.

• More than 845,000 specific U.S. workers, most in the manufacturing sector, have been certified for Trade Adjustment Assistance (TAA) since NAFTA because they lost their jobs due to offshoring to, or imports from, Canada and Mexico.The TAA program is narrow, covering only a subset of jobs lost at manufacturing facilities, and is difficult to qualify for. Thus, the TAA numbers significantly undercount NAFTA job loss. A TAA database searchable by congressional district, sector and more is available here.

• NAFTA has contributed to downward pressure on U.S. wages and growing income inequality.There is broad consensus among economists that recent trade flows have been a significant contributor to growing income inequality; the only debate is about the degree of trade’s responsibility. NAFTA’s broadest economic impact has been to fundamentally transform the types of jobs and wages available for the 63 percent of American workers without a college degree. Most of those who lost manufacturing jobs to NAFTA offshoring and import competition found reemployment in lower-wage service sector jobs. 

• According to the U.S. Bureau of Labor Statistics, two out of every three displaced manufacturing workers who were rehired in 2012 experienced a wage reduction, most of them taking a pay cut of greater than 20 percent.  

• As increasing numbers of workers displaced from manufacturing jobs have joined those competing for non-offshorable, low-skill jobs in sectors such as hospitality and food service, real wages have also fallen in these sectors under NAFTA. The resulting downward pressure on middle-class wages has fueled recent growth in income inequality.

• Scores of environmental and health laws have been challenged in foreign tribunals through NAFTA’s controversial investor-state dispute resolution system. More than $360 million in compensation to investors has been extracted from NAFTA governments via “investor-state” tribunal challenges against toxics bans, land-use rules, water and forestry policies, and more. More than $12.4 billion is pending in such NAFTA claims, including challenges of medicine patent policies, a fracking moratorium and a renewable energy program.

• The average annual U.S. agricultural trade deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. U.S. beef imports from Mexico and Canada, for example, have risen 133 percent. Over the past decade,  total U.S. food exports to Mexico and Canada have actually fallen slightly while U.S. food imports from Mexico and Canada have more than doubled. This stands in stark contrast to projections that NAFTA would allow U.S. farmers to export their way to newfound wealth and farm income stability. Despite a 239 percent rise in food imports from Canada and Mexico under NAFTA, the average nominal U.S. price of food in the United States has jumped 67 percent since NAFTA.

• The reductions in consumer goods prices that have materialized have not been sufficient to offset the losses to wages under NAFTA; U.S. workers without college degrees (63 percent of the workforce) likely have lost a net amount equal to 12.2 percent of their wages even after accounting for gains from cheaper goods.This net loss means a loss of more than $3,300 per year for a worker earning the median annual wage of $27,500.

• The export of subsidized U.S. corn did increase under NAFTA’s first decade, destroying the livelihoods of more than one million Mexican campesino farmers and about 1.4 million additional Mexican workers whose livelihoods depended on agriculture. The desperate migration of those displaced from Mexico’s rural economy pushed down wages in Mexico’s border maquiladora factory zone and contributed to a doubling of Mexican immigration to the United States following NAFTA’s implementation.

• Facing displacement, rising prices and stagnant wages, more than half the Mexican population, and more than 60 percent of the rural population, still falls below the poverty line, despite the promises that NAFTA would bring broad prosperity to Mexicans. Real wages in Mexico have fallen significantly below pre-NAFTA levels as price increases for basic consumer goods have exceeded wage increases. A minimum wage earner in Mexico today can buy 38 percent fewer consumer goods than on the day that NAFTA took effect. Despite promises that NAFTA would benefit Mexican consumers by granting access to cheaper imported products, the cost of basic consumer goods in Mexico has risen to seven times the pre-NAFTA level, while the minimum wage stands at only four times the pre-NAFTA level. Though the price paid to Mexican farmers for corn plummeted after NAFTA, the deregulated retail price of tortillas – Mexico’s staple food – shot up 279 percent in the pact’s first 10 years.

“Given NAFTA’s damaging outcomes, few of the corporations or think tanks that sold it as a boon for all of us in the 1990s like to talk about it, but the reality is that their promises failed, the opposite occurred and millions of people were severely harmed and now this legacy is derailing President Obama’s misguided push to expand NAFTA through the TPP,” said Wallach.

2013 Trade Data: USITC Corrections of Last Week’s Census Data Show Why Obama’s TPP, Fast Track Quest Is in Trouble

This weekend’s U.S. International Trade Commission (USITC) release of corrected 2013 year-end trade data goes a long way in explaining broad congressional and public opposition to the Obama administration’s trade agenda, which is premised on expanding to additional nations a model of trade pacts that the data show are failing most Americans. The data (graphs below) show:

A stunning decline in U.S. exports to Korea, a rise in imports from Korea, and a widening of the U.S. trade deficit under the Korea Free Trade Agreement (FTA).

• In 20 out of 21 months since the Korea FTA took effect, U.S. goods exports to Korea have fallen below the average monthly level in the year before the deal.
• U.S. average monthly exports to Korea since the FTA are 12 percent lower than the pre-FTA monthly average, while monthly imports from Korea are up 3 percent.
• The monthly trade deficit with Korea has ballooned 49 percent compared to the pre-FTA level. These losses amount to tens of thousands of lost U.S. jobs.

Zero growth in U.S. goods exports relative to 2012, placing the United States decades behind in Obama’s stated goal to double exports in five years.

• Total U.S. goods exports in 2013 actually dropped slightly from 2012 after adjusting for inflation, revealing a negative 0.1 percent growth rate.
• The data show there is no chance to meet President Obama’s stated goal to double 2009’s exports by the end of this year. At the paltry 1 percent annual export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054, 40 years behind schedule.

A staggering U.S. trade deficit with Canada and Mexico after 20 years of the North American Free Trade Agreement (NAFTA).

• The 2013 U.S. goods trade deficit with Mexico and Canada was $177 billion - a nearly seven-fold increase above the pre-NAFTA level, when the United States enjoyed a small trade surplus with Mexico and a modest deficit with Canada.
• Even worse for U.S. workers, the non-oil NAFTA deficit has multiplied more than 13-fold, costing hundreds of thousands of U.S. jobs. Indeed, the share of the combined U.S. trade deficit with Mexico and Canada that is comprised of oil has declined since NAFTA.

Today’s USITC data correct last week’s Census Bureau trade data to remove re-exports – goods made elsewhere that pass through U.S. ports en route to final destinations. The corrected data only heaps further doubt on Obama’s prospects for getting Fast Track trade authority, now publicly opposed by most House Democrats, a sizeable bloc of House Republicans, and Senate Majority Leader Harry Reid. Obama has asked for Fast Track to push through Congress the Trans-Pacific Partnership (TPP), a controversial deal modeled on the Korea FTA and NAFTA.

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

“Many in Congress and the public oppose NAFTA-on-steroids “trade” agreements like the TPP and Fast Track authority to expedite them because past trade deals have proved to be so damaging. Just like today for TPP, in the past we were sold on glorious projections of these deals’ benefits but the actual data show an ever-larger drop in U.S. exports to Korea since that pact and a growing trade deficit, a massive NAFTA trade deficit and overall zero growth for U.S. goods exports relative to last year despite implementation of more-of-the-same trade deals. The White House and the corporate lobby are trying to sell Congress the TPP and Fast Track with the same old promises about export growth and job creation, but today’s data show that under Obama’s only past major trade deal with Korea on which TPP is modeled, U.S. exports dropped dramatically, imports soared and the U.S. lost more jobs to a trade agreement.”

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Obama’s Free-Trade Conundrum

On Wednesday the New York Times published an op-ed by David Bonior, the House Democratic whip during the 1993 vote on NAFTA, on President Obama's stated support for Fast Tracking the NAFTA-style Trans-Pacific Partnership (TPP) through Congress.  Here are a few pertinent excerpts:

...Mr. Obama’s desire for fast-track authority on the T.P.P. and other agreements clashes with another priority in his [State of the Union] speech: reducing income inequality.

This month is the 20th anniversary of the North American Free Trade Agreement, which significantly eliminated tariffs and other trade barriers across the continent and has been used as a model for the T.P.P. Anyone looking for evidence on what this new agreement will do to income inequality in America needs to consider Nafta’s 20-year record.

While many analysts focus on the number of jobs lost from Nafta and similar pacts — and some estimates say upward of a million — the most significant effect has been a fundamental change in the composition of jobs available to the 63 percent of American workers without a college degree.

...

The Labor Department’s Trade Adjustment Assistance program...reads like a funeral program for the middle class. More than 845,000 workers have been certified under this one narrow and hard-to-qualify-for program as having lost their jobs because of offshoring of factories to, and growing imports from, Mexico and Canada since Nafta.

The result is downward pressure on middle-class wages as manufacturing workers are forced to compete with imports made by poorly paid workers abroad. According to the Bureau of Labor Statistics, nearly two out of every three displaced manufacturing workers who were rehired in 2012 saw wage reductions, most losing more than 20 percent.

The shift in employment from high-paying manufacturing jobs to low-paying service jobs has contributed to overall wage stagnation. The average American wage has grown less than 1 percent annually in real terms since Nafta, even as productivity grew three times faster.

But the decline in the wages of workers who lost a job to Nafta is only part of the story. They joined the glut of workers competing for low-skill jobs that cannot be done offshore in industries like hospitality and food service, forcing down real wages in these sectors as well.

And, for America’s remaining manufacturing workers, Nafta put downward pressure on wages by enabling employers to threaten to move jobs offshore during wage bargaining. A 1997 Cornell University study ordered by the Nafta Commission for Labor Cooperation found that as many as 62 percent of union drives faced employer threats to relocate abroad, and the factory shutdown rate following successful union certifications tripled after Nafta.

...

The Nafta data poses a significant challenge for President Obama. As he said on Tuesday, he wants to battle the plague of income inequality and he wants to expand the Nafta model with T.P.P. But he cannot have it both ways.

Obama Downplays Trade Authority, Trans-Pacific Partnership: Fleeting Mention Doesn’t Even Reference Recently Introduced Camp-Baucus Fast Track Bill

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

“Corporate interests were fiercely lobbying for President Obama to dedicate serious time in this State of the Union speech to pushing Fast Track and the Trans-Pacific Partnership in order to try to overcome broad congressional and public opposition to both, but instead he made only a passing reference that largely repeated his past statements.

With almost no House Democratic support for Fast Track, a bloc of GOP “no” votes and public opposition making congressional phones ring off the hook, high-profile treatment of the issue was considered necessary to revive any prospect that Fast Track could be passed in this Congress.

“Opposition has been growing to the massive Trans-Pacific Partnership deal. Implementing this  NAFTA-on-steroids deal would undermine Obama’s efforts to battle income inequality. It would be like drilling a hole in a boat just as you are trying to seal the cracks that are letting the water in.”

Background: President Obama’s references to trade in tonight’s speech were similar to his 2013 SOTU trade mentions: “To boost American exports, support American jobs and level the playing field in the growing markets of Asia, we intend to complete negotiations on a Trans-Pacific Partnership.  And tonight, I’m announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.” Tonight’s speech also replayed   the administration’s standard statement on Fast Track, for instance in the  2013 Annual Trade Policy Agenda: “To facilitate the conclusion, approval, and implementation of market-opening negotiating efforts, we will also work with Congress on Trade Promotion Authority. Such authority will guide current and future negotiations, and will thus support a jobs-focused trade agenda moving forward.”

A letter released Monday by more than 550 Democratic base organizations and a news conference today by Tea Party leaders against Fast Track reiterates the breadth of grassroots opposition. The letter included organizations such as MoveOn, SEIU, AFSCME and the American Federation of Teachers, that have not been involved in past “trade” fights and who are strong Obama supporters.

Past trade pacts’ role in fueling the growth of U.S. income inequality is animating new entrants into the Fast Track debate. Over the weekend, former Clinton Labor Secretary Robert Reich called for opposition to Fast Track and the TPP.  The failure of Obama’s past SOTU trade promises is feeding skepticism. In his 2011 SOTU, Obama promised the pact would expand U.S. exports to Korea.  In the pact’s first year, exports dropped 10 percent, imports soared and the U.S. trade deficit with Korea grew 37 percent, equating to a net loss of approximately 40,000 more U.S. jobs.

Democratic and GOP presidents have struggled to persuade Congress to provide Fast Track authority, which Congress has authorized for only five years (2002-07) of the past 20. In late 2013, 151 House Democrats signed a letter opposing Fast Track. Two weeks ago, when U.S. Rep. Dave Camp (R-Mich.) and U.S. Sens. Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) introduced legislation to establish Fast Track, 17 Senate Democrats sentletters opposing the bill, which did not  have a single House Democratic sponsor. Two groups of GOP representatives have also sent letters opposing Fast Track.

Studies Reveal Consensus: Trade Flows during “Free Trade” Era Have Exacerbated U.S. Income Inequality

Recent Studies: Trade’s Contribution to Inequality Has Increased since the 1990s and Is Likely to Increase Further

Tonight President Obama is expected to address two linked subjects in his State of the Union address: the historic rise in U.S. income inequality and a trade policy agenda that threatens to exacerbate inequality. As we've repeatedly pointed out, Obama cannot have it both ways: he cannot propose to close the yawning income gap while pushing to Fast Track through Congress a controversial Trans-Pacific Partnership (TPP) "free trade" deal that would widen the gap. The TPP would expand the status quo "free trade" model that study after study has found to be an increasingly significant contributor to U.S. income inequality.

As unfair trade deals have been Fast Tracked into law, U.S. income inequality has jumped to levels not seen since the robber baron era. Today, the richest 10 percent of the U.S. is taking over half of the economic pie, while the top 1 percent is taking more than one fifth. Wealthy individuals’ share of national income was stable for the first several decades after World War II. But that share has shot up 51 percent for the richest 10 percent and 146 percent for the richest 1 percent since the passage of Fast Track in 1974, a time period characterized by a series of unfair trade deals. The income share of the richest 10 percent escalated particularly abruptly after the 1994 enactment of the North American Free Trade Agreement (NAFTA), as indicated in the graph below.

Since 1941 standard economic theory has held that trade liberalization will contribute to greater income inequality in developed countries like the United States. In the early 1990s, as U.S. income inequality soared amid the enactment of U.S. “free trade” deals, a spate of economic studies put the theory to the test, aiming to determine the relative contribution of trade flows to the rise in U.S. income inequality. The result was an academic consensus that trade flows had, in fact, contributed to rising U.S. income inequality. The only debate was the extent of the blame to be placed on trade, with most studies estimating that between 10 and 40 percent of the rise in inequality during the 1980s and early 1990s stemmed from trade flows.

More recent studies have concluded that trade’s role in exacerbating U.S. income inequality has likely grown since the 1990s, as U.S. imports from lower-wage countries, and U.S. job offshoring to those countries, have grown dramatically, impacting an increasing swath of middle-class jobs. Further, an array of studies now project future increases in the offshoring of U.S. jobs, suggesting that even under current U.S. trade policy, trade flows will soon be responsible for an even greater share of rising U.S income inequality. Attempts to Fast Track through Congress controversial deals like the TPP, which would incentivize further offshoring, would only exacerbate the historically high degree of U.S. income inequality.

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Recent studies examining trade’s current and projected future contribution to U.S. income inequality:

 

Rising Income Inequality: Technology, or Trade and Financial Globalization?

Florence Jaumotte, Subir Lall, and Chris Papageorgiou;  International Monetary Fund;  September 30, 2009

The International Monetary Fund authors find that the rise in income inequality from 1981-2003 in 20 developed countries, including the United States, is primarily attributable to trade and financial globalization trends. They conclude that globalization’s contribution to inequality has outweighed the role of technological advancement: “Among developed countries…the adverse impact of globalization is somewhat larger than that of technological progress” (p. 19).

 

Trade and Wages, Reconsidered

Paul Krugman;  The Brookings Institution;  Spring 2008

In a Brookings Institution study, Nobel-winning economist Paul Krugman finds that trade flows likely now account for an even greater degree of U.S. income inequality than that found in a series of studies from the early 1990s, which had already concluded that trade liberalization had a negative, but modest, impact on income inequality in developed countries like the United States. In particular, Krugman notes that U.S. manufacturing imports from low-wage developing countries have grown dramatically in the last two decades, suggesting that the role of trade flows in spurring U.S. income inequality growth is “considerably larger” than before (p. 106).  Krugman concludes, “…there has been a dramatic increase in manufactured imports from developing countries since the early 1990s. And it is probably true that this increase has been a force for greater inequality in the United States and other developed countries” (p. 134).

 

Globalization, American Wages, and Inequality: Past, Present, and Future

Josh Bivens;  Economic Policy Institute;  September 6, 2007

In this study Josh Bivens of the Economic Policy Institute updates an early-1990s model estimate of the impact of trade flows on U.S. income inequality and finds that, using the model’s own conservative assumptions, the degree of U.S. income inequality attributable to trade with lower-wage countries increased more than 40 percent from 1995 to 2006. In addition, Bivens cites an array of recent economic studies that project that the offshoring of U.S. jobs will increase under current trade policy, suggesting a substantial rise in the impact of trade flows on U.S. income inequality. For example, Princeton economist and former Council of Economic Advisors member Alan Blinder estimates that about one in every four U.S. jobs, including higher-paying service-sector jobs, could be offshored in the foreseeable future. While such studies differ in the projected extent of future U.S. job offshoreability, all imply an increase in the impact of trade flows on U.S. income inequality. Bivens finds that the range of projections for increased offshoring suggest a further 72 to 262 percent increase in U.S. income inequality attributable to trade with lower-wage countries, compared to the level seen in 2006. Bivens concludes, “The potential level of redistribution caused by offshoring is vast, and, so should be the policy response” (p. 8).