Trade Reform for Economic Recovery and Global Justice
Stop the Third Worldization of the United States and Advance Global Justice – Take Action For Comprehensive Trade Reform!
Over the last 15 years the United States has entered into a number of treaties that have been called "free trade agreements.” In fact, these deals are not really free, and they’re unfair. They manipulate the rules of trade to benefit large corporations and investors at the expense of small farmers and other working people. They allow consumer, food safety, environmental, labor, and other laws to be attacked as interference with profitable trade. They have also undermined the U.S. economy by facilitating and encouraging the outsourcing and off-shoring of millions of jobs. In Oregon alone, some 10,000 jobs were lost to trade in a recent 12-month period. That number is almost certainly low because it includes only workers who have applied for and received Trade Adjustment Assistance. On a broader scale, from 2001-2006, one in six US manufacturing jobs, 2.9 million in all, were lost. (Charles McMillion, “New analysis of US job market: Jan. '01 to Jan. '06 -- jobs lost in almost every industry that faces outsourcing or import competition,” February 9, 2006) (http://www.citizenstrade.org/pdf/mcmillion_jobslostinalmosteveryindustry_02092006.pdf). For more details on the impact on the economy, see, Paul Craig Roberts, “Government Is The Largest Employer: The Fading American Economy” (April 8, 2008) at http://www.counterpunch.org/roberts04092008.html, and “American Economy: R.I.P” (September 12, 2007) at http://www.counterpunch.org/roberts09122007.html. Roberts points outthat the US trade deficit is actually larger than the total output of US manufacturing, making it difficult for exports to grow the economy and unlikely that exports alone can solve the deficit.
The Third Worldization of the United States
Job training or retraining is beside the point when there are no jobs for those workers. The U.S. has become a services economy, with not enough capital and workers making things anymore. Our manufacturing base has been substantially dismantled, with family-wage jobs being replaced by lower-paying service jobs without comparable benefits. That and the inequality between increasingly super-rich and increasingly impoverished Americans threaten the Third Worldization of the United States, in process and already considerably far along. Inequality in the US has now reached levels not seen since 1928. Of every dollar of real income growth that was generated between 1976 and 2007, 58 cents went to the top 1 percent of households. http://www.nakedcapitalism.com/2010/07/58-of-real-income-growth-since-1976-went-to-top-1-and-why-that-matters.html A recent report from the Economic Policy Institute, “State of Working America,” details how, despite significant productivity gains, median household income has remained stagnant, and shows that wealth has increasingly gone to the top 5 percent (and especially the top 1%) of Americans; as of 2004, the top 20 percent controlled 85 percent of the nation’s wealth. EPI warns, “Today’s economic crisis finds America’s working families in an ever harder place. … [R]ecent developments are compounding a broader economic failure that has been not months or years, but decades in the making.” David Rosen finds most disturbing the graph in the EPI report showing that in 2006, the top 1 percent controlled 23 percent of all income. “[T]he super-rich have [thus] regained the position they held just prior to the 1929 stock market crash when they controlled 24 percent of all income.” David Rosen, “Suffering the New Normal: The End of the American Century?” http://www.counterpunch.org/rosen09102010.html.
The Role of Trade
The trade deficit – the amount by which the value of goods and services imported into the U.S. exceeds the value of goods and services we export – “is actually a central reason why American growth has lagged and President Obama’s stimulus hasn’t led to a robust recovery: since February 2009, the government has injected $512 billion into the American economy, but during roughly the same period, the trade deficit leaked about $602 billion out of it and into foreign markets.” Alan Tonelson and Kevin L. Kearns, “Trading Away the Stimulus,” New York Times, 9/9/10. However, while Tonelson and Kearns offer a useful perspective on the overall problem, I think at least some of their solutions would run afoul of trade agreements to which the U.S. is already a party.
These agreements include the North American Free Trade Agreement (NAFTA), the Central American Free Trade Agreement (CAFTA), and the World Trade Organization (WTO). While they have some problems in common, a few key differences are worth noting. Under the WTO, for example, signing governments can sue each other in trade courts, separate from and independent of the courts of the member countries, for policies and laws that interfere with trade. For example, the Government of Brazil has successfully sued the United States in trade court for U.S. subsidies of agricultural products that compete with those of Brazil. So far, the U.S. has been paying fines to Brazil rather than change the subsidies, with the result that some Brazilian agricultural producers are now in effect being subsidized by the U.S. Government. Under NAFTA, however, not only governments but investors, including companies, can sue to overturn the laws of member countries, and Canadian companies have filed a number of actions that allege U.S. laws interfere with their ability to profit from trade with us.
Until now, the “investor rights” provisions of the trade agreements have had their impact primarily in Third World countries, as U.S.-based companies used the agreements to undermine competitors in Latin America. The main trade agreements involved here are NAFTA, between the US, Canada, and Mexico, and DR-CAFTA, between the US, the Dominican Republic, and Central American countries. These agreements have contributed greatly to forced migration to the United States, by undermining the economies of their Third World signatories. For example, Mexico used to subsidize small farmers, and thus had a thriving agricultural sector that could meet the needs of its people. Under NAFTA, however, Mexico had to stop subsidies and loans to small farmers. But, under US farm policy, the federal government here still gives billions of dollars in subsidies to big farming operators, often called agribusinesses. These U.S. agribusinesses could thus sell corn in Mexico for less than it costs to grow. Naturally, Mexican farmers can’t compete successfully on that basis. This arrangement drove over one million small Mexican farmers out of business. Nearly seven million farm workers became unemployed. No longer able to make a living in Mexico, many of them came to the US.
At the same time, job losses among the people already living here causes tension between current residents and the newly arriving immigrants. This tension has at times and in places flared into racism and xenophobia – fear of “the other” – and these reactions have been encouraged and exacerbated by various reactionary people and organizations. Immanuel Wallerstein, “Xenophobia All Over the Place!” (September 8, 2010) (http://www.zcommunications.org/zspace/immanuelwallerstein)
One Place I’d Rather Not Go From Here
Writing for the Institute for Policy Studies, Walden Bello discusses how the left has failed to solve these problems, while thus far the right looks to win big in the next election by exploiting them – without, however, offering any real solutions. He suggests that a reinvigorated right with fewer apprehensions about state intervention could combine technocratic Keynesian initiatives with a populist but reactionary social and cultural program, and points out, “There is a term for such a regime: fascist.” Bello quotes Roger Bootle, author of The Trouble with Markets, to remind us that millions of Germans were disillusioned with the free market and capitalism during the Great Depression. But with the failure of the left to provide a viable alternative, “they became vulnerable to the rhetoric of a party that, once it came to power, combined Keynesian pump-priming measures that brought unemployment down to 3 percent with a devastating counterrevolutionary social and cultural program.” (Is that the understatement of the year, or the decade, or what? But you get the idea. http://www.fpif.org/articles/the_political_consequences_of_stagnation, September 5, 2010.)
Comprehensive Trade Reform: The TRADE Act
Of course we need more than trade reform, and I suggest in at least a rudimentary way many of the things that should be done to save us and our situation in a piece called “Avoiding the Even Greater Depression – We Could Still Build A Sustainable Recovery” (September 2, 2010), published at http://healingjustice.wordpress.com/2010/09/02/avoiding-the-even-greater-depression-we-can-still-build-a-sustainable-recovery/ with an update at http://pdamerica.org/articles/news/2010-09-08-09-14-11-news.php. But comprehensive trade reform could go a long way toward addressing the decimation and disintegration of the US economy. To that end, in 2009, Rep. Mike Michaud and Sen. Sherrod Brown introduced the Trade Reform, Accountability, Development and Employment (TRADE) Act. The TRADE Act would change the rules to set standards for labor, environmental, consumer and other protections. It would address the provisions of trade agreements that undermine our economy by rewriting the rules governing international trade. The TRADE Act has now been cosponsored by over half the Democrats in the House. In broad terms, the TRADE Act would establish mandatory standards for future trade agreements regarding labor, the environment, consumer safety, trade in services, public procurement, agriculture, intellectual property, and other concerns; require the review and renegotiation of existing trade pacts, such as NAFTA, CAFTA and the WTO, so that they meet the new standards; and reassert congressional authority and public oversight in the trade policymaking process.
As the TRADE Act was gathering momentum, President Obama announced last June that he would seek passage of the Korea Free Trade Agreement (Korea FTA) soon after the elections in November. This maneuver has caused many trade reform activists to divert their attention to changing or opposing the Korea FTA. The Korea FTA embodies many of the worst provisions of previous agreements. Some activists for fair and sustainable trade have therefore focused on changing the provisions of the Korea FTA, calling for it to be renegotiated along the lines of the TRADE Act. Led by Citizens Trade Campaign – one of my favorite organizations, by the way – over 500 faith, family farm, environmental, labor, consumer protection and civil society organizations have signed a letter to President Obama asking that he renegotiate “the most damaging aspects of the Korea FTA” and promising that if it is brought before Congress without the needed changes, they will work to defeat it. However, I think this is a strategic mistake. As others have pointed out, that approach leaves the proponents of just and fair trade open to “divide and conquer” tactics, whereby a change desired by one group could be used to “pick off” that group, for example, by offering a labor gain here or an environmental gain there while leaving other provisions intact, thus undermining overall opposition and achieving passage of a fundamentally flawed agreement.
I therefore believe the best position is to ask your U.S. Senators and Congressional Representatives to join in cosponsoring the TRADE Act now pending in Congress (or thank them if they’ve already done that, as Oregon U.S. Senator Jeff Merkeley and Congressmen Peter DeFazio and David Wu have done); to oppose any trade agreement that is not modeled on the provisions and principles incorporated in the TRADE Act, including the Korea Free Trade Agreement (Korea FTA); and to support the review and renegotiation of existing trade agreements such as NAFTA and CAFTA to reflect and incorporate the principles and protections of the TRADE Act. An outline of this approach with many important details appears in a template letter posted by the Alliance for Global Justice at http://afgj.org/?p=675#more-675.
Trade agreements must be negotiated under democratic mechanisms with broad-based citizen participation. They must not be negotiated behind closed doors and then “fast-tracked” for Congressional approval without meaningful review. The Korea FTA was not negotiated by a democratic or transparent process. As drafted and agreed to by the Bush administration, it contains all the worst provisions of prior trade agreements, including provisions that would allow Korean corporations to sue in trade court to overturn federal, state and local laws. An outline of the flaws in the Korea FTA shows why it would be better to reject it and start over with the TRADE Act as a blueprint, rather than trying to amend the Korea FTA in detail. I use Oregon as an example because that’s where I live. As now drafted, the Korea FTA would:
Accelerate Job Loss: According to the Economic Policy Institute, the Korea FTA would displace about 888,000 more U.S. jobs within seven years, as the result of imports, with thousands of job losses in Oregon’s high-tech and green-tech sectors, among others. The Korea FTA would also ban “Buy Local” procurement preferences. As AFL-CIO President Richard Trumka has said, the Korea FTA “is the last thing working people need. With a fragile and incomplete economic recovery…we should not be putting in place new trade agreements that will speed up the offshoring of U.S. manufacturing.”
Weaken Local Sovereignty: The Korea FTA would allow Korean corporations to sue in trade court to overturn federal, state and local laws. There are about 135 Korean corporations with around 270 establishments now in the United States, and the Korea FTA would let them all sue in foreign tribunals to overturn U.S. laws. Korean corporations currently operating in Oregon include Hynix Semiconductor Manufacturing America Inc., Hanjin Shipping Company, Ltd., Hyundai America Shipping Agency, Inc., and C.J. Corp. The Korea FTA would hasten the Third-Worldization of the U.S., doing to us what previous trade agreements have done to other countries.
Prevent Banking Reregulation: Written before the recent collapse, the Korea FTA would prevent the U.S. and South Korea from limiting the size of banks or insurance companies, from banning risky derivatives, and from instituting capital controls.
Allow Human Rights Abuses: The current trade model embodied in the Korea FTA has caused enormous harm to many and provided enormous benefits for a disproportionate few, and accepting the Korea FTA in its present form would open the door to similar agreements with Colombia and Panama, raising issues of grave human rights violations and suppression of trade unions. The Korea FTA even has an “annex” that could allow goods made by sweatshop workers under the North Korean dictatorship to enter the United States.
Undermine Environmental Protection: Oregon’s strong environmental and land use laws would be among the many public interest policies at risk of attack under the Korea FTA’s investor-to-state provisions. The Bush administration pressured the South Korean government to weaken its auto emission standards, and the Korea FTA would lock-in these weaker standards. The Korea FTA would also trump most new measures designed to combat global warming.
Trade agreements must respect the basic rights of workers and provide for dispute resolution and effective enforcement. No trade agreement should prevent countries from establishing their own domestic agricultural policies to promote food sovereignty. Trade agreements must not undermine environmental standards or their enforcement. Trade agreements must respect national and local sovereignty with respect to economic development, capital flows, procurement and other issues. The TRADE Act would address these and other problems caused by past agreements and serve as a blueprint for a new model of trade that Americans can unite behind.
Trade reform could not be more urgent. Working people in Oregon and throughout the United States face a continuing crisis. The economy is down, and may not yet have hit bottom. Federal stimulus has ameliorated some of the worst impacts, but does not solve the longer-term problem, that there are not enough family-wage jobs in the U.S. to produce adequate levels of aggregate demand for a sustained economic recovery. This is in considerable part due to the export of jobs that has been facilitated by existing trade agreements.
A bipartisan poll recently conducted by Mark Mellman and Whit Ayres shows U.S. voters are unified in their concern over the loss of manufacturing jobs. In a poll of 1,000 likely general election voters, “We have lost too many manufacturing jobs” is the top concern among independents and working class voters, even compared to government debt, loss of life in Iraq and Afghanistan, the high cost of health care, illegal immigration or terrorism. Eighty-seven percent favor having a “national manufacturing strategy,” 77 percent say that “jobs being shipped overseas” is among the issues they worry about most or worry about a great deal, and 92 percent have a somewhat or very favorable impression of goods made in America. Other highlights from the poll are that 86 percent of voters want Washington to focus on manufacturing, and 63 percent feel working people who make things are being forgotten while Wall Street and banks get bailouts. Two-thirds of voters believe manufacturing is central to our economic strength, and 57 percent believe manufacturing is even more central to our economic strength than high-tech, knowledge or financial service sectors. The poll shows overlap among Tea Party supporters, independents, non-union households and union households on these issues. And it found all that without even offering the more fundamental choices, such as withdrawal from NAFTA, for which voter support has been growing for some time.
All of our Congressional representatives, and a third of all U.S. Senators, are running for re-election right now. Ask your federal legislators and other candidates whether they will promote passage of the TRADE Act, reject the Korea FTA in its present form, and support U.S. withdrawal from the North America Free Trade Agreement (NAFTA) and the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) and the adoption in their place of new treaties negotiated under the principles and containing the protections provided in the TRADE Act. Doing so is in the national interest and the interests of working people. It is also what likely general election voters want, both in Oregon and throughout the country.
Stop the Korea FTA and pass the TRADE Act — do it now!
TAKE ACTION – Do It Now!
Oregon Senator Ron Wyden is the chairman of the Senate Subcommittee on International Trade. If you’re an Oregon voter, thank Sen. Jeff Merkley and Congressmen David Wu and Peter DeFazio for cosponsoring the TRADE Act, and tell Sen. Wyden: “The Korea FTA is another NAFTA – Send the Korea FTA back to the drawing board. Pass comprehensive trade reform (the TRADE Act, HR 3012 and S. 2821) before moving forward with any more trade agreements.” Wherever you reside, and especially if your Senator is running for re-election this year, give him or her – and all Congressional candidates – the same message.
Contact your senators and members of Congress at:
Because lawmakers value letters and phone calls more than emails messages, it would also help to send a letter or make a phone call. You can call the Congressional Switchboard at (202) 224- 3121 and they’ll put you through to the office of any Senator or Representative. Or, write to:
United States Senate
Washington, DC 20510
House of Representatives
Washington, DC 20515
Again, you may find helpful the sample letter posted by the Alliance for Global Justice at http://afgj.org/?p=675#more-675. Further resources are online at http://www.citizenstrade.org/orftc-korea.php, and http://www.citizen.org/trade/. You can also contact the Oregon Fair Trade Campaign at (503) 736-9777 or firstname.lastname@example.org.