Downsides, upsides (?) in US free-trade policy

By Satur C. Ocampo
At Ground Level | The Philippine Star

In 1993, then US President Bill Clinton had to fight hard to overcome his Democratic partymates’ “fierce opposition” to the passage in Congress of the North American Free Trade Agreement. Today another Democratic president, Barack Obama, is encountering similar opposition to his bid for broad authority to negotiate the 12-nation Trans-Pacific Partnership and get it approved by Congress without amendment.

(TPP aims to cover 40 percent of global trade. Negotiation participants with the US are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The Philippines isn’t included).

The déjà vu atmosphere in the free-trade debate is explained by America’s experience with NAFTA and neoliberal globalization. The regional trade pact, a 2013 Congressional Research Service review concluded, neither played a big role in expanding trade nor produced big economic gains for Americans.

Besides NAFTA, the US signed trade pacts with 17 other countries. Yet, taken together their estimated impact was even smaller – “a few snowflakes added to a snowball already rolling downhill,” says a recent reportage by the International New York Times.

An earlier study by the free-trade advocate Peterson Institute for International Economics claimed that trade deals had added 7.3 percent to US economic output, or $10,000 annual income for every American household.

However, recent studies by University of California economist Gordon Hanson and others, cited by the INYT, argue that the claimed benefits weren’t distributed evenly among Americans, since “global competition is increasing unemployment and reducing wages.” An Economic Policy Institute study shows that globalization and a strong dollar have reduced the annual earnings of “roughly 70 percent of American workers without college degrees by about $1,800.”

A typical case is Galesburg, Illinois. Its largest employer, the Maytag refrigerator factory, shut down because of NAFTA, and moved its operations to Mexico to avail of cheaper wages there. That step spurred Obama (then running for senator in Illinois) to decry in his speech at the Democratic National Convention that the displaced workers were “victims of globalization.”

The Galesburg case, notes the INYT, affirms two facts:

1) “The costs of globalization have been greater and more enduring than what economists expected, and government efforts to mitigate the impact on American workers have often been insufficient;” and

2) “There is also mounting evidence that the benefits of globalization have accrued disproportionately to upper-income households, while the costs have fallen heavily on the less affluent, contributing to the rise of economic inequality.”

Nobel Prize-winning economist Joseph Stiglitz, weighing in on the issue, remarked: “The argument was always that the winners (in globalization) would compensate the losers. But the winners never do. And that becomes particularly relevant when we have a society with as much inequality as we have today.”

The findings on globalization’s deleterious impact on peoples’ lives are true, yes, globally.

Perversely, the Obama government presents the TPP as a “shield against globalization,” saying that other nations need “to move closer to American standards for environmental protection, worker rights, and intellectual property.”

William M. Daley, Obama’s former chief of staff who helped Clinton clinch congressional approval of NAFTA in 1993, recently pitched for free trade in an INYT opinion piece. He wrote:

“There is no path to middle-class prosperity without tearing down barriers to American exports. By 2030, the world economy is expected to grow by $60 trillion, with almost 90 percent of the growth occurring outside the US. Our success depends on how much of the new wealth is spent on American products.”

“But today,” Daley lamented, “of the 40 largest economies, the US ranks 39th in the share of our gross domestic product that comes from exports. This is because our products face very high barriers to entry overseas in the form of tariffs, quotas and outright discrimination. When barriers disappear, we prosper. “

Daley cited another imperative for US geopolitical strategy: to check China’s trade and investments initiatives.

“If we don’t set the rules for commerce in the Asia-Pacific region, China will,” he warned adding, “Since 2000, China has concluded trade agreements with 23 countries, Hong Kong and Macaw and is now drafting its own Asia trade deal that cuts us out.” (The TPP excludes China.)

He denigrated China’s trade deal, saying it “apparently omits any mention of labor rights and environmental standards common in modern American-led deals.” It would tie down those joining it, he claimed, to “substandard factory floor conditions that China and other Asian nations used to become manufacturing giants.”

But if the TPP passes, he crowed, “the poorer countries in the pact will have to conform more to the standards of the US, Japan, Australia, Canada, and South Korea — all signatories to the proposed deal.” Consequently, he concluded, “the need for the China-led agreement disappears,”

Democrats in Congress, led by Sen. Elizabeth Warren, furiously oppose the TPP because it has been negotiated in secrecy and multinational corporations are setting its terms. Also, 250 info-tech companies, in a letter to the US Congress, are demanding transparency in the negotiations. Sen. Warren dared Obama:

“If the President is so confident the TPP is a good deal, he should declassify the text and let people see it before asking Congress to tie its hands on fixing it… Corporations should not be allowed to dominate secret trade negotiations.”

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Published in The Philippine Star
May 23, 2015

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