Trade Deal Promises vs. Realities

Dave Johnson

Again and again we are promised jobs and economy gains from trade deals. Instead we get job losses and trade deficits. Next year the giant multinationals are going to try to sell us another trade deal by promising jobs and prosperity. And they’re going to push fast track to grease the skids to get it passed. It’s a good idea to be informed about what has actually happened.

Wednesday’s post, How “Citibank Budget” Push Foreshadows “Fast Track” For Trade Deals, described how fast track is a rigged process designed to essentially pre-approve trade agreements before the public has a chance to digest the text of an agreement.

Part of the rigged process will involve the giant multinationals executing a massive public relations campaign to drive the appearance of public support for the agreement. They will promise a huge increase in jobs and prosperity from the treaty. This is how past agreements were sold. So it is worth examining what actually happened.

Did NAFTA (the North American Free Trade Agreement), bringing China into the World Trade Organization, CAFTA (the Central America Free Trade Agreement), the recent trade deal with South Korea and other agreements create jobs in the U.S. and generally bring prosperity? Or did they cost us jobs, factories and living standards? Did they improve our balance of trade or did they drive an increase in the trade deficit?

Promises, Promises

The promised jobs and prosperity did not pan out. We lost more jobs from imports than we gained from exports. Robert E. Scott lays it out in “Growing Trans-Pacific Trade Deficits Set the Stage for Growing Trade-Related Job Displacement“:

Under the 1993 North American Free Trade Agreement, growing trade deficits with Mexico cost 682,900 U.S. jobs as of 2010, and U.S.-Mexico trade deficits and job displacement have increased since then. President Obama promised that the U.S.-Korea Free Trade Agreement would increase U.S. goods exports by $10 to $11 billion, supporting 70,000 American jobs from increased exports alone. However, in the first two years after that deal went into effect, U.S. exports actually declined, and growing trade deficits with Korea cost nearly 60,000 U.S. jobs.

Scott writes, “Trade and investment agreements negotiated in recent decades have been bad deals for working Americans.” He links here to the EPI “Economic Snapshot” titled, “Fast Track to Lost Jobs: Free Trade Agreements Are Bad Deals for Working Americans.”

Maybe these trade deals brought in jobs, but they pushed out more jobs than they brought in. These deals have only increased our trade deficit – the metric for counting the jobs, factories, dollars and living standards that bleed out of the country from unbalanced trade. The trade deficit with China trade alone has cost us 3.2 million U.S. jobs, according to the EPI report titled, titled “China Trade, Outsourcing and Jobs.”

My March post, “Should Democrats Support “Expanding” Trade?” also took a look at some of the numbers, including what happened with Korea:

The numbers vary but none of them are good. According to Public Citizen’s Global Trade Watch, exports to Korea are down 11 percent and the trade deficit with Korea has gone up 47 percent since this agreement was signed.According to the Economic Policy Institute 60,000 American jobs have been lost (mostly in manufacturing), exports to Korea are down 7.5 percent and the trade deficit is up 59.6 percent.

So trade with Korea “expanded,” but to the benefit of Korea’s economy (and a few U.S. multinational corporations and billionaires) at the expense of working Americans and our country’s economy.

So the examples of trade with NAFTA, Korea and China show that these were bad deals for us. (Studies of other trade deals, like CAFTA, show similar destructive results.) The promised jobs and prosperity didn’t pan out. A few people got massively richer, though, while the rest of us fell behind.

Trade Deals Help Drive Inequality

Along with killing jobs and increasing our trade deficit these deals are a lot of what drives the increase in inequality. Our pay is cut or our jobs moved offshore, a few at the top benefit massively, their incomes and wealth is driven into the stratosphere as the rest of us fall further and further behind.

Josh Bivens, also at EPI, writes about trade deals and inequality in New Trade Agreements will Take Center Stage in 2015. So Will Bad Arguments Made on their Behalf, warns that these agreements worsen inequality.

The standard trade theory that links falling trade costs and rising inequality in rich countries like the United States is clear that this rise in inequality is accompanied byabsolute (not just relative) income declines felt by the losing group. In the United States, the losing group is generally proxied by either production and nonsupervisory labor, or workers without a college degree—in either case the majority of the workforce. And while these trade-induced losses (which I estimated to be roughly $1,800 annually for a full-time worker without a college degree) do not explain all, or even the majority, of the rise in inequality over the past generation, they’re not trivial.

… [I]n fact,plenty of research has shown exactly that the rising share of capital income across advanced countries in recent years is likely driven by trade and investment liberalization.

Bivens sums up:

Economic theory predicts clearly that trade liberalization exacerbates income inequality in countries like the United States. No, trade and globalization don’t explain all of our increase in inequality—we still have lots of domestic discretion about how unequal a society we’d like to have. But expanded trade does push in the wrong direction, as demonstrated by ample economic evidence. And the trade agreements we sign, while habitually referred to as “free trade” pacts, are actually acodification of protections to privileged interests, and never contain provisions for addressing the most important issue in international economics for most American workers—the persistent U.S. trade deficit. This is what policymakers should know, and which too many policy analysts are trying to obscure.

The promised jobs and prosperity don’t come through. Instead our trade agreements have cost us and have exacerbated inequality, which is a threat to our democracy.

We Can Win This If We Arm Ourselves With Knowledge

Soon the giant multinationals and their spokespeople in office will start to sell fast track to push trade deals. They will promise jobs and prosperity – they always do. This time we will be ready. This time, too many people understand how these trade deals have been used to enrich the few at the expense of the many, and to rig the economy against working people. This time we can stop them before they succeed in rigging the process using fast track.

Arm yourself with knowledge. Please visit No Fast Track for more.

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