What You Need To Know When Obama Talks Trade

Dave Johnson

President Obama is likely to use the State of the Union to push for passage of the Trans-Pacific Partnership (TPP) and the rigged “fast track” trade promotion authority. Here are some facts to counter the expected public relations campaign.

Of Course “Trade” Is Good

But first, of course “trade” is a good and necessary thing. We all trade with others. This is how people, businesses and even countries “make a living.” Critics of our country’s current trade policies are not “anti-trade”; they are anti-trade-deficit. They are opposed to the use of so-called “trade” agreements to promote the interests of the largest multinational and Wall Street corporations at the expense of America’s working people, its middle class, its domestic “Main Street” companies, our environment and the country’s long-term economic health.

Compare the timeline of a chart of our country’s trade deficits with the increase in the economic tensions of our middle class, our manufacturing regions and other economic troubles:

Trade policies that are rigged to boost the interests of the giant, multinational corporations at the expense of the rest of us are not good at all. “Trade” agreements and “offshoring” of jobs have become synonymous. But “trade” doesn’t at all have to be about moving American jobs and factories out of the country so that executives can pocket the pay difference and the difference in the cost of enforcing environmental protections.

The Recent Korea-U.S. Free Trade Agreement Is An Example

During the State of the Union speech the president is expected to feature the owner of a small business that has increased its exports to South Korea since the Korea-U.S. Free Trade Agreement (KORUS FTA) was signed. This is ironic. Americans believe in and support small business – hence the use of the owner of one – but our country’s trade deals have been negotiated primarily for the benefit of giant, multinational corporations, and their interests often collide with the interests of smaller, “Main Street” businesses.

Some American businesses have indeed added sales and workers as a result of the KORUS FTA. But the fact is that since that trade agreement was signed the U.S. trade deficit with Korea has grown 50 percent – a metric that has resulted in 50,000 American jobs lost. In other words, since the KORUS FTA went into effect, South Korea is selling much more to us than the country is buying from us – and this problem is getting worse and worse. And as the trade deficit chart above shows, this just happens to be the record of our “trade” agreements.

Please take a look at this Census Bureau data page, “Trade in Goods with Korea, South.”

The KORUS FTA went into effect in March 2012. That month we sold $4,224 million in goods to South Korea and we imported $4,788.2 million in goods.

In November 2014 the U.S. had a $2.8 billion monthly trade deficit with Korea – the highest monthly U.S. goods trade deficit with Korea on record. We had $6.3 billion in imports from Korea (a record) and $3.5 billion in exports to Korea that month. In the first two years of the KORUS FTA, the U.S. goods trade deficit with Korea went up by 50 percent (a $7.6 billion increase).

So since March 2012 our exports to South Korea decreased from $4.224 billion to $3.5 billion. Meanwhile, our imports increased from $4.788 billion to $6.3 billion.

The KORUS FTA has hit American small businesses harder than large ones. According to U.S. Census Bureau data, small firms with fewer than 100 employees saw exports to Korea drop 14 percent while firms with more than 500 employees saw exports decline by 3 percent. According to “Report Funded by Big Business Explains to Small Businesses What’s Best for Them” at Public Citizen’s Eyes on Trade blog, “As a result, under the Korea FTA, small businesses are capturing an even smaller share of the value of U.S. exports to Korea (just 16 percent), while big businesses’ share has increased to 72 percent.”

This is the record: The KORUS FTA so far has resulted in a trade deficit of $2.8 billion a month, representing the loss of around 50,000 jobs. It has been harder on smaller businesses than larger ones, allowing the larger businesses to push the smaller businesses aside. But in the State of the Union, the president is going to bring attention to the owner of one small business that increased its exports and hired more workers, and use this to say to make the public think that the KORUS FTA has been good for our country – and that we should enter into more agreements like it.

Other Trade Agreements

The KORUS FTA certainly is not our only “free trade” agreement. NAFTA is the shorthand name many Americans use for our trade agreements generally. How has NAFTA – the North American Free Trade Agreement – worked out for the U.S.?

The Public Citizen Global Trade Watch report titled, “NAFTA at 20: One Million U.S. Jobs Lost, Mass Displacement and Instability in Mexico, Record Income Inequality, Scores of Corporate Attacks on Environmental and Health Laws” compared the promises with which NAFTA was sold to the results measured 20 years later. Some of the effects of NAFTA that are highlighted in the report include:

● a $181 billion U.S. trade deficit with NAFTA partners Mexico and Canada,
● one million net U.S. jobs lost because of NAFTA,
● 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 also show how post-NAFTA trade and investment trends have contributed to:

● middle-class pay cuts, which in turn contributed to growing income inequality;
● U.S. trade deficit growth with Mexico and Canada 45 percent higher than with countries not party to a U.S. Free Trade Agreement,
● U.S. manufacturing and services exports to Canada and Mexico that have grown at less than half the pre-NAFTA rate.

What about our deal to bring China into the World Trade Organization? Obviously South Korea is small potatoes when compared with China and the data bear this out. In August 2012 the Economic Policy Institute estimated that the U.S. lost 2.7 million jobs as a result of the U.S.-China trade deficit between 2001 and 2011, with 2.1 million of those lost in the manufacturing sector. Along with these job losses, U.S. wages fell due to the competition with cheap Chinese labor, which has cost a typical U.S. household with two wage-earners around $2,500 per year.

The Commerce Department reported earlier this month that our November trade deficit with China was $29.8 billion. That’s $29.8 billion in one month! Our exports to China decreased $200 million to $11.1 billion and our imports from China decreased $100 million to $40.9 billion from the previous month. Think how many jobs would be created here if $29.8 billion of additional orders came in to companies making and doing things inside the U.S., and this continued every month!

Balance Needed

Trade should be balanced or economies are thrown out of whack. “Trade” is supposed to mean we buy from them and they buy from us. It is not supposed to mean we buy from them and later they use the money to buy us. It is not supposed to mean we send jobs and factories out of our country so that a few executives and shareholders can pocket the wage difference and the reduction of environment enforcement costs.

Exports are great, but if a deal to increase exports increases imports even more, we have a trade deficit and are still at a net loss of jobs, factories and wealth. This means that we are still offshoring jobs so that executives can line their pockets with the wage differential. This has been the case with the KORUS FTA. This has been the case with NAFTA. This has so obviously been the case with China. The last thing We the People need is even more of this.

The reason our trade policies are working out this way is because the beneficiaries of this kind of trade deal are the ones controlling and negotiating these trade deals. The giant, multinational corporations and Wall Street make money from offshoring U.S. jobs and production – partly because our tax laws encourage this activity. The rest of us, including our “Main Street” businesses and the country at large, are net losers. This is obvious to anyone who drives through much of the country or who talks to regular, working people. This is obvious to anyone who looks at the timeline of that trade deficit chart and compares that to the economic shifts of our last few decades.

Our trade negotiating process is rigged from the start. Giant, multinational and Wall Street corporate interests are at the negotiating table. Consumer, labor, environmental, human rights, democracy, health and all the other stakeholder representatives are excluded and the results of these negotiations reflect this. A rigged process called “fast track” is used to essentially force Congress to pre-approve the agreements before the public has a chance to analyze and react to them.

Obviously the giant, multinational and Wall Street corporations would want the public to believe that everyday small businesses gain from our trade deals, when in fact they do not. It is less obvious why President Obama would want to present at the State of the Union the story of one small business that does not reflect the reality of the trade deals he is promoting.

Get updates in your inbox

Comments