Global economic inequality, the latest stats show, has reached astounding proportions. The world’s richest 1 percent last year held 48 percent of the world’s wealth, up from 44 percent in 2009. The world’s poorest 80 percent, for their part, hold a meager 5.5 percent of the world’s wealth share.
“The gap between the richest and the rest,” as Oxfam’s Winnie Byanyima puts it, “is widening fast.”
This wasn’t supposed to happen. NAFTA and other global trade agreements negotiated over recent years, America’s top elected leaders assured us, would usher in a new win-win era of global prosperity.
Thea Lee, the current deputy chief of staff at the AFL-CIO and the labor federation’s former policy director and chief international economist, has spent much of the last two decades challenging this and other claims from those who wave the “free trade” banner. She’s now engaging the proposed Trans-Pacific Partnership, the latest of these major trade pacts.
Does this new agreement represent a new departure for U.S. global economic policy, as the White House insists? Or does the TPP represent more of the same? For the May issue of Too Much, the Institute for Policy Studies monthly on excess and inequality, I put these questions – and more – to Lee late last month.
You’ve debated over the years a variety of “free trade” deal advocates. Have they changed their tune over time? Do you see any change in substance behind that change in tune?
On content, we’ve seen some important improvements, mostly as a result of pressure applied from labor, environmental, and consumer groups. But on balance, unfortunately, the agreements remain lopsided. They deliver benefits that enhance the mobility, flexibility, and profitability of multinational corporations over working families and the general public.
An increasing number of mainstream economists — including many who consider themselves “free traders,” like Joseph Stiglitz, Jeffrey Sachs, and Paul Krugman — now see all this. They’re agreeing that these seriously flawed trade deals haven’t delivered on their promises.
The proponents of the Trans-Pacific Partnership, meanwhile, are using a lot of the same recycled arguments we’ve been hearing since NAFTA. The New Republic’s David Dayen just did a great piece comparing President Obama’s arguments on behalf of the TPP to the arguments then-Vice President Al Gore used during the NAFTA debate.
But these arguments aren’t flying these days as well as they did back then. We’ve now had the experience of actually living through many of these trade agreements, and this experience is helping to rebut those “free trade” promises.
Proponents promise that these trade deals will open consumer markets and create lots of jobs in the United States. But we’ve seen that these deals generally end up accelerating the offshoring of jobs and production.
The proponents claim that these deals make for a great foreign policy tool. But the deals often end up exacerbating inequality within the societies of our trading partners and fanning resentment against the United States.
Proponents also claim that the trade agreements will raise other countries’ labor and environmental standards, but then our own government fails to enforce these provisions, leaving American workers in competition with unfairly cheap labor — and workers in other countries vulnerable and exploited.
A series of teams have been negotiating the Trans-Pacific Partnership for the United States. Who sits on these negotiating teams?
The United States trade representative negotiates the TPP, along with an inter-agency team from State, Commerce, Labor, and other federal agencies. A large group of private-sector advisory committees, comprised mostly of corporate representatives, offers advice along the way.
Have any representatives from the AFL-CIO or any other labor body been invited to be part of the TPP deal-making process?
The AFL-CIO, along with many individual unions, is represented on the Labor Advisory Committee on Trade Negotiations and Trade Policy, or LAC. There’s also an environmental advisory committee.
The labor representatives on the LAC – including myself, as a staff liaison to AFL-CIO President Trumka — do have security clearance to read the initial negotiating texts put forward by the U.S. government. But I wouldn’t say we’re “part of the TPP deal-making process.”
We’ve offered the U.S. trade representative dozens of concrete suggestions over the last five years to address our concerns in the TPP. Most of our suggestions have been ignored.
And while some of us from labor do have access to some portions of negotiating text, we’re bound by law not to reveal what’s in that text – not to our colleagues, not to our members, and not to the press or the public at large. We’ve advocated for making the draft TPP text public, so that we can have a full public debate.
What worries you about the impact the Trans-Pacific Partnership deal will have on inequality in the United States?
On day one, this massive TPP would cover 40 percent of the global economy, and our government has said that other countries – including China – could be invited to join at a future date. The TPP already includes some pretty formidable industrial export powerhouses – notably Japan, but also Vietnam and Malaysia.
We’re concerned that the agreement further opens the U.S. consumer market, provides additional protections for multinational corporations looking to move jobs offshore, and contains weak “rules of origin” – that is, allows imported components from non-signatory countries additional access to the U.S. market.
TPP also offers no protections at all against countries that seek an unfair competitive advantage by manipulating their currencies. This makes no sense at all, as both domestic business and labor have asked the administration to address this problem.
One organizational entity seems to pop up throughout the proposed TPP: the “Investor State Dispute Settlement” tribunal. Why should people uneasy about concentrated wealth and power be paying attention to these panels?
Labor has been raising alarms about “Investor State Dispute Settlement” for 25 years now, so I’m personally glad that this issue is finally gaining some traction.
The United States has included “Investor State Dispute Settlement” in many bilateral investment agreements and almost every trade agreement since NAFTA. This ISDS process allows foreign investors to sue governments over what they consider unfair treatment.
Now “unfair” treatment can include expropriation or discrimination. But corporations can also invoke this “unfair treatment” charge to knock down legitimate regulations that protect public safety, workers, and the environment.
“Investor State Dispute Settlement,” in effect, puts democratic government decision-making on the defensive, opens governments to potentially enormous taxpayer liability, and unfairly privileges corporations over governments, citizens, and workers.
We’ve also been hearing about the TPP “expectation of profits” principle. What danger do you see lurking here?
Under this principle, if a corporation has reason to expect that it will be able to profit from a particular investment — a proposed mining operation, for instance, or the marketing of a particular chemical — and then a government action thwarts that expectation, the corporation can use the ISDS process to challenge that government action.
The corporation can argue that the government action — a new regulation, the denial of a permit, a zoning decision — “nullified” the benefits the investor expected to earn.
Trade deals almost always seem to make it through Congress. What makes you hopeful that the TPP can be stopped?
This time around, we’re seeing an extremely broad — and unprecedented — coalition coming together to oppose what we know of the TPP.
This coalition goes beyond labor, environmental, and consumer groups. We’ve seen really thoughtful critiques put forward by organizations advocating for development and human rights, access to medicine, Internet freedom, family farms, and small business.
I think people across the political spectrum – Republican and Democrats alike — are just fed up with the failure of U.S. global economic policy over the last couple of decades. The proponents of this policy have won almost everything they wanted. Almost every proposed trade agreement has passed, and global economic integration has grown rapidly.
And now, with all these agreements in place, we’re running enormous trade deficits year after year. We’ve lost huge swaths of our manufacturing capacity, and income inequality has reached ridiculous heights.
We need a very different trade policy going forward — and that is not the TPP.
Sam Pizzigati, an Institute for Policy Studies associate fellow, edits Too Much, the IPS online weekly on excess and inequality. His latest book: “The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class.” (Seven Stories Press)