With trade as a major issue in this election season (voters are against it), the Trans-Pacific Partnership (TPP) is clearly in trouble.
All but one (John Kasich) of the remaining presidential candidates oppose it, with both Donald Trump and Bernie Sanders actively campaigning against the damage the country’s trade policies have done to working people.
Could this also mean an end to these kinds of “free trade” deals generally? This has triggered a lot of discussion online.
TPP In Trouble
Presidential candidates Hillary Clinton, Bernie Sanders, Donald Trump and Ted Cruz all oppose TPP. Clinton, after a “message retooling” has even started speaking out against TPP – for now anyway. In the Congress, Speaker Paul Ryan said last month that there are not enough votes to pass it.
However, Tory Newmyer, writing at Fortune, doesn’t believe for a second that Hillary Clinton is telling the truth when she says she opposes TPP, and is happy about that. Newmyer writes in “Hillary Clinton and John Kasich Win Ohio, and So Does Free Trade“:
Free-trade boosters can breathe a sigh of relief after the Ohio presidential primary. A little one, anyway.
Buckeye State voters in both parties delivered wins to trade-friendly candidates on Tuesday—and denied them to a pair who staked their claims on pledges to oppose new deals, starting with the Trans Pacific Partnership. That outcome was in doubt after Ohio’s neighbors to the north in Michigan last week voted for reality-show billionaire Donald Trump and Vermont Sen. Bernie Sanders, the most aggressive trade foes in the field.
But in Ohio, Hillary Clinton and home-state Gov. John Kasich prevailed.
TPP seems to be done for in Congress for now. There’s one thing, though: Wall Street and giant multinational corporations tend to get their way in Congress and there is one way they can still sneak TPP through. After the election there will be a “lame duck” session of Congress. Politico’s Morning Trade wrote Wednesday that Senator Orrin Hatch is still looking at a “lame duck” vote to push TPP through:
HATCH HAS NO PROBLEM WITH LAME-DUCK TPP VOTE: Senate Finance Committee Chairman Orrin Hatch said he has no problem holding a vote on the Trans-Pacific Partnership during a lame-duck session of Congress … He said it would be difficult for the next president to completely drop the trade deal if it’s not approved this year, but the deal could lose political support if it takes too long to hold a vote.
So we still have to worry about TPP, but not before the election.
Corporate Free Trade In Trouble, Too
TPP, like previous corporate-written “trade” agreements, has little to do with trade and everything to do with increasing corporate dominance. And while those agreements have benefited giant corporations, the rest of us have paid a terrible price. Once in a rare while voters get to have their say on things like that. As a result, TPP is not all that is in trouble; the entire corporate-dominated free trade agenda is coming under fire as well. For good reason. This week’s CAF post, What’s The Problem With “Free Trade”?, explained the problem:
“Free trade” broke down those borders of democracy. It enabled goods from low-wage countries into the U.S. with no protective tariffs. This made the low wages and lack of environmental and worker protections in some countries into a “comparative advantage” – which meant democracy because a comparative disadvantage. We stopped “protecting” American jobs, and allowed companies to freely lay off workers and close factories here and we have seen what has happened since.
… Free trade encourages further exploitation of workers and the environment in other countries and here. It helps fuel calls inside of our own country for “less regulation” (fewer environmental protections), “right-to-work” laws (that break unions and lower wages) and “more competitive” tax policies (that defund democracy and our ability to provide public services) to “attract” companies back to the U.S.
The free trade discussion is breaking out in other online outlets as well. Eduardo Porter, writing at the New York Times in “On Trade, Angry Voters Have a Point,” explains that the price being paid for free trade is making voters angry:
What seems most striking is that the angry working class — dismissed so often as myopic, unable to understand the economic trade-offs presented by trade — appears to have understood what the experts are only belatedly finding to be true: The benefits from trade to the American economy may not always justify its costs.
In a recent study, three economists — David Autor at the Massachusetts Institute of Technology, David Dorn at the University of Zurich and Gordon Hanson at the University of California, San Diego — raised a profound challenge to all of us brought up to believe that economies quickly recover from trade shocks. In theory, a developed industrial country like the United States adjusts to import competition by moving workers into more advanced industries that can successfully compete in global markets.
They examined the experience of American workers after China erupted onto world markets some two decades ago. The presumed adjustment, they concluded, never happened. Or at least hasn’t happened yet. Wages remain low and unemployment high in the most affected local job markets. Nationally, there is no sign of offsetting job gains elsewhere in the economy. What’s more, they found that sagging wages in local labor markets exposed to Chinese competition reduced earnings by $213 per adult per year.
In another study they wrote with Daron Acemoglu and Brendan Price from M.I.T., they estimated that rising Chinese imports from 1999 to 2011 cost up to 2.4 million American jobs.
As this cost to most of us hits home, voters appear ready to make politicians pay a price. The result, according to Jared Bernstein, also writing at the New York Times, is that “The Era of Free Trade Might Be Over. That’s a Good Thing.“
It is unquestionable that expanded trade has vastly increased the supply of goods and services and has thus contributed to lower costs for consumers. But basic trade theory connects prices to wages, and in the United States, globalization is widely accepted as a contributor to both wage stagnation and the growth in inequality. For example, the real wage for blue-collar manufacturing workers in the United States is essentially unchanged over the past 35 years, while productivity in the sector is up more than 200 percent.
We should no longer buy the statistically strained arguments about F.T.A.s delivering growth and jobs. The evidence just isn’t there, a fact not lost on those campaigning for president.
…the F.T.A. process has been captured by investors and corporate interests. According to The Washington Post, 85 percent of the members of the outside committees advising the administration on the proposed Trans-Pacific Partnership were from private businesses and trade associations (the rest were from labor unions, NGOs, academics and other levels of government).
Dean Baker pins down why working class voters are angrier than professionals, in “The Year of the Angry Economists“:
It is hard to know where to begin with the contempt for “free trade” economists. The trade agenda of administrations of both parties has been to quite deliberately put U.S. manufacturing workers in direct competition with low paid workers in the developing world. The predicted and actual consequence of this competition is to eliminate jobs in manufacturing and to put downward pressure on the wages of less-educated workers more generally. And the economists can’t understand why people are unhappy.
The economists’ complaints would at least be more understandable if it they were based on some consistent principle, but they aren’t. We have not sought to impose free trade everywhere. We have only done it for less well paid and less educated workers. We have maintained and in some cases strengthened protectionist barriers that sustain the jobs and paychecks of the most highly paid professionals.
Take the case of doctors with an average pay of well over $200,000 a year. … We prevent foreign doctors from practicing in the United States unless they completed a U.S. residency program.
There is a similar story for dentists, who get paid almost as much as doctors. …
… This is about power. Just as autoworkers and textile workers want protection from foreign competition, so do doctors and dentists. The difference is that doctors and dentists have the power to get protection and to get the economists to ignore this massive interference with free trade.
[. . .] These economists are totally fine with protectionism of all sorts, as long it benefits the wealthy and not ordinary workers.
Free trade was a big deal in the Michigan primary, helping Sanders score his upset win over Clinton. If you have seen Detroit and Flint and Pontiac (quick, what car was named after this city?) and other parts of Michigan devastated by free trade, you understand why. In a video released Tuesday and produced by the Campaign for America’s Future, Robert Scott, a senior economist at the Economic Policy Institute, calls for trade agreements that raise labor standards and the prospects for economic development in other countries rather than engaging them in a race to the bottom.
While the video focuses on the Michigan Democratic primary race, it covers the problems with our past trade agreements in general, and offers an alternative path that can lift workers and wages on all sides of trade borders.
Speaking of the need for alternatives to a corporate-dominated free trade agenda, Robert Reich, in “Are Trade Deals Good for America?” explains that trade has worsened inequality but is not the only factor.
If you’re well educated, free trade has given you better access to worldwide markets for your skills and insights – resulting directly or indirectly in higher pay.
On the other hand, if you’re not well educated, the trade deals of the last quarter century have very likely taken away the factory job you (or your parents or grandparents) once relied on for steady work with good pay and generous benefits.
These jobs were the backbone of the old American middle class. Now they’re almost all gone, replaced by lower-paying service jobs in places like retail stores, restaurants, hotels, and hospitals.
The change has been dramatic. A half century ago America’s largest private-sector employer was General Motors, whose full-time workers earned an average hourly income (including health and pension benefits) of around $50, in today’s dollars.
Today America’s largest employer is Walmart, whose typical employee earns just over $9 an hour. A third of Walmart’s employees work less than 28 hours per week and don’t even qualify for benefits.
The core problem isn’t really free trade, or even the loss of factory jobs per se. It’s the demise of an entire economic system in which people with only high-school degrees, or less, could count on good and secure jobs.
That old system included strong unions, CEOs with responsibilities to their employees and communities and not just to shareholders, and a financial sector that didn’t demand the highest possible returns every quarter.
Trade has contributed to the loss of this old system, but that doesn’t necessarily mean we should give up on free trade. We should create a new system, in which a greater share of Americans can be winners.
Corporate America Tries To Rescue TPP, Free Trade
All this voter opposition to TPP and corporate free trade is making corporate American nervous. Wonkblog explains, in On free trade, this election is giving business the willies, that pro-trade forces are trying to figure out how to fight back.
The [Washington Council on International Trade] coalition that helped pass critical legislation last year that binds Congress to voting a deal up or down without amendments — known as trade promotion authority, or “fast track” — has been working during the primary season to place op-eds from small businesses in newspapers and reach out to others who might influence the relatively small population that votes in party primaries. On a higher level, groups like the Business Roundtable are trying to keep trade on the agenda for 2016 in desperate hope that it might pass before a new president takes office, despite increasingly negative signals from congressional leaders.
The multinationals are pushing the usual suspects to try to get the public on TPP’s side, casting those who oppose this corporate trade deal (note that TPP isn’t really about “trade” at all) as opposing the idea of trade itself. For example, Morton Kondracke and Matthew J. Slaughter write at The Wall Street Journal this week, in “Making the Case for Trade,” began with this in the very first sentence: “Divided though the four leading presidential candidates are on so many topics, united they stand on one: the assertion that trade hurts America.” The op-ed warned of “antitrade anecdotes” and did not once mention that the result of these agreements has been enormous, humongous trade deficits.
It seems as though Thomas Friedman got in a cab driven by the head of the Chamber of Commerce before he wrote “Let Trump Make Our Trans-Pacific Trade Deal,” talking about how great a deal the TPP is, writing, “… if we eliminate 18,000 tariffs we’ll be able to keep more production at home and sell more abroad. [. . .] Our workers can compete if we level the playing field …”
Friedman uses Vietnam as an example of one of the countries to which we would sell more. In Vietnam that “level playing field” has people making $150 a month. They’ll be buying a lot from us for sure with that $150 a month, you betcha. Meanwhile companies here that want to pay $150 a month will be closing factories and moving them there…
Enough Is Enough
Voters are making it clear that they have had enough of this. This time they seem ready to throw out politicians who might say they oppose free trade in the campaign but turn around and help the big corporations at voters’ expense after the election. His focus on fixing trade is one reason Donald Trump is doing so well and might clinch the Republican nomination.
If Clinton becomes the Democratic nominee, she is going to need to do a better job proving to voters that she really means what she is saying about trade.