How Can We Do ‘Trade’ Right?

Dave Johnson

People have figured out that our country’s “trade” deals haven’t been working our so well for “our country.” A visit to Flint, Detroit or almost any town, city, state or region that was built around manufacturing make it clear what we have done. Shifting jobs and factories to places where people are paid squat and are forced to work long hours with few protections while the environment is sacrificed might have put a lot of money into the pockets of already-wealthy executives and Wall Street “investors” but it hurt almost everyone and almost everywhere else in the country.

With the Trans-Pacific Partnership (TPP) coming up for a vote in the “lame duck” session of Congress following the election, and a new President coming in January, many are looking for a different way to do “trade.”

“Trade”

The way word “trade” is used in current discussions is misleading. “Trade” used to be about “trading” banana for cars. Bananas can only be grown in certain regions, and cars were already being made in other regions. “Trade” meant the people who made cars could get bananas and the people grew bananas could get cars. Everyone benefited.

But “trade” has instead come to mean one and only one thing: moving jobs and production to low-paying areas that don’t spend to protect the environment, so executives and “investors” can pocket the savings. The regions production was relocated to did not have existing regional expertise in “making cars” (as in the “bananas example. Making smart phones is a better example.) The factories were not already located in these regions. The ecosystem of expertise, supply chains, etc. was not yet in existence. The only pre-existing regional specialty, or “comparative advantage” of the low-wage regions was governments that to one degree or another kept the wages low, kept the unions (and resulting worker protections) out and let the factories pollute freely. China, for example.

The result, of course, was devastating to American workers and their communities. Mike Konczal at The Nation, “Here’s the Trade Policy That Progressives Should Get Behind,” writes about the impact of opening up “trade” with China had on US workers:

Manufacturing was hit hard, and so were workers outside manufacturing—especially those without a college degree—as these areas lost their economic vitality. Contrary to the optimistic forecasts offered by many economists, workers didn’t magically get jobs in new places and new industries; instead, they faced worse employment prospects and lower wages—if they found jobs at all.

Corporate Influence

The biggest problem with our country’s trade policies is that the process of negotiating the deals has been “captured” by interests representing giant multinational corporations. As a result “trade” is not about “trade” at all, and “trade deals” are really about limiting the power of governments to make decisions that corporation don’t like.

Lori Wallach op-ed in the Washington Post, “Free Our Trade Deals from Corporate Interests,” describes the result of this capture:

Consider the Trans-Pacific Partnership: A 2014 Post infographic reveals that more than 500 official U.S. trade advisers representing corporate interests had special access to TPP negotiators and texts while the public, press and Congress were shut out.

Wallach says one result of this corporate-dominated process is “trade” agreements loaded up with “goodies” for corporations, and the deals “have been used as a backdoor delivery mechanism for the corporate-favored-versions of non-trade policies.” These “goodies” include moving multinational corporations — but not domestic corporations — outside of our own legal system:

Only nine of the TPP’s 30 chapters cover trade matters like cutting tariffs. Much of the rest is a smorgasbord of corporate goodies, such as the requirement that signatory countries protect pharmaceutical companies from having to compete with generic medicines, thereby raising consumer prices.

Another key provision grants new rights to thousands of multinational corporations to sue the U.S. government before a panel of three corporate lawyers. These corporations need only convince the lawyers that a U.S. law, regulation or court ruling violates the new privileges TPP grants them, and the lawyers can award the corporations unlimited sums to be paid by America’s taxpayers — including for the loss of expected future profits. The decisions are not subject to appeal.

Jared Bernstein writes about this in, “The New Rules of the Road: A Progressive Approach to Globalization,”:

Unfortunately, both the trade debate and trade negotiations have long been co-opted by multinational corporate interests at the expense of workers and consumers both here and abroad. Fortunately, this election season has finally elevated that reality. The days when elites, both here and elsewhere, could ignore those who perceive themselves as hurt (on net) by globalization are hopefully gone, if not for good, than for a number of years.

Dean Baker, writing in “It Was As Inevitable that Doctors and Lawyers Would Lose Jobs to Foreign Competition as Factory Workers,” notes that it isn’t just giant corporations that benefit from this, but an entire “class” of professionals:

There are millions of very bright people in Mexico, India, China and other developing countries who would be happy to train to U.S. standards and work as doctors and lawyers in the United States. However, because these groups have far more political power than manufacturing workers, we have maintained walls that largely prevent foreign professionals from competing with our own doctors and lawyers.

The result is that these professionals have seen substantial increases in real wages over the last four decades and the rest of us pay hundreds of billions of dollars more each year for health care, legal services, and other items. The cost to the economy from this protectionism is almost certainly an order of magnitude greater than any potential gains from a trade deal like the Trans-Pacific Partnership. In spite of the enormous economic costs, the power of these professions largely prevents economists or the media from even discussing the protectionism enjoyed by professionals.

So What Can Be Done?

How can we negotiate trade agreements that are actually about trade and actually benefit people and the environment on all sides of trade borders?

Konczal starts with a suggestion about corporations, one that won’t happen if we have a corporate-dominated process. He writes:

So what can be done? First, we need a progressive vision of what trade deals should look like in the future. Here’s one: At this point in globalization’s spread, these deals are less about direct trading between countries and far more about the regulations that govern multinational corporations as they expand across the globe. We should be sure that trade deals don’t interfere with any country’s ability to regulate corporate behavior.

Wallach writes:

To get our trade policy redirected back onto trade — that is, to get rid of the protectionist baggage and develop trade terms that benefit U.S. workers and consumers — a new president will need to eliminate the special interest advisory system and greatly increase transparency. We need a new trade pact negotiation and approval process to replace the Nixon-era “Fast Track” regime that sets criteria for appropriate trade partner countries and what must and must not be in agreements. And, unlike our current system, Congress must approve agreements’ contents before they can be signed, making negotiators more accountable to congressional directives.

Bernstein and Wallach write at The American Prospect (same title, different content):

The new rules must prioritize the economic needs of low- and middle-income families while preserving the democratic, accountable policymaking processes that are essential to creating and maintaining the environmental, consumer, labor, and human-rights policies on which we all rely.
[. . .] A more transparent process with opportunities for meaningful engagement, accountability, and oversight by the public and Congress—rather than the current regime that privileges the commercial interests that have long captured these negotiations—is needed.

Wallach wants trade agreements that benefit not just giant corporate interests but also “U.S. workers and consumers.” Konczal wants agreements that limit corporations rather than unleash them. Bernetein and Wallach ask for transparency; and a democratic, accountable policymaking processes. They write,

U.S. positions on trade deals can be formulated the way other U.S. federal regulations are: through the on-the-record public process established under the Administrative Procedure Act to formulate positions, obtain comments on draft texts throughout negotiations, and seek comments on proposed final texts.

So “trade” shouldn’t just be about the interests of giant corporations. All of us have a stake in how we conduct trade. Trade deals should be negotiated openly with all of the stakeholders on all sides of trade borders involved and finalized in an open and democratic process.

We have the opportunity to accomplish this with a new administration, beginning in January.

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