The result is that the costs to American workers of each cycle of expanded trade relentlessly exceed the benefits. This fundamental problem will not be resolved by better negotiations. The trade policy of the last quarter century is now bankrupt, economically and politically. This is the moment for America to go back to the drawing board and rethink strategies for competing in the global economy in ways that raise living standards for all.
The first step is to declare a freeze on all trade negotiations—bilateral as well as multilateral—until we have such strategies in place. Donald Trump hammered away at those trade deals and the arrogance of an establishment that cared more about its relationship with Wall Street and foreigners than with Americans whose lives were being wrecked by globalization.
He attacked leaders of both parties. But Democratic presidents Bill Clinton and Barack Obama were the most prominent champions of corporate globalization.
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And because the Democratic Party has traditionally claimed to be the champion of the working class, it was the most vulnerable to feelings of betrayal. Many voters became convinced, however incorrectly, that Democrats were increasing benefits and protections to these groups, while pulling the rug out from under industrial workers and their communities, which contain Americans of all races, genders, and social identities.
This impression was reinforced by political consultants and pundits who argued that the party no longer needed that traditional base but could win an electoral college majority on the basis of larger turnouts from a coalition of minorities, immigrants, women, and white male college men. They lost the bet. Hillary Clinton underperformed relative to Obama in with African Americans, Latinos, and white women.
Donald Trump, for all of his insulting diatribes against immigrants from south of the border actually did better among Latino voters than Mitt Romney in And when he attacked the Carrier Company for planning to move its factory to Mexico, he was talking about a plant where 50 percent of the workforce is African American.
Women make up half the workforce on the assembly lines.
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The facility also employs dozens of recent Burmese immigrants. But many voters in the Midwest were understandably skeptical. In the primaries of , both Clinton and Barack Obama promised voters in the Midwest that they would renegotiate NAFTA, and quickly broke that pledge after Obama became president and Clinton secretary of state.
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As the working class grew angrier, their concerns—and those who tried to defend them, from industrial union leaders to members of Congress such as Bernie Sanders, Ohio representative Marcy Kaptur, and Ohio senator Sherrod Brown—were consistently ridiculed by columnists, economists, and editorial writers. The conventional economic wisdom was that workers should be grateful to have traded away good jobs and wages, stable communities, and a future for their children in exchange for cheap underwear and cell phones.
But they are bad politics because they are bad economics. If the American political establishment is to learn anything from this election, it has to start by ending its 20 years of deception, denial, and anti-democratic arrogance over trade policies.
The accusation is false and the argument irrelevant. Only six of 30 chapters of the TPP directly address questions of trade. The rest lay down rules that protect the interests of multinational investors above those of workers, the environment, and human rights. It is rife with restrictions on domestic policies—including restrictions on government policies to favor local procurement—that protect multinational corporate rights to future profits.
To enforce those rights, the TPP would establish an Investor-State Dispute Settlement system by which corporate-affiliated judges can override the decisions of democratic governments.
Until a quarter century ago trade policy—primarily the raising and lowering of tariffs—was an instrument of domestic economic development. As the U. Balanced trade reinforced virtuous cycles of internal economic growth. When a company replaced workers with machines, the increased profits were reinvested in other domestic industries, creating new jobs. Balanced trade helped assure that the benefits of rising productivity and technological change were widely shared by American workers as well as investors. After World War II, American producers emerged with a unique and temporary comparative advantage over foreign competitors.
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The new policy was also a weapon in the Cold War; providing access to the huge U. Inevitably, Europe and Japan recovered, taking back their own markets—and reaching into ours. In the late s the United States began to run chronic trade deficits, a market signal that it was losing competitiveness.
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By , real wages of U. With the collapse of the Soviet Union in the next decade, the geopolitical rationale for Cold War trade policies also disappeared.
U.S. trade policy—time to start over
But in the s, business and financial institutions with global operations grew more dominant in Washington. As did pro-corporate international economic policies. In effect, it responded to the changing circumstances by allowing U. President Bill Clinton promised that NAFTA would increase the surplus, creating , new American jobs in its first two years and a million jobs in five years. By , deficits with Mexico had cost the United States , jobs.
And, anyway, they insisted, the benefits from cheaper goods made these Americans better off. Highly skilled industrial work—in autos, steel, and electronics—was the next to go, as low-wage nations with free access to the American market rapidly educated and trained their own technical workforces. The pain spread into the high-end service sector, affecting professional services, for example accounting, law, data analysis, entertainment, internet management, inventory control, and record-keeping.
In a deregulated global market, any job that can be done with a computer can be offshored to places where costs are cheaper. As they continued to promote new trade deals, Republican and Democratic leaders told Americans anxious about their future to get more education. They did, and growing numbers of younger, more educated Americans now find themselves with massive school debts, floundering in a labor market where wages are stagnant. The real wages of young college-educated workers in were no higher than they were 15 years before.
To cover up the failure of trade deals to deliver jobs and higher wages to American workers, the promoters of the TPP. Ignoring imports in analyzing trade is like ignoring withdrawals in analyzing your checkbook balance. Labor markets are linked. When factories close, business drops off for suppliers, retailers, and services. Tax revenue falls, affecting education, health, transportation, and other government services.
And when profits from labor saving automation that used to be reinvested in new industries in the United States are reinvested in industries elsewhere, the bargaining position of the next generation of workers is undercut as well. Imbalanced trade—in which we are importing more than we are exporting—helps turn the short-term dislocation of workers by technological change into permanent joblessness and lower incomes.
Thus, the radical shift in trade policy since NAFTA has made a major contribution to the growing gap between the productivity of American workers and their incomes. Thus, for example, NAFTA required that at least roughly 65 percent of a product imported from Mexico actually be made in Mexico to qualify for a lower tariff. Even so, it meant that 35 percent of a product imported into the United States could be made in a country with even lower wages. In effect, it means that means that TPP countries could continue to ship goods to the United States that are largely made in China.
But U. Our Asian trading partners, who routinely use currency manipulation to make their exports cheap, refused to discuss it. But it is at best cosmetic, and as usual, there is no serious enforcement mechanism. There is no court or procedure with teeth for violations. Indeed, it is clear that under the current corporate-dominated mindset, the American government has no serious intention of enforcing such rights in trade agreements.
Even the fervid promoters of the TPP stopped predicting any but the most marginal of economic gains. The International Trade Commission, for example, making a series of optimistic assumptions and claims about the economy farther into the future than anyone could possibly see, predicted that the TPP would increase annual U. With the economic case in tatters, it was no surprise that TPP promoters then reached for other arguments, which had even less credibility. They shifted from the claim that the TPP would make Americans prosperous to the claim that it would make us safer, i.