People now more ‘soured’ than ever on trade and off-shoring

Almost all managers and professionals believe that outsourcing of production and manufacturing work to foreign countries is a reason the U.S. economy is struggling and few are being hired. That’s a surprising finding of the latest Wall Street Journal/NBC news poll.

The exact percentage of managers and professionals who hold that view is 95%. The lowest figure is 75% for retired people.

Another surprising finding published in the October 4 Journal: 90% of Republicans and 80% of Democrats take the negative position on outsourcing and its stifling effect on the U.S. economy.

The Journal’s page one story, headlined “Americans Sour on Trade,” also dealt with another question: “Do you think free-trade agreements have helped or hurt the U.S.?”

Hurt the U.S., according to more than half (53%) of those surveyed, up from 46% three years ago and 32% in 1999, according to the Journal.

In analyzing the total results of the survey, the Journal added:

“Even Americans most likely to be winners from trade – upper income, well-educated professionals, whose jobs are less likely to go overseas and whose industries are often buoyed by demand from international markets – are increasingly skeptical.”

What if Congress were to pass legislation in response to the U.S. multi-billion dollar trade deficit with China now that public opinion is increasingly “sour”?

In the October 4 issue the Journal did not comment on that possibility, which it would normally denounce as triggering a “trade war.” But in the September 27 Washington Post column, economics writer Robert J. Samuelson deals with a possible trade war were the U.S. to adopt a policy of “Standing up to China,” as his article is titled. His answer, as expressed in its subtitle: “A trade war may be the lesser of two evils.”

The basic problem with China, Samuelson points out, is that it has never genuinely accepted the rules governing the world trading system, Its major victim is the United States, at a crippling cost in American jobs and to U.S.-based companies.

China benefits from a trading system subordinate to its needs, which Samuelson says includes ample export markets to support the jobs necessary to keep the Communist party in power.

“The collision,” he writes, “is between two concepts of the world order…The United States faces a dreadful choice: resist China’s ambitions and risk a trade war in which everyone loses; or do nothing and let China remake the trading system. The first would be dangerous; the second, potentially disastrous.”
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‘Doubling exports’ would be a big loser as a U.S. jobs policy

The Obama administration’s commitment to doubling U.S. exports in five years is woefully inadequate: it aims to create 2,000,000 American jobs when 22,000,000 are needed. That’s the criticism of by a former CEO, Leo Hindery, writing a guest editorial in the current issue of Manufacturing & Technology News.

A major problem with this export-reliant pledge, says Hindrey, is President Obama’s plan to ratify three free trade agreements negotiated by President Bush – with South Korea, Panama, and Colombia. All “are very poorly negotiated and will cause even more American jobs to be lost overseas.”

He singles out the South Korea FTA as “simply awful,” so much so that, if approved without major changes, “the Obama administration will be giving a major unwarranted victory to America’s multinational corporations and Korean workers at the expense of America’s workers.”

Korean negotiators bested the United States in 2007 and later negotiations, according to Hindery, “especially in automobiles, where the FTA would lock in Hyundai Motor Corp.’s dominance of the South Korean market while locking out American manufactured vehicles, and in beef, where the U.S. would largely be excluded from exporting all but young carcasses.”

In Hindery’s view, President Obama must undertake a series of initiatives in addition to radically amending the three pending FTAs:

-- Decide that job creation is the number-one object of his administration’s economic policy, with domestic manufacturing as the top priority.

-- Line up his entire administration behind that policy. At present, some top officials voice positions that are “complete BS.”

-- Especially level the trade playing field between U.S. and China.

-- Emphasize the primary (not secondary) role of “big business” in creating the bulk of the millions of new jobs, and stop fixating on the ability of small business to do so.

Hindery is the former CEO of Tele-Communications Inc. (TCI) and chairs the U.S. Economy/Smart Globalization Initiative of the New America Foundation.
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Aiming for a trade agreement that breaks with the past

It’s time for the next trade agreement to be a “21st century agreement.” That’s the advice that top union leaders from seven Pacific rim nations have for seven trade ministers who have started negotiating an unusual trade pact called the Trans-Pacific Partnership Trade Agrement (TPPTA).

In their May 10 letter the labor leaders, including President Richard Trumka of the AFL-CIO, urged the seven trade ministers, including Ronald Kirk of the United States, “to break from past practice and negotiate in a more open, transparent, and participatory manner.”

Toward that end, the union leaders recommended the creation of a joint TPPTA Website that would convey a full range of information about the on-going negotiations, including “white papers, draft texts, offers and counter-offers, press statements, and declarations.”

Access to the Website, and posting on it, would not be limited to the government side, but would “allow civil society to post documents (analysis, proposals, etc.) relevant to the negotiations by topic or by country.”

Another proposal is to establish “side rooms” (apart from the negotiating venue) “where accredited civil society representatives could be briefed from time to time during negotiations’ and where those representatives could also present their views.

“Consultation must also be on-going,” the union letter emphasized. “Throughout the negotiation process, governments must establish regular channels to ensure [that] civil society, including unions and employers, are able to meaningfully engaged in the negotiating process.”

Generally, such consultations have been routinely granted only to employer representatives – a point that the letter did not make.

In its final paragraph, the letter warned: “Without implementing at least these measures, any final agreement cannot count on broad civil society support.” Translation: the agreement won’t fly if employers are its only supporters.

The first round of TPPTA talks took place in Melbourne, Australia, in mid-March. The next round is scheduled in June in the United States.

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Identifying that 800 pound gorilla in U.S. trade with China

Why have American companies shifted most of their production for the American market to China? And why do they continue to do so?

The overriding reason is the huge advantage they gain from China’s absolute control of Chinese workers, not from China’s rigid control of its currency. That truth is worth revisiting in light to the exaggerated hope being placed in the benefits that the U.S. would gain if Beijing abandoned its currency manipulation.

The issue came to the fore on business pages last month because the Obama administration decided to postpone the scheduled April 15 announcement to declare the People’s Republic a currency manipulator. In a teleconferenced briefing for some 65 activists, the Citizens Trade Campaign labeled China’s exchange rate policy as “the 800-pound dragon in the room.”

“Currency manipulation is just one of Chinese governments many unfair trade advantages, but it also the largest one,” the Citizens Trade Campaign (CTC) said in summarizing the teleconference.

In acknowledging the unfair advantage (and attractions for foreign companies) in China’s labor market, one CTC briefer mentioned China’s low wages and its government’s labor federation as causes.

That understates the plight of China’s working men and women. The iron fist of the country’s neo-Communist rule deprives them of all rights and makes them vulnerable to a wide range of exploitation, individually and collectively. Ironically, they are deprived of freedoms enjoyed by American business people in China.

It is an arrangement so obviously discriminatory, so immoral, that it should not survive one day longer. However, American business, to its eternal shame, will try to hold on it as long as possible, given the support of the U.S. government through its unfree trade and other policies.

Even some insiders now understand the folly of these policies. Robert B. Cassidy, a former Assistant Trade Representative, recently wrote:

“I now understand why so many of the trade agreements we negotiated never delivered the promises that were made and, if continued, never will.”

Cassidy wrote that as a blurb for a new book by Ian Fletcher, “Free Trade Doesn’t Work: What Should Replace It and Why.” See an article by Fletcher in Truthout titled “Uncle Sam, Global Trade Sucker.”

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A new model for trade agreements is U.S. aim, starting in trans-Pacific

The Obama administration is starting to move U.S. trade policy in a new direction – very new, or so it appears from the words of the top U.S. trade official, Ron Kirk.

President Obama will start the ball rolling soon. He intends to enter into negotiations for an Asia-Pacific trade agreement known as the Trans-Pacific Partnership, as U.S. Trade Representative (USTR) Kirk announced in a press statement and in letters to Congressional leaders December 14.

The goal is “a new kind of trade agreement for the 21st century, bringing home the jobs and economic opportunity we want all our trade deals to deliver,” Ambassador Kirk said in his press announcement.

He emphasized that USTR would intensify the already-begun consultation with congress to develop negotiating objectives seeking “the highest economic benefit for America’s workers, farmers, ranchers, manufacturers, and service providers” and reflecting “our shared values on labor, the environment, and other key issues.”

In separate letters to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, Kirk reiterated the theme that successful conclusion of the Trans-Pacific Partnership negotiations requires “a high-standard, 21st century agreement,” one that “updates the U.S. approach to traditional trade issues. “

Among the issues he cited that need updating were:

-- “environmental protection and conservation, transparency, workers rights and protection, and development.”
-- “new opportunities for small and medium-sized businesses to increase exports to the region.”
-- U.S. firms’ participation in “production and supply chains in order to encourage investment and production in the United States.”

In concluding his two-page letter to the Congressional leaders, Kirk wrote:

“The TPP Agreement provides an opportunity to develop a new model for U.S. trade negotiations and a new regional approach that focuses more on jobs, enhances U.S. competitiveness, and ensures that the benefits of our trade agreements are shared by all Americans.”

U.S. negotiating partners under TPP so far include only seven countries: Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore, and Vietnam. Others countries are expected to join soon. China is the wild card.

Initial negotiations are already scheduled to begin in March. Negotiations – oops, consultations -- with Congress and within Congress on priorities are already underway.

USTR is seeking public input on the “direction, focus, and content” of the TPP negotiations. A new webpage, http://www.ustr.gov/tpp is already operational with information for the public.

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The President's Trade Quandries

Trade and globalization: where do they rank on the list of President Obama’s priorities? If you rely on the White House Website, they are not a priority of his at all.

When I checked the Website five days ago, I found that the home page listed 22 “issues,” lined up alphabetically from Civil Rights to Women. Then I clicked on “Additional Issues” at the end of the 22-item list. Seven more popped up, with Faith at the top, followed by six more listed alphabetically, from Arts to Transportation. No Trade or Globalization.

I turned to a “contact us” form, whicd invites the viewer to submit comments or questions for the President or his staff. I submitted the following;

"Mr. President: Why are two highly important issues -- globalization and trade -- omitted from your list of issues and additional issues?. That's very strange. You need to take a clear stand on these issues, considering their impact on American working men and women. I know your advisers would like to duck these issues, but that's impossible. Bob Senser"

I checked a box marked “a response requested.” Today, after getting no response, I scanned the Website again. The 22 issues and seven additional issues were still there as before. No additions.

It occurred to me that Globalization and Trade might be treated under Foreign Policy or Economics. No, they are not.

The President is the midst of a historic struggle for universal health coverage for Americans, a goal that none of his predecessors, from President Truman on, had achieved. I presume that his “issues” staff did prepare drafts at least on Trade, but that anything clear on this controversial subject would ignite additional fireworks, which the White House did not want to set off at this time.

In any case, because of conflicting pressures, foreign and domestic, as well as a less than full grasp of globalization, the President appears to be in a real quandary on trade. But he will certainly have to take a stand of some kind next week, when he addresses the AFL-CIO convention in Pittsburgh, followed by a G20 summit the following week in the same city.

Will he come down on the side of workers? Or on the side of major American corporations whose highly profitable off-shore production, imported into the United States, accounts for 40 percent or more of the huge U.S. trade deficit?

On September 11 the President imposed increased duties for three years on tire imports from China, ruling in favor of a petition by the United Steelworkers and a few U.S.-based corporations. See my article, “Obama Faces Crucial Test on Trade,” for background.

In explaining the President’s decision, U.S. Trade Representative Ron Kirk said: “When China came into the WTO, the U.S. negotiated the ability to impose remedies just like this one…Enforcing trade laws is key to maintaining an open and free trading system.”

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Obama faces crucial test on trade

Should the U.S. government impose tariffs on the China-made tires that are flooding the U.S. market? That’s just the immediate question that President Obama must decide in the next few days.

But the larger question is: Should he begin to reverse a trade policy that, day after day, is bleeding more and more American jobs and enfeebling the American economy?

The President has the legal power to restrict imports under certain conditions. Congress insisted on that restriction – and China agreed to it -- as a critical component of legislation approving China’s joining the World Trade Organization in 2001: the U.S. can put up a barrier against a flood of imports that damaged domestic business.

President Bush rejected every petition – four in all – to enforce that restriction. The tire petition is the first one to reach President Obama.

It was approved in July bv the U.S. agency that reviews such petitions, the International Trade Commission (ITC). The ITC found that the American tire market had indeed been disrupted by a surge of Chinese products, and by a 4-2 vote recommended approval of the petition, brought by the United Steelworkers in April. The deadline for Obama’s decision is September 17.

At stake is more than whether the People’s Republic of China should be permitted to export an unrestricted number of tires into the United States – 46,000,000 of them last year, valued at $1.700,000,000 – whatever the cost to the American tire industry.

In his September 2 Washington Post column, Harold Meyerson spelled out some broader implications of an Obama decision not to enforce U.S. trade policy:

“Why would anyone concerned about American jobs believe such provisions in future trade agreements? Why would U.S. manufacturers maintain their domestic production if they know that none of the legal protections they’ve been promised will ever be invoked?”

The even bigger question: will President Obama show that the U.S. government will no longer be a party to dismantling the economy of the United States?

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President Obama’s basic choice on trade

As the Obama administration wrestles with shaping its policy on the World Trade Organization (WTO), the old questions about fairness and equal treatment pop up once again.

Fairness? (I can hear the loud objections.) Why sidetrack the WTO into controversies about fairness and equal treatment?

It may come as a surprise to some that the WTO is already committed to equal treatment. That commitment is so basic that it is expressed in two principles that the WTO calls “the foundation of the multilateral trading system.”

These two principles, both formulating “trade without discrimination,” are:

“1. Most-favored-nation (MFN): treating other people equally….Grant someone a special favor (such as a lower customs duty rate for one of their products), and you have to do the same for all other WTO members.”

“2. National treatment: treating foreigners and locals equally. Imported and locally produced goods should be treated equally….The same should apply to foreign and domestic services, and to foreign and domestic trademarks, copyrights, and patents.”

Those two principles, here quoted from an official document, “Understanding the WTO,"are written into all three key WTO agreements, the General Agreement on Tariffs and Trade (GATT), the General Agreement Trade in Services (GATS), and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Why does equality of treatment have such a fundamental role in the WTO as in the trading system as a whole?

Because it is fair to those whose rights and interests it is designed to protect – the business people and firms engaged in international commerce. The laws of individual countries were not – and are not -- adequate to offer that protection. After World War II, policymakers of leading nations agreed to correct that particular gap, and created the first versions of GATT the agreement and GATT the organization, both focused on business.

Even at the beginning, some leaders recognized that the focus on business was one-sided and needed to be corrected to include the rights and interests of workers and their organizations. Those efforts failed then, and have failed ever since.

The challenging trade issues now facing the Obama administration can be reduced to three statements:

1. The world trade and investment system does not protect the rights and interests of workers and worker organizations as it does the rights and interests of business and business firms.

2. That imbalance is unfair, and is increasingly recognized as unacceptable -- a trend that partly accounts for the widespread disenchantment with globalization.

3. The challenge is to decide what actions, short range to long range, are necessary to correct that imbalance.

Adopting a WTO agreement on Trade-Related Aspects of International Labor Standards (TRAILS) would be a historic achievement, but not a cure-all. Biased ideas toward work, workers, and worker organizations are imbeded in our culture. Curing them requires a multi-faceted approach.
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This crisis should not go to waste

“Anonymous” makes the following comment about my previous post (below), titled “Oust U.S. financial oligarchy: economist”

“I'm so not listening to economists these days, Bob. Let's hear from people who are breaking out new mobilization ideas - the grass-roots cannot be rallied with what this-or-that economist says. Get the agit-prop, resistance-inspiring and activists' victories stories out there, before this moment passes!”

My view: Let a thousand flowers bloom. Including those among economists.


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Oust U.S. financial oligarchy: economist

Every country has its dominant elites, oligarchs of one kind or another. The challenge is to change them when they get too powerful. The United States, too, has its oligarchy, the banking/financial industry, which has grown so powerful that it thrives on the chaos it created and blocks essential reforms. Ousting the oligarchy must be accomplished soon, or else we may well suffer not just a repeat of the Great Depression, but something worse.

That paragraph summarizes the unsettling message of “The Quiet Coup,” an article in the May issue of The Atlantic by Simon Johnson, a former chief economist of the International Monetary Fund (IMF). Now a professor at MIT, Johnson draws on his experience at the Fund to describe the typical plight of “emerging market” countries in a desperate economic situation.

“The biggest obstacle to recovery is almost invariably the politics of the countries in crisis….The powerful elites within them overreached in good times and took too many risks,” he writes. Then, in the downward spiral that follows “the oligarchs are usually among the first to get extra help from the government.” But an economic reform program succeeds “only if at least some of the powerful oligarchs who did so much to create the underlying problems take a hit.”

Johnson compares the situation of troubled emerging market countries with that of the United States, except that here it’s much worse, as he sees it. “Just as we have the world’s most advanced economy, military, and technology, we have its most advanced oligarchy” -– the banking/financial industry.

Economist Jagdish Bhagwati’s name for this oligarchy is the “Wall Street-Treasury complex,” a powerful network he describes as “unable to look beyond the interests of Wall Street which it equates with the good of the world.” Like Bhagwati, Johnson illustrates its influence by tracking the back-and-forth movement of its leaders between Wall Street and top federal government posts in both Democratic and Republican administrations.

In a key insight, Johnson writes: “The American financial industry gained political power by amassing a kind of cultural capital – a belief system…[that held] that what was good for Wall Street was good for the country…In a society that celebrates the idea of making money, it was easy to infer that the interests of the financial sector were the same as the interests of the country.”

What followed in the past decade is what Johnson calls “a river of deregulatory polices that is, in hindsight, astonishing.” Three items from his list of seven:

-- The insistence on the free movement of capital across borders.
-- Major increases in the amount of leverage [borrowing] allowed to investment banks.
-- A light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement.

The environment, or at least public opinion, has now changed, but “financial elites have continued to assume that their position as the economy’s favored-children is safe, despite the wreckage they have caused.” And the government itself “has taken extreme care not to upset the interests of the financial institutions, or to question the basic outlines of the system that got us here.”

For Johnson, “the government’s velvet-glove approach with the banks is deeply troubling, for one simple reason: it [doesn’t] change the behavior of a financial sector accustomed to doing business on its own terms, at a time when that behavior MUST change.” Instead, big banks have a veto power over public policy, despite their loss of popular support.

The solution? Johnson’s advice, as he puts it, is similar to the advice that the IMF, and the U.S. government, has given to developing countries in deep economic trouble: temporary nationalization of hopelessly insolvent banks. Instead, the U.S. Treasury is trying to negotiate bailouts bank by bank, and “behaving as if the banks hold all the cards.”

Meanwhile, in foreign trade and investment policy, an area not examined by Johnson, the Obama administration has signaled that it will ask Congress to ratify the three still pending Free Trade [and investment] agreements negotiated by the Bush administration with Columbia, Korea, and Panama. There likely will be changes in the contents, but none in how the agreements extend Wall Street’s power in the global economy and hence in the United States also.

Johnson’s overall assessment: “The Obama administration’s fiscal stimulus [program] evokes FDR, but what we need to imitate here is Teddy Roosevelt’s trustbusting.” Its operating principle would be: “Anything that is too big to fail is too big to exist.’

The article’s closing analysis is dire:

“What we face now could, in fact, be worse than the Great Depression – because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.”

To learn more about Johnson’s ideas, see the Website he co-founded, BaselineScenario.com.

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Doubting WTO chief Pascal Lamy‘s Doha data

The top executive of the World Trade Organization (WTO) got an unusual public rebuke April 14 during an informal session in Geneva of the WTO trade policy review board, made up of representatives of the organization’s full membership.

India’s trade envoy, Ujal Singh Bhatia, challenged a forecast that WTO Director-General Pascal Lamy made in his latest report on trade and the current economic and financial crisis. Bhatia specifically questioned Lamy about how he arrived at the figure of $150,000,000,000 as the potential “stimulus” benefit that would result if the stalled Doha Round succeeded.

He cautioned against repeating figures “not supported by hard data.”

“In the last few years I have seen numbers ranging from $400,000,000,000 to $40,000,000,000,“ Bhatia said, citing a statement of economist Peter Galbraith that “the only function of economic forecasting is to make astrology look respectable,” according to a report of the Business Standard of India.

In his remarks at the meeting, Ambassador Peter Allgeier, deputy U.S. trade representative, said that the U.S. remains committed to conclude “an ambitious and balanced” Doha Development Agreement. According to a USTR release, he added: “In this regard, we support India’s request for details on the $150,000,000,000 figure in the report for estimated tariff savings from DDA.”

In his response, Lamy defended his figure as neither “rocket science” nor “astrology” but based on “the revenues foregone” from the tariff cuts proposed last July as part of the Doha round. His report to the meeting explains in detail why “The Doha Development Round is the best stimulus package.”

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Toward a new day for trade

In a letter sent to Congress on February 7, more than 350 organizations representing faith, family farm, labor, consumer, and environmental groups said they strongly support Senate and House action to “replace the failed trade policies of the past with those that deliver broadly shared benefits.”

“Hundreds of groups are now organizing, rolling up their sleeves, pushing for reform, including support for Buy American provisions in the stimulus package,” said Andy Gussert of the Citizens Trade Campaign, which organized the petition to Congress.

The four page letter summarizes the key issues facing decision by lawmakers and the Obama administration.; and specifically expresses opposition to harmful features contained in “hangover” Bush administration free trade agreements with Colombia, Panama, and Korea.

Among those objectionable features:

-- Foreign investor are granted rights that promote off-shoring and also subject U.S. domestic environmental, zoning, health, and other public interest polices to challenge by foreign investors in foreign tribunals.
-- Food-safety provisions would require the United States to limit import inspection and accept imported food that does not meet our domestic safety standards.
-- Procurement rules would hamstring many reasonable procurement practices of our federal, state, and local governments.

The worsening recession is distracting policymakers from the need to reform the U.S. foreign trade and investment policies. Forgotten is the role that our outmoded trade policies, and their failure to share their benefits more widely, play in fueling economic decline.

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Five lessons for new U.S. trade policies

An experienced American trade negotiator, Robert B. Cassidy, is speaking out with a candor rare among high-ranking trade bureaucrats. Cassidy, a former assistant U.S. Trade Representative,is discussing the mistakes of the past and the lessons that should be learned from them by the Obama administration.

In remarks before a packed audience at the Economic Policy Institute (EPI) in Washington on January 27, Cassidy, now in private practice, offered “five overarching lessons” to guide any overhaul of U.S. trade policy.

Fortunately, EPI provides the full text of Cassidy’s talk on its Website, from which this report draws his five lessons and a brief explanation of each, as follows:

First: Trade policy should be based on U.S. economic self-interest, not as the equivalent of corporate self-interest, nor as a subset of foreign policy. Cassidy cites the free trade agreement with Korea as one motivated largely by foreign policy objectives, in this case to surround China with bilateral FTAs.

Second: Trade policy as such has only limited reach. Global monetary, fiscal, and competition policies are more important. As the “only country capable of standing up to China,” the United States should take the lead in the WTO in challenging China’s manipulated exchange rate.

Third: The advisory and decision-making processes of trade policy “need to be balanced,” that is enlarged beyond State, Treasury, and Commerce (plus Agriculture occasionally) to include Labor and environmental interests. The present race to the bottom on labor standards should be abandoned, and indeed can be abandoned fully consistent with WTO principles.

Fourth: We need to get our trade relationship with China on a more balanced footing by asserting our interests more aggressively. On our imports of tainted foods, why are we relying on China to safeguard the health of our citizens?

Fifth: Reconsider “trade promotion authority” to make negotiations more transparent and negotiators more responsible in pursuing our objectives.

The administration, according to Cassidy, should take advantage of a “short window of opportunity” to ensure that the benefits of trade “flow to the broader U.S. economy. . . and help achieve other goals such as improved labor standards and environmental objectives.”

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Exposing the High Costs of Trade

International trade is a Good Thing. Our opinion leaders say it is. The Washington Post says it is. So trade is clearly a win-win process, right?

No, sorry. It isn’t.

“The trade story is not win-win but rather good news-bad news,” Economist John Bivens explains in a new book, Everybody Wins, Except for Most of Us, subtitled “What Economics Teaches about Globalization.”

Trade, he writes, is “good news for national incomes, bad news for many if not most individuals and families.” Why? “Because trade “redistributes their income away from them and up the income ladder.”

That’s not a secret. It’s a truth “predicted by standard economic theory and proven by empirical studies,” Bivens points out. Economic integration across borders does make countries “a bit richer,” but its “more powerful effects [are] on the distribution of income within each economy.”

Cheerleaders for free trade, however, fail to make the basic distinction between trade’s effect on national income and on family income

Bivens not only clearly explains the theoretical distinction but also calculates its practical effect on American workers in dollar terms. He finds that for a full-time median-wage earner in 2006 the annual trade-related losses totaled about $1,400; for a typical household with two earners, the loss was $2,500. He goes on:

“These losses are as high or higher than other economic costs commonly presented as much more damaging to American families, such as the cost of health care, spikes in gasoline and fuel oil prices, the cost of a child’s four-year college education, or the funds needed to remedy a possible shortfall in the future of Social Security.”

Does the incoming Obama administration fully understand what is at stake?

That’s not yet clear.

Clearly, Obama and some of his key people do understand that globalization is a serious issue, but it is another matter whether they grasp the gravity of the real harm to ordinary American workers (as well as to workers in poor countries) – and how globalization impacts specific problems, like health care. Without such an deep understanding, it will be easy to be frozen into inaction by charges of “protectionism.”

A foreign trade union friend asked me the other day whether I had a “channel” to the Obama administration. I don’t. If I did, I’d try to get Obama or his chief economic advisor to read at least the executive summary of Everybody Wins Except for Most of Us, just published by the Economic Policy Institute.


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Pro-Obama think tank on trade reform

The Obama administration is getting some strong advice from the Center for American Progress, a think tank headed by transition co-chair John D. Podesta. Among other things, the advice deals with creating “a new and different trade policy –- one that takes a strategic approach to making globalization more inclusive and sustainable.”

How to implement that approach is the subject of a Center report by Ira Shapiro, a former general counsel in the Office of the U.S. Trade Representative (USTR), and Richard Samans, a senior fellow at the Center for American Progress.

Their newsiest recommendation:
-- Resist the temptation to lead a revival of the collapsed “Doha Round” of the World Trade Organization (WTO)
-- Do remain a “committed leader” of the multilateral trading system, while also making “new trade arrangements” within the WTO and outside of it.

Their most intriguing recommendation concerns “the special case of Asia” and how the United States could regain “its economic position” there. The report suggests that the Obama administration “reach out to the more advanced countries in Asia as potential partners in a vanguard, global club of advanced economies that agree to pursue deeper economic integration through both free trade and basic consistency of structural, regulatory, and exchange rate policies and institutions.”

“Basic consistency” would include comparable labor, environmental, consumer, and investor protections, the report emphasizes. It envisions that the pioneering members of this arrangement would be the United States, Australia, Singapore, South Korea, and Japan, and that it might serve some nations’ self-interest to have “a counterweight to China’s increasing economic and political clout.”

Whether that particular idea flies or not, the report makes a reasonable case for a “more flexible approach” that regards fundamental policy consistencies as “a sounder organizing principle for [free trade agreements] than geographical proximity or bilateral ties.” The approach thus departs from a founding principle of the current trade regime: that all countries, whether democratic or dictatorial, are treated the same and get the same trade rights and privileges.

Here is what the report says about several of the current trade issues facing the new administration:

NAFTA: Because of global changes in the 15 years since the North American Free Trade Agreement went into effect, “it is perfectly appropriate” for Canada, Mexico, and the United States not only to evaluate the agreement but to explore other topics of mutual interest (e.g., better regulatory coordination on food safety).

Colombia FTA: Before this can be ratified, Colombia will have make “sufficient progress” in ending violence and in prosecuting those engaging in violence.

South Korea FTA: South Korea must address impediments to U.S. beef and auto exports

Presidential trade promotion authority: Without it (including some version of “fast track”), other nations won’t take U.S. negotiators seriously, but this executive power needs to be balanced by a strengthened role for Congress, even to the point of it helping choose countries for trade agreements.

The report, part of a book titled “Change for America: a Progressive Blueprint for the 44th president,” is aimed at the Office of United States Trade Representative (USTR) and what it should do about “responding to the changing global challenge.”

For the new President, the “blueprint” in the 17-page trade section is obviously subject to change because of competing priorities, not only within the ten-chapter book, but also because of the financial debacle that happened after the book was drafted.

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No more false choices. . . .

. . . is the title of a perceptive op-ed article in today’s New York Times by two of Senator Obama’s economic advisors. They debunk three widely held “false choices” facing the economy, and then propose alternatives to the either/or categorization. One important polarizing dichotomy they target is “free trade versus protectionism.”

The article’s special significance is that it is written by Robert E. Rubin, a former U.S. treasury secretary who is currently a Citigroup executive, and Jared Bernstein, a senior economist at the Economic Policy Institute. The two express agreement on trade as follows:

“With respect to trade, the choice is not trade liberalization versus protectionism. Instead, as trade expands, we must recognize that protecting workers is not protectionism. We must better prepare our people to compete effectively and help those who are hurt by trade—not just displaced workers, but those who find their incomes lowered through global competition. This means investing more of the benefits of trade in offsetting these losses, through more effective safety nets, including universal health care and pension coverage.”

But the two economists then go on to disagree on a key issue:

“Beyond that, while we share a commitment to helping workers deal with our new global challenges, one of us (Mr. Bernstein) would advocate provisions in trade agreements that are intended to protect workers, both here and abroad, and the other [Mr. Rubin] would have considerable skepticism about the likely effectiveness of those provisions for our workers.”

In other words, since we are facing “new global challenges” in international trade, Bernstein advocates addressing them domestically and globally. Rubin, even while recognizing new global challenges, advocates addressing them only domestically, with better U.S. safety nets.

Two apparently different approaches. Can either work effectively?

The domestic approach, concentrating on U.S. measures alone, could work if U.S. legislation were globalized, truly globalized. That would mean adding a worker-friendly dimension to a wide set of U.S. laws. Tax laws, for example, would provide incentives for businesses to invest in the United States instead of abroad. Tariffs would be raised to cover more than the cost of building and maintaining our sea and airports, but also some of the cost of new safety nets. Corporate laws would be revised to make U.S.-based multinationals accountable for their treatment of workers in foreign countries, both those on their own payroll and those on the payrolls of contractors of the multinationals.

Rubin is right to be skeptical about labor provisions added to trade agreements, if he has in mind the provisions in existing agreements and the limited provisions adopted so far (as in the Peruvian free trade agreement). But Bernstein seems to favor a broader approach, one that would “protect workers, both here and abroad.”

To be serious about meeting the new global challenges facing workers here and abroad, it is pitifully inadequate to improve only the labor chapter of a trade agreement. The whole trade agreement, every single chapter of it, must be analyzed from a brand new perspective, one sharply different from the prevailing paradigm among negotiators.

At present, all trade agreements, including overall accords on the scope of trade agreements, are dominated by negotiators who have this objective uppermost in mind: How can we protect the rights and interests of business and business organizations in the global economy? The resulting document, whether bilateral, regional, plurilateral, or multilaternal in reach, is then judged by that one-sided standard.

That standard needs to be balanced by another: How can we also protect the rights and interests of workers and their organizations in the global economy? To its great shame, the World Trade Organization, like its predecessor bureaucracy, has steadfastly refused to put that question on its agenda. Worse, the WTO’s bosses, the political leaders of the world’s nations, are complicit in that shameful taboo.

Let me propose an addition to the list of economics false choices. The issue of what approach to take under the new global challenges is not global versus national. The most effective approach is to work at both.


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Worker rights as an economic asset

Protecting worker rights as part of trade policy can be good for the economy. So says report just released by a Washington think tank, the Center for American Progress.

“The promotion of labor standards, alongside environmental protections, should be an integral part of the future U.S. trade agenda,” says the report titled “Labor Rights Can Be Good Trade Policy.”

The authors, Christian E. Weller and Stephen Zucconi, warn that, to be effective, the worker rights provisions of trade agreements must be enforced with “positive incentives for moving toward better labor standards, and negative incentives, including sanctions, when benchmarks are not met.”

Nearly a third of the 34-page report consists of data buttressing their points, including the fact that “stronger labor rights are correlated with smaller trade balances,” for instance, and that U.S. trade is more balanced with countries that have better worker rights.

Yet improving standards won’t, by itself, produce impressive results. That’s a crucial point emphasized in the Center report. Adopting global labor standards, Weller and Zuicconi insist, is a “key”(but not the only) element in a “broader” progressive international policy agenda to grow the global middle class.

In other words, improving labor standards in the North American Free Trade Agreement, as Senator Obama advocates, is a necessary but not sufficient reform. The Center study does not draw that specific conclusion, but I think it follows logically from a realistic assessment of the negative impact that NAFTA.as a whole has on the situation of workers in Canada, Mexico, and the United States

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WTO Isn't Keeping Up with the World

So once again global trade talks have hit a stone wall. Once again the Washington Post sheds tears over the latest collapse in negotiations. A July 30 Post editorial finds it “particularly dismaying” that the People’s Republic of China cast a veto on the World Trade Organization’s latest proposal to save the so-called Doha Round.

Those ungrateful Chinese! After all, “U.S. supporters of Chinese inclusion in the WTO [including the Post] argued that drawing China into a system of multilateral give-and-take would mute its nationalistic tendencies. Evidently, the Chinese see the matter differently. They, and the world, will be poorer because of it.”

Well, the Chinese are not the only ones who see matters differently from the Post.

“Don’t cry for Doha,” says the title of economist Dani Rodrik’s July 30 Weblog. He writes: “There was not a whole lot at stake to begin with for poor nations as a whole…Panicky statements about dire consequences and protectionist spirals will be more damaging than the actual effects of the collapse of the trade talks.”

Be assured: robust world trade will continue, regardless. Robert Wade, professor at the London School of Economics, explains why. In a letter published in the July 26 Economist weekly, he writes:

“There is almost no chance that the global economy would become less integrated as a result of ‘failure’ [of the Doha talks]. The producers of most goods and services in the major economies are much more integrated into complex cross-border systems than between 1914 and the 1930s, when the world economy did become less integrated.”

The WTO suffers from a much bigger failure than the current one in Geneva. The overall failure is this: the world trading system has simply not kept up with the world. That’s not an opinion; it’s a fact.

One example: today's global system, as patched together in the 20th century, ignores the radical changes in information technology since then and therefore does not outlaw the trade barriers erected by China (and other repressive countries) against the free flow of information.

I've written an account of how this particular failure troubles me personally. My article is published in the August 4 issue of America under the title “Buyer’s Remorse: Spatulas, Yahoo, and the conscience of a consumer.” Click here. It is part of my collection of evidence that the WTO has not kept up with the world as transformed by globalization.


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Foreign Trade as 'Threat to the Economy'

“What do you think that foreign trade means for America? Do you see foreign trade more as an opportunity for economic growth through increased U.S. exports or a threat to the economy from foreign imports?”

In response to that question, 51 percent of Americans said that foreign trade is “a threat to the economy,” according to a CNN/Opinion Research Corporation poll toward the end of June. It was the first time in 12 CNN polls since 1992 that a majority of Americans reported a negative view of trade.

In the June poll, 41 percent – a 16-year low -- rated foreign trade as “an opportunity for economic growth.” Four percent volunteered that it was “neither”; 2 percent, “both.”

The poll listed 15 issues and asked respondents to rank them according to their importance in choosing the President in November. “The economy” was tops, with 58 percent deeming it “extremely important.”


CNN’s July 1 news report on the poll was headlined “Majority against free trade,” although the survey question referred to foreign trade. Questions about “free trade” in recent polls have been similarly negative. The CNN poll, phrased more generally, may mean that the public suspicion of free trade is morphing into something more serious.

For the results of a Pew Research Center poll on this issue in April, see “More Bad News about Globalization.”

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Preparing Trade Policy Reforms

The United States will reform its trade policy no matter who occupies the Oval Office next year. That’s the prediction of Sherwood Brown (above, center), U.S. Senator from Ohio, long an advocate of fair trade.

Brown is leading a Congressional initiative to do the groundwork for that policy. On June 4 he introduced a bill to 1) review all existing trade agreements, 2) renegotiate those agreements based on that review, and 3) set the terms of new trade agreements.

The bill proposes policy requirements that broaden the protection of the public interest in trade and investment policy. For example, protecting the rights of foreign investors could no longer override a country’s efforts to protect the rights of its own workers.

Under current law and practice, President Bush has signed trade agreements on his own authority before sending them to Congress for approval under an expedited procedure that permits no amendment. Under Brown’s bill, the President could sign a trade agreement only after it gets the approval of both Houses of Congress.

The bill’s full title is the Trade Reform, Accountability, Development, and Employment Act of 2008, or TRADE Act for short. Although the bill is unlikely to be enacted this year, it should help develop an improved version for 2009.



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New World vs. Old World Trade Policies

-- The flow of foreign direct investment (FDI) into developing countries (including China) grew more than 10-fold in the past 15 or 16 years. It reached $379,070,000,000 in 2006.

-- The services sector – banks, communication, education, hotels, restaurants, and public utilities, for example – now outpaces manufacturing in attracting FDI. In 2005 the services sector accounted for about three-fifths (61 percent) of global FDI stock (up from 49 percent in 1990).

-- Although the number of multinational corporations with headquarters in developing countries is increasing, they still are dwarfed by those based in industrialized economies. The total foreign assets of the top multinationals based in developing economies, for example, in 2005 amounted to the total foreign assets of a single U.S. multinational, General Electric, the largest multinational in the world.

-- Foreign affiliates of the 78,000 multinational corporations based in the United States, Europe, and Japan have tripled their workforce. In 2006 the number of people on their payrolls stood at 73,000,000 (not counting people hired by contractors and subcontractors), up from 25,000,000 in 1990.

Those are a few of the fascinating statistics in Development and Globalization: Facts and Figures, just issued by the United Nations Conference on Trade and Development (UNCTAD). They illustrate the transformations the world has undergone since 1990.

What implications do these and other transformations have for world trade and investment policies? The question is seldom addressed. But there are some exceptions.


Awareness is growing that at least the investment chapter of the typical trade agreement needs revision. UNCTAD’s 2007 Trade and Development Report, for example, criticized most bilateral “North-South” free trade agreements for restricting the options that poor countries have for adopting FDI policies suitable for their own circumstances.

On October 1-2, over 30 negotiators representing more than 25 countries assembled in Singapore for the 1st Annual Forum of Developing Country Negotiators. There they discussed (as a forum report put it) “their common challenge: finding the appropriate balance between the need to attract more foreign direct investment and the need to serve a wide range of public policy objectives, including economic development.”

That same challenge facing developing countries is analyzed in a report expected to be approved by the June meeting of the Human Rights Council. The report; written by Professor John Ruggie of Harvard, devotes seven paragraphs to the “adverse effects” of the current one-sided policy of protecting foreign investors and investments. These protections, Ruggie writes, have been expanded “with little regard to States’ duties to protect to protect [human rights], skewing the balance between the two [the State and the foreign investor].”

“The State Duty to Protect” human rights is a major theme of the Ruggie report, titled Protect, Respect and Remedy: a Framework for Business and Human Rights. Pope Benedict XVI stressed the same theme, mostly using the same terms, in his address to the UN General Assembly on April 18.

When will U.S. policymakers listen to these voices? Until they do, expect the backlash against globalization to continue, or even to intensify. See previous postings this month.


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