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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Linking Trade and Labor via the WTO, or much sooner

Why do China’s people spend so little compared to Americans? A major reason is that China’s workers are paid so little for their work.

That pretty much sums up an article on “The Frugal Republic” by James Surowiecki in the December 7 New Yorker.

“While [China’s] boom has been extraordinary, ordinary workers have not reaped the gains one might expect,” Surowiecki writes. “In the past decade, in fact, the share of GDP that goes to wages has actually fallen, while the share that goes to profits has risen.” Further, only a small fraction of the workforce receives unemployment benefits, and pensions are underfunded and haphazardly administered.

No wonder, then, that household consumption in China accounts for 35% of GDP, only half the rate of the United States, as the New Yorker financial writer points out, adding:

“Ultimately, all China’s barriers to higher consumption are a product of the fact that for the past three decades the entire economy has been focused on one thing: making stuff. The Chinese and American and American economies are mirror images of each other.”

In short, China makes things; the United States (and other countries) consumes them. An unsustainable imbalance, meaning that it can’t last.

A drawing accompanying the New Yorker article shows a Chinese woman packing fancy high-heeled shoes coming off an assembly line. The worker is in her bare feet, shoeless.

As early as a half century ago, many unions foresaw that kind of umbalanced result from free trade – workers deprived of their share of the benefits from working in the international economy. The unions argued for adding a “social dimension” to trade agreements.

What if their idea had been accepted then? Wisely implemented, it could have served as a guideline for a half century of trade agreements more balanced than the worker-unfriendly policies that now prevail.

The idea is not dead, but it needs updating for the 21st century. Since the global economy has exploded, especially in the past 15 years, the original concept would have to be buttressed with a set of other provisions ensuring that the complexities of globalization and its various institutions serve the common good.

Toward that end, the International Trade Union Confederation and its Global Union partners last month prepared a statement of priorities for the WTO Ministerial Conference held in Geneva November 30 to December 2. The conference was not a negotiation session, so it is impossible to know for sure what effect the statement, and the 60-member union delegation promoting it, had on the ministers.

One positive sign: in summing up the conference, its chairman cited “trade and social issues” as among the “new” topics that the WTO needed to address to conclude the stalled Doha Development Round next year. A high-level preparatory group is to meet in mid-December to consider those issues.

But it could be too late. New WTO policies take years to adopt, more years to enforce.

At the Geneva conference Ron Kirk, the U.S. Trade Representative (USTR), emphasized that trade can, and should, help the economic recovery “right at home – particularly in terms of creating the well-paid jobs that Americans want and need.” (See “In Geneva and in Washington the call is for Jobs, Jobs, Jobs.”)

In an interview with the Associated Press, Ambassador Kirk voiced his impatience with WTO procedures. “The whole notion of everything taking 10 years, 15 years, and 20 years is just antithetical to me,” he said. “The world changes too quick. Competition is too fierce. The consumers, businesses, workers can’t often wait 20 or 30 years just to get a result.”

Will the Obama administration, having become more job-conscious, set its own job-creation link to trade? It’s a safe bet that experts are pouring over all the options, before checking where WTO boundaries may or may not exist.

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In Geneva and in Washington the call is for Jobs, Jobs, Jobs

In his speech on the morning of the last day of the WTO Ministerial Conference in Geneva, U.S. Ambassador Ron Kirk only hinted at all that he had in mind. At a working session on the WTO’s contribution to development, Kirk, the United States Trade Representative (USTR), spoke of what “remains the linchpin to our efforts” to bring the stalled Doha negotiation round to a successful conclusion.

That, he said, “will require market-opening initiatives from all key players – not only developed but also advanced developing countries, commensurate with their role in the global economy.”

In a statement that afternoon, December 2, he reaffirmed the Obama administration’s commitment to a Doha agreement favorable to the poorest countries, but also emphasized another economic necessity:

“In the United States, we recognize that trade can be an important pillar of global economic recovery and of recovery right at home – particularly in terms of creating the well-paid jobs that Americans want and need.”

Then in subsequent talks with reporters Ambassador Kirk was more specific.

“We are turning out attention almost full time to how we can create jobs and continue to grow the economy,” he told the Associated Press. “Too many Americans believed…that our previous trade policies had been overly generous to our partners.”

So far what is offered on the negotiating table, he told the Wall Street Journal, doesn’t give the United States “meaningful market access in the part of the world that will be growing and driving GDP growth over the next few years,” referring to countries like China, India, and Brazil.

The Business Standard of India quoted Kirk along the same lines: “The United States has been clear that we will need to achieve meaningful opening of markets that results in significant new trade flows – China, India, and Brazil, and South Africa.”

Meanwhile, Washington was preparing for a White House “Jobs Summit” on December 3 with the participation of business, labor, academia, and non-profit groups on how to put Americans back to work.

The Alliance for American Manufacturing called for “aggressive action to spur manufacturing job creation.” On the AFL-CIO blog, the call was for Jobs, Jobs, Jobs.

Lori Wallach, director of Public Citizen’s Global Trade Watch division, issued a statement on December 2 calling for replacing the Doha Round agenda with a WTO “turnaround plan.” “Ten years after the world’s most powerful governments and corporations failed to launch a massive WTO expansion at the 1999 WTO Ministerial,” she said, “there is still no WTO expansion. BUT, there also is still no WTO turnaround, and the current rules are causing major damage on many fronts.”

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USTR's initiative on worker rights

The U.S. government’s top official on trade, Ambassador Ron Kirk, has committed his White House agency to a rather ambitious goal: “a proactive enforcement strategy to save American jobs, by helping to ensure that American workers compete on a level playing field.”

Henceforth, Kirk said in a policy announced July 23, the Office of the U.S. Trade Representative (USTR) will be proactive in monitoring and enforcing the labor obligations contained in the country’s free trade agreements.

Previously, USTR’s involvement in labor violations has been largely “complaint driven.” That is, USTR usually would not get involved unless a person or a group filed a formal complaint backed with evidence persuasive enough to trigger an investigation by USTR and an inter-agency committee.

Under the new procedure, USTR, together with other agencies, principally State and Labor, will “regularly” monitor violations of worker rights and will try informally to obtain compliance. When these efforts fail, Kirk added, “USTR will not hesitate, as in other areas of trade agreement enforcement, to invoke formal dispute settlement.”

USTR and other agencies also are to undertake a positive role in promoting respect for international labor norms. Kirk mentioned China specifically as a country with which the administration “is seeking to enhance engagement” on labor issues.

Other Opportunities for Human Rights Initiatives

The USTR announcement illustrates that government officials, under their existing legal authority, and without any new legislation, have a good deal of leeway to take initiatives to enhance human rights. Opportunities abound.

Take the State Department. Among its little known responsibilities is to house the “national contact point” for the Guidelines on Multinational Corporations of the 30-nation Organization for Economic Cooperation and Development (OECD). That national contact point (NCP) handles grievances that individuals or unions have against a corporation for alleged violations of the Multinational Guidelines.

Says a report of John G. Ruggie, the UN Special Representative for Business and Human Rights: Housing the NCP within a government office that is “tasked with promoting business, trade, and investment raises questions about conflicts of interest.” In State the NCP is housed in the Office of Investment Affairs of the Economic Bureau.

In the same report, approved by the UN Council on Human Rights, Ruggie pointed out that the OECD guidelines were last updated in 2000, and suggested they could stand revision. “We’ve learned a lot about business and human rights since 2000,” he told the 2008 meeting of NCPs in Paris. State: hint, hint.

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Coming: a new U.S. ‘framework’ for trade

President Obama will soon be outlining a new “framework” for international trade. Ambassador Ron Kirk, the President’s trade representative, confirmed that on June 2 in remarks to the U.S.-China Business Council in Washington.

Recognizing that trade “has the potential to lift up workers in America and around the world,” Obama holds that future trade agreements need to have strong, enforceable labor and environmental standards, Kirk said.

Hanging over U.S.-China relations is the fact that China alone accounts for about half of the U.S. trade deficit with the whole world. In the first quarter of this year, the United States imported $64,810,000,000 in goods from China, while exporting only $14,426,000,000.

Ambassador Kirk did not cite these figures, but spoke of “the extraordinary opportunities for job creation here in the United States if we shrink our trade imbalance with China, and if China further opens its market to U.S. goods and services.”

Complicating those two if’s is that about a quarter of the U.S. imports from China is in “intra-firm” trade, that is, cross-border transactions between different branches of the same firm.

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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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