April 2015 Archives

US FTAs (Photo credit: Wikipedia)

            Congress will soon begin formal deliberations on the proposed Trans Pacific Partnership Agreement (TPP). Not surprisingly, the U.S. Chamber of Commerce, corporate America, Wall Street and other members of this country's "entrepreneurial class" enthusiastically support the proposed deal.

              Last week, President Obama granted an interview of Chris Mathews of MSNBC to discuss the TPP. The president was surrounded during the interview with a group of hand-picked, local, purportedly small business owners, all of whom insisted that the agreement would be a boon to their businesses.

              During the interview, President Obama claimed that Senator Elizabeth Warren and other progressive senators such as Sherrod Brown sand Bernie Sanders were wrong on the facts and he insisted that the proposed trade agreement would result in widespread economic benefits throughout the economy and create thousands of well-paying jobs. The president's claim, however, was not backed by any hard economic data, nor was he pressed to explain the reason why if the TPP was such a good deal, the American public and Congress should not be permitted to publicly view and debates the merits of the proposed pact. In addition, President Obama was not why, if the TPP was certain to produce so many well-paying jobs, not one labor union in the United States supports the proposed agreement and why no labor leaders were invited to appear with him during the interview.

             The essence of the president's argument was "Trust me. This is a good deal." 

              For his part, Chris Matthews' analysis of the TPP boiled down to more consumer choices for people like him. A week prior to his interview with President Obama, Matthews, during is "Hardball" show, dismissed Ohio Congresswoman Marcy Kaptur's insightful objections to the TPP and to free trade agreements in general. He commented that he grew up in an era when  America was protectionist and one could only choose between two styles of jeans to buy at a clothing store. Now, since the advent of free trade, all kinds of styles and brands of jeans were available for purchase. Left unsaid, of course, is the fact that the value of consumer choice is meaningless to people whose jobs have been out-sourced because of free trade agreements.

              The hard economic data shows that President Obama and other supporters of free trade are wrong and that the TPP is a bad deal for the United States. In his first administration, President Obama predicted that the South Korean -U.S. Free Trade Agreement (KORUS FTA) would create 70,000 American jobs and that U.S. exports to South Korea would grow faster than imports. The reality has been very different.

              Data compiled by the U.S. Census Bureau shows that U.S. exports to South Korea increased from $38, 820.6 million in 2010 to $44,544.0 million in 2004. Correspondingly, South Korean exports to the United States increased in value from $48,875.23 million in 2010 to $69,605.7 million in 2104. The net effect was to increase - to exacerbate - the U.S. trade deficit with South Korea from -$10,054.00 million to -$25,061.17. In addition, a study by the Economic Policy Institute has predicted that more than 150,000 American jobs will be lost over the next few years as a result of KORUS. 

              The North American Free Trade Agreement (NAFTA), negotiated during the Clinton Administration, is Exhibit Number 1 of failed free trade agreements. In 1993, the U.S. States had a $1.6 billion trade surplus with Mexico, but by 2101 the U.S. trade deficit reached $61.6 billion. During that same time period, the U.S. trade deficit with Canada increased from $ 8.1 billion to $71 billion. Further, the U.S. Department of Labor estimated that NAFTA cost 525,000 jobs between 1994 and 2002.

              In 2014, Public Citizen published a report that identified more than one million jobs that had been lost as a result of NAFTA between 1994 and 2014, and noted that more than 845,000 U.S. workers in the manufacturing sector have been certified for Trade Adjustment Assistance (TAX) since NAFTA because they lost their jobs due to imports from Canada and Mexico or the relocation of factories to those countries.

               Public Citizen also observed that NAFTA contributed to downward pressure on U.S. wages and growing income inequality and pointed to the U.S. Bureau of Labor Statistics that found two out of every three displaced manufacturing workers who were rehired in 2012 experienced wage reductions, with a majority having lost more than 20 percent. The Public Citizen reported, "As increasing numbers of workers displaced from manufacturing jobs joined the glut of workers competing for non-offshorable, low-skill jobs in sectors such as hospitality and food service, real wages have also fallen in these sectors since NAFTA. The resulting downward pressure on wages has fueled recent growth in income inequality."

              From its founding until 1975, the United States enjoyed an overall trade surplus with all other nation-states. In 1975. U.S. exports exceeded foreign imports by $12,400 million. That was the last trade surplus the United States has ever enjoyed. By 1987, the American trade deficit had swollen to $153,300 million and has continued to increase exponentially since then.

             The administrations of Ronald Reagan and George Bush eschewed tariffs and chose to endorse the GATT/WTO free trade policies. Since then, most Republicans, far too many Democrats and the popular media - exemplified by Thomas Friedman and his nonsensical book, The Earth Is Flat - have followed in lock-step.

             Purveyors of conventional economic wisdom invoke David Ricardo's theory of comparative advantage as the premise upon which free trade should be supported.The paradigm, however, no longer explains the anomalies. Patrick Buchanan, no fan of government meddling in the economy, has noted in The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed To the Gods of The Global Economy, has correctly noted, "Ricardo's theory...demands that more efficient producers in advanced countries give up industries to less efficient producers in less advanced countries....Are Chinese manufacturers more efficient than U.S. factories? Of course not!"

            The Conference's statement of Concern is in keeping with the spirit of Pope Francis who in his Apostolic Exhortation, Evangelii Gaudium ("Joy of the Gospel") warned that, "Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape."

             Historically, the Catholic Church has rejected those economic doctrines that have elevated the primacy of the markets and capitalism over basic human needs. Catholic social thought has insisted that the state exists to serve the needs of the community; not as libertarians and classical liberals would have it, to serve only the needs of the individual. As such, the state should not be viewed as a passive instrument, designed merely to protect private property or to protect rights, but it imposes reciprocal obligations upon each citizen as a member of a political community.

            Today the United States remains the only major advanced economy that has not adopted a coherent industrial policy. Market enthusiasts continue to condemn such notions as socialist propaganda and dismiss any arguments for enlightened protectionism with the mantra, "It's a global economy now." Nevertheless, these enthusiasts turn a blind eye to currency manipulation, labor law violations, predatory export policies and blatant protectionism that is still engaged in by so many countries that are parties to GATT and to subsequent fee trade agreements.

             One also wonders when, if ever, those who still cling with an almost religious fervor to the mythology of unfettered capitalism will admit that their support for trickle-down economics, continued public austerity, and free trade have led to the gutting of the American heartland, appalling economic inequality, wage stagnation and the evisceration of the middle class and the American Dream?

            John Maynard Keynes observed that, "The ideas of economists and philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist."

            By and large, the GOP has chosen to become the party of William Graham Sumner and
Ludwig von Mises and, given its worldview, the party's leadership consider employees to be only so many interchangeable ("fungible" is the term apologists prefer), disposable units of production. Now,  as the party of Franklin Roosevelt also pivots to satisfy the interests of the 1%, American workers and their ever-dwindling union membership will continue to receive the back-of-the-hand and they will be left without a voice or a vote that really matters.