Media coverage of the proposed Trans Pacific Partnership (TPP) trade agreement has highlighted the concern of many Democrats and liberals that the TPP would lead to a massive loss of American jobs and a sell-out of workers' rights and even national sovereignty to international corporations and powerful moneyed interests.
Many of these critics point to the impact of NAFTA and argue that TPP, and the Transatlantic Trade and Investment Partnership, the proposed European counterpart trade agreement, would lead to a hollowing-out of the American economy and a “race to the bottom” resulting in Third World-level wages and protections for American workers.
To that I respond, strong leadership that supports American interests with good public policy, and our experience with and lessons from NAFTA, can help us make better-informed policy decisions.
Also, NAFTA was but one factor in a decades-long exodus of American jobs from our country. Do you really think manufacturing was strong up to and until NAFTA? There was also the effect of decades of disinvestment in American manufacturing, decades of union-busting, tax policies that undermined support for long-term industrial strength and domestic manufacturing, China’s entry into the W.T.O. and obtaining “Most Favored Nation” status, etc.
I worked summers in a steel factory in the Midwest starting in 1974 and through to 1979. The newest overhead press there was built in 1941, and it was not even made in the U.S.A., but in the former Soviet Union. It, and all the other presses there, pre-dated OSHA safety regulations, and worker injuries were commonplace.
And some of the nearby steel mills were originally pig iron mills from the 1800s that were converted as cheaply as possible. And by the early 1980s, most of those firms already had begun the process of subcontracting out their labor operations to the non-union South, or moving overseas.
The fact is, before NAFTA was even a glimmer in the eye of President Reagan – who spearheaded the initiative under the banner of the North American Union – the private sector was engaged in a policy of active disinvestment in these kinds of facilities, which hollowed out our industrial sector:
Leveraged buyouts of manufacturers created huge amounts of corporate debt which resulted in pressure from shareholders to downsize, shift priorities and budget allocations, or otherwise trim expenses in order to maximize revenues and boost stock prices;
Private equity firms and corporate raiders acquired industrial firms only to raid pension funds, spin-off or outsource profitable divisions, and sell off valuable real estate for short-term gains;
Tax laws were enacted to provide firms with incentives to shut down factories and outsource, write off “phantom” losses that existed only on paper, take advantage of accelerated depreciation schedules, etc.
Which brings us to today, and the challenges and opportunities we are now facing.
President Obama has said he wants to reform NAFTA, and TPP includes Mexico and Canada – the other members along with the U.S. in NAFTA. So this is an opportunity to right some of the wrongs in that agreement.
Also, consider that China’s economic growth has been slowing recently, and that China’s leaders – perhaps mindful of the possibility that they may be reaching the limits of their foreign investor- and export-driven economic model, and are also reaching the limits of their population's ability to absorb the pressures of the relentless industrialization and urbanization of recent years – has announced it will pursue policies that could sacrifice short-term growth in favor of more long-term stability.
And that they might want to promote policies that foster a stronger consumer-based economy, to boost domestic spending to help sustain their economy, which could lead to even more protectionist policies.
Also, foreign investment in China is similarly slowing down, so it could be that many Republicans, and their hard-nosed business backers, simply see the writing on the wall, and are willing to make concessions – which they might feel are probably inevitable anyway – in regard to liberalization of worker interests and environmentalism that might be driven by internal pressures or the dynamics of the negotiation’s give-and-take.
China is not a party to the TPP, so this trade agreement represents part of President Obama’s “pivot” to Asia. Perhaps if this agreement is firmed up we and our TPP partners can prevail upon China to address their violations of agreements they made when made a party to the WTO.
And that’s the key: the dynamics of the negotiating process and the goals and objectives of the negotiating partners – and not any presumed inherent job-killing nature of trade agreements per se – will determine this outcome.
If we can leverage our negotiating assets of a major market, a dynamic and growing economy – the world’s largest – a vast security umbrella, and a strong and stable currency that serves as the basis of much of the world's trade to convince the decision makers in the other 11 nations to join us and agree to establish a floor of enforceable international labor and environmental standards that lessen the incentives for American firms to outsource while reducing trade barriers to American exports, in exchange for terms that are similarly favorable to our partners, this could be a mutually beneficial win-win.
And there are other factors currently in play that give me hope for an advantageous agreement and a broader American economic and industrial revival:
- Some factories are returning to the U.S. because of our cheap and plentiful energy sources, our highly skilled and productive workforce, our strong patent and intellectual property rights laws, the narrowing of the income gap between American and foreign workers, and the increasing recognition of the need, for both economic and logistical reasons, to bring production closer to markets;
- The U.S., economically strong and politically stable, is increasingly becoming the prime destination for overseas investment, which may be tapped for infrastructure and industry;
- The attempt by Volkswagen – unsuccessful last year, but they are expected to try again – to establish a Worker’s Council at their Tennessee plant. U.S. laws limit these councils to plants that also feature a labor union, and last year various powerful Tennessee Republicans including Gov. Haslan and U.S. Senator Corker, for partisan political reasons, helped kill the attempt to unionize by employee vote. VW still wants to import their innovative, worker-empowering worker-management relationship model into the U.S., and this is a development that bears watching as a possible corrective to the often antagonistic relationship that currently exists between management and organized labor;
- The idea of co-ops and worker-run enterprises (hat tip to Churchlady), which could benefit from a significant infusion of foreign capital facilitated by some variation of Obama’s tax holiday to free up the trillions of dollars parked overseas in tax havens and the foreign divisions of American-flagged multinationals. Another boost to co-ops would be to allow these worker-run firms to compete for government contracts, just as traditional investor-owned firms typically do; perhaps there could also be set-asides for them, just as there are for minority-owned firms;
- The improvement in the nation’s balance sheet, as witnessed by increased tax revenues and the shrinking national deficit, which might provide some political breathing room for increased spending on domestic priorities;
- The Obama administration is developing various federally-funded public-private institutes or “hubs” in an attempt to jump-start innovative manufacturing activity. One, intended to advance the field of 3D printing, has been established in my former hometown of Youngstown, Ohio. Other high-tech manufacturing hubs, which synergistically partner the resources and expertise of government, business, non-profit organizations, and universities to maximize innovation, focus on the emerging fields of digital manufacturing and design, lightweight metals, advanced composite materials, wide band-gap semiconductors, specialized medications, nanotechnology, flexible hybrid electronics, robotics, and advanced manufacturing technology;
- The announcement a few months ago by the National Retail Federation, the trade association representing major retail chains, that their biggest barriers to increased growth are not government regulations or taxes but stagnant wages and sluggish consumer spending. At the same time, a number of firms including Target, McDonald’s, and Wal-Mart – the nation’s largest private employer – have announced that they will voluntarily raise wages for entry-level workers. That this powerful trade bloc now recognizes consumer and worker buying power as a crucial factor to their continued success bodes well for the chances that they can be enlisted into support for the campaign to raise the minimum wage and establish overtime pay for middle-income workers;
- An apparent recognition by leading Republicans in Congress and on the presidential campaign trail of the need to address income inequality and the sluggish recovery – or, at the very least, the admission by some leading Republicans that this is indeed a problem in need of a solution – which might lead to a meaningful policy discussion;
- Democratic and liberal opposition to a stand-alone free trade agreement that does not include counterbalancing provisions or companion bills that protect workers displaced by free trade, which provides impetus and political cover for increased domestic spending on worker training and job-creating infrastructure projects;
- The successful implementation of a program offering free community college in the state of Tennessee and the city of Chicago, which Obama is now championing as a nationwide program. Offering two years of free community college would open up access to education for millions of financially needy youth and adults seeking to retrain for a new career, and promote upward mobility by encouraging greater partnerships between business and academia through customized curricula, apprenticeships and internships. Students could complete a two-year degree and begin working, or transfer their credits to a four-year institution and save up to half of their total tuition outlay. Another benefit to boosting community college would be to undercut the interests of predatory for-profit colleges that exploit financially needy students and returning military veterans and drain federal student-loan budgets;
- An anticipated desire of House Speaker John Boehner and Senate Majority Leader Mitch McConnell to hammer out some legacy-burnishing policy achievement with the administration. The fact that the Republicans now control both chambers of Congress means they must deal in good faith with the President if they hope to have any of their bills enacted and ever get a Republican elected president again; they can no longer complain that “all our great job-creating bills were stuck on Harry Reid’s desk,” but must prove that they can govern; and
- The stated desire of President Obama, House Speaker John Boehner and Senate Majority Leader Mitch McConnell to implement tax reform, and Obama’s stated desire to utilize tax reform as a means to replace current policies – many of which support finance capitalism’s focus on risky, unproductive, speculative investments that maximize short-term gains but only for the investor class’s privileged few – with new policies that will encourage productive investments from both the public and private sectors and create jobs and improve standards of living for the working class, protect and enhance the long-term value of our nation’s infrastructure and capital improvement projects on behalf of the public interest, and also promote the types of job skills that enable workers to move up the career ladder.
So, no, there is no single “magic bullet” to achieve a more robust economic revival, but the combined force of all of these factors, together with good public policy and the attempt of this and the next administration to rally support for crucial investments and mutually beneficial trade agreements, can get us closer to realizing this goal.
And wistfully hoping for a return to the 1950’s – when the U.S. dominated international trade in a world devastated by World War II, and almost half the American workforce enjoyed the benefits of union membership – is not a realistic strategy. And neither is economic protectionism that attempts to insulate ourselves from global competition. Business has been international and operating across national borders for a long time, and if we don’t forge a trade agreement that upholds our values and protects our interests, and the interests of workers in developing countries, we will continue to be sidelined.
As a native of the formerly industrialized Midwest that is now called the Rust Belt, I understand the concerns and misgivings that some harbor for international trade agreements – and I share some of them – but I do not share the abject pessimism of the detractors. Given the strong pro-worker positions President Obama has championed and fought for, and considering his success in steering us out of the worst economic crisis of our lifetime, I await a draft of this international trade agreement with measured optimism. As Obama has said, we have an opportunity to write the rules for the 21st Century.
The entire global economy is in the doldrums, and much of the world is looking for American leadership. And, since our economy is on an upswing, with growth outpacing other advanced nations, and with much of the developed world experiencing declining growth rates at best or scrambling to avoid another recession, we have an opportunity – and the leverage – to execute an advantageous trade agreement, champion American interests, and uphold – and export – American values.