You would think America had learned its lesson from NAFTA, which the Labor Department has estimated cost us 525,000 jobs.
But no. President Obama and the Republican leadership are united in pressing for ratification of the Korea-U.S. Free Trade Agreement (KORUS-FTA). This is an agreement which the Economic Policy Institute estimates will cost us 159,000 more jobs over the next five years.
Yes, you read that correctly. At a time when even the president admits that his number one economic priority is job creation, and has created an entire new commission for that purpose, they're going ahead with it anyway. It gives the phrase "contradictions of capitalism" a whole new meaning.
Make no mistake: we're in big trouble. The US economy has entirely lost the ability to create jobs in tradable sectors, and the recent downward blip in unemployment was merely the result of more people giving up looking, which causes them to drop out of the statistics.
Even the official U.S. International Trade Commission has admitted that KORUS-FTA will cause significant job losses. And not just in low-end industries. The ITC foresees the electronic equipment manufacturing industry, with average wages of $30.38 in 2008, as a major victim.
The supposed logic of America swapping junk jobs for high-end jobs simply isn't the way the economics really works out. Pace free-market mythology, there are actually well-understood reasons for this, if you dig a little into what economists already know.
Was this the Obama America voted for in 2008?
No. That Obama is at an undisclosed location somewhere. He campaigned against KORUS-FTA during the 2008 campaign. (It was originally negotiated, but not ratified by Congress, by Bush in 2007.) Among other things, that Obama said:
I strongly support the inclusion of meaningful, enforceable labor and environmental standards in all trade agreements. As president, I will work to ensure that the U.S. again leads the world in ensuring that consumer products produced across the world are done in a manner that supports workers, not undermines them.
Nice words, but none of them are reflected in KORUS-FTA, which contains no serious new provisions on these issues. This agreement is essentially a NAFTA clone. It is, in fact, the biggest trade agreement since NAFTA, and the first since Canada with an industrialized country.
This agreement, like NAFTA and the dozen or so other free trade agreements America has signed since NAFTA, is fundamentally an offshoring agreement. It is about making it easier for U.S. companies to move work overseas. The provisions to protect workers and consumers are unenforceable window dressing.
Don't be fooled by the fact that some unions, like the United Auto Workers (UAW), have endorsed the agreement. This is part of a cynical ploy by the White House to split the trade union movement in order to keep the AFL-CIO neutral. The UAW's out-of-touch leadership is so punch-drunk from the 2008 collapse of the U.S. auto industry that it has lost touch not only with what is good for the American economy as a whole, but with what is good for rank-and-file auto workers. Don't take my word for it: in the words of Al Benchich, retired president of UAW Local 909:
The UAW Administration Caucus is the one-party state that controls the UAW at the International level. Every International officer is a member of the Caucus, and they surround themselves with appointed international reps that unquestioningly do their bidding.
No wonder other, more democratic and more intelligent, unions, like Leo Gerard's United Steelworkers, are criticizing the UAW for its decision to support KORUS-FTA. Interestingly, the UAW's past record of criticizing KORUS-FTA is more honest than anything they're doing in a desperate bid to help keep Obama in the White House. For example, here's what they originally said about this agreement:
KORUS-FTA has inadequate protections and enforcement mechanisms to enforce either the spirit or the letter of the law.
Precisely. And changes made since then are, as noted, minimal. As an example of how one-sided the treaty is, consider that it now allows -- to great rejoicing -- America to export 75,000 cars a year to Korea. This translates to a measly 800 jobs. Korea's exports of cars to the U.S. in 2009, on the other hand?
Try 476,833.
Furthermore, even if the U.S. does get to sell more cars in Korea, American companies will mostly not be making the steel, tires, and other components that go into them, because the agreement allows cars with 65 percent foreign content to count as "American."
This is just one example of how KORUS-FTA isn't even as good as the deal the EU just signed with Korea. (The EU got a 55 percent standard on this item.) And remember that the EU and most of its member states, of course, don't really practice free trade anyway: they practice a covertly managed trade that has kept the EU's trade balance within pocket change of zero over the last two decades, while America has been running deficits around the $500 billion mark.
"Free trade agreement," in American English, means "free trade agreement." In other languages, it means "politely codified agreement for managed trade at a low tariff." The Europeans invented this game -- called mercantilism -- back when international trade was conducted with sailing ships. South Korea learned it from the Japanese. Uncle Sam (and maybe John Bull and a few others) are the only naïfs who still don't get it.
Despite what the White House and the U.S. Chamber of Commerce are saying, this agreement makes no sense as a strategy to reduce our horrendous trade deficit. America's trade deficits have a long record of going up, not down, when we sign trade agreements with other nations.
Paradoxically, trade agreements even seem to sabotage our own trade with foreign nations: according to an analysis by the group Public Citizen, in recent years our exports to nations we have free-trade agreements with have actually grown at less than half the pace of our exports to nations we don't have these agreements with. So these agreements don't hold water as trade-expanding measures.
Even leaving aside trade-balance issues, this agreement is a disaster, thanks to something called "investor-state arbitration." Like NAFTA, it compromises American sovereignty and subjects American democracy to having its own laws overruled by foreign judges as interfering with trade. Under NAFTA to date, over $326 million in damages has been paid out by governments as a result of challenges to natural resource policies, environmental protection, and health and safety measures. There about 80 Korean corporations, with about 270 facilities around the U.S., that would acquire the right to challenge our laws under KORUS-FTA.
What kind of problems could this cause? The U.S. was forced in 1996 to weaken Clean Air Act rules on gasoline contaminants in response to a challenge by Venezuela and Brazil. In 1998, we were forced to weaken Endangered Species Act protections for sea turtles thanks to a challenge by India, Malaysia, Pakistan and Thailand concerning the shrimp industry. The EU today endures trade sanctions by the U.S. for not relaxing its ban on hormone-treated beef. In 1996, the WTO ruled against the EU's Lome Convention, a preferential trading scheme for 71 former European colonies in the Third World. In 2003, the Bush administration sued the EU over its moratorium on genetically modified foods.
It gets worse. KORUS-FTA also signs away our right (and Korea's, too, not that this makes it any better) to a wide range of financial regulations of the kind that might have helped avoid the crisis of 2008. For example, it forfeits our right to limit the size of financial institutions. It forfeits our right to place firewalls between different kinds of financial activities in order to prevent volatility in one market from collapsing another. It prevents us from limiting what financial services financial institutions may offer -- Enron Savings & Mortgage, here we come... It bans regulation of derivatives. It ban limits on capital flows designed to tame volatile "hot money."
Why is the U.S. flirting with making such an appalling mistake yet again? Because a) multinational corporations have bought our political system and b) because our government would rather play power politics than keep its own (declining) economic house in order.
It is remarkable how stuck we are in the 1950's, with an invincible economy at home and a Cold War abroad. As a report by the Senate Finance Committee once put it:
Throughout most of the postwar era, U.S. trade policy has been the orphan of U.S. foreign policy. Too often the Executive has granted trade concessions to accomplish political objectives. Rather than conducting U.S. international economic relations on sound economic and commercial principles, the executive has set trade and monetary policy in a foreign aid context. An example has been the Executive's unwillingness to enforce U.S. trade statutes in response to foreign unfair trade practices.
Ironically, it may eventually be our own decline that solves our trade problems, by rescuing us from our own arrogance and stupidity. When we finally realize we can't take our economy for granted, we may finally stop giving away the store in international trade.
P.S. There have been huge demonstrations against KORUS-FTA in Seoul, South Korea. If you live in the Bay Area, there'll be a protest outside Nancy Pelosi's San Francisco mansion on January 29. Click here for more details.
Follow Ian Fletcher on Twitter: www.twitter.com/FrTrDoWk
Some would say textiles are an old technology...NOT TRUE...what about KEVLAR for police vests...carbon fiber for aircraft, geo-fabrics for roads and landfills... Go visit a textile plant...(outside of apparel) it's a building full of machinery, wages typically are only 4-5% of cost (at around $18 per hour with fringes... You have to ask yourself WHY can't we be competitive...the answer IS NOT labor costs.
Look out automotive, the future is rooted in the past!!
Entering into free trade agreements while China is able to manipulate the U.S. Dollar is very short-sighted.
Thefreedictionary.com defines beggar-thy-neighbor as: an international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners. Under the guise of fostering ‘indigenous innovation’, the Chinese government has creatively used a non-conventional, subtle version of beggar-thy-neighbor. Its version doesn’t entail the competitive devaluation of its own currency, which would enhance China’s exports and inhibits its trading partners’ exports. China’s version perpetrates an over-valuation of the currencies of one or more of its trading partners. This negatively affects all the trade of the pegged trading partner(s), not just trade with China. During the recent period China pegged its currency to the U.S. Dollar, its version of beggar-thy-neighbor was 8 times as damaging to the U.S. economy as what the media refers to as “China keeping it currency undervalued”.
In November 2003, Warren Buffett in his Fortune, Squanderville versus Thriftville article recommended that America adopt a balanced trade model. The fact that advice advocating balance and sustainability, from a sage the caliber of Warren Buffett, could be virtually ignored for over seven years is unfathomable. Until action is taken on Buffett’s or a similar balanced trade model, America will continue to squander time, treasure and talent in pursuit of an illusionary recovery.
Right now we have airplanes, ooVoo, phones, computers and many others fruit of new technology.
It makes globe small and nothing wrong if companies, bankers are trying to live in new world.
"if you buy an IPOD for $179, almost all of it $168 goes to China and other nations, $11 stays in America"
If American workers did nothing in production of IPOD, why we need to complain about $11.
We must found products, which will be used not only in USA with 300 million of population, but in the world with 6 billion.
Our problems not globalization, which make all product cheaper.
Our problems with outsourcing our jobs overseas.
We must push our Government to create unstoppable grows of jobs in USA, which will at least 5 years stay in USA, after that sold with profit overseas.
Our Governmment could create more jobs, which stay in USA forever.
Only few person could compete with world, by something new.
Government companies like NASA, could collect ideas, implement them in real products in companies and sell them as franchise to people.
It will be positive answer on globalization problems.
I read somewhere that if you spend $1,000 for a new laptop built in China all but $25 of that stays in the US (I think it was Fallows in the Atlantic).
Why is the iPOD so different?
Yeah, it's fine and dandy that a kid in China gets a job in the plant assembling iPhones, but isn't it with the same late 19th century/early 20th century conditions the USA had?
There's a reason all these "burdonsome" regulations [that drove manufacturing out of the USA-as some would have you believe] came to be, and it's not because the government simply wanted them.
This is what Obama means when he says we need to be "competitive" with the rest of the world (China).
Americans of all political stripes must understand that our government no longer works for us. It has been bought and paid for by economic elites whose interests have diverged from the interest of the rest of us. If this is true (and I challenge anyone to prove it otherwise) than it is incumbent upon all of us to change the nature of our government. This is infinitely more important than any one "trade agreement".That is not to say that we shouldn't fight this but judging by historical precedents in this matter will most probably lose.
We must make our government once again represent primarily the interest of American people. If we cannot succeed in this we must understand that we are done as a free nation and our children and grandchildren will have become serfs and slaves.
We spent trillions of $$ on "defense" and yet our government has been taken over by essentially the same interests which are feeding on that "defense" trough.
I wonder when (or if) Obama's remaining supporters will finally get their "OK, that's the last straw," moment and support a Primary opponent to his re-election in 2012. Union support for the President in 2012 campaign will likely be zero at this rate.
Unless the economy roars back to life in an unprecedented way, the key states that Obama carried in 2008 will not be his in 2012. Entering an agreement that could lead to more job losses probably won't improve his re-election chances, either.
The perfect example of this is steel. George W. Bush to win votes in steel states, put tariffs on foreign steel. "Saving" a few hundred jobs while thousands lost jobs because they had to pay higher prices. The result was a net loss for workers and America.
First you use biased anti trade sources to make your point. The economic policy institute (nice neutral name) is funded by labor unions and is an anti-trade outfit. Public citizen is a Ralph Nader arm that is always against trade agreements. Finally you quote the head of a steel union (i'm sure he has all of America's interests at heart not just members) and a retired union leader from UAW.
Next the examples you list of job loses many come from the same biased anti trade sources. The others are inaccurate. Read Douglas Erwins' book to see that the gasoline example you cite is factually inaccurate. The regulations we had on gasoline did discriminate; we could have applied the regulations to domestic firms but because of the power of the oil lobby we just scrapped them altogether (trade unrelated). Next the countries that we've signed FTA's we have lower trade deficits than the countries with no FTA.
The only logical case you can make to oppose this agreement is on internationalist grounds. Some free trade advocates like Jagdish Bhagwati do not like bi-lateral agreements and would prefer that the world stick to most favored nation principals through multilateral agreements through the WTO.
Fletcher you used bias sources. Use examples that are factually wrong.USBIC is protectionist. Free Trade is good overall for America.
Critics of NAFTA seem to ignore some very important data. From 1993 after being implemented to 2007, US employment increased from 110.8 million to 137.6 million. It is disingenuous to say NAFTA hurts jobs when we had seen (prior to the recession) one of the largest spurts of growth in the history of the US Labor Market.
Moreover for people who decry the loss of manufacturing jobs, should understand that manufacturing jobs are reduced through automation. Automation and technology increase the average productivity of workers in every sector and it is through automation that job shedding occurs. Total Manufacturing output has been increasing over the last decade despite the continued job loss.
Finally in a great book “Mad About Trade” the author sifts through data of the US Census Bureau and comes to the following startling conclusion; For every one job lost in manufacturing since 1991, our economy has created five in better-paying service sectors, three in less well-paying sectors, and one in government. That pattern was not just a phenomenon of the 1990s.
Truly free trade is one of the greatest wealth creators in human history. My only problems with recent agreements is they rarely promote actual free (as in the absence of all tariffs) trade.
If we didn't flock like lemmings to the store/company that sold us the cheapest socks/cars/equipment/clothes, their manufacturers wouldn't have been scouting the cheapest venues in which to manufacture them.
As we shop at Walmart/the Gap/everystore, we plug our ears, hold our noses and pretend that our lust for endless numbers of "things"...bought cheaply so we can have many... isn't what has driven the local manufacturers away from North America.
And the excuse that we can only afford to shop at those chains because we have restricted budgets doesn't neccesarily hold water, either... we don't "need" 26 t-shirts (manufactured cheaply in China, Taiwan, India, etc) ... we can quite nicely do with 6... bought from that manufacturer down the road, at a price that will keep his North American plant going. Ahhh, but we're long past that now. Let's just stop blaming everyone else but ourselves.
The plus in NAFTA is that Canadians and Americans can each buy the others' north-american-made products duty free. And there's a huge trade between the two countries.