THE BLOG
07/06/2007 11:20 am ET | Updated May 25, 2011

CEOs Panic on Trade -- But They Are Organizing the Counter-Attack

If you are among the enlightened group of many millions of people who have spoken up (either in elections or real organizing) for a world where people can expect a decent standard of living and trade takes place under conditions that values communities first, you can pat yourself on the back for sending the corporate elites into a complete tizzy because of the strong opposition to a number of so-called "free trade" deals. But, a determined ideological and political counter-offensive by corporate CEOs is underway--a counter-offensive that we need to help our political allies be aware of. That is what this blog addresses.

I want to start with some good news. So-called "free trade" is crumbling, not just in the U.S, but, perhaps more importantly, around the globe; we have the best environment I've seen in the last 15 years working on the issue. The president's fast-track authority expired this past Sunday and I don't see it being revived any time soon, for either a Republican or Democratic president. Also, this past weekend, Nancy Pelosi and other House Democrats announced that they would not support the so-called "Free trade" deal with South Korea. A raft of other deals are probably dead. And most, and perhaps all, of the Democratic presidential candidates are talking a much better line on so-called "free trade," including Sen, Clinton who, though a long-time supporter of so-called "free trade," announced her opposition to the South Korea deal.

But, the pro-so-called "free trade" forces are not giving up. The Financial Services Forum, which is a gathering of the most powerful global firms , in commercial banking, investment banking, credit cards and insurance, has produced a study that is worth reading and is likely a leading example of what we can expect. As far as I can tell, only The Wall Street Journal, in an article last week, has reported on the study. The study is slick, with obviously high production value. But, substantively it is, in my humble opinion, nothing but a repackaging of old arguments with a veneer of academic respectability. It is entitled, I kid you not, "Succeeding in the Global Economy: A New Policy for the American Worker."

Before diving a bit into content and conclusions of the report, I'd like to make a historical point that is important as we, and our potential allies in Congress, prepare to endure a deluge of new defenses of so-called "free trade." Virtually every debate over so-called "free trade" and "globalization" going back to NAFTA--and, I'm sure this goes back to the 1970s before I started paying close attention to this--was accompanied by a raft of think-tank mumbo-jumbo and academic studies that drowned the debate, with the help of every major mainstream newspaper and media outlet, in a cacophony of cheerleading for so-called "free trade." And virtually all those major studies shilling for so-called "free trade" were wrong, wrong, wrong.

Take NAFTA--people like Jeffrey Schott of the International Institute of Economics (one of the main pro- so-called "free trade" voices) promised that NAFTA would generate 200,000 new American jobs, that the relatively small $9 billion U.S. trade deficit with Mexico and Canada would turn into a trade surplus and that the U.S. would become an export engine of manufactured goods. Mexicans would buy up exported goods from the U.S and rocket into the middle class. Canadians would also benefit from new trade opportunities. Supporters of NAFTA were branded "forward- looking," while opponents were called "protectionists."

The reality? Using the same methodology NAFTA's proponents wielded, the agreement cost us 750,000 jobs, many of them well-paying manufacturing jobs that were a backbone of America's middle class. The U.S. trade deficit with Mexico and Canada ballooned to $87 billion in 2002. In the U.S., workers haunted by the specter of losing their jobs, became even more fearful of forming unions or striking--and companies used that fear to break union organizing drives and drive down wages and benefits. Wages in Canada now lag behind U.S. wages and the average Mexican wage has plummeted.

What went wrong? Actually, nothing--NAFTA worked perfectly if one understands that it was an agreement to make life easier for corporations, not people. Blinded by the tens of millions of dollars spent by corporate interests to push NAFTA and the backroom deals made by Bill Clinton to buy votes, Congress either did not see, or did want to admit, that companies were not as interested in exporting goods as they were in exporting jobs.

When the Free Trade Agreement for the Americas (FTAA) was proposed (it would have covered 34 countries in North, Central and South America, from Canada down to Chile), sure enough, along came a new set of experts and studies to replace the discredited NAFTA promoters (who, typically, slipped into obscurity without being held accountable for their views). In one instance, Florida business groups were flogging a study that predicted that the state would gain 89,000 jobs over ten years if the FTAA Secretariat was located there. That was utter nonsense--under NAFTA, Florida lost as many as 27,000 jobs and the FTAA, with its far broader hemispheric reach, would expose Florida's citrus and sugar industries to even stiffer foreign competition. The FTAA, which is effectively dead (to be replaced by attempts to cut bi-lateral deals), did not contain a single chapter on labor rights and it would gut U.S. laws aimed at protecting the economic, social, environmental, and health and safety interests of our citizens..

But, I digress. Back to our financial services friends. In one sense, this report is fascinating because it underscores how deeply worried the financial services' companies--and, by extension, their brethren throughout the corporate world--are about the demise of so-called "free trade." The report is designed to show concern for the plight of workers. They acknowledge facts that are simply undisputed, even though some so-called "free trade" proponents and Republicans (and a few Democrats) try to downplay that:

From the mid-to-late 1970s to the mid-to-late 1990s, the real and relative earnings of less-skilled Americans was poor relative to both economy-wide average productivity gains and also the earnings of their more-skilled counterparts. And since around 2000, the large majority of American workers has seen poor income growth. Only a small share of workers at the very high end has enjoyed strong growth in incomes. The strong U.S. productivity growth of the past several years has not been reflected in broad growth in wage and salary earnings.

Indeed, more than 30 million people have been forced out of jobs since the early 1980s and haven't been able to find employment with similar income.

Throughout the paper, you can find numerous references to growing inequality. And, since the myth about education being the salvation for workers has been my personal tirade for a long time, I note that the authors, looking at 2000-2005, even acknowledge that even education has not provided a respite for workers (as the Economic Policy Institute recently pointed out):

During this period, an astonishingly small fraction of workers--just 3.4%--was in educational groups that enjoyed any increases at all in mean inflation-adjusted money earnings: those with doctorates and those with professional graduate degrees (JDs, MBAs, and MDs). In contrast to earlier decades, during this time even college graduates and those with non-professional master's degrees--29% of workers--suff ered declines in mean real earnings. And, as just noted above in terms of inequality, the real earnings of high-school graduates actually held up better than those of college graduates.

But, the study is also quite deceptive and misleading. To deconstruct each deceptive assertion or economic whopper would turn this into a far lengthier piece than would be tolerable. Just as an example (and feel free to post your own after reading the report), they assert that "global engagement" has lead to an aggregate gain in U.S. income of at least $1 trillion per year "or an average gain of at least $10,000 per U.S. household per year--21.6 percent of the 2005 median U.S. household income of $46,326." This is extremely misleading because, by using averages, you can entirely obscure inequality and how the computed increase in wealth has been distributed--all direct results of globalization (see my point down below). Think of it this way: if you and Bill Gates were the only two people in the room, the average wealth of the two people would be in the billions (nice, huh?).

Or, the authors conveniently see a very narrow picture of economic "integration" and globalization. Example: they use China as an example of rapid growth thanks to "integration" and opening up its economy to "market forces"--and neglect (intentionally?) to point out that China's rapid growth is almost entirely due to one factor: it operates an entirely controlled, non-market labor market, which suppresses wages and creates the low-wage haven essential to the country's overall growth statistics.

There are plenty of other bad or misleading economics in the study but I want to focus on the framing of the argument. If you wade through the 60-plus pages of the paper, the rhetorical framing is pretty simple to see. The introduction of the paper is entitled "The Problem of Protectionist Drift." The essence is boiled down to "three key messages," incorporated into a box, the better for the reader to truly grasp the importance of the messages. Pay attention now:

Global engagement has generated, and has the potential to
continue generating, large gains for the United States overall
and for the rest of the world as well.

And...

These aggregate gains, however, are not evenly shared and do
not directly benefit every worker, firm, and community

And...

Efforts to address these legitimate and large pressures on
American workers by closing American borders is likely to be
both infeasible and ineffective.

Translation:

1. Global engagement is good

2. Global engagement causes problems

3. People upset about #2 are against #1 and just want to close up the country.

So, what is the primary goal of this paper? It is all revealed in the final section, which is entitled "A New Policy Agenda." Count me as one individual thoroughly unimpressed by this section: It is clearly an effort to resuscitate so-called "free trade" and, specifically, build support for renewing the president's "fast track" authority (or, in Washington-speak, Trade Promotion Authority). But, it's paired with a whole set of suggestions that boil down to this: defense and enhancement of the current trading system with some band-aids offered to the millions of people who will suffer the consequences. Thus, we have calls for some tax credits, throwing some more money at "retraining" and "adjustment" programs and enforcing rules against labor and environmental abuses.

One reason I decided to spend time on this is a concern that Democrats are going to buy this malarkey. Indeed, the Financial Services Forum has already posted a press release from Rep. Barney Frank who praises the report: "The Forum's report is a serious contribution to that effort. I am impressed with the broad scope of the recommendations, the innovative nature of many of the proposals, and the Forum's overall willingness to argue for a strong government role in support of workers." This is the danger we face.

Some final thoughts:

1. Pro- so-called "free trade" opponents try to divorce economics from corporate power. That is, people, like the authors of the study, do not--either intentionally or not--want us to see the connection between inequality and how inequality is precisely created by the so-called "free trade" system. The authors of the study can correctly cite a pile of statistics about the assault on workers' livelihood yet come to the conclusion that we need more so-called "free trade." The fact is that the power so-called "free trade" conveys to corporations to do as they please is precisely a central reason for inequality because so-called "free trade" is about one thing, and one thing only: the search for the lowest wage possible.

2. We should oppose such "fast track" whether the president is a Democrat or Republican because it undercuts democratic debate. (read more on the dangers of fast track here)

So, we must be vigilant.