China Trade Promises All Snake Oil -- Fair Trade Crucial
In the free for all 21st, it all sounds terrific -- free markets, free trade and free commerce. But really, it's lies, traderous lies and statistics.
The "d" in trader is deliberate. This is about the sleight of hand billed as free trade.
We're constantly told it's a win-win. In 2000, when China was admitted to the World Trade Organization, for example, a former president said that exports to China already supported hundreds of thousands of American jobs, and this figure would grow substantially with the new access to Chinese markets that the WTO agreement would create. Politicians also promised the U.S. would benefit from exports to the rapidly growing consumer market in China.
The opposite, however, has occurred: China has exploited the U.S. consumer market while U.S. companies have been restricted to selling to China bulk goods such as grains, scrap, and chemicals, some intermediate products such as semiconductors and some durable products such as aircraft.
The China trade promises were snake oil.
The Economic Policy Institute released a study Wednesday revealing what happened to American jobs since China was admitted to the WTO. Between 2001 and 2007, 2.3 million workers lost their jobs or were displaced because of trade deficits with China.
Annual earnings for all U.S. workers without a college degree are $1,400 lower because of competition with China's low-wage workers and because China now accounts for such a huge percent of all of our imports. Displaced American workers, who did find new jobs, lost an average of $8,146 a year in earnings each. That is $156 less each week to use to feed the kids, to pay the mortgage, to meet the car payments.
Coincidentally, on the very same day EPI released its report, talks in Geneva, Switzerland to open global markets even further collapsed as China and India refused to allow free trade when it came to their own agricultural products. Both countries wanted to impose or raise tariffs on imported agricultural goods to protect their indigenous farmers.
Remember, it is for the most part, bulk goods, such as agricultural products, that the U.S. is exporting to China. A sticking point in the negotiations, for example, was soybeans. U.S. trade representative Susan C. Schwab had agreed that China could increase tariffs on soybeans in 8 of every 10 years, and still China walked away from the Geneva talks.
So here is the question: how can this relationship possibly be called free trade when China wanted to impose tariffs on our soybeans in 8 of 10 years, when it is manipulating its currency, when it is subsidizing its manufacturing, when it is failing to enforce even the most basic environmental and labor regulations?
That is snake oil.
We need fair trade. And so do Chinese workers and families, who are being abused by this so-called free trade system that benefits only CEOs and major shareholders of global corporations.
What do Americans workers and families get out of so called free trade? A report, "The Toxic Truth: Unfair Trade Kills" issued recently by the United Steelworkers details the gross destruction, including a four-year-old who died after swallowing a lead pendant that was attached to his shoe imported from China; two Philadelphia carpenters killed when their van crashed while they were traveling home from work on defective tires manufactured in China, and 81 patients from across the country poisoned by contaminated heparin, a blood thinner imported from China.
In addition, the U.S. Consumer Products Safety Commission recalled 30 million toys made in China last year because they were doused with dangerous leaded paint; Chinese-made pet food sickened and killed untold numbers of American cats and dogs because it contained tainted wheat protein; officials pulled off the market poisonous Chinese toothpaste; children were sickened by Aqua Dots toy kits made in China with a substitute chemical that turned into the "date rape" drug when swallowed, and the U.S. blocked import of Chinese fish containing banned antibiotics.
That's just the consumer viewpoint. The EPI study dispelled the myth that a good education is insurance against job displacement. EPI found that 31 percent of the jobs lost since China entered the WTO were among workers with college degrees and more than half -- 55.6 percent -- of the displaced were in the top half of American wage earners. The China trade deficits have contributed to the loss of 200,000 scientist and engineer jobs within this nation's manufacturing base, a 10.7 percent drop.
This is what free trade has given the U.S. Poisonous products. Lost jobs. Lower earning power.
It's not just us though. Think about this: One effect of free trade is polluted air wafting all the way across the Pacific Ocean to the shores of California, a state that enforces environmental standards higher than the national ones. Twenty-five percent of the pollutants in the Los Angeles basin come from China. That's tragic for Californians who try so hard.
That's also tragic for the Chinese people who live with befouled air every day. (Well, except during the brief period of the Olympic Games when the country is attempting to impress the world. After that, the cars, trucks and industrial pollution will return full force.) More than half of the rivers in China are too polluted to serve as a source of drinking water -- often because of untreated pollution pouring into them from factories.
An investigative report issued earlier this month by the National Labor Committee describes conditions in the Kai Da Toy factory in Shenzhen, China where the Sesame Street's Kid K'Nex Ernie construction toys are made. In violation of local and national laws, the factory's employees are forced to work 13 to 15 hours a day, 7 days a week without health care. After deductions for room and board, they are paid 28 cents an hour, far below the requisite minimum wage. The 600 workers include 100 16-year-olds, and earlier this year, included numerous children who "disappeared" after an investigation by a Chinese newspaper.
NLC inquiries have repeatedly uncovered violations of Chinese labor law. Chinese firms don't have to pay U.S. minimum wage. But they need to follow their own rules and not make virtual slaves of their country's own adolescents.
Adult American factory workers trying to support families cannot compete with Chinese teenagers living four to a dormitory room on the factory site without any health or other benefits, working sweatshop hours, seven days a week.
What kind of "free trade" system is this? Those Chinese adolescents aren't free. The American factory workers who have lost their jobs have forfeited financial freedom.
Still, the Kai Da factory will make big money. And the American corporations selling the Ernie construction toys will make big profits. Free trade works just fine for them.
If so-called free trade is ever to be replaced with fair trade, workers and families in China and America and every other trading country must demand it. Fair trade means that at the very least, labor and environmental regulations must be respected and enforced, so that people are not enslaved and the environment destroyed in the name of global corporate profit.
Really, at some point, when politicians claim these free trade deals are a win-win, and the actual result is 16-year-old Chinese youngsters working 16 hour days and American workers idled while their youngsters play with toxic imported toys, aren't the lies traitorous?
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Lets recap all the "benefits" of globalization:
Stagnant wages
Job losses
plant closures and downsizings
Poorer quality products and services
Unsafe toys and other products like tires
Poisonous food and personal care products
decreased national sovereignity
eroded technological and innovative edge
reduced national security
increased foreign entanglements
increased illegal immigration
intellectual property theft
accelerated environmental degradation
increased demand for oil
record trade and budget deficits
Globalization has put the last nail in the coffin of the new Deal, and ushered in the era of the Raw Deal
for working and middle class people
The author leaves one extremely important economic element out of the equation -- inflation. The cost of most consumer goods has gone down significantly over the past 10 years. Plus there are much more consumer good available now for consumers to buy. The CPI is misleading in analyzing this phenomena as 40% of the index is housing related and another portion service related. The reduction in inflation because of foreign trade, especially China, has also led to lower interest rates allowing consumers to refinance homes and free-up money, reduce credit card interest, and see a dramatic increase in home+stock values.. Currently even the poorest Americans can easily go to a Walmart, Target, Home Depot, or Children's Place and buy all the clothes, TVs, microwaves, silverware, toasters, blenders, computers, DVD players, books, shoes, phones, and anything else they want to buy; and American's have benefited dramatically by this. Some point out that trade with China is bad because jobs have been lost, however they don't realize a huge number of jobs have been created directly or indirectly because of trade with China: whether at ports, restaurants, tourism+ other service industries (because cheaper goods frees up money to spend elsewhere), financial services, construction, oil and nat gas industry, heavy machinery, electrical machinery (more recently), agriculture and coal, railroads, etc. The US has seen a net gain of over 5 million jobs since 2001 and there has been a fairly significant increase in real disposable income.
Drink much Kool-Aid do you?
Yes appliances and consumer electronics cost less - but the quality isn't any good and they don't last nearly as long. Major appliances used to last decades, now you are lucky to get 5-6 years out of them
So up front costs go down but overall cost of ownership goes way up
Quality has been a major casualty in globalization. And the sad factr is people like me would gladly pay moire money for better quality US made products
"The US has seen a net gain of over 5 million jobs since 2001 and there has been a fairly significant increase in real disposable income."**
Where in the world did you get this bogus information? Limbaugh? Hannity? Heritage / Cato talking points?
The data from the BLS and other credible sources do not support your assertions. Wages have been stagnant and declining for all but the upper 2% who has seen major increases that skew the numbers for the whole time of the Bush administration. That 5 million jobs you speak of, is a gross not a net number - so you have to subtract the 3.5 million lost, and even those 5 million are not to be believed since the administration came up with the "birth death model" to manipulate the employment statistics to over estimate jobs created and downplay un and underemployment. And what about the quality of jobs created? mostly service sector jobs that pay 9-20% less than the manufacturing jobs they displaced. Bush job creation has been the worst since the great depression barely keeping up with population
"The cost of most consumer goods has gone down significantly over the past 10 years. Plus there are much more consumer good available now for consumers to buy. The CPI is misleading in analyzing this phenomena as 40% of the index is housing related and another portion service related. The reduction in inflation because of foreign trade, especially China, has also led to lower interest rates allowing consumers to refinance homes and free-up money, reduce credit card interest, and see a dramatic increase in home+stock values"***
In case you hadn't noticed, inflation is on the rise due to a devalued dollar - caused by two things, record federal defiticts and an unsustatinable trade deficit. And the CPI woefully inderstates inflation because it does not contain food and fuel- the second and third l;argest expenses after housing for most consumers. And aslo since you apparently have been asleep for the last several years we are in the midst of a housing bust, brought on by too cheap and easy credit. Homes are losing value in some areas as much as 30% and foreclosures are at depression era levels, as is credit card debt also at record numbers as people offset lost earnings with debt. Oh and the stock market hasn't been so hot lately either.
"The cost of most consumer goods has gone down significantly over the past 10 years. Plus there are much more consumer good available now for consumers to buy. The CPI is misleading in analyzing this phenomena as 40% of the index is housing related and another portion service related. The reduction in inflation because of foreign trade, especially China, has also led to lower interest rates allowing consumers to refinance homes and free-up money, reduce credit card interest, and see a dramatic increase in home+stock values"***
In case you hadn't noticed, inflation is on the rise due to a devalued dollar - caused by two things, record federal deficits and an unsustatinable trade deficit. And the CPI woefully understates inflation because it does not contain food and fuel- the second and third largest expenses after housing for most consumers. And also since you apparently have been asleep for the last several years we are in the midst of a housing bust, brought on by too cheap and easy credit. Homes are losing value in some areas as much as 30% and foreclosures are at depression era levels, as is credit card debt also at record numbers as people offset lost earnings with debt. Oh and the stock market hasn't been so hot lately either.
Great article Leo. I just pdf-ed it it is so good. You know your stuff. Bottome line: free-trade is total bunk. Even one of its pioneers Paul Samuelson has now questioned the very roots of free-trade; that it is more like win-lose. Before that, the economic historian, Paul Bairoch, said that inevitably free-trade leads to a depression. He also noted that if economic growth, in terms of goods and services available for domestic consumption, could be obtained at home what then is the benefit of free trade? It is time to impose tariffs on Chinese goods that, if we don't, will cause the further loss of even more of our manufacturing base. Let me add, that a number of American corporations are engaging in labor arbitraging (outsourcing) to turn a quick buck by trading away our nation's comparative advantage. It is un-American in a very literal sense.
If I can sum up this article: complain, complain, complain, why doesn't somebody do something.
What the anti-trade types never seem to mention is what they actually want to do about the situation. Why? Because they know that when people find out that their "solution" is to jack up the prices of everything you buy by imposing tariffs, they'll lose all support. If there's some other policy you're recommending, please enlighten us.
If I can sum up this article: complain, complain, complain, why doesn't somebody do something.
What the anti-trade types never seem to mention is what they actually want to do about the situation. Why? Because they know that when people find out that their "solution" is to jack up the prices of everything you buy by imposing tariffs, they'll lose all support. If there's some other policy you're recommending, please enlighten us.
Oh, and NO ONE is suggesting we shouldn't trade. We are saying we need fairer and smarter trade.
For comparative advantage to work trade must be conductied on a level playing field, of which we do not have
Fairer and smarter trade, nice. once again, nobody says what that means or what they're specifically recommending. if the fair trade movement is nothing more than slogans, leave me out.
Thats just yet another myth - prices won't "jack up" pennies at most, and how come prices were affordable BEFORE "free" trade?
If you ask people if they want lower prices, of course the answer would be yes, but if you finish the question bys saying "do you want lower prices if it means unsafe products, or you or a friend or family member will lose their job, or the national security will suffer" you will get a much different answer
Many things wouldn't be affordable or available without global trade. If most things were still manufactured in the US, goods would be much more expensive and take money away from purchases of other goods and services, and interest rates would go up significantly causing debt servicing to become much more expensive and further reducing the amount of money people had to spend. We'd probably see large job losses in the service industries like restaurants, retail stores, hotels, golf courses and be hearing about housing shortages rather than housing gluts.
I can't believe, **25 years** after the Neoliberal revolution went into high-gear and Reagan put a bullet to the head of U.S. manufacturing and unions and moved ***millions*** of jobs out of this country since....
......we are NOW starting to talk about this???
I guess one could say; "Better late than never!" - but that's not true in this case. Now Capitalism as we knew it has become Fascism and the only hope out of this global corporate slavery is Social Democracy.
I think you have summe dup the situation exactly, Mr Gerard. The whole debacle is one big smokescreen to allow Corporations to profit from exploitable labor. And the only people who are going to end up benefiting are the CEOs. We ar ein the process of selling off our country's industries and economy so that a small group of unethical charlatans can strike it rich ... and the rest of us will be left holding the bag and looking around at the smoking ruins left behind.
Excellent post - well said.
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