It’s The Trade, Stupid !

Filed in International by on March 25, 2014

One of my favorite investigative reporters, David Cay Johnston observes that our foreign trade deals in the last couple of decades figure in a big way in  the systemic weakness of our domestic economy.  Particularly hard hit by really bad trade deals are the non-college educated in the workforce.

Here’s how that seems to work.  While the economy overall is somewhat positively impacted by our trade agreements such as NAFTA, CAFTA and the WTO, the evidence in the manufacturing and family farm sectors we all know is quite the contrary.  The loss and exporting of manufacturing jobs has impacted 100 million U.S. workers and 170,000 family farms,  which are by and large non-college educated and include a significant share of minority persons.

These are people who were at the heart of our middle class, the drivers of the consumer economy in the U.S.A.  If they are not among the 5 million left unemployed with the manufacturing jobs eliminated  or exported via NAFTA and the WTO by 2010, they are suffering from the wage gap and income inequality we are experiencing today.  Half of those jobs went to China.

And speaking of income inequality, the immigration debate raging today would be much less a factor in the national conversation if it were not for the impact of NAFTA on our neighbor to the south, Mexico.  In 1992, just before NAFTA, we had 3.9 million undocumented within our borders, mostly from Mexico.  By 2011 they numbered 11.1 million.  It is impossible to not correlate the impact of NAFTA on this increase, starting in 1994.  The NAFTA agreement  in Mexico resulted in 2.5 million small/tenant farmers being dislocated by corporate farming (Monsanto?) and either driven to the tar paper shanty towns outside of Mexico City or across our border  through 2005.

I was heartened by Bill Clinton’s observation at the African conference he keynoted in Wilmington a few days back.  Remember, he was a huge cheerleader for the NAFTA agreement.  He said that it is important when we are dealing with African nations that any deal we set up with them take into account that the farming populace there not be dislocated from their source of family income from the land.  I’ve always admired his intellect and am very happy that he learned from our mistakes and unintended consequences on the citizens whose governments make trade deals.

Then of course we also have to account for the impact of these agreements on our trade deficits, which were mostly surpluses before these pacts with counties such as Canada, China, Japan, Mexico and South Korea.  By 2013 the trade deficit accounted for 3% of our GDP, at around $500 million.

The recent, much applauded decline in the trade deficit increases is accounted for almost entirely by the petroleum industry.  Examples of bad trad deals?  How many  U.S. cars were purchased last year in South Korea?  Around 15,000.   And S. Korean cars sold in the U.S.A.?  1.3 million !  Clearly this new trade deal isn’t working to our benefit.

It is time to ask, why do  smart Americans make such stupid  trade deals?   Unintended consequences?  Maybe.  Or maybe the corporate and multinational lobby is so damned persuasive (Think $$$$$ persuasive) compared to fair trade, labor such brilliant analysts as Public Citizen that the deck is stacked against us non-corporate citizens.  With new trade agreements pending such as TPP, It is time to learn from past mistakes and make damned sure our congressional representatives robustly research and debate the contents of old trade deals and new trade proposals alike and vote to rebuild our manufacturing base and middle class.  These are the job creators, not the 1%.

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  1. bamboozer says:

    As ever, follow the money for the answer. These trade deals pumped billions into those at the top, screwed the middle class and poor and accelerated America’s march towards plutocracy. Unintended consequences? Sure, as the article mentions Bill Clinton was a big supporter and I doubt this is what he had in mind. Also note American economists starry eyed love of “free trade” in which any and all trade is just so damn good they can taste it. The rest of the world protects their industries and workers, here we offer them up for sacrifice on the alter of free trade that some how never quite works.

  2. Liberal Elite says:

    “It is time to ask, why do smart Americans make such stupid trade deals?”

    Because we have a government that can be bought. It’s a fundamental flaw in our political system, and it’s only going to get worse… much worse.

    In a previous era, there was no rampant propaganda machine protecting the wealthy at the expense of the rest of us. That allowed the creation of the estate tax and other financial reforms that protected and expanded the middle class.

    Those days appear to be over.

  3. Your premise is flawed. Trade has produced many well paying jobs and opened up markets to American goods. You take the Korean example. You assume that the trade deal flooded the market with Korean cars, when the truth is the cars were selling before the recent deal. The benefit is that we can now sell other goods and have easier access to capital. Better cheaper cars challenging Detroit was good.

    I agree with you that the WTO has accelerated the middle class decline. It was not a stupid deal. It functioned as intended. It was about the world having easier access to Western economies and spreading the wealth around the world. There is a case for that, but one cannot pretend that it doesn’t have an impact on us. I opposed the GATT/WTO back in the day and feel sadly vindicated today.

    The bilateral trade deals do more good than harm. Economies are dynamic and we cannot advance without change. We have to take care of people harmed in the process, but if we do not participate in the managed change, worse will happen. Trade is good.

  4. Of course multinational corporations have an interest in global economic outlooks and undermining any national economic policy. They don’t care about the Mexicans or the Americans. They care about what makes their bottom line grow. That is fine. What I care about is what benefits the American people, which contrary to corporate funded propaganda is also fine. When we care as much about that as they care less about it, we will be on a level playing field.

    I am for the corporations making money and improving our lives. I am not for one at the expense of the other. I am fine with the person in Nigeria or Nicaragua making a better life, I just want our interests to have equal footing. We do not need to set one against another in the world. We do need to look out for the American interests and not just in military or foreign policy sense. The notion of America first is not a heresy.

    That is why I favor going back to a Constitutional approach to trade negotiation. Eliminate fast track, eliminate the U. S. Trade representative, and go back to Congress appointing the negotiators and taking care of trade deals. The executive is too easily influenced by other foreign objectives while Congress reflects the varied interests of the American people more readily.

  5. I only wish Congress reflected the varied interests of the American people ! But, I commend you for opening up a reasonable discussion about where trade negotiations could best be handled. My own view leans toward congressional negotiators based on my observation of President Obama’s selection Czar in Ron Kirk, now gone from the administration. Here was a corporate lawyer, who did the bidding of corporations while Mayor of Dallas and whose political cronies were mostly wealthy Dallasites. His natural tendencies were geared toward what benefited corporations, IMO. The people were simply left out of the equation as he pursued the fortunately stalled out TPP. Yes, we can do better.
    Some years ago I had the opportunity to travel and interact with business people in Japan, with assistance from the State Dept. I was frankly surprised at the emphasis the State Dept. put on trade and business as I thought that was the domain of the Commerce Dept. It seemed to me trade and business dominated their agenda, at least in my experience. This further amplifies your point.

  6. It scares me to say that I agree with your last comment, but I do. I guess on that point we will have to agree to agree.

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