The Difference Between Free Trade and Fair Trade

If you’re like most average Americans, words and phrases like “currency manipulation,” “trade deficits,” “monetization”, and “horizontal equity” leave you with a headache. Donald Trump speaks frequently on these subjects, particularly in regard to China.  His detractors claim he doesn’t know what he’s talking about.

 

But the truth is, we’re the ones who aren’t sure what he’s talking about, and Hillary’s team takes advantage of our ignorance to disparage Trump as some sort of snake oil salesman (actually, Obama wears that crown).

 

Just when you thought you were lost in a cloud of economic gibberish, along come Dick Morris and Eileen McGann, in their book, Armaggeddon: How Trump Can Beat Hillary (Humanix Books, 2016) to help us make sense of the dollars and cents of Trump’s economic plan, without having to get a master’s degree in Economics.

 

Even so, it’s a long chapter, but one in which all of you have a “vested interest.” (My typing speed has benefitted wonderfully from quoting these books!)

 

The economics comes in Chapter Four. At the time the pair published the book (in March of this year), Terrorism was the big topic.  It could become one.  Let us hope and pray that it does not and that we can focus on an issue affecting us like a terrorist financial IED.

 

“’The Republicans are the party of the rich and the Democrats represent the poor and middle class.” This viewpoint, fundamentally ingrained in popular wisdom for over a hundred years is wrong.  Just plain wrong.

 

“On the one hand, the Republican Party has become divided between its Wall Street/establishment wing and its more popular Main Street/Tea Party elements. The fierce Republican nominating contest of 2016 and the majority that lined up behind anti-Establishment candidates like Trump, Cruz, Carson, and Paul demonstrates the depth of this split.

 

“The New Republicans are set on breaking up the big banks and limiting their powers and privileges, while the Establishment wing of the party is linked to Wall Street at the hip. The Republicans who won the battle for the party’s soul and spirit in the 2016 primaries have more in common with the Occupy Wall Street demonstrators than with the board members of the big banks [note: we’re cleaner than either].

 

“On the other hand, the Democratic Party has embraced Wall Street with gusto, relying increasingly on its financial largesse and protecting its interests in Congress. It’s just that the old adage that Democrats are for the poor and Republicans are for the rich hasn’t been updated.  To get the white, working-class vote, we need to bring the up-to-date.

 

“In the past, we could use the tax issue to get their votes. But Obama has outflanked us on the tax issue by differentiating between those who make more than $250,000 and the rest of us.  Even as he regularly crosses the line and taxes us all, he still has managed to blunt taxation as an issue, undoing the good work of Ronald Reagan.

 

“And Obama has succeeded brilliantly in substituting class for race among white even as he doubles down on racial rhetoric among his black base. By getting blue-collar whites to resent rich whites more than poor blacks, he has cancelled out the policies Richard Nixon used to augment the GOP base.

 

“We must accept what Obama has done and move on by explaining to the working class how the establishment Democrat Party, represented by Obama and Hillary Clinton, is no friend of theirs. America’s working class has not seen its household income rise – adjusted for inflation – since 1985.  While it briefly ticked up during the Clinton Years [thanks to Newt Gingrich and Congress], the Great Recession and Obama’s policies have snuffed out the gains.

 

“So while the U.S. economy, as noted, expanded by 30 percent since the middle of the Reagan Years, net median family income has remained absolutely flat.

 

“There are two major reasons the poor are getting poorer or at least not getting richer: trade with China and immigration.  On both issues, the Democrats are taking a position against the interests of the working class and Republicans, led by Donald Trump, are lining up on the other side.

 

“Even the labor unions – as sycophantic s they always are toward the Democrat Party – can’t stomach the trade deals America has been making lately.

 

“That’s why Donald Trump has attracted so much working-class support. He rightly attacks the trade agreements as bad deals, conceived by idiots and negotiated by weak bureaucrats.

 

“Trump has shattered the post-World War II American political consensus that free trade [meaning no tariffs or taxes] is necessary and good. The governing class abused the patience of the American worker as he saw his job being exported under generous trade deals.  Often bought off by the very foreign interests with whom they were negotiating, our trade representatives gave too much away and lost the confidence of the American worker.

 

“Beginning with President Clinton’s hard sell that led to the ratification of NAFTA (North American Free Trade Agreement), Democrat politicians have found it more and more difficult to get their base to accept the premise that freer trade means more prosperity. They are opting out of the consensus that has animated American foreign policy for the past hundred years.

 

“Why? Because they see that American manufacturing jobs are disappearing due to unfair trade competition from China.  This rapid erosion of our blue-collar jobs is more responsible than any other factor for the income stagnation of the American working class.

 

“Since 1979, we have lost 7,231,000 manufacturing jobs in the United States – 37 percent of our total manufacturing employment. At the same time, the real (inflation-adjusted) median household income of Americans who have completed high school but not gone on to college, has dropped from $56,395 to $40,701 – a drop of $15,694, or 27.8 percent.

 

“No longer are our Democrat friends willing to follow their leaders to support trade deals. The idea that free trade will bring prosperity is falling flat in the face of the obvious evidence of Chinese chicanery and the equally apparent refusal of a Democrat president to confront it.  Free trader or not, Adam Smith would never have found these one-sided trade deals acceptable.”

 

Adam Smith (“The Wealth of Nations, 1776”) wrote that a nation’s first economic responsibility was to its own population. After the nation’s needs were met, only then would the nation’s traders sell its surplus stock.

 

“The Economic Policy Institute puts the blame for this job loss where it belongs, on trade. The Institute reported, ‘The United States lost 5 million manufacturing jobs between January 2000 and December 2014.  There is a widespread misperception that rapid productivity growth is the primary cause of continuing manufacturing job losses over the past 15 years.  Instead, as this report shows, job losses can be traced to growing trade deficits in manufacturing products prior to the Great Recession and then massive output collapse during the Great Recession.’

 

“The biggest trade deficit is with China. Apologists in both parties say that China has a lower labor cost and naturally makes more money selling to us than buying from us.  But China’s edge in labor costs is more than offset by the cost of transporting goods from there to here, especially at times of high energy prices.  It is not greater efficiency or lower labor costs that give China its advantage so much as its artificial currency manipulation (i.e., cheating).

 

“China undervalues its own currency, the yuan, by about 25 percent so that Chinese products are 25 percent cheaper in U.S. stores and American goods are 25 percent more expensive in China.

 

“China’s huge trade deficit, brought about by its massive cheating, increased by over half on Obama’s and Hillary’s watch. When they took office, China had a deficit of $229 billion with us. Now it is $367 billion.

 

“Everyone understands that the United States has been hemorrhaging jobs to China ever since Bill Clinton let Beijing into the World Trade Organization (WTO). Clinton promised America that admitting China would be a win/win for Americans.  But the opposite has been the case.  It’s been a great deal for China, but a terrible one for us.  And yet, no politician has the courage to take on China.  Congress passed a law requiring the president to cite any nation that manipulates its currency to gain unfair trade advantage.  Each year, he is required to make a finding on whether or not China is a currency manipulator.

 

“And for each of the eight years, including during Hillary’s tenure at the State Department, our government has refused to cite China as a currency manipulator, even though virtually all the job loss to Beijing comes about precisely because of its currency shenanigans.

 

“The president won’t crack down on China and Congress won’t act, either. While the Democrats say they fight for the working person, they don’t utter a peep about this gigantic global fraud that is draining the good paying manufacturing jobs out of the country.  Big business and the banks don’t care about the job loss.

“China is a convenient, ready, and cheap place for American companies to outsource their production, cutting back jobs in the United States, [while] increasing their corporate profits. While Democrats do nothing to stop China’s games, they rant and rave about corporate outsourcing and ‘sending jobs overseas.’

 

“Before 2001, when we let China into the WTO, its trade with the United States was relatively small. We sold them about as much as they sold us.  [Fair trade].  Back then, the main complaint of American businesses and workers was the competition [from] Japan.  But Japan fought fair, outclassing us by making better, smaller, and cheaper products.  China gets its edge by stealing our technology and manipulating its currency to make its products artificially cheaper.  Look at how our trade deficit with China jumped in 2002.  Since then, it has quadrupled.

 

U.S. Trade Deficit with China

 

1994: $39 billion

2000: $83 billion

2001: $83 billion (China joins WTO)

2006: $234 billion

2011: $295 billion

2015: $367 billion

 

“Once China entered the WTO in 2001, it took advantage of the lower tariffs to undercut American manufacturers all around the world, causing huge trade deficits.

 

“Although China only buys 7% of our exports, it sells us 20% of our imports and accounts for half of our total trade deficit with the entire world. The job loss to China as a result of the trade deficit has been horrific.  Since China joined the WTO in 2001, we have lost 2.4 million jobs to Chinese exports.  Some experts have tried to belittle the loss of jobs.

 

“They sat that other factors like automation, environmental regulation, fuel costs, and competition from other countries are more responsible for our manufacturing job losses.

 

“But a recent study by a group of economists who were initially skeptical of the impact of China on American jobs affirms that the total loss is, indeed, in the millions. To be exact, the study found that of the five million manufacturing jobs lost in the United States since China joined the WTO, between one and two million are attributable to Chinese imports.

 

“While the economists participating in the study shared a bias toward free trade, the evidence soon made it apparent that the job loss to China was real. ‘The ‘aha’ moment,” said Massachusetts Institute of Technology economist David Autor, ‘was when we traced through the industries in which China had surging exports to the local addresses of their U.S. competitors and saw the power correspondence where China had surged and where U.S. manufacturing employment had collapsed.’

 

“Bloomberg reported that Justin Pierce of the Federal Reserve and Peter Schott of Yale University found in April 2015 ‘that the biggest U.S. manufacturing employment declines and largest surges in imports were in products for which China permanently locked in the greatest reductions in tariffs as part of its entry to the WTO. Industries such as apparel, leather goods, plastic plumbing fixtures, and surgical and medical equipment sustained substantial hits.’

 

“Schott said the changes since China entered the WTO were the ‘smoking gun’ proving that Beijing’s exports were responsible for our job loss.

 

“More than any other candidate, Donald Trump has singled out China for blame for U.S. job loss.

 

“’We have been too afraid to protect and advance American interests and to challenge China to live up to its obligations,’ he said. “We need smart negotiators who will serve the interests of American workers – not Wall Street in siders that want to move U.S. manufacturing and investment offshore.’

 

“China manipulates its currency by using Chinese yuan to purchase American-dollar-denominated Treasury bills at a frantic pace. By buying dollars and paying for them in yuan, they keep the price of the dollar artificially high and the price of the yuan correspondingly low, making Chinese products less expensive in the United States and American goods more costly in China.”

 

It’s an economic trick as old as China itself.

 

“Chinese currency manipulation really got started in 2005 when its currency traded at 8.2 yuan to each U.S. dollar.

 

$ = YYYYYYYY

 

One cup of American tea in China in 2005    =  YYYYYYYY

 

One cup of Chinese tea in America   =   $

 

 

“At the end of Bush’s term, it had dropped to 7.6 yuan to the dollar. But during Obama’s first term and Hillary’s tenure as secretary of state, it really crashed.  It was down to 6.2 yuan by the time Hillary left office in 2013.  Since then, it has remained about the same.  All told, the yuan has lost about one-quarter of its value since 2005.

 

I must confess I don’t quite understand the authors’ logic when they say that the yuan dropping from 8.2 to 6.2 was a “crash.” The more yuans Chinese must spend on a U.S. product the more expensive it is for them and the worse it is for business.  It doesn’t make sense to me, but then, I’m not an economist; just an average American.

 

“All told,” the authors continue, “the yuan has lost about one-quarter of its value since 2005. And that means that Chinese products in the United States cost one-quarter more than they should.  If we ended Chinese currency manipulation on the effect on our economy would be huge.  The Alliance for American Manufacturing, a labor-management partnership, says that a 28.3% increase in the value of the yuan would create two and a quarter million U.S. jobs and cut the trade deficit by $190.5 billion.

 

“Why does the United States let China get away with its money manipulation? American politicians and Treasury officials claim that they are reluctant to rein in China’s purchase of American Treasury notes since, in effect, China is lending us money with each purchase, relieving our banks and citizens of the necessity of lending their own money [through bonds] to our government to cover its deficit.  (And making it less necessary for the Fed to monetize our deficit by printing currency to cover it).  But that reason is obviously phony.  If China stopped “lending us money” by ceasing to buy our Treasury bills, its currency would become stronger and its goods less attractive to American customers, causing a reversal of the jobs outflow from our country.

 

“We would prosper as a result, reducing our deficit dramatically. Even if China immediately stopped buying our Treasury bills, the effect would be minor.  The Federal Reserve Board is, by far, the biggest lender to our government, lending us the money it creates to pay off our debts.  Undesirable as a long-term policy, this “monetization” of the debt has not set off the feared inflation.  In fact, as China has oscillated its level of purchase of U.S. securities, the markets have scarcely noticed.

 

“While China’s trade in dollars is opaque, to say the least, there is evidence that China dumped about $94 billion in U.S. securities in August 2015, bringing its holdings down to $1.3 trillion. And the world didn’t fall apart.  The Fed just cranked up the old printing press once more.  Nobody much noticed.  Why doesn’t the WTO crack down on China’s cheating?

 

“The rules of the World Trade Organization are biased in China’s favor. The rules of the WTO do not even address currency manipulation.   While the WTO holds down tariffs, it does nothing about artificially holding down the value of a nation’s currency to gain competitive advantage.

 

“A tariff, of course, is a tax imposed on imports to make them more expensive for consumers to buy. Tariffs are a no-no.  The entire thrust of global economics in the years since World War II has been to hold them down and, eventually, to eliminate them because give one country an unfair competitive edge against another.  But currency manipulation does the exact same thing.  Not by taxing imports from the other country to make them more expensive, but by weakening a country’s currency to make their exports to other countries cheaper.

 

“If the World Trade Organization has a blind spot where currency manipulation is concerned, the International Monetary Fund (IMF) does not. The IMF forbids currency manipulation but, unfortunately, does not have enough enforcement power.  The WTO, which has the power to stop currency juggling, won’t use it.  Of course, if Obama – or the next president – wanted to, he or she could force China to abandon its unfair manipulation.

 

“The first step would be for the White House to label China as a currency manipulator and then invoke sanctions on Chinese exports to the United States to force Beijing to reverse its policy. China would, doubtless, crack down on American exports to China in retaliation,  but since they sell us four times as much as we sell them, that’s not a sanction that’s likely to bring us to our knees.

 

“University of Maryland economist Peter Morici suggests that the United States impose a tax on Chinese imports equal to the extent of its currency manipulation, rising or falling as China pushes its currency value down or lets it float up to the market rate.

 

“The real reason our White House – and Hillary’s State Department – did not and will not crack down on China is that Beijing has its tentacles dep into the Clintons. China hired Patton Boggs, a top U.S. lobbying firm, for a fee of $35,000 per month, to fight against curbs on Chinese currency manipulation.  Reuters reported that ‘the Chinese hire top-notch lobbying firms whose ranks are filled with well-connected former U.S. and Canadian officials [and] buy TV advertisements to buff their image.’

 

“While U.S. law bars candidates from taking campaign contributions from foreigners, a tony of money from China has found its way into the Clinton Foundation, which funds Hillary’s staff and travel needs. One donor, Rilin Enterprises, pledged $2 million in 2013 to the foundation’s endowment.  While allegedly a private company owned by Chinese billionaire Wang Wenliang, it has strong links to the government.

 

“Jim Mann has written several books on China’s relationship with the United States and points out that the company was one of the contractors that built Beijing’s embassy in Washington. Mann points out that the Chinese government was especially careful in choosing Rilin to build the embassy because of its close ties to the company.  ‘So you want to have the closest security and intelligence connections with and approval of the person company that’s going to build your embassy,’ Mann writes.  Rilin also keeps its U.S. contacts up to date, spending $1.4 million since 2012 to lobby Congress and the State Department.  And remember who was secretary of state.

 

“The Clintons began raking in money from China in 2008, a few days after Hillary was nominated to be secretary of state. Bill hosted a special meeting of the Clinton Global Initiative called CGI Asia.  The keynote speaker was Chinese Foreign Minister Yang Jiechi, who is particularly famous for saying that the Chine people do not consider the Dalai Lama to be a ‘religious leader.’  He described the Dalai Lama as, instead, ‘the mastermind behind [Tibet] separatist sabotage’ and the ‘personification of evil and deception,’ whose efforts are ‘doomed to failure.’  Since then, the Clintons and their foundation have gotten millions from Chinese sources in donations and speaking fees.

 

“Other top American foreign policy experts and former diplomats also find fertile soil in dealings with China. Former Secretary of State Madeleine Albright currently serves as the chair of the Albright-Stonebridge firm.  The late Sandy Berger, Clinton’s National Security advisor and Hillary confidante, was her co-chairman.

 

“Albright-Stoneridge offers its clients ‘the knowledge and on-the-ground resources to help businesses and organizations successfully navigate this often complex [nepotistic Chinese] market. Our team in Beijing and Shanghai works to create allies within the Chinese system, through an approach that emphasizes systematic engagement with agencies and non-government stake-holders at the central, provincial, and local levels.  We offer the agility, insights, and practical support to overcome challenges and a strategic approach to help you thrive for the long term.’

 

“In other words, the firm that includes Bill Clinton’s [former] secretary of state and a key Hillary ally promises an inside track to Beijing’s wealth, a sure inducement to any politician [or business leader] to sell his soul to China.

 

“As Democrats watch Hillary take money from Chinese interests to sell them out, they fell abused and spurned, betrayed by those who claim to fight for them. With friends in high places, protective lobbyists hovering over Congress, and funds flowing to the secretary of state, China has been more than able to protect itself against charges of unfair trading practices.

 

“The American worker has been less fortunate. In fact, competition from China – through lower wages and currency manipulation – has introduced a third-world wage standard into American manufacturing.  No longer do U.S. workers compete with one another or even along union/non-union lines.  Rather they are being forced to a global, third-world level of compensation entirely incommensurate with middle class life in the United States.  It’s time that U.S. voters stand up and demand that their elected officials declare their independence from China and resolve to advance the needs and interests of American workers instead.

 

“It is not only China that is sucking jobs out from the United States. It is Mexico, too.  As a result of NAFTA (the North American Free Trade Agreement), our balance of trade has changed drastically from a positive $2.2 billion in 1991 to a negative $59 billion in 2015.

 

“NAFTA, hailed as a job-creating agreement for American workers, has proven to be the exact opposite. Ross Perot predicted, when he ran for presidents against Bill Clinton and George H.W. Bush in 1992, that NAFTA would create ‘a giant sucking sound’ as jobs fled over the border.  Derided and even ridiculed at the time, Perot was right, and the statistics prove it.

 

U.S. Trade Balance with Mexico

 

1991: +$2.2 billion

1992: +$5.4 billion

1993: +$1.7 billion

NAFTA TAKES EFFECT

1994: +$1.4 billion

1995: -$15.8 billion

1996: -$17.5 billion

2001: -$24.6 billion

2006: -$64.5 billion

2012: -$81.7 billion

2015: -$58.6 billion

 

“Ever since NAFTA was passed, our trade deficit with Mexico has soared. The blame for NAFTA falls squarely on the shoulders of Bill and Hillary Clinton.  It is the centerpiece of the New Left’s criticism of the Clintons and their wing of the Democrat Party.  While its adoption and ratification by the Senate were heralded in the main-stream media as the signature achievement of the Clinton Administration’s first year, it has been a disaster for working Americans.  It led to deficits, deficits, and more deficits.

 

“In a way, the deficit with Mexico is more problematic than the one with China. American businesses are flocking to Mexico City as Chinese wages increase.  The New York Times reported that businesses are turning to Mexico for outsourcing where once they chose China:  ‘With labor costs rising rapidly in China, American manufacturers of all sizes are looking south to Mexico with what economists describe as an eagerness not seen since the early years of the North American Free Trade Agreement in the 1990s…Mexican workers are increasingly in demand.’  U.S. trade with Mexico has grown by 30 percent since 2010 and foreign direct investment is up to $35 billion.  Mexico now makes 14 percent of the manufactured goods imported by the United States.”

 

Obama didn’t deport anyone, as Hillary Clinton claimed in last night’s debate; they’ve been going back home to Mexico since our Great Recession, leaving behind only the drug dealers and the hardened criminals.

 

“’When you have the wages in China doubling every few years, it changes the whole calculus,’ said Christopher Wilson, an economics scholar at the Mexico Institute of the Woodrow Wilson International Center for Scholars in Washington. ‘Mexico has become the most competitive place to manufacture goods for the North American market, for sure, and it’s also become the most cost-competitive place to manufacture some goods for all over the world.’

 

China has had influence in Mexico and Central and South America for at least a century.

 

“The list of fleeing U.S. companies is long and painful: Caterpillar, Chrysler, Stanley Black & Decker and Callaway Golf.  Americans are hearing ‘that giant sucking sound’ and resent it mightily.  Again, Donald Trump was first on the case saying Mexico is ‘killing us on trade.’

 

“Workers at the Carrier Corporation, a big air-conditioner manufacturer who just announced plans to move to Mexico, would agree. Founded by Willis Carrier, who invented air-conditioning, the formerly Indianapolis-based company stands to save $81 million a year by kicking 1,400 Americans out of their jobs.  The company pays its Indiana workers $34 an hour, including benefits, but will have to pay its new Mexican employees only $6 an hour.

 

“Trump was quick to pounce: ‘I would go to Carrier and say, ‘You’re going to lay off 1,400 people.  You’re going to make air conditioners in Mexico, and you’re trying to get them across our border with no tax.’  I’m going to tell them that we’re going to tax you when those air conditioners come.  So stay where you are or build in the United States because we are killing ourselves with trade pacts that are no good for us and no good for our workers.’

 

“But this dismal experience with China and Mexico has not soured the Obama administration – or Hillary – on our free trade deals. Obama, with Hillary’s support, has approved free trade deals with Colombia, Peru, Chile, and a host of other countries.  But the big player is the TPP (Trans-Pacific Partnership) – joining us to 11 countries on the Pacific Rim:  Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, Mexico, Canada, and Japan.”

 

And all the while, the brand spanking-new Chinese navy with its man-made islands, will be patrolling the shipping lanes.

 

“To win in 2016, we must exploit the fault lines revealed by the Democrat primaries. None is greater than the TPP, which Bernie Sanders has denounced and Hillary helped to negotiate (although she now says she’s against it).  James Hoffa (the younger) spoke on behalf of the Teamsters, Steelworkers, Food and Commercial Workers, Machinists, and Communication Workers in denouncing TPP.

 

“Hoffa said, ‘Bum trade deals like NAFTA have killed upwards of 1 million jobs, many of which moved abroad. And that’s the concern with the looming TPP.  Those big business handouts continue to hollow out the manufacturing base of communities and destroy middle-class jobs in their wake.’

 

“The goal of the TPP goes far beyond the elimination of tariffs (we already eliminated them for Canada, Mexico, Chile, and Peru, who account for the vast majority of our trade with the 11 TPP partners). The TPP takes control of a host of issues away from Congress and the Executive branch and vests the power in international courts established to police the deal.

 

“For example, regulation and labeling requirements for genetically modified foods (GM) would no longer be subject to state or federal legislation or FDA or USDA oversight. Instead, the decisions governing what our consumers will see on the food labels will be made by the TPP administration – with no right of appeal.”

 

The authors cite the dilemma over the protection of dolphins through better, more expensive fishing nets that will allow Flipper to escape, but which TPP nation fishermen, especially in Japan, don’t want to buy. But in 2015, the WTO, on a complaint from Mexico, ruled that the dolphin-safe labels violated the free trade agreement and could not be used in the United States.

 

“Hillary helped negotiate the TPP,” the authors continue, “and, in her book, Hard Choices, endorsed it as the ‘gold standard’ in trade agreements.  She said the deal was ‘important for American workers, who would benefit from competing on a more level playing field.’  She also called it ‘a strategic initiative that would strengthen the position of the United States in Asia.’

 

“But when Hillary makes a promise, be sure to cash the check quickly. Once her polls or political objectives change, her position is also bound to change.  After she announced for president in 2015 and leftist Senator Bernie Sanders (D-VT) said he’d run against her, she sensed the need to move to the left to avoid being upended in the primary.  So Hillary flip-flopped and came out against the deal, saying that its final text fell short of the ‘gold standard’ she wanted to hold it to.  And this about a treaty she negotiated.

 

“If she wins, we know what will happen she will insist on some largely cosmetic changes in the treaty language, declare it fixed, and – presto! – be back on board advocating it.

 

“Trade takes a big bite out of U.S. manufacturing. But plans are afoot to do the same with the service industry, which accounts for more than 80 percent of jobs, and has, so far, been largely immune to foreign competition.  Obama is working hard on a new Trade in Services Agreement (TISA) that will do to the service sector what NAFTA, WTO, and TPP are doing to the manufacturing sector.

 

“Even as trade agreements like NAFTA and the currency manipulation of countries like China have more than decimated America’s manufacturing sector, we have survived because our service industries have done very well. It’s easy to make something somewhere else and ship it here.  But it’s a lot trickier to deliver services when you are not on location.

 

“Since World War II, manufacturing employment has dropped from 33 percent of all jobs to 12 percent, while the service sector has risen from 24 percent to 50 percent. As we have lost millions of manufacturing jobs, we have gained tens of millions of jobs in the service industries.  A big reason for the disparity is that it has been harder to import services from abroad than it is to import products.

 

“But with the Internet and other modern communications capabilities, it may be getting easier for foreign-owned firms to compete in delivering services to American consumers.

 

“Enter the TISA that is designed to facilitate trade in services. A key obstacle to the importance of services abroad is the difficulty in importing workers from other countries into the United States.  Our current immigration laws, while filled with loopholes, do a lot to constrain the importation of foreign workers to replace Americans.  But Obama is about to try to change all that.  While the TISA is still being secretly negotiated by 50 countries, leaks from Julian Assange’s WikiLeaks expose some of the contents of the never-made-public draft treaty.

 

“Assange’s revelations make it obvious that the TISA is a back-door attempt to allow unrestricted immigration into the United States and, indeed, to remove the power to regulate most immigration from Congress or the president. Under the proposed deal, foreign workers could be transferred from a foreign location to a domestic one simply as the company wishes.  Immigration limits would not apply.  So Sheraton International, for example, could move its kitchen or hospitality staff from hotels in Singapore to facilities in the United States and nobody could stop them.

 

“The principle of free flow of labor is fundamental to the European Union, central to its efforts to create a common market where labor and goods can flow freely, just as they do from state to state in the United States. But applied internationally, they amount to a total override of our immigration or work-permit laws.  Since virtually any company could make such a transfer, it obliterates our national boundary and permits free flow across it.

 

“In our current political situation, where the parties are often at war with one another over immigration policy, this treaty removes the power to regulate our borders from Congress, or even the president, and makes them totally open. Since this proviso would be included in a treaty, which has the effect of the “law of the land” according to the U.S. Constitution, it could not be abrogated or even modified by an act of Congress or by the president.  Even U.S. courts would have to apply the provisos of the treaty rather than American or state law.  This override is a deliberate effort by the Obama administration to remove immigration from the control of the American people and our government.  It would set up permanently open borders.

 

“The TISA would also restrict American laws governing worker safety, environmental regulations, and consumer protections. It would treat all these rules as impediments to trade in services and subject them to being struck down – with no appeal – by an international body.  TISA would also ‘restrict our ability to license health care facilities, power plants, waste disposal facilities and even university and school accreditation,’ according to Professor Jane Kelsey from the Faculty of Law at University of Auckland in New Zealand.

 

“Kelsey also points out that TISA will be ‘expected to lock in and extend their current levels of financial deregulation, lose the right to require data to be held onshore, face pressure to authorize potentially toxic insurance products and risk legal challenge if they adopt measures to prevent or respond to another crisis.’

 

“Public interest groups opposing the TISA cite a litany of top corporations that are pushing the agreement including Microsoft, JP Morgan Chase, CHUBB, Deloitte, UPS, Google, Verizon, Wal-Mart, Walt Disney, and IBM.

 

“When Obama sought approval of the TPP, he asked Congress to grant him ‘fast track’ authority over trade agreements, which limited the Senate to an up or down vote on the treaty with no amendments or filibusters permitted. He did so because he had a hope of getting the power – he got it – with the relatively mild TPP in the offing.

 

“But his real goal was to pass the TISA and jam it through on an up or down vote. Otherwise, why put free flow of workers into a trade bill?  It has nothing to do with trade.  Besides, the United States already has free trade under NAFTA with Canada and Mexico, and other bilateral treaties with Peru and Chile, 4 of the 11 countries in the TPP.  And these 4 account for over three-quarters of our trade with 11 countries in the deal.  We didn’t need a free trade treaty to have a free trade with them.

 

“But a TISA agreement, breaking entirely new ground, would change everything. Obama is putting it into a trade bill so he can take advantage of fast track to jam it through.  Setting up free flow of service worker would eliminate the only advantage U.S. workers have over foreign competition.  Under TISA, workers from high tech firms to McDonald’s would be subject to low-wage competition from foreign workers for whom employers would not be obliged to purchase Obamacare (since they aren’t Americans).  This would create a built-in advantage for non-American workers of about $3,000 a year per worker (the estimated fine for not covering a worker in your employ under Obamacare).

 

“Conservatives and establishment Republicans usually back free trade deals because of an ideological commitment to free trade, going back to the theories of Adam Smith, so they have been resultant to crack down on Chinese currency manipulation or to oppose TPP or TISA. But they misunderstand the issue. We are not talking here about free trade; we are talking about blatant cheating by currency manipulation where China is concerned and about an open-door immigration policy masquerading as a trade deal in TISA.

 

“Anti-Establishment Republicans and Democrats can both rally under the banner of opposing TISA and other free trade deals. Under free trade, each country does what it does best and cheapest, creating a global free market to the benefit of all.  But when one country is only pretending to produce goods more cheaply by manipulating its currency, the rules do not apply.

 

“But let’s face it – trade is being used to hold down the American worker to maximize profits for business and lower prices for the consumer. Both parties are complicit in the deal and both get campaign contributions to perpetuate it.  But this deal is a major cause of income inequality.  The poor and middle class keep getting poorer.  The other half of this process of impoverishing the American working class is immigration, which keeps wages low and unemployment of Americans high so as to benefit business profits and Democrat vote-getters.”

 

 

 

 

 

 

 

 

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Published in: on October 20, 2016 at 2:55 pm  Leave a Comment  

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