Candidates mislead voters on trade by Marjorie Arons Barron

The entry below is being cross posted from Marjorie Arons Barron’s own blog.

tradeAll three presidential candidates are pandering to voters on trade rather than educating them to the complexity of the issue. Demagoguing it, Donald Trump and Bernie Sanders simplistically blame trade pacts for disappearing jobs and dimmed future prospects. Back in 2012,  Hillary Clinton, an early advocate of NAFTA.  said the Transpacific Partnership was “the gold standard of trade agreements.”   Now she’s done a 180. I don’t expect Trump or Sanders to deal responsibly and educate voters on the issue.  I would have expected more of her.

Millions of Americans (the bottom 80 percent) are hurting economically, their families at risk,  their real wages  stalled,  their prospects  bleak. Many of their lost jobs will not be coming back, nor perhaps should they.  People  deserve to be told the truth and offered substantive solutions, not merely emotionally charged rhetoric.  A serious debate over appropriate responses should be at the heart of this year’s campaigns.

American job losses and economic dislocation started well before NAFTA and other recent trade agreements. Many manufacturing jobs disappeared the way the buggy whip business did when automobiles came into use. Technology changes. Productivity improves, requiring fewer workers to do the same tasks.  Robotic arms replace assembly line bodies. Do we want our children to prepare for jobs making t-shirts and particle board desks or more high-value careers?

Globalization has created  an interconnected and interdependent world , with the relentless transfer  of goods, capital and services. Offshoring and outsourcing  problems are quite real here and elsewhere. This is also happening in Europe, but the dislocations there have been cushioned by  different tax systems and social safety nets. Is something to be learned from them?

Donald Trump laments China, China, China in every speech. Yes, some two million jobs have been lost to China since it joined the World Trade Organization 15 years ago. But China is not the unstoppable juggernaut poised to roll over us tomorrow. It   lost 18 million jobs between 1995 and 2005.   Its economic growth is slowing, with sizable layoffs in manufacturing and a structural shift from factory jobs to service jobs.  Its population is aging, compounded by the legacy of its one-child policy. Some even consider the once unthinkable thought of attracting immigrants to fuel its growth.

The climate  agreement reached in Paris was a breakthrough. But it means that coal mines in Appalachia are going out of business and workers will have to be retrained for other jobs.  But the problem is not ours alone.  China has allocated some $15 billion to help workers in the coal and steel industries adjust to new jobs. Again, these complexities don’t lend themselves to rhetorical bombast and bumper-sticker sloganeering.

Amid all the talk of  outsourcing American  jobs, there’s also recent evidence that “reshoring” is taking place.   Some companies are bringing manufacturing jobs back to the United States because of work force quality. Sadly, any nuanced articulation of these competing trends,  and what still needs to be done, is difficult in this campaign, fueled by rage and frustration at years of government gridlock, broken promises, inaction and ineptitude.

The Asia-Pacific region accounts for 40 percent of international trade and 60 percent of global GDP. It is the fastest growing region in the world.  The 3.2 billion people in the Asian middle class will drive consumption over the next decade. Trade will happen, with or without the TPP and with or without U. S. leadership. The only question is: will the rules of international trade be shaped by the United States, one of 12 TPP nations excluding China, or by China.

China has alliances with many Asia-Pacific countries and is pushing an agreement called the Regional Comprehensive Economic Partnership (RCEP). Several State Department economists last week told opinion writers from the Association of Opinion Journalists that China’s alternative to TPP will not have the same standards as the United States has gotten into TPP .

China is finding other ways to flex its muscles. Dissatisfied with the power the U.S. exercises over the World Bank, for example, it has moved to create the Asian Infrastructure Investment Bank or AIIB. The United States tried to persuade its allies not to join, but they decided to do so anyway  for their own economic and strategic interests.   Such was the case with the United Kingdom, which caused tension with the United States. UK Ambassador Kim Darroch conceded as much Tuesday morning to the New England Council, but Darroch believes joining China in the AIIB will give it standing to help shape Asia-Pacific investment practices, as well as defend the rule of law in navigation disputes in the South China Sea and other spheres of Chinese influence.

American policy toward China is “borderline incoherent,” with words favoring constructive engagement but actions indicating containment. Just what should our approach be?

Secretary of State John Kerry said in an April 12 speech to the Pacific Council on International Policy,”In the 21st century, you cannot only sell to yourself and expect to grow and survive….not when 95 percent of the world’s consumers, customers live beyond our borders; not when 11.7 million well-paying American jobs… are supported by exports.”  The TPP eliminates most U.S. tariffs and over 18,000 taxes on American made products. By most accounts, the US, its multinational corporations and some special interest lobbies would be the biggest winners.

President Obama praised TPP as “the highest-standard, most progressive trade deal in history,” noting for the first time, the trade agreement contains standards on environmental protection, fair labor practices, product regulation, intellectual property, corruption and transparency. Countries that violate the standards will suffer the restoration of the tariffs.    But even accepting Obama’s assessment doesn’t mean that it is without serious flaws. Many of the well-reasoned critiques, notably by Nobel Prize-winning economist Joe Stiglitz, Congressman Sandy Levin and others give pause.   So, too, with that of Celia Wexler of the Union of Concerned Scientists,  The painstakingly negotiated areas cited by Obama have devilish details. Economic assumptions from other trade agreements have often yielded inaccurate cost-benefit results.

TPP proponents argue that these trade agreements are about security as much as they are about developing markets for products. Defense Secretary Ashton Carter says that “TPP is as important to me as another aircraft carrier.”  Trump, Sanders and Clinton are clearly ignoring that aspect. Breaking down barriers against trade, instituting international rules for dispute resolution, bind us to our trade partners and establishes habits of non-military problem solving.  Freer markets can be an invitation and often a prelude to emerging democratic governance.  It could help with Vietnam now and even more if China were ever to join TPP.

Congressional approval is far from a done deal. Rather than throw out the TPP and start again, it would seem logical to redress its weaknesses. But returning to the negotiation table could make things worse. And doing nothing opens the door for China to dominate the United States in the Pacific. When Congress finally votes on it,  it will do so under fast track rules, which permit only an up or down vote.  So how do we get out front on its challenges?

When Congress approved the fast track approach, it also re-upped the Trade Adjustment Assistance program that, since the 1960’s, has focused on those whose jobs were lost due to trade. That help can provide retraining as well as additional unemployment benefits, but these programs have been reactive, tied to an outmoded manufacturing economy  and not always effective.

As Jeffrey Garten wrote: “If we develop programs that are designed just to help workers after they are displaced or after their wages are significantly reduced, it’s too late, for they will forever be behind the curve of acquiring cutting-edge skills. “ The 2014 Workforce Innovation and Opportunity Act is similarly too limited.  Before voting on TPP,  Congress should  develop more robust and comprehensive strategies for helping workers adjust to our fast-changing economic realities – including, as Garten proposes, education and training, infrastructure, safety net and experimental grants.  Each of those topics should be included in the Presidential debates.

The global economy is a fast-moving game of three-dimensional chess, and regrettably candidates would have us believe America can win expecting to engage others in a game of checkers. Voters and the media covering the campaign should make it clear that it’s not too much to expect thoughtful debate on this by the presidential candidates  as well as by leaders in Congress.

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