The TPP: what everyone should know | Economics on Blog#42

The Trans-Pacific Partnernship Agreement, the fancy name for the current trade agreement in front of Congress, has been negotiated by the Obama administration and a group of countries for the past couple of years. Every president for some decades now has negotiated his version of such a pact and has been lobbied by this or that interest for some benefit on the behalf of some industry or group. Nothing unusual there. That there is some level of secrecy to negotiations is also not unusual. Some level, however, does not equal complete and utter secrecy. That 85% of the negotiating team was, in fact, lobbyists, is unprecedented.

The TPP has carried with it all kinds of unusual, right from the start. The makeup of the US negotiating team was 85% industry lobbyists and the rest administration officials. That, in and of itself, is not indicative of a mindset geared towards the common good. How is that possible you ask?

AFL-CIO president Richard Trumka told Vox:

One, it fails to address currency manipulation. Currency manipulation … has or will cost us between 2.3 million and 5.8 million jobs. China leads that group. Twenty countries have been determined to have manipulated their currency. And yet there’s nothing in the agreement to stop it. So all of the benefits they claim we could get from TPP, even if you assume every one of the benefits is right, could be wiped out the next day by a country manipulating its currency, to negate all this.

Two, it has the ISDS [investor-state dispute settlement] secret tribunals that are only available to foreign investors, and it thus encourages people to send jobs and money offshore. Because think about this: people invested here in the past because we had a safe, defined system and a rule of law. If they can now get that in Vietnam because of ISDS, they will send their money to Vietnam and send their products back here. The reason why countries would develop a rule of law is because of the pressure of non-investment. This eliminates that pressure, so it would slow down the migration in these countries to a real rule of law.

Same with environmental standards. It fails to address climate change in any way, so that encourages people to go outside. Here’s why: if it doesn’t have the same targets or the same cooperative agreements that are just as strong as the US-China bilateral deal, it encourages them to go elsewhere so they don’t have to comply with our carbon emissions standards in this country.

It also fails to help create jobs here because it doesn’t have strong rules of origin,” Trumka says. In other words, Trumka fears that Chinese companies could put factories in a TPP country like Vietnam or ship raw materials to a TPP country for assembly, which would give China the preferential access to US markets provided by the TPP without having to follow the TPP itself.

It prohibits things like Buy American policies. Say the taxpayers in Minneapolis decide they want to use their money to do something and they want to make it a Minnesota product, that violates this trade agreement, and it can be negated.

And the last thing is transparency. This is an agreement that’s going to cover 40 percent of the world’s GDP. It’s going to be NAFTA and [the US-Korea Free Trade Agreement] on steroids. And yet they want to be able to do it in secret, plunk it down, and have Congress vote up or down with no amendments,” says Trumka.

O.K., you may say, but Trumka has a vested interest as a union leader. Right? Wrong! Unions represent workers and unless you are a mid-to-large size enterprise with a sizable labor for working for you, unions represent your interests. Be that as it may, let’s look at what economists have been saying about the TPP over the past two years.

Robert Reich and “The worst trade deal you’ve never heard of:”

David Cay Johnston: “Makes Absolutely No Sense!”
Source: Democracy Now!

Senator Bernie Sanders:  The Dangers of the TPP (Trans-Pacific Partnership) Free Trade Deal

Dean Baker: The top-secret trade deal you need to know about | Bill Moyers and Company

TTIPProposed TTIP Agreement is Profoundly Undemocratic

One of the characteristics of this agreement is the secrecy that is surrounding it. Apparently, members of the European Parliament who have followed the negotiations for TTIP have been essentially forced to sign confidentiality agreements. Is this correct?

That’s absolutely correct, and the level of secrecy surrounding these negotiations means that ordinary people across Europe and most of the national members of parliament have no idea what’s going on. The European Commission placed a 30-year ban on all public access to the key documents behind TTIP right at the beginning of the negotiations. Any members of the European Parliament who are given access to the special reading rooms where they can see some of the documents – they have to sign documents promising that they will not share any of what they’ve seen outside that room. Really, it’s like a scene from the Stalinist Soviet past, where you have individual documents marked with secret markings, so that they can trace the source of any leaks when the documents do go out into the public domain. It’s profoundly un-transparent and anti-democratic, and it’s destroying any credibility within the European Commission itself.

Rachel Maddow: Elizabeth Warren says “Secret TPP Trade Deal” is RIGGED!


As stated by all of the speakers in the videos above, the TPP was negotiated in secret and all officials outside of the agencies that negotiated it, whether here in the US or in Europe and Asia, are bound to secrecy. Yet, when President Obama made a direct reference to Senator Elizabeth Warren being wrong, he omitted the fact that even she can’t talk about the contents of the deal he wants Congress to pass and the Democrats to sign on to. Mention has been made by him that he wants the people to judge the TPP on its own merits yet, at the same time, he is demanding that Congress put it on the fast track and give up any possibility of making amendments to it. What comes to mind is Malcolm X’ famous quote: “Oh, and I say it again, you’ve been had. You’ve been took. You’ve been hoodwinked. Bamboozled. Led astray. Run amok!” Shame on us if we let this happen.

The consequences of trade deals has been the steady, then sudden loss of jobs in the US, with American companies transferring jobs and earnings overseas to maximize profits because the conditions of those trade deals made it more advantageous to operate from without, than it used to be to operate from within. It’s that simple. While technology has taken a bite of some jobs, we aren’t yet at the point where robot is replacing man in most tasks, manual or intellectual. What we are facing is the effect of the neoliberal view of the world, one in which moneyed interests come before the interests of the many.

We’ve seen the neoliberal mindset at work, in increasing dosages, since Bill Clinton and the grand entrance of “globalization” in our every day economic lexicon. With globalization came the relaxation of all kinds of regulations pertaining to commerce, banking, and taxation, making it far more attractive for the companies we used to know as the pillars of the workforce to pull up stakes and employ elsewhere. It was during the Clinton administration that Hillary Clinton’s chief economic adviser, then Secretary of the Treasury, Larry Summers, pushed for the repeal of Glass-Steagall. The direct consequence of that repeal, the Great Recession, came eight years later, as President George W. Bush was preparing to leave office after two terms. Since then, we’ve had a recovery, but not the kind we expected or wanted, with low-wage service jobs and much lower-wage white collar jobs than pre-recession times.

When it comes to describing our recovery and unemployment, with very rare exception, while referring to the Bureau of Labor Statistics data, the media has been careful to avoid using its U6 figure when reporting monthly job numbers. If the current reported unemployment in the US is 5.7%, real unemployment is actually just a hair under 11% when you count absolutely everyone who wants to work but is either unable to find full time work or gave up looking because they’ve been identified as 99ers.

U6
Source: BLS

Some blame the loss of jobs on automation and technology. To be sure, over time, automation has taken a bite out of the job market, but in my estimation, we cannot point to it as the cause of our predicament in any significant way. Not yet.

In his essay, “The “iEverything” and the Redistributional Imperative,” Robert Reich explains some of the ways we are already seeing the effect of technology on the workforce:

At its prime in 1988, Kodak, the iconic American photography company, had 145,000 employees. In 2012, Kodak filed for bankruptcy.

The same year Kodak went under, Instagram, the world’s newest photo company, had 13 employees serving 30 million customers.

The ratio of producers to customers continues to plummet. When Facebook purchased “WhatsApp” (the messaging app) for $19 billion last year, WhatsApp had 55 employees serving 450 million customers.

A friend, operating from his home in Tucson, recently invented a machine that can find particles of certain elements in the air.

He’s already sold hundreds of these machines over the Internet to customers all over the world. He’s manufacturing them in his garage with a 3D printer.

So far, his entire business depends on just one person – himself.

New technologies aren’t just labor-replacing. They’re also knowledge-replacing.

The combination of advanced sensors, voice recognition, artificial intelligence, big data, text-mining, and pattern-recognition algorithms, is generating smart robots capable of quickly learning human actions, and even learning from one another.

If you think being a “professional” makes your job safe, think again.

The two sectors of the economy harboring the most professionals – health care and education – are under increasing pressure to cut costs. And expert machines are poised to take over.

We’re on the verge of a wave of mobile health apps for measuring everything from your cholesterol to your blood pressure, along with diagnostic software that tells you what it means and what to do about it.

In coming years, software apps will be doing many of the things physicians, nurses, and technicians now do (think ultrasound, CT scans, and electrocardiograms).

Meanwhile, the jobs of many teachers and university professors will disappear, replaced by online courses and interactive online textbooks.

Where will this end?

I don’t fully agree with Reich on the degree and prevalence of automation and technology employed today, nor do I agree that certain things, teaching is one, medicine is another, that will ever fully be automated. Maybe with the advent of really advanced artificial intelligence, but not in the current state of that technology, and not any time soon.

But I can certainly see a time, not hundreds of years into the future, when it will indeed be the case that many of the jobs humans do now, will be done by a robot or a string of code in a program. In that sense, I fully agree with Reich when, in his conclusion, he talks about the need for a new economic model that accommodates higher levels of automation. We must prepare for that. We must also prepare for a different kind of productivity to go along with that model.

Professor Reich mentions the redistribution of wealth as a possible long-term solution, The term has indeed taken on a negative connotation in today’s public parlance. But there is no way to get around discussing it. Redistribution of wealth needs to be reframed in a context that makes sense to all. If corporations are people and we, the people, live alongside corporations in our country, then corporations are just as much a citizen as we are and, as such, must pay their taxes as we do, in proportion to the services they consume, and the wear and tear they inflict on the environment around them.

But corporations, in the last couple of decades, at least, have ceased to contribute their fair share of the wealth in proportion to the resources they consume or take out and, as a result, the working class has been decimated and the middle class has shrunk visibly. We cannot survive as a nation that is based solely on service industries to provide jobs and wealth. Corporations will lose their continue to see reductions in consumer demand and spending. If consumers don’t have decent paying jobs, they just won’t have the extra cash to buy goods, no matter how much more cheaply and efficiently they are manufactured elsewhere and brought to the US consumer.

Along with fixing taxation (wealth redistribution) we must also fix financial regulation. If corporations are going to claim US citizenship, they must act as such and have manufacturing bases to at least some percentage of their product manufacturing here in the US, with at least some percentage of the workforce based in their home country. Profits, a good percentage of it, should be required to remain within the US and taxed accordingly. Gone should be the days when it is possible for corporations like General Electric to pay $0.00 in taxes and receive a refund from the IRS. Real banking reform is still needed. As things stand, we run the same risks for collapse as we did in 2008.

While we talk about new economic models we have yet to deal with the fallout of the Great Recession. We still have millions of people who have been unable to rejoin the workforce and are now completely without help, subsisting on the occasional gig and not much else. We have young people who, after graduating from college and having taken on heavy student debt, are not finding the kinds of jobs their parents did, that pay in any way that is commensurate to their education level and adequacy in meeting basic needs. We still have exceedingly high unemployment among minorities, particularly African Americans. Absolutely nothing has been done to alleviate Black unemployment. Employment among the very young is now nonexistent. Raising the minimum wage to a more realistic level, $15 an hour rather than the proposed $10.10, will help, but not in large metropolitan areas where $20 an hour is the lowest livable minimum.

Older workers who were laid off at the start of the recession, never to be rehired, need a solution. While they are called “older,” the vast majority were in their mid-to late forties and early fifties, with at least a couple of decades of career left in them. The media has ceased its scant coverage of the 99ers.  Seven million, or more, people are completely off the income grid, without a voice or anyone to champion their cause, with millions more elderly living rather badly on retirement incomes that are inadequate.

We now live in an age of multi-generational families and shared housing, not out of a lifestyle choice, but out of economic necessity because jobs that used to sustain independent living no longer do, and the cost of rental housing has skyrocketed after the housing collapse of the Great Recession.

Neoliberalism was sold to America as the “Third Way” a compromise between fend-for-yourself conservatism and big government liberalism. What America got in return is conservatism. In today’s political reality, GOP conservatism has been replaced by neoconservatism which is Milton Friedman libertarianism wrapped in Ronald Reagan gift paper. Today’s liberalism is yesterday’s conservatism wrapped in Bill Clinton gift paper. While we are charmed by both men, we fail to realize that they implemented what has turned out to be the most harmful policies for our country.

One of the Democrats’ biggest failings, with the election of President Obama, is that they’ve not provided the support and balance of a majority party when they were the majority, or as a minority party since they’ve become one. This failing is our failing as voters. When we don’t show up at primaries to ensure that we are represented by people who think the way we do and care about things that affect us, what we get, is a compromise: neoliberalism.

While it is true that compromise in a variety of situations in life is a good thing. When it comes to principles, however, the combination of cutting corners, compromising and not paying attention is how we got here. The opposite is how we get out. Martin Luther King, Jr. saw a lot of what we are now experiencing coming in 1966, I leave you with a quote from an article he published in The Nation. As you read this quote, think about how much wider the circle of poverty and loss has become in the years since he wrote this.

Remember this: Martin Luther King wasn’t assassinated because he fought for civil rights. He was assassinated after he foresaw the predicament we are in today and tried to prevent it by uniting poor Blacks with poor whites in an effort to end poverty.  That is when MLK became too powerful.

Mass nonviolent action continues to be the effective tactic of the movement. Many, especially in the North, argue that the maximum use of legislation, welfare and anti-poverty programs now replaces demonstrations, and March 14, 1966 that overt and visible protest should now be abandoned. Nothing could prove more erroneous than to demobilize at this point. It was the mass-action movement that engendered the changes of the decade, but the needs which created it are not yet satisfied. Without the will to unity and struggle Negroes would have no strength, and reversal of their successes could be easily effected. The use of creative tensions that broke the barriers of the South will be as indispensable in the North to obtain and extend necessary objectives.

These are partial elements of the Negro’s program for freedom. Beyond these is one of singular importance which will be featured in the North—economic security. This is usually referred to as the need for jobs. The distinction made here between economic security and jobs is not semantic. A job in our industrial society is not necessarily equivalent to security. It is too often undercut by layoffs. No element of the working people suffers so acutely from layoffs as Negroes, traditionally the fired and the last hired. They lack the seniority other workers accumulate because discrimination thwarts long-term employment. Negroes need the kind of employment that lasts the year through. They need the opportunity to advance on the job; they need the type of employment that feeds, clothes, educates and stabilizes a family. Statistics that picture declining rates of unemployment veil the reality that Negro jobs are still substandard and evanescent. The instability of employment reflects itself in the fragile character of Negro ambitions and economic foundations.

Whether the solution be in a guaranteed annual wage, negative Income tax or any other economic device, the direction of Negro demands has to be toward substantive security. This alone will revolutionize Negro life, including family relations and that part of the Negro psyche that has lately become conspicuous-the Negro male ego.

Our nation is now so rich, so productive, that the continuation of persistent poverty is incendiary because the poor cannot rationalize their deprivation. We have yet to confront and solve the international problems created by our wealth In a world still largely hungry and miserable. But more immediate and pressing 1s the domestic existence of poverty. It is an anachronism in the second half of the 20th century, Only the neglect to plan intelligently and adequately and the unwillingness genuinely to embrace economic justice enable it to persist.

Social conflict is not the product of skilled agitation. The apathy from which Negroes suffered for so long was derived from their powerlessness and their acceptance of the myth that abundance was not available. They are now accumulating power; they are taught by every media of communication that we are so opulent we can enjoy both butter and guns. That is why they confront the white power structure with their program and challenge it to produce one of its own. The creative combining of both programs would unite social and economic justice into a single package of freedom.

The Negro in 1966 does not issue his challenge in isolation. Selma in 1965 made clear that there are white Americans who cherish decency and democracy; who will physically come to the scene of danger; who will fight for their nation not only on foreign battlefields but where its integrity is threatened within its borders. When 50,000 Americans, white and Negro, Protestant, Catholic, Jew and nonbeliever, assembled in haste from all corners of the land at Montgomery, there lived again in a luminous moment the spirit of the Minute Men who at Lexington and Concord electrified the world.

Negroes expect their freedom, not as subjects of benevolence but as Americans who were at Bunker Hill, who toiled to clear the forests, drain the swamps, build the roads—who fought the wars and dreamed the dreams the founders of the nation considered to be an American birthright.

March 14, 1966
The Last Steep Ascent | The Nation