President Obama may view this as his legacy, but it may well not be something of which he will long be proud
Every political system has its own local economic agenda. In Britain this currently includes the Osborne commitment to austerity politics, with its potentially devastating impact on the plight of the low-paid. Here, in the United States, that austerity agenda is enthusiastically advocated by the Republicans who control the US Congress, but not by the Obama Administration itself. On the contrary, the White House is currently putting trade reform, rather than spending cuts, at the heart of its growth agenda.
As this post is drafted, the Administration is developing a comprehensive trade deal with the European Union; and, as recently as 5th October, its trade negotiators signed the Trans-Pacific Partnership agreement (TPP) with representatives of 10 Pacific-rim economies that include Japan, Canada, Mexico, Chile and New Zealand, but specifically not China – with whom the United States is currently running an unprecedentedly large deficit of over US$300 billion a year. Under US law, any such trade deal has to be passed by Congress, so in the United States we are now in a 90-day consultation period prior to the beginning of that ratification process.
The claims being made for the advantages of the TPP by those who support it are substantial indeed. The main one is that the agreement will trigger enhanced economic growth and rising American living standards. ‘The more we sell abroad’, as the White House TPP website puts it, ‘the more high-paying jobs we support here at home’. Or, as the Petersen Institute report (much quoted in this regard) has it: the TPP ‘could yield annual global income gains of $295 billion (including $78 billion for the United States) and offer a pathway to free trade in the Asia-Pacific with potential gains of $1.9 trillion’.
Nor is this new trade deal offered to the American people as just another NAFTA. Rather, as the President stressed when announcing the agreement, the TPP includes ‘tough, enforceable standards … to protect workers’ rights and the environment’ and does so ‘for the first time in history’. The economic growth it generates will, in consequence, be simultaneously ‘equitable, sustainable and inclusive’.
Not everyone, however, agrees. Although the Administration clearly thinks of the TPP as a crucial part of the Obama legacy, many of the President’s main supporters (in both Congress and the wider labour movement) remain to be convinced. For them, this is déjà vu all over again, as Yogi Berra would have put it – ‘NAFTA on steroids’, according to one of its leading Congressional critics.
For promises on strong labour and environmental standards in major trade deals have been made before. Al Gore made them as Clinton’s Vice-President when pushing NAFTA through a reluctant Democratically-controlled Congress two decades ago. Those promises proved hollow then – NAFTA cost at least 700,000 American jobs, outsourced to lower-paid labour south of the Rio Grande – and the signature deal on labour standards in the TPP, the one with Vietnam, is equally likely to be high on promise and low on enforcement. It gives the Vietnamese government a long five-year window in which to establish basic labour rights, with only the threat of international arbitration down the road should it fail to comply. In an America increasingly dominated by the forces of the political right, a commitment to rigorous enforcement by a Democratic Administration with only twelve months left in office is unlikely to prove persuasive: particularly to trade union members whose jobs are the most vulnerable to any further round of employment-outsourcing.
Nor is the TPP a free-trade deal as such a thing is conventionally understood. Although apparently some 1800 tariffs are reduced in the detail of its 6000+ pages, this is merely tinkering on the edge of the free-trade deals which already exist between the United States and at least five of the TPP signatories. What critics fear is that TPP is less about free trade than about protecting the property rights of large US corporations, protecting them from direct government control by creating international arbitration panels whose decisions will be legally binding. The TPP is ‘not about free trade,’ Joseph Stiglitz has written: ‘it is an agreement to manage its members’ trade and investment relations – and to do so on behalf of each country’s most powerful business lobbies’. The secrecy with which the deal was negotiated, and the way in which the first round of consultation was restricted to members of Congress and business lobby groups, only served to convince those excluded from the initial consultation that they were kept away from the detail of the deal because these details had so much to hide!
Even if that fear proves excessive, the basic equation at the core of the case for the TPP remains unconvincing to many of Obama’s more progressive critics. No matter what the President now claims, US exports can grow without generating a new slew of high-paying US-based jobs, and they have done so – on the grand scale – in America’s immediate past. As the Petersen Institute report has conceded, the TPP will likely worsen the US trade deficit in manufactured goods, and this in the context of an economy that has already lost 5 million manufacturing jobs since 2000 as its trade deficit has mushroomed. At a moment in history in which almost one US worker in two now earns less than US$15 an hour, estimates abound that the full implementation of the TPP will reduce real wages for at least the 70% of the American labour force that has no further education or college degree. Lowering the tariff on the importation of sneakers into the United States, for example, will make those shoes cheaper for the American consumer – that much is not in dispute – but most likely only at the cost of yet further contraction of employment in the already beleaguered US-based shoe manufacturing sector.
Free trade between countries with equivalent levels of worker pay and rights might well be a ‘win-win’ process for all parties over the long period. That is something we will need to discuss if and when the TTIP agreement between the United States and the European Union (the so-called Transatlantic Trade and Investment Partnership) comes up for ratification in 2016 or beyond. But opening America’s internal markets to goods made in cheaper labour markets overseas, as the TPP will facilitate, can only be a ‘loss-loss’ process for the people making those goods at both ends of that commodity chain: reinforcing still more wage-compression abroad (to hold on to market advantage) and still more job-loss at home (as market advantage is lost).
The Obama Administration has tied its flag and its legacy to the TPP. Yet it is likely to win the ratification battle only with the support of Congressional Republicans who remain keen to cut wages and reduce still further the already-limited rights of American workers to unionise and bargain collectively. Barack Obama may want the legacy, but, if the fears of many of the TPP’s progressive critics are right, it will not be a legacy of which he will long be proud.
A fuller version of this post, with complete citations, can be found at www.davidcoates.net