The Trans-Pacific Partnership: A Class Issue And A Profit Pathology

Much of what we know about the Trans-Pacific Partnership, negotiated entirely in secret, is from a release by Wikileaks, an organization dedicated to exposing the powerful in the public interest (source:  wikileaks.org/tpp)

Much of what we know about the Trans-Pacific Partnership, negotiated entirely in secret, is from a release by Wikileaks, an organization dedicated to exposing the powerful in the public interest. (source: wikileaks.org/tpp)

Last year’s mid-term elections are long over, but the effects are yet to be felt. It was an election that ended in a Republican landslide — the Senate is now Republican-controlled. Few realized the policy implications. On November 5th, the day after the election, now Senate Majority Leader Mitch Mcconnell staged a press conference to bring in the new era. Early in the press conference, a question signaled what is to be a priority–and probably the most important legislative battle–in the new Congress:

“What are a couple of things you think you can work with the president on?”

”Trade agreements,” said Mcconnell.  “The president and I were just talking about that right before I came over here.  Most of his party is unenthusiastic about international trade.  We think it’s good for America.  And so I’ve got a lot of members who believe that international trade agreements are a winner for America.  And the president and I discussed that right before I came over here.  And I think he’s interested in moving forward.  I said, send us trade agreements.  We’re anxious to take a look at them.”

Although not mentioned by name, it was a clear reference to the Trans-Pacific Partnership (T.P.P.), a major trade deal in the works expected to devastate America’s working class. Like previous so-called “free trade deals”–N.A.F.T.A. and C.A.F.T.A.–the T.P.P. is less about trade and more about limiting national governments abilities to adopt their own regulatory schemes. Twelve countries are currently negotiating the agreement: The U.S., Japan, Canada, Mexico, Australia, New Zealand, Peru, Chile, Vietnam, Singapore, Malaysia, and Brunei.

T.P.P.’s main function is the establishment of a business-friendly regulatory structure in member states. It extends patent monopolies; it would restrict the freedom of countries to impose environmental regulations; it would even restrict what health services a country could provide to its citizenry. Some fear it would be a backdoor for the wildly unpopular S.O.P.A. and P.I.P.A. bills that failed to make it through the House due to popular unrest. Pretty much everything that a government might do would be subject to the stipulations of the Trans-Pacific Partnership. In the words of Wikileaks editor Julian Assange: “if you read, write, publish, think, listen, dance, sing or invent; if you farm or consume food; if you’re ill now or might one day be ill, the T.P.P. has you in its crosshairs.”

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Central to the T.P.P. is the creation of so-called “investor-state tribunals,” courts in which corporations can actually sue states over perceived limitations on their ability to make a profit. It’s a loss of sovereignty: it means that if the environmental laws are lax in Vietnam, then corporations have a legal basis to expect the same lax laws in the United States as well; it’s a race to the bottom.

And when it actually comes to trade, T.P.P. is really all about reducing the third world to an impoverished service role. American multinationals are huge enterprises, the recipients of decades of protectionist policy, subsidy, and other “gifts” from the American Government such as access to government research and other elements of public infrastructure. When subsidized American agricultural goods and other commodities flood foreign markets, local competitors find themselves unable to compete. Exports from the third world become limited to low-value-added commodities as aspiring foreign enterprises fail to compete with high-value-added imports from large American multinationals — and as “experts” warn of “comparative advantage.” The result is a shock to these economies: mass unemployment, limited growth, and a conducive environment for mass migration.

T.P.P.’s predecessor, the North American Free Trade Agreement (N.A.F.T.A.), has a particularly sordid history in Mexico. According to an analysis by C.E.P.R., in the two decades since N.A.F.T.A., Mexican G.D.P. growth per capita has increased a mere 18.7%; compare this to a 98.7% growth for the twenty years prior. Mass poverty has continued unopposed and unemployment has become a serious issue. All of this led to massive migration to the United States during the relevant period. Expecting different results from T.P.P. would be reckless in the extreme, but, of course, the clear data on the topic suggests that proponents have unstated motives.

Another major feature is the trade deficit. The U.S. has a trade deficit of close to $540 billion a year (roughly 3% of G.D.P.) This means that we’re importing $540 billion more than we’re exporting — that’s 540 billion dollars worth of job-creating economic demand lost each year; when you’re importing products, you’re not producing products and creating employment. It’s $540 billion worth of capital that flows away from the U.S. economy each year. This is, in fact, one of the major sources of the national budget deficit, though it’s never mentioned in this light — largely because the supposed budget crisis is mere farce meant to scare a public into accepting cuts to important social programs. The trade deals of the last few decades are an important source of these large trade deficits. Currently the United States has a 260 billion dollar trade deficit with the 11 other countries in the T.P.P. proposal — it’s a situation that will only get worse with the Trans-Pacific Partnership.

Some have a reason to want to support such a “trade deal.” Recently a full segment on the T.P.P. was featured on the Diane Rehm Show, one of N.P.R.’s flagship programs. One of the “expert guests” was Linda Dempsey of the National Association of Manufacturers, a trade association eager to access foreign, low-wage labor markets in order to offshore American jobs — obviously it was going to be an exercise in propaganda.

“The 20 countries we have free trade agreements with right now purchase 47% of our exports,” said Dempsey. “We have a trade surplus with our 20 free trade partners including NAFTA.”

Actually, "free trade agreements" have lead to huge trade deficits.  (source: Public Citizen)

Actually, “free trade agreements” have lead to huge trade deficits. (source: Public Citizen)

Notice the language: “exports” and not “net exports” — so it’s completely meaningless propaganda. Public Citizen did an analysis–“U.S. Trade Deficits Have Grown More Than 440% with FTA Countries, but Declined 16% with Non-FTA Countries”–on the claim that we have a “trade surplus with our 20 free trade partners” and found it to be completely false (see the above chart); in fact, it’s quite the opposite. Among the many misleading methodologies used by the National Association of Manufactures to make this claim are simply ignoring imports and counting “re-exports,” thereby ignoring net exports:

[The National Association of Manufacturers] has misleadingly claimed that the United States has a manufacturing surplus with [Free Trade Agreement] nations by counting as U.S. exports goods that actually are made overseas – not by U.S. workers. NAM’s data include “re-exports” – goods made elsewhere that are shipped through the United States en route to a final destination. Determining FTAs’ impact on U.S. jobs requires counting only U.S.-made exports.

Dempsey never missed a chance to lie to the public: “There actually is no real link between income inequality and trade deals.” This is also false — to quote an article by Public Citizen on the impact of the “free trade agreements”:

Longstanding economic theory states that trade will increase income inequality in developed countries. In the 1990s a spate of economic studies put the theory to the test, resulting in an academic consensus that trade flows had indeed contributed to rising U.S. income inequality. The pro-“free trade” Peterson Institute for International Economics (PIIE), for example, found that nearly 40 percent of the increase in U.S. wage inequality was attributable to U.S. trade flows. In 2013, when the Economic Policy Institute (EPI) updated an oft-cited 1990s model estimate of trade’s impact on U.S. income inequality, it found that using the model’s own conservative assumptions, one third of the increase in U.S. income inequality from 1973 to 2011 – the Fast Track era – was due to trade with low-wage countries. The role of trade escalated rapidly from 1995 to 2011 – a period marked by a series of Fast-Tracked “free trade” deals – EPI found that 93 percent of the rise in income inequality during this period resulted from trade flows. Expressed in dollar terms, EPI estimates that trade’s inequality-exacerbating impact spelled a $1,761 loss in wages in 2011 for the average full-time U.S. worker without a college degree.

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At one point on the Diane Rehm Show, they began taking calls from listeners. The very first caller–“Melinda of D.C.”–immediately put to rest many of the mistaken claims about the T.P.P.: that it’s a source of growth, jobs, and wages.

When it comes to growth, Melinda cited a study by the Department of Agriculture which showed that, even if it eliminated all tariffs, “the T.P.P. is projected to have no measurable impacts on real G.D.P.” in the United States — a “0.00% difference in real G.D.P. by 2025.”

When it comes to jobs, she pointed out a Washington Post article that found that, although White House officials are claiming some 650,000 in newly created jobs from the T.P.P., actually “the net number of new jobs is zero.” The methodology behind these hugely inflated numbers is to merely look at exports expected from the T.P.P. and attribute to them an amount of jobs — completely ignoring the larger increase of imports in the process. The article concludes: “Our advice remains: be wary whenever a politician claims a policy will yield bountiful jobs. In this case, the correct number is zero (in the long run), not 650,000, according to the very study used to calculate this number.”

When it comes to wages, she cited a study by the Center for Economic and Policy Research that estimated the impact of the Trans-Pacific Partnership on the wages of American workers — and it’s not impacts we share equally. Based on a few well-established assumptions about the effects of trade deals on economic inequality–as highlighted above–the majority of Americans are expected to lose as part of the trade deal:

“…under any reasonable assumptions about the effect of trade on inequality, the median wage-earner, and therefore the majority of workers, suffers a net loss as the result of these trade agreements.”

A graphical representation of the effects from the T.P.P. on income.  (Source:  C.E.P.R.)

A graphical representation of the effects from the T.P.P. on income. Here “50%” and “15%” refer to the percent of income inequality attributable to increases in trade; it’s a range of estimates representative of the literature on the topic. (source: C.E.P.R.)

In fact, as one can see by the graph from C.E.P.R. (pictured above,) the vast majority of Americans will lose due to the implementation of the Trans-Pacific Partnership, with only a few at the very top standing to gain in any noticeable way. The T.P.P. is a class issue, these’s simply no other way to look at it.

All of this, of course, means that the T.P.P. has been negotiated entirely in secret; the public would not accept it.

Linda Dempsey was not without a last refuge, the pro-T.P.P. crowd’s “nuclear argument”: “If we don’t engage with the rest of the world; if we don’t tear down these barriers…”

The idea is that opponents of the deal are simply anti-progress, anti-world isolationists; to oppose the T.P.P. is to oppose integration with the world itself — it’s the classic straw man.

The very term “globalization” has been claimed by the very same corporate forces of destruction behind the Trans-Pacific Partnership. The usage of the term is perhaps dissected best by political scientist Michael Parenti:

Globalization is an attempt to extend corporate monopoly control over the entire globe, over every national economy, over every local economy, over every life. It does this by treating international corporate property rights and international corporate investment rights as supreme, as taking precedence over all other rights including our democratic sovereignty.

It is here, in the fight over the Trans-Pacific Partnership, that we are reminded of what America is really all about — what it consistently stands for at home and abroad. America represents something very different from the “neutral progressive vision” that so many in the United States take for granted — fish that don’t notice the water.

America is about property rights as supreme over all others. James Madison–America’s most important Constitutional Framer–laid out this principle clearly in his Federalist Number 10: “The diversity in the faculties of men, from which the rights of property originate is [an] insuperable obstacle to a uniformity of interests. The protection of these faculties is the first object of government.” The protection of one’s ability to acquire and hold wealth, no matter the consequence, is the first object of government. This was Madison’s vision, and it is enshrined in the Constitution and American political thought. It is the essence of America, and the Trans-Pacific Partnership, with its elevation of investor rights over human rights, is merely the next step in visiting America’s ideology upon the world.

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