Tuesday, April 29, 2014

Is TPP in trouble?

As someone who spent quite a bit of time and energy trying to keep NAFTA from being passed, I must admit to great pleasure watching the problems facing the Trans-Pacific Partnership (TPP).  During the NAFTA fight, we were just overwhelmed.  Not only were up against the whole economic establishment, the groves of academe, and all the major organs of the press, we were up against that name.  Spent a lot of time just getting by the question, "Why are you against Free Trade?"  In 1993, even (or especially) the lowest classes had been exposed to enough petty and arbitrary regulation to believe a healthy dose of freedom was probably just what the doctor ordered to cure a sick economy.  And having an enlightened political debate on a subject that way less than 10% had heard of and only a tiny fraction of them remotely understood was damn near impossible.

But this time around, a trade agreement with Asia is in real trouble.  A lot has changed since NAFTA—mostly in Asia.  They have many reasons to suspect the 'great' ideas of neoliberalism.  The catastrophe that was the financial crises of 1997 pretty much disabused Asia of pirate economics as a development model. Asia is obsessed with development and any economic strategy doesn't get this result is automatically suspect.  And as any late-developing industrializing economy has proven over the years, nothing works better than import substitution and technology transfer—subjects that the neoliberals barely acknowledge exist.  These are two very different worldviews.

My guess is that TPP is doomed in the important countries of Asia.  Obama has been selling it on his latest trip and while he isn't getting a hard no, he is getting the sort of polite no that means TPP will be in the same limbo 15 years from now.  There's a video over at real news that explains what happens when a President is sent to sell something no one wants anymore entitled:
TPP Unraveling? President Obama returns from East Asia empty-handed after Japan rejects bilateral agreement - but if the TPP moves forward, will it be in the interest of most Americans?
It would be nice to win this one.  Neoliberalism needs some big losses before it will be discredited.  Losing TPP would demonstrate that at least the debate has been lost in the part of the world where most of the people live.

Japanese minister: No deal yet with U.S. on Trans-Pacific Partnership

By Agence France-Presse  April 24, 2014

Japan’s economy minister said Friday that Tokyo had not reached a basic accord with Washington over a Pacific-wide trade deal despite intense talks after a bilateral summit.

There had been hopes that Tokyo and Washington might break an impasse in the stalled talks during U.S. President Barack Obama’s visit to Tokyo.

Speaking hours before Obama’s departure, however, Japanese economy minister Akira Amari said what had been achieved was “not a basic accord although there was progress”.

“In talks between the two leaders and ministers, we have confirmed the path to solve important pending issues between Japan and the United States,” Amari told reporters.

Japan and the United States would “cooperate to help accelerate talks with other countries participating” in the Trans-Pacific Partnership (TPP) to bring it to an early conclusion, he said.

Obama and Prime Minister Shinzo Abe failed to reach an agreement on the TPP in summit talks on Thursday but told their delegates to continue negotiations.

Obama urged Japan to take “bold steps” to seal the TPP, a vast agreement that would cover about 40 percent of the global economy and a key plank in the president’s bid for a renewed US focus on Asia.

The ambitious 12-nation deal has stalled as Tokyo and Washington lock horns over key details, including Japanese tariffs on agricultural imports and US access to its ally’s major auto market.

Obama arrived in Tokyo late Wednesday on the first leg of his Asian tour which will also bring him to South Korea, Malaysia and the Philippines. He will leave for Seoul later Friday. more

Why Would Obama Push A Trade Deal That Would Cut Pay Of 90% Of Workers?

By Dave Johnson April 26, 2014

Research concludes that if you're making less than $87,000 per year (the current 90th percentile wage), the Trans-Pacific Partnership would mean a pay cut. But that's fine for corporations who want this treaty.

President Obama is in Asia, partly to "reassure" partner countries that the U.S. is a strong ally and partly to push the Trans-Pacific Partnership (TPP). Both are to counter China's growing influence. While TPP is being sold as a "strategic" countermeasure to China, like other so-called "trade" agreements TPP does not help American workers; it hurts them.

Obama In Asia Pushing TPP

President Obama is in Japan as part of his "pivot to Asia" tour of Pacific countries. He is also visiting South Korea, Malaysia and the Philippines. The trip is meant to demonstrate U.S. diplomatic and economic efforts toward Pacific nations to counterbalance China's increasing influence in the region. Part of this effort is a big push to get TPP negotiations back on track and completed.

TPP is a massive "trade" treaty between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. "Trade" is in quotes because only five of the treaty's 29 chapters actually deal with trade. Others set rules on investment, set limits on the ability of governments to regulate corporations, restrict a government's ability to spend its own tax dollars on goods made in that country (such as "Buy America" procurement policies) and other things well beyond the usual scope of what would be considered a trade agreement. This leads many to claim that the treaty is really about limiting the ability of governments to reign in the giant corporations. (For those not familiar with TPP, read all about it in ourfuture.org's TPP section.)

Most Workers Likely To Lose

The treaty is being negotiated in secret with lots of corporate involvement and not much involvement by stakeholders like labor, environmental, human rights, consumer and other groups that would be affected. But even though it is secret we know from leaks that TPP as currently negotiated appears to be designed to benefit a few giant corporate interests, while potentially driving the nail into the coffin of America's middle class.

Since NAFTA our "trade" agreements have gotten a bad reputation with the public. People have come to realize that these "free trade" agreements are causing companies to close American factories and open factories in countries with low wages and that allow companies to pollute. Pitting American workers against low-wage workers has encouraged employers to cut wages and benefits for those who are able to keep their jobs.

A September 2013 study, "Gains from Trade? The Net Effect of the Trans-Pacific Partnership Agreement on U.S. Wages," by the Center for Economic and Policy Research (CEPR), looked at the effect of past trade agreements and estimated what TPP would do if enacted. The study estimated that the TPP would force wages down (even more) for almost all U.S. workers.

The CEPR study estimated that U.S. economic gains would be only 0.13 percent of gross domestic product by 2025. In exchange for these small gains, according to the study, "... most workers are likely to lose—the exceptions being some of the bottom quarter or so whose earnings are determined by the minimum wage; and those with the highest wages who are more protected from international competition."

Any workers who don't lose would not win as a result of the "trade" parts of the treaty. "Rather, many top incomes will rise as a result of TPP expansion of the terms and enforcement of copyrights and patents." So everybody loses except those who own copyrights and patents.

In "'Trade' Deal Would Mean a Pay Cut for 90% of U.S. Workers," Public Citizen's Eyes on Trade blog explains just who would lose,
[CEPR's] Rosnick shows that if we assume that trade has contributed just 15% of the recent rise in inequality (a still conservative estimate), then the TPP would mean wage losses for all but the richest 10% of U.S. workers. So if you're making less than $87,000 per year (the current 90th percentile wage), the TPP would mean a pay cut.
But "everybody losing on wages" is not a bad thing for giant corporations; it's a good thing. As much as they can squeeze down labor costs, that boosts their bottom line. And they are exactly who is pushing for this treaty.

Enormous, Humongous Trade Deficits

The United States used to try to have balanced trade, often with a surplus. This means we were selling more to the world than we were buying. More money coming in than going our made us comparatively "rich." But since the free trade agenda that came along in the late 1970s, which was accelerated by the Reagan administration, we have been running continuing trade deficits. Then when we opened up trade with China, the deficit skyrocketed.

Now this trade deficit has reached enormous proportions, more than $700 billion before the recession. (It actually fell last year to $471.5 billion in 2013, from $534.7 billion in 2012.) Our trade deficit with China alone was over $318 billion last year.

In summary: the free-trade legacy so far.
  • Trillions of dollars lost. We have an ongoing trade deficit bleeding money from our economy.
  • Stagnant or falling wages for most of us. Pitting Americans against low-wage workers has forced US wages down.
  • Millions of good-paying jobs lost. Most of these workers are getting paid much less now, if they can find work.
  • Tens of thousands of factories closed, moved out of the country. This costs us our ability to make a living as a country.
  • Entire industries lost. As we lose the factories and supply chains, entire industries disappear.
  • Devastation of entire regions of the country. Nothing has come along to replace manufacturing in much of the country. Go take a look at Detroit, Flint, Cleveland, Lorain, Eria and so many other areas.
  • Massive increase in income and wealth inequality. A few billionaires do great when labor costs decline and profits rise.
  • Destruction of the middle class and maybe even our democracy. Just look around you.
Democracy Or Oligarchy?

The public "gets it" that these trade deals have really, really hurt regular, working Americans and TPP would continue free trade's devastation of the middle class. There is a revolt going on in both parties in the Congress. House Democratic Leader Rep. Nancy Pelosi and Senate Majority Leader Harry Reid have reaffirmed that they don’t agree with the current process and course of TPP. Tea party conservatives and progressives oppose TPP. Even many American corporations oppose the current TPP!

The public "gets it." Take a look at the Trade and Manufacturing section of the Populist Majority poll-aggregation website.
  • "95% favor goods manufactured in America."
  • "73% favor offering companies a tax break for every job they bring from overseas to the US." But current law gives tax breaks and deferrals for jobs, factories and profit centers shipped out of the country. Republicans are obstructing efforts to change this.
  • 84% of the public "support a concerted plan to make sure that economic, tax, education and trade policies in this country work together to help support manufacturing." But that would be "government action" and "picking winners and losers" so it is opposed in the Congress.
  • "60% say the US needs to “get tough” with countries like China in order to halt unfair trade practices, including currency manipulation, which will keep undermining our economy."
  • "65% consider outsourcing, rather than a potential shortage of skilled workers, as the reason for a lack of new manufacturing jobs."
  • "56% believe trade agreements that allow corporations to sue governments, such as the Trans-Pacific Partnership, should be rejected."
Democracy would say hold off on TPP. But a few giant, multinational corporations and the billionaires behind them want it. So in our corporate-dominated political system, it's full speed ahead for TPP.

Trading Our Economy For National Security Fears?

The history of this is that many in government believe that America’s national security interests are served by letting the big corporations cut these trade deals with countries like China and Japan, because security arrangements should have a priority over economic concerns. So they have worked to strengthen South Korea, Japan and even China at the expense of our own economy. This was a Cold War strategy. Now they are using China as a bogeyman to push the TPP, saying we need it to counter China's influence. Get all of these countries into this agreement and we'll be stronger than China.

This way of seeing the TPP as a way to strengthen these strategic partners allows those countries to extract concessions in the treaty negotiations that the giant corporations like, but that hurt our own country's economy. State Department and various National Security interests give this a go-ahead; they say this is good because it will elevate those countries. Meanwhile, our factories close, our own industries suffer.

Of course, even as this argument is used we do nothing about our massive trade deficit with China, we allow them to manipulate their currency and exploit workers.

The reality at this point is that it is now in the security interest of America to rebuild our own middle class, rebuild our infrastructure and competitive position, rebuild our education and research institutions, rebuild our own democracy. Real security comes from having a strong economy and a strong middle class.

We can do trade right. We can elevate the people and economies of other countries without exploiting working people around the world and destroying our own middle class.

Scott Paul of the Alliance for American Manufacturing wrote Thursday that "A Good Trade Deal Is Well Worth the Wait":
[L]ost in this rush to secure a pact is what the TPP (and every other trade agreement) should actually accomplish: A more balanced U.S. trade account that ultimately benefits the American middle class, which recent reports show could use some help right about now. Unfortunately, America's track record on trade policy has pushed our trade deficits in the wrong direction and weakened the middle class. And despite the Obama administration bromides that this will be a "21st century trade agreement," it's hardly certain that the TPP will be any different, at least when it comes to deterring currency manipulation.

With that in mind, I say a good trade deal is well worth the wait and effort.

We've already seen what's happened when trade policy is inexpertly wielded as a tool of foreign diplomacy. Consider the debacle of permanent normalized trade relations with China in 2000. In exchange for the promises of a more open Chinese society, a Republican Congress and a Democratic president removed the threat of annual review of tariffs on Chinese imports. This resulted in none of the hoped-for democratic reforms (if anything, China has used its funding stream courtesy of our burgeoning trade imbalance to become more belligerent) and; massive job loss in the U.S. manufacturing sector. But while China and Japan couldn't be more different in terms of domestic governance, they share a remarkable similarity in international economic policy: Both regularly distort their currency exchange rates to push their trading surpluses with the U.S. high and keep them higher. Despite that fact, no U.S. action has been taken against China or Japan for manipulating their currency. And though there is much secrecy around the details of the TPP proposal (of which Japan is a potential party and is, as the world's third largest national economy, the most important negotiator aside from the U.S.), a rule barring currency manipulation has most certainly not been discussed.
We can do so much better. Our government can negotiate for the American people instead of against them, as they have done. Step back, take a breath, wait ... Get the giant corporations out of the front seats of the process and go back and make NAFTA work for us and Mexican working people and farmers. Make trade work for the American people and Chinese working people. more

Radiate Me with Trade Deals, Baby

Obama Pivots, China Profits


Let’s start with a flashback to February 1992 – only two months after the dissolution of the Soviet Union. First draft of the US government’s Defense Planning Guidance. It was later toned down, but it still formed the basis for the exceptionalist dementia incarnated by the Project for the New American Century; and also reappeared in full glory in Dr Zbig “Let’s Rule Eurasia” Brzezinski’s 1997 magnum opus The Grand Chessboard.

It’s all there, raw, rough and ready:
“Our first objective is to prevent the reemergence of a new rival, either on the territory of the former Soviet Union or elsewhere, that poses a threat on the order of that posed by the Soviet Union. This … requires that we endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power. These regions include Western Europe, East Asia, the territory of the former Soviet Union, and Southwest Asia.”
That’s all one needs to know about the Obama administration’s “pivoting to Asia”, as well as the pivoting to Iran (“if we’re not going to war”, as US Secretary of State John Kerry let it slip) and the pivoting to Cold War 2.0, as in using Ukraine as a “new Vietnam” remix next door to Russia. And that’s also the crucial context for Obama’s Pax Americana Spring collection currently unrolling in selected Asian catwalks (Japan, South Korea, Malaysia and Philippines).

Obama’s Asia tour started this week in full regalia at the famed Jiro restaurant in Ginza, Tokyo, ingesting hopefully non-Fukushima radiated nigiri sushi (disclosure: I was there way back in 1998, when sushi master Jiro Ono was far from a celebrity and the sushi was far from atomic). Obama’s host, hardcore nationalist/militarist Prime Minister Shinzo Abe, obviously picked up the bill. But the real bill comes later, as in Japan bowing to strict US demands – on trade, investment, corporate law and intellectual property rights – embedded in the 12-nation Trans-Pacific Partnership (TPP), which is code for American Big Business finally cracking open the heavily protected Japanese market.

Abe is a tough customer. His rhetoric is heavy on “escaping the post-war regime”, as in re-weaponizing Japan and not playing second fiddle militarily to Washington in Asia anymore. The Pentagon obviously has other ideas. Post-sushi at Jiro, what matters for Obama is to force Tokyo to bend over not only on TPP but also on keeping the weaponizing subordinated to the larger US agenda.

Beijing, predictably, sees all that for what it really is, as expressed in this Xinhua op-ed; the actions of an “anachronistic”, “sclerotic” and “myopic” superpower that needs to “shake off its historical and philosophical shackles”.

The Southeast Asia leg of the Spring collection tour is all about making sure to Malaysia and Philippines, not as strong militarily as Vietnam, that the US Navy will never be replaced as the hegemon in the South China Sea – or even allow China to reach parity with it. It’s at the heart of the “pivoting to Asia” as containment of China, whose aim is preventing China from becoming a naval power simultaneously in the Indian Ocean and the Western Pacific.

The Pentagon is predictably paranoid, accusing China of waging not only one but “three warfares” against the US. The fact is Beijing is developing a state-of-the-art underground base for 20 nuclear submarines in Hainan island just as Malaysia boosts its own submarine base in Borneo and the Philippines keeps imploring Washington for more planes, ships, airstrips and cyber capabilities as protection for what it regards as its absolute priority: explore for oil and gas in the West Philippine Sea to boost the economy.

Radiate me with trade deals, baby

The Spring collection is far from derailing other pivoting – whose latest offering is the current “anti-terrorist” campaign in eastern Ukraine by the Kiev regime changers, which follows a most curious calendar. CIA’s John Brennan hits Kiev, and the regime changers launch their first war on terra. Dismal failure ensues. Vice President Joe Biden visits Kiev and the regime changers, right on cue, relaunch their war on terra.

Thus the pivoting to Cold War 2.0 proceeds unabated, as in Washington working hard to build an iron curtain between Berlin and Moscow – preventing further trade integration across Eurasia – via instigation of a civil war in Ukraine. German Chancellor Angela Merkel remains on the spot: it’s either Atlantic high-fidelity or her Ostpolitik – and that’s exactly where Washington wants her.

As for the batshit crazy factions fully deployed across the Beltway revolving door, everything goes, from “warning” China not to pull a Crimea to advocating war in Syria and even the North Atlantic Treaty Organization entering a nuclear war, as shownhere by the appropriately denominated Anne Marie Slaughter. This is what she’s teaching her exceptionalist students at Princeton.

How’s Beijing reacting to all this hysteria? Simple: by reaping dividends. Beijing wins with the US offensive trying to alienate Moscow from Western markets by getting a better pricing deal on the supply of Eastern Siberian gas. Beijing wins from the European Union’s fear of losing trade with Russia by negotiating a free-trade agreement with its largest trading partner, which happens to the be the EU.

And then, the sterling example. Just compare Obama’s Spring collection tour, as a pivoting appendix, to the current tour of Cuba, Venezuela, Brazil and Argentina by Chinese Foreign Minister Wang Yi. It’s a business bonanza, focused on bilateral financing and, what else, trade deals.

It’s all in the mix: Peruvian and Chilean copper; Brazilian iron and soybeans; support for Venezuelan social programs and energy development; support for Cuba in its interest for greater Chinese involvement in Venezuela, which supplies Cuba with subsidized energy.

And all this against the background of a Beltway so excited that the Chinese economy is in deep trouble. It’s not – it grew at 7.4% year-on-year for the first quarter of 2014. Demand for iron and copper won’t significantly slow down – as the Beijing-driven urbanization drive has not even reached full speed. Same for soybeans – as millions of Chinese increasingly start eating meat on a regular basis (soybean products are a crucial feedstock). And, of course, Chinese companies will not losee their appetite for diversifying all across South America.

For the large, upcoming Chinese middle class – on their way to becoming full-fledged members of the number one economic power in the world by 2018 – this Spring collection is a non-starter. He or she would rather hit Hong Kong and queue up in Canton Road to buy loads of Hermes and Prada – and then strategically celebrate with Jiro quality, non-Fukushima-radiated, sushi. more


  1. LOL.."Obama Pivots, China Profits" its really humorous but gives good information. the dumping done by the Chinese in the previous years are now affecting them. the sales have been down and their dump is now dumped in their own country. if there is an economic slowdown here then the world will be affected especially America.
    1 Bhk flat for sale in Jalgaon

  2. Anyone in the US who thinks that Barack Obama is serving their interests is (HI), as you defined yesterday. Our Preznit so offended his Japanese counterparts (DI = Diplomatically Illiterate?) that they allowed articles about his shameful pimping for TPP to surface in the local media ( http://ex-skf.blogspot.com/2014/04/president-obama-demanded-concessions.html ).

    There should be no doubt about where Obama stands on Keystone or any other initiative that USA Inc. wants.

  3. If we want to save the middle class we also need some concrete ideas to stop job poaching from blue states like Washington and California to Red States like Texas and South Carolina. Unfortunately the only answer seems to be lower wages and more tax breaks for the damn rich. Toyota is moving its headquarters from California to Texas. God it scares me that so many women in my family have been forced to take jobs in fundamentalist states like NC and Texas. I don't think women or blacks will even have the right to vote in those places 5 years from now.