Jan 31, 2018
"America has also finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs and our wealth ... The era of economic surrender is totally over," Trump crowed in his first State of the Union address Tuesday night, echoing the pro-working-American populist message he rode into the White House.
But in his near record-length speech, Trump actually said very little about trade and jobs, and nothing of substance.
Candidate Trump won Midwestern swing states in part by focusing on the reality that many people haven't seen a pay increase in years and cannot find better paying jobs because of trade deals like the 1994 North American Free Trade Agreement (NAFTA) and our 2000 China trade deal. Instead of leveling the playing field for workers, these deals made it easier for companies to outsource jobs so they can pay employees less.
Trump promised to stop American job outsourcing, bring down the trade deficit and bring jobs back with fast renegotiation of NAFTA and speedy action to reverse the huge China trade deficit. On Tuesday night, he reiterated "we expect trading relationships to be fair. And very importantly, reciprocal." But in the first year of his presidency, both the NAFTA and China trade deficits are up.
And contrary to Trump's claim that companies are "roaring back," outsourcing has continued. Hundreds of the very Carrier workers who Trump pledged to protect saw their jobs shipped to Mexico, along with 300 jobs across Indianapolis at Rexnord and another 600 at Nabisco in Chicago. Hundreds of Milwaukee GE workers saw their jobs shipped to Canada this fall, while Microsoft is outsourcing jobs to China. The list goes on.
Contrary to Trump's campaign pledge, his administration continued to grant lucrative government contracts to firms that outsource, including 15 new contracts to Carrier's parent corporation, United Technologies. And Trump's tax bill is projected to incentivize corporations to outsource even more, offering lower tax rates to firms operating offshore while failing to eliminate longstanding outsourcing loopholes.
Despite his endlessly repeated promise of China trade action, Trump has done almost nothing to slow the flood of Chinese imports or boost U.S. exports there. A comprehensive new China trade policy is needed, not only stopgap measures to counter damage to specific industries.
Worse, during Trump's China state visit, Commerce Secretary Wilbur Ross gleefully touted Goldman Sachs' new $5 billion joint fund with the Chinese government's main investment arm and plans by other Chinese state-owned and state-linked companies to acquire assets in sensitive U.S. infrastructure, energy and food sectors. Greater control over the U.S. market is part of the Chinese government's "Made in China 2025" plan to dominate the global economy, not Trump's promised "tough on China" agenda.
The sixth round of NAFTA renegotiations just ended in Montreal, but Trump's speech provided no clue how he might deliver on his pledge to redo the trade pact to benefit working people. At the heart of the deal are special investor protections that make it cheaper and less risky to outsource jobs and empower firms to attack domestic policies before tribunals of corporate lawyers.
In October, the U.S. proposed vital changes -- long demanded by many in Congress, unions and consumer groups -- to cut NAFTA's investor outsourcing protections, "Buy American" waivers and the investor-state tribunals, and to add tighter rules of origin and a mandatory performance review and reaffirmation clause. But the corporate lobby is now doing all it can to stop these changes.
The administration has also not yet proposed tough labor and environmental standards with swift and certain enforcement that would discourage companies from continuing to move jobs to Mexico, paying workers poverty wages and dumping toxins, and then importing those products back for sale here. Last week, a letter signed by nearly every Democratic member of the House of Representatives conveyed eagerness for a NAFTA rewrite they could support and the necessity of strong labor standards to be able to do so. Meanwhile, the talks are being mobbed by corporate lobbyists who want to preserve NAFTA's outsourcing protections and add new limits on food safety, consumer privacy safeguards and financial rules, and new monopoly rights for pharmaceutical firms to raise medicine prices.
To date, more than 930,000 specific American workers are certified by the Department of Labor as having lost their jobs to NAFTA. Their job loss affects us all in the form of lower wages economy-wide as those who lose jobs to trade join the glut of workers seeking jobs in sectors that can't be offshored. According to the Labor Department, almost half of laid-off manufacturing workers who find reemployment were paid less and 25 percent saw their income cut by one-fifth. That's a $7,700 pay cut for the median wage manufacturing worker. Economists have previously shown that trade-related wage loss can exceed the savings consumers get from cheaper imported goods.
Meanwhile, Mexican wages have dropped from pre-NAFTA levels, with Mexico's real minimum wage declining 19.4 percent. Manufacturing wages of under $2 per hour are now lower than in coastal China.
Unless we rewrite NAFTA, the trade pact will keep giving the green light to corporations to outsource American jobs, pushing down wages for everyone. A deal that harvests the benefits of expanded trade while halting NAFTA's job outsourcing, lowering of wages and attacks on environmental and health safeguard is doable.
What remains a mystery, which his State of the Union speech notably did nothing to clarify, is if Trump will fight for these changes and if he does, whether he can deliver a deal.
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