The Great Debate » trans-pacific partnership http://blogs.reuters.com/great-debate Tue, 25 Oct 2016 20:07:05 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.5 Trump and Bernie are both right: ‘Free trade’ is killing us http://blogs.reuters.com/great-debate/2016/04/12/forget-free-trade-heres-what-fair-trade-looks-like/ http://blogs.reuters.com/great-debate/2016/04/12/forget-free-trade-heres-what-fair-trade-looks-like/#comments Wed, 13 Apr 2016 03:00:06 +0000 http://blogs.reuters.com/great-debate/?p=47507 A closed factory is seen in Sandusky, Ohio November 1, 2012. President Barack Obama and Republican Mitt Romney went back on the attack on Thursday, breaking a storm-induced campaign truce to hit the road and pound home their closing messages in the final stretch of a tight battle for the White House. REUTERS/Eric Thayer (UNITED STATES - Tags: POLITICS ELECTIONS USA PRESIDENTIAL ELECTION) - RTR39W36

A closed factory in Sandusky, Ohio, November 1, 2012. REUTERS/Eric Thayer

Trade has been central to the 2016 presidential political debate, from Donald Trump threatening 45 percent tariffs on Chinese imports to Senator Bernie Sanders (I-Vt.) pressuring former Secretary of State Hillary Clinton to oppose President Barack Obama’s Trans-Pacific Partnership deal, the pact she earlier celebrated as the “gold standard” for trade accords.

It is becoming clear how ruinous U.S. global trade and tax policies have been. Yes, Americans have benefited from the lower prices and increasing variety of imported goods. But the nation has been running unprecedented trade deficits, now at about $500 billion a year, or 3 percent of gross domestic product.

The United States lost an estimated 2.4 million jobs to China trade alone from 1990 to 2010 while running the largest trade deficits with that country in recorded history. As companies moved good jobs to countries, like China, with low wages and scant environmental or consumer protections, entire communities in the United States were savaged. Economists estimate trade with low-wage countries has lowered blue-collar workers’ wages about $1,800 a year. Displaced workers lose incomes, homes, marriages, hope — and suffer through stunningly slow adjustments, often to lower-income jobs.

Factory employees are seen working in the plant of General Motors in the city of Silao, in the state of Guanajuato, Mexico in this November 25, 2008 file photo. The specter of bankruptcy hanging over automakers in Detroit is also stoking fears in Mexico, whose car industry is heavily dependent on the U.S. Economy. Mexico was the world's 10th-biggest car producer in 2007, building cars for most of the world's top car makers, but exports are slackening as the United States goes through its worst financial crisis since the Great Depression. To match feature AUTOS/MEXICO   REUTERS/Henry Romero/Files (MEXICO)

Factory employees working in a General Motors plant in Silao, in the state of Guanajuato, Mexico, November 25, 2008. REUTERS/Files

The benefits of trade accords have flowed largely to corporate balance sheets, to investors and to high-level executives. Workers, meanwhile, have suffered a loss of wages, security and power.

So what would a new U.S. trade policy look like? First, it would break with the current template of trade accords by abandoning the Trans-Pacific Partnership, which is pending ratification, and suspending negotiations on the Trans-Atlantic Trade and Investment Partnership, or TTIP, now underway.

The new trade policy would be based on a different set of principles. Trade should be seen as a means, not an end, as Dani Rodrik, a professor of international political economy at Harvard’s John F. Kennedy School, argues. Washington should seek a trading system that would enable the United States, and other nations, to pursue their own values.

A sensible system would allow countries to protect their social arrangements, including workers’ rights and environmental laws. Congress would regain authority to set clear objectives for trade accords, to decide what could be included in negotiations and to have access to the negotiations while they are underway. Fast-track trade authority, which allows the president to negotiate in secret and forces Congress to vote up or down without the ability to amend, would be repealed.

The substance of trade discussions would also change radically. Instead of detailed negotiations about enforcing drug companies’ patents, for example, a new focus would be on pressing issues that affect working people. Raising and harmonizing taxation of global corporations, while shutting down tax havens and coordinating enforcement efforts, would be a centerpiece, as the Panama Papers tax-dodging scandal justifies. Pushing to place a global price on carbon emissions to counter climate change would be a first priority. Empowering countries to retaliate against currency manipulation would be central.

General Motors Willow Run Powertrain plant is seen in Ypsilanti, Michigan June 2, 2009. GM said Monday it would permanently close more plants, including the historic Willow Run plant, and idle three others to trim production and labor costs under bankruptcy protection.    REUTERS/Rebecca Cook  (UNITED STATES TRANSPORT BUSINESS EMPLOYMENT)

General Motors Willow Run Powertrain plant in Ypsilanti, Michigan, June 2, 2009. Demolition of the buildings began in late 2013. REUTERS/Rebecca Cook

One initiative, suggested by Dean Baker, director of the Center for Economic Policy Research, would remove barriers that protect the inflated earnings of doctors, dentists and lawyers. If trained doctors and dentists from abroad were allowed to practice in the United States, he estimates savings of about $90 billion a year, or roughly $300 a person annually.

International negotiations might also create a global fund to pay for public, direct financing of medical research, with the results staying in the public domain. In the United States, Baker estimates, lower drug costs would likely save $360 billion a year, or 2 percent of GDP, about $1,100 a person a year. That is a far higher benefit than even advocates say would be produced from the TPP deal.

A thoughtful and comprehensive alternative trade policy has been put forth by the Congressional Progressive Caucus, the largest caucus in the House of Representatives with more than 70 members. The plan calls for a goal of more — but balanced — trade. The president could announce that the United States plans to move to roughly balanced trade by the end of five years. That would put countries with a trade surplus on notice that they must increase domestic demand and decrease reliance on export-led growth. It would also put global corporations on notice that if they want access to U.S. markets, they had better invest in the United States.

A closed factory is seen in Sandusky, Ohio November 1, 2012. President Barack Obama and Republican Mitt Romney went back on the attack on Thursday, breaking a storm-induced campaign truce to hit the road and pound home their closing messages in the final stretch of a tight battle for the White House. Obama has a somewhat easier path to 270 electoral votes than Romney, fueled primarily by a small but steady lead in the vital battleground of Ohio - a crucial piece of any winning scenario for either candidate - and slight leads in Wisconsin, Iowa and Nevada. Obama plans to visit Ohio on each of the last four days of the campaign, and plans two more trips to Wisconsin and Iowa.  REUTERS/Eric Thayer (UNITED STATES - Tags: POLITICS ELECTIONS USA PRESIDENTIAL ELECTION)

A closed factory in Sandusky, Ohio, November 1, 2012. REUTERS/Eric Thayer

The call for more balanced trade was embraced by the world’s 20 leading economies (the G-20) after the financial collapse in 2009. But the consensus didn’t survive efforts by Germany and China to export their way out of the crisis.

Balanced trade could be produced, as Warren Buffet once proposed, with a system of trade vouchers that would give companies the right to import a stated amount of goods, with that amount adjusted to get closer and closer to projected export totals each year. Or each major county that Washington trades with could be given a limit on the deficits the United States will abide. That would put pressure on these trading partners to increase imports, reduce exports or pay fines that can serve as de facto tariffs.

Second, the proposed plan details steps to enforce labor rights, human rights, and consumer and environmental protections. It would also protect countries’ right to promulgate higher standards, if desired. It would require that trade accords secure affordable access to essential medicines, which would curb drug companies’ efforts to extend patent protections.

Third, the progressive plan mandates that trade accords respect “nationhood rights.” To do this, it would repeal the Investor State Dispute Settlement system, which would force global investors to rely on national legal systems. If global corporations are concerned about corrupt local systems, they can self-insure or invest elsewhere. It would also expand and defend “Buy America” government procurement policies. Taxpayers should be able to demand that their taxes go to support jobs in America — not jobs across the world.

Fourth, the plan would work to accomplish in fact what free traders argue for in theory: That the winners from global trade compensate the losers. Displaced American workers would gain assistance under an expanded Trade Adjustment Assistance Act; they would receive extended unemployment benefits and wage insurance if they were forced to take lower-paying jobs. New initiatives would provide targeted assistance to communities hit by plant closings. In Denmark and Germany, where workers earn higher wages than in the United States, far more resources are devoted to sophisticated training and placement programs to ensure that workers are not victimized by the trading system.

More balanced trade would also benefit from a clear industrial strategy, one focused on capturing the lead in inventing, building and marketing the essential products of the green industrial revolution, which has already begun to sweep the world.

Proponents of Washington’s current system paint the choice as one between free trade and protectionism. But current trade accords aren’t creating free trade; they are enforcing selective protection for special interests. Ruinous U.S. deficits aren’t an inevitable result of globalization, but the intended result of corporate trade and tax policies.

Sanders and Trump have helped expose the folly of America’s current course.  Our trading policies are classic examples of rules rigged to benefit the few.  Economists increasingly accept that they contribute directly to our increasingly extreme inequality, as workers lose ground and CEOs clean up.  The Congressional Progressive Caucus proposal shows that sensible alternatives are possible.

America’s current plight is a question of politics and power, not fate.

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Obama looks abroad to secure his legacy http://blogs.reuters.com/great-debate/2015/06/24/defeated-at-home-obama-looks-abroad-to-secure-his-legacy/ http://blogs.reuters.com/great-debate/2015/06/24/defeated-at-home-obama-looks-abroad-to-secure-his-legacy/#comments Thu, 25 Jun 2015 03:17:08 +0000 http://blogs.reuters.com/great-debate/?p=41525 U.S. President Barack Obama meets with the leaders of the Trans-Pacific Partnership (TPP) countries in Beijing

U.S. President Barack Obama (2nd R) meets with the leaders of the Trans-Pacific Partnership (TPP) countries in Beijing November 10, 2014. REUTERS/Kevin Lamarque

At a moment when much of the world is watching Greece, one of the most critical moments in Barack Obama’s presidency is also fast approaching.

Within a few days, the president could secure not just a historic nuclear deal with Iran, but also sign into law domestic legislation that could enable two potentially landmark international trade agreements — allowing the country to help write what U.S. officials have called “the rules of the road” for the 21st Century world economy.

Together with an Iran deal, the success of a Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP) — which would link the economies of countries that generate 40 percent and 50 percent respectively of global gross domestic product — could be the high point of Obama’s second term, embedding U.S. influence in Asia-Pacific, the Americas and Europe. These victories would become a major part of his presidential legacy as his tenure in the White House begins to wind down.

The fact that Obama’s second-term legacy is being defined on the foreign policy front, rather than by domestic policy, has become a relatively common pattern for re-elected presidents in recent decades. Since his 2012 campaign against Republican Mitt Romney, Obama has achieved very little domestic policy success.

His gun control bill was defeated and looks unlikely to be rejuvenated despite this month’s tragic shooting in Charleston. Comprehensive immigration reform faces significant opposition in the Republican-controlled House of Representatives. And the prospect of a long-term budgetary “grand bargain” with Congress in 2015 or 2016 looks very unlikely too. Implementation of his landmark healthcare initiative was widely seen as botched.

Many re-elected presidents in the postwar era have, like Obama, struggled to acquire domestic policy momentum, in large part because their parties, as with the Democrats now, often hold a weaker position in Congress. Thus Dwight Eisenhower in 1956, Richard Nixon in 1972 and Bill Clinton in 1996 were all re-elected alongside Congresses where both the House of Representatives and Senate were controlled by their partisan opponents.

While Congress can significantly influence the course of Obama’s foreign policy — the legislature, for example, will vote on any deal that is ultimately brokered with Iran — it generally has less latitude over international issues, compared to domestic issues. So with little opportunity to push domestic policy forward, the president’s focus on foreign policy may only grow for his remaining period in office, especially if the U.S. economy continues to recover.

The Iranian deal is being brokered amidst frenetic diplomacy, with a June 30 deadline — set by the so-called P5+1 (United States, China, Russia, United Kingdom, Germany and France) — fast approaching. Despite domestic U.S. and international criticism of such a deal, securing a comprehensive nuclear agreement would be a major victory for the White House. An Iran deal also has the potential to transform the wider geopolitics of the Middle East, and help with Obama’s broader goal of enhancing global nuclear security.

On the trade policy front, the president hopes to sign into law domestic legislation, Trade Promotion Authority and Trade Adjustment Assistance, which will enable the Trans-Pacific Partnership. The TPP reflects Obama’s desire to reorient U.S. international policy towards the Asia-Pacific region and other strategic, high-growth markets.

The president also wants to secure the Transatlantic Trade and Investment Partnership (T-TIP) — a trade and investment deal with the 28 European Union states. This deal would represent the largest regional free trade and investment agreement in history, with the United States and Europe accounting for more than 50 percent of the world’s gross domestic product.

In addition to these trade deals and a nuclear agreement with Iran, Obama could bolster his presidential legacy with other international achievements. In Iraq and Syria, a U.S.-led military coalition is trying to weaken Islamic State, while a reduced U.S. force remains in Afghanistan to stabilize the new national unity government, the victim of recent Taliban attacks.

In Europe, meanwhile, the Obama administration is helping to bolster Ukraine after Russia annexed Crimea. If Greece defaults on its international debts and decides to leave the eurozone, the White House may have to play a greater diplomatic role in the continent to manage the political and economic fallout.

Obama is entering into a massively important period of his presidency, with several major potential foreign policy objectives that will help to define his legacy. With his domestic policy stalling in Congress, his focus on key international issues may only intensify.

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The five most important issues in U.S.-China relations http://blogs.reuters.com/great-debate/2015/06/23/the-five-most-important-issues-in-u-s-china-relations/ http://blogs.reuters.com/great-debate/2015/06/23/the-five-most-important-issues-in-u-s-china-relations/#comments Tue, 23 Jun 2015 05:00:40 +0000 http://blogs.reuters.com/great-debate/?p=41440 Chinese Foreign Minister Wang and US Secretary of State Kerry hold a joint news conference following meetings at the Ministry of Foreign Affairs in Beijing

Chinese Foreign Minister Wang Yi (R) and US Secretary of State John Kerry hold a joint news conference following meetings at the Ministry of Foreign Affairs in Beijing May 16, 2015. REUTERS/Saul Loeb/Pool

This week, the United States will host the seventh annual U.S.-China Strategic and Economic Dialogue (S&ED), the capstone piece of more than 90 high-level meetings between American and Chinese officials. Treasury Secretary Jack Lew and his Chinese counterpart will lead the economic track, while Secretary of State John Kerry and his counterpart will co-chair the strategic track. All four will be acting as the direct representatives of their respective presidents.

This year’s dialogue has special significance because it will set the stage for President Xi’s state visit in September. U.S.-China relations have been rocky recently, owing primarily to tensions in the South China Sea, China’s new law governing foreign non-governmental organizations, and friction over membership in China’s Asian Infrastructure Investment Bank and the U.S.-led Trans-Pacific Partnership (TPP). In addition to these issues, Chinese and American leaders will devote substantial attention to cybersecurity and the recently disclosed hack of the Office of Personnel Management’s database, as well as the ongoing negotiations toward a U.S.-China Bilateral Investment Treaty (BIT).

The diplomatic community has expected previous dialogues to produce substantial agreements, but they have lower expectations for this round — due partly to recent difficulties in the relationship, as well as an inclination on both sides to save major announcements until President Xi’s state visit.

I’ll briefly explain the significance of these five major issues.

1. The South China Sea

The South China Sea issue has been front and center for the last 18 months, as China carried out major land reclamation efforts. While the issue stems from territorial disputes between China and various Southeast Asian nations, which don’t intrinsically involve the United States, the United States sees China’s island building activities as a potential threat to freedom of navigation along a critical trade route. China, on the other hand, sees U.S. involvement in the region as meddling in bilateral disputes with China’s neighbors. It sees enhanced U.S. military cooperation with Vietnam and the Philippines, and increased Japanese military activity in the region, as part of a U.S. strategy to contain China. The 2015 dialogue provides an opportunity to ratchet down the recent level of confrontation in order to smooth the way to a successful state visit by President Xi.

2. China’s New Law Governing Foreign NGOs

China’s new draft law on NGOs will substantially limit the ability of a wide range of organizations to work in China. The key sticking point in the new law is that it places regulatory authority over foreign NGOs with China’s State Security Bureau, rather than the Ministry of Civil Affairs, which regulates domestic NGOs. Police will be allowed to enter and inspect offices, and seize documents and equipment. The United States has long been critical of China’s record on human rights, and this proposed law, which was released for comment on June 8, will be a focal point in that discussion.

China’s response to U.S. pressure on this issue will likely turn on its view that foreign elements are stirring up trouble in China. This is the same argument that China used to explain the Occupy Central pro-democracy demonstrations in Hong Kong. Reading between the lines, it is clear that in both instances, when China says “foreign elements,” it means the United States and its allies.

3. Friction Over Membership in China’s Asian Infrastructure Investment Bank

Economic alignments in East Asia will likely be a central focus of this year’s dialogue. China is in the process of starting the Asian Infrastructure Investment Bank, which is intended to provide more streamlined funding than the World Bank or the Asian Development Bank can currently provide. The United States opposed the establishment of the AIIB  — and lobbied its allies to decline membership — on the grounds that it had unclear governance standards, inadequate environmental controls, and might not be sufficiently capitalized to sustain its loans. But in the week before a March deadline, the United States suffered a stinging defeat as its allies, led by the United Kingdom, became founding members of the bank, leaving the United States and Japan on the outside looking in. Governance of the AIIB, and a means for coordinating its efforts with the World Bank, will be key elements of the economic discussions.

In a similar vein, the U.S.-led TPP includes the United States and Japan as the key members of what would be the largest trade agreement ever. The difference here is that China is the outsider. China has complained that the TPP is yet another instance of the United States trying to contain China. President Obama’s recent remark that the U.S. must write the rules for trade, or China will, didn’t dispel this notion.

4. Cybersecurity

Cybersecurity, which has been a simmering point of dispute at every dialogue, will become even more heated in light of the recently disclosed hack of the OPM personnel database, as well as the database containing security background data for nearly every federal employee and military member. The United States, while not directly accusing the Chinese government, has claimed that the hack was the work of Chinese actors. Couple that with the indictment of five Chinese military personnel for cyber-espionage against U.S. corporations and labor organizations in order to gain economic advantage, and there is little doubt that the meetings will be fairly rancorous.

Still, not everything on the cyber front is gloomy. The United States and China have made a great deal of progress in cooperating on cyber-tracking of illicit movements of funds and people. The Chinese will be pressing hard to get the United States to cooperate in disrupting the illegal flow of cash from China to the United States, and in repatriating both the funds and the fugitives who stole them. This discussion will likely bleed over into the human rights arena, as evidenced by the case of Yang Xiuzhu, who is wanted on corruption charges and applied for asylum in New York after being detained by Interpol.

5. Bilateral Investment Treaty

The least contentious of the major issues is the Bilateral Investment Treaty (BIT), which would establish rules for foreign investment in each country. After hitting roadblocks in previous years, the two countries have made concrete progress in the run up to this year’s dialogue. They’ve exchanged “negative lists” that designate areas of the economy where foreign investment will not be allowed — the first step toward winnowing each country’s lists to a level acceptable to the other side. Experts are optimistic that this deal can be completed during President Obama’s tenure. Don’t expect instant success, but this is the most likely area for the dialogue to come up with some sort of major agreement.

The dialogue will set the tone for U.S.-China relations for the next year. These issues will be central to those relations. All of them bear watching.

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Why China has the upper hand in the South China Sea http://blogs.reuters.com/great-debate/2015/06/03/how-u-s-dependence-on-chinese-goods-invites-beijing-adventurism/ http://blogs.reuters.com/great-debate/2015/06/03/how-u-s-dependence-on-chinese-goods-invites-beijing-adventurism/#comments Wed, 03 Jun 2015 05:06:30 +0000 http://blogs.reuters.com/great-debate/?p=40855 Employees work inside a LCD factory in Wuhan

Employees in a LCD factory in Wuhan, Hubei province, May 8, 2013. REUTERS/China Daily

Washington’s failure in recent years to keep careful watch over what goods are made where — especially when it comes to such vital items as electronics and drugs — means the United States now depends far more on China than vice versa.

Back in the 1990s, advocates of liberalizing U.S. trade with China said economic interdependence would inevitably lead to peaceful coexistence. But one-sided dependencies invite adventurism, as China’s growing belligerence today proves.

Washington must now address the fundamental flaws in the international trade system that gave China such a big advantage. The White House claims the proposed Trans-Pacific Partnership will help offset China’s increasing heft. Unfortunately, the pact, which includes 11 Pacific Rim allies but excludes Beijing, will do nothing to fix the problems.

To match Analysis LED-CHINA/

Employees measure the aging levels of low-energy consumption light bulbs at a factory in Nanjing, Jiangsu province, May 18, 2012. REUTERS/Sean Yong

The fact that the global trading system is not working as promised is most dramatically evident in the seas around China. Beijing is engaged in a pattern of provocation bordering on recklessness. In late 2013, China unilaterally imposed an “air defense declaration zone” covering portions of the East China Sea. Earlier this year, the Chinese navy set about transforming a reef in the Spratly Islands into a military base.

International relations in East and South Asia are tenser than at any time since the 1960s. Japanese Prime Minister Shinzo Abe last year compared the situation to 1914 just before World War One. The U.S. Navy recently began to directly challenge China’s claims of sovereignty over large swaths of the South China Sea.

This is the opposite of what was supposed to happen when the United States and its allies created the World Trade Organization in the mid-1990s and then invited Beijing to join. President Bill Clinton asserted that “growing interdependence would have a liberalizing effect in China.”

Worse, the extreme industrial interdependence fostered by the World Trade Organization appears to have put powerful levers into China’s hands.

During the Cold War, the United States promoted high degrees of integration with allies, including Japan, Germany, Britain and Canada. Washington did this to promote mutual prosperity and peaceful coexistence. Yet even though each of these nations was smaller than the United States — and all were more or less democratic — Americans chose not to rely entirely on any of these close friends for any vital good.

To match Analysis LED-CHINA/

Employees work at a production line of low energy consumption light bulbs at a factory in Nanjing, Jiangsu province May 18, 2012. REUTERS/Sean Yong

Today, the United States depends on China for myriad items that U.S. citizens need every day. These include 100 percent of key electronics and chemical components. They even include basic ingredients for some of the nation’s most important drugs, including antibiotics. Given that supply chains often run on a just-in-time basis, in which goods are produced only as fast as they are consumed, there are often no backup supplies nearby.

China, by contrast, depends on the United States for little of vital importance. For what it does import in quantity, like energy and metals, it holds large stockpiles.

And unlike Washington’s main trading partners of the past two decades, China’s economy is bigger than America’s and growing fast. China is also by no means a democracy. Quite the contrary. The United States finds itself increasingly dependent on the good will — and stability — of the world’s most powerful and sophisticated autocracy.

The World Trade Organization freed U.S. corporations and foreign nations to restructure every assembly line on which Americans depend in almost every respect, such as by concentrating production wherever and however they wished.

Washington’s challenge now is to understand what this revolution means in the real world. Most specifically, how exactly does Washington’s asymmetrical dependence on China affect U.S. sovereignty and freedom of action? Might it, for example, lead Beijing to conclude that the United States will not use force in response to Chinese aggression?

The proposed Trans-Pacific Partnership, at best, amounts to a doubling down on a strategy that failed. At worst, it sets Americans to fighting with one another at a time when the international threats they face grow ever more complicated and dire.

Globalization is a smart and viable strategy. U.S. trade policy from the end of World War Two to the mid-1990s proved that.

Rather than waste more time on the Trans-Pacific Partnership, Washington must figure out how the extreme changes of the 1990s upset those balances. More to the point, it must swiftly figure out how to live and trade peacefully with China in what is fast becoming a post-global world.

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Who doesn’t want $123 billion? Why the trade deal must be done. http://blogs.reuters.com/great-debate/2015/05/28/who-doesnt-want-123-billion/ http://blogs.reuters.com/great-debate/2015/05/28/who-doesnt-want-123-billion/#comments Thu, 28 May 2015 05:00:24 +0000 http://blogs.reuters.com/great-debate/?p=40759 The skyline of Singapore's central business district is seen at dusk as operations continue at a PSA International port terminal in Singapore

The skyline of Singapore’s central business district at dusk as operations continue at a PSA International port terminal in Singapore, September 25, 2013. REUTERS/Edgar Su

It’s absurd to pretend that economic activity and commerce stop at U.S. borders. But that is the position of leading Democrats in Congress.

They have turned enactment of two major trade deals, covering more than 50 percent of the world economy, into a hard-fought battle. Achieving the Trans-Pacific Partnership with Asian countries and the Transatlantic Trade and Investment Partnership with the European Union will require navigation of a unique political landscape. President Barack Obama must work with Republican members of Congress to overcome opposition from congressional Democrats and the labor-union bosses who help fund the modern Democratic Party.

The United States has sat idly by in recent years while other nations have gained advantages by inking agreements to eliminate tariffs and reduce barriers to trade. That makes these two big trade deals imperative. The only way the agreements get done, however, is for Congress to approve trade-promotion authority, known as fast-track authority. With this, trade agreements negotiated by the White House go to Congress for an up-or-down vote and are not subject to amendments. Granting the president fast-track authority is the only way to get prospective trading partners to sit down for the time-consuming and complicated negotiations required to reach an agreement.

Ships gather off the ports of Los Angeles and Long Beach, California in an aerial image

Ships gather off the ports of Los Angeles and Long Beach, California, February 6, 2015. REUTERS/Bob Riha Jr

Senate Minority Leader Harry Reid (D-Nev.) likes to boast he has never supported a trade agreement in his 33 years in Congress. In recent weeks, he has been working hard to block fast-track approval for Obama. But Senate Majority Leader Mitch McConnell (R-Ky.) fought successfully to get it passed out of the Senate on Friday, so the House can take up the bill after Memorial Day recess.

It will be good for the country if House Republicans can overcome Democratic opposition and the concerns within their own caucus about granting Obama this additional authority. Much evidence shows that these trade agreements would benefit Americans.

Trade supports one out of every five U.S. jobs, according to the Brookings Institution. Jobs tied to trade are more lucrative, paying 18 percent more, on average, than other occupations. European Commission analysis of a Center for Economic Policy Research study finds that approval of the European trade pact would raise wages for both high- and low-skill jobs. The study also finds that an EU/U.S. trade deal could, once fully phased in, increase gross domestic product by $103 billion in the United States and $130 billion in  Europe. This would result in a permanent increase in the amount of wealth that these two trading partners can produce every year.

Loading cranes are seen at a shipping terminal  in the harbour in Hamburg

Loading cranes at a shipping terminal in Hamburg, September 18, 2014. REUTERS/Fabian Bimmer

The Trans-Pacific Partnership is expected to boost world exports by $305 billion, of which more than $123 billion would come from the United States, and increase the size of the global economy $223 billion a year by 2025, according to a study by the Peterson Institute for International Economics. The Peterson Institute estimates real income benefits to the United States could be as high as $77 billion a year.

The pending trade deals are also of particular importance to certain states. California and Texas, for example, are the biggest exporting states in terms of total dollar figures. This doesn’t tell you, however, which states are most dependent on trade.

When looking at the share of state economies tied to trade, Washington and Louisiana are at the top of the list, with more than 20 percent of their economies tied to exports. Rounding out the rest of the top exporting states are Texas, South Carolina, Kentucky, Vermont, Michigan, Utah, Mississippi and Indiana.

Regardless of how much they distrust Obama or how much money they get from labor unions, any of the 68 Republicans and 29 Democrats in those congressional delegations who oppose giving the president fast-track authority would be doing their states a great disservice.

Congressional opponents claim they want a say in the trade agreement. Yet even if they grant trade-promotion authority, members of Congress will have a say if they don’t like any deal reached. They can vote it down.

Time is of the essence. We have a Democratic president who wants fast-track authority. We have a unified GOP Congress that wants to pass it. After the 2016 election, Republicans may not control the Senate. That would doom fast-track authority right there.

If the authority isn’t granted now, there is a real possibility that the United States may not do any trade agreements for the next decade. Washington cannot afford such a withdrawal from the global economy.

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How far is Japan willing to go to back the United States? http://blogs.reuters.com/great-debate/2015/04/27/how-far-is-japan-willing-to-go-to-back-the-united-states/ http://blogs.reuters.com/great-debate/2015/04/27/how-far-is-japan-willing-to-go-to-back-the-united-states/#comments Mon, 27 Apr 2015 10:29:06 +0000 http://blogs.reuters.com/great-debate/?p=39792 Handout photo shows U.S. Navy and Japan Maritime Self-Defense Force ships steaming in formation during their military manoeuvre exercise known as Keen Sword 15 in the sea south of Japan

U.S. Navy and Japan Maritime Self-Defense Force ships steam in formation during their military manoeuvre exercise known as Keen Sword 15 in the sea south of Japan, in this November 19, 2014 handout provided by the U.S. Navy. REUTERS/Mass Communication Specialist 3rd Class Chris Cavagnaro/U.S. Navy/Handout

Japan is weighing whether it needs to be a major military power in the Pacific again, 70 years after World War Two.

Since the end the war, Japan has interacted with its neighbors through the lens of a bilateral relationship with the United States. Japanese domestic politics either benefited from the arrangement (through a lucrative domestic arms industry that caters to the U.S. military) or were subservient to it (by providing military bases). However, a multi-polar East Asia and new homeland pressures are challenging how Prime Minister Shinzo Abe views his loyalty to the United States.

Behind the scenes of the April 28 Obama-Abe White House summit — which will include a state dinner and a congressional address by Abe — the leaders will wrestle with changes in what has been the strongest bilateral relationship in Asia.

Security issues loom over the U.S.-Japan relationship, particularly each country’s stance toward North Korea. The Japanese public believe that Japanese Cold War-era hostages are still alive in North Korea; returning them home is an emotional issue (think American POWs “left-behind” in Vietnam) and has always moderated the country’s stance toward Pyongyang.

Negotiations with North Korea on the issue have been troublesome for Abe, and he has already been pressed to loosen sanctions. The North Koreans are demanding that ferry service between the two nations resume, after Tokyo shut it down in 2006, in part under U.S. pressure. Abe is faced with American desire for harsher rhetoric against Pyongyang, but fearful of jeopardizing progress on the hostage issue.

The implicit understanding of the broader U.S.-Japan security relationship has been that Japan’s “contribution” would be almost completely financial; Japan pays out billions of dollars to support, operate and maintain the American military bases on its own territory, in addition to land grants and sweetheart leases for military bases. In this context, Abe and his predecessors have for years managed domestic friction, particularly on Okinawa, over the expansion of U.S. bases, and that is not expected to be a major issue when he meets Obama.

Washington now wants Abe to agree to a “collective defense” arrangement similar to NATO, which would see Japan strike back at an enemy that attacks the United States. (The inverse has been true for some seven decades.) If Abe goes along with this arrangement, he would place Japan at even greater loggerheads with China and North Korea, making his own nation subject to retaliation in response to American military actions throughout the region.

Abe would also suffer domestically if he consented to the United States’ demands for collective defense. In mid-March Abe’s own Liberal Democratic Party convened a conference during which party members challenged the wisdom and constitutionality of the policy. Even conservatives who welcome American military support if China moves toward any of the disputed islands in the Pacific are wary of being drawn into some greater U.S.-China regional tussle.

Japan’s economic priorities are also at stake. Abe must decide whether to join China’s new Asian Infrastructure Investment Bank (AIIB). The United States has opposed the bank, arguing that it will undermine the World Bank and Asian Development Bank. But the White House failed to keep allies South Korea, Taiwan and Australia from signing on. Only Japan has so far stood aside, at the cost of further weakening its relations with China.

Japan’s business community, seeking access to the funds and the Chinese markets that AIIB membership will provide, turned up the heat on Abe. “The business community woke up late, but now they have mounted a big campaign for the AIIB which appears to be very effective,” Japanese Ambassador to China Masato Kitera told the Financial Times. Abe will have to choose between disappointing the United States or his own business community.

Some Japanese media are stating Japan “has not yet decided” whether or not to join the AIIB, as opposed to a common line just a few months ago that the country gave a firm “no.” There is speculation that Japan may announce its participation in the new bank as early as this summer.

The U.S.-Japan relationship is also being tested over the Trans-Pacific Partnership (TPP), one of the biggest trade deals in history. The White House is pushing Japan to sign on; doing so would provide significantly higher gains for the United States by busting open Asian markets, freeing some 40 percent of American imports and exports from tariff and non-tariff barriers, and thus weakening the economic power of China in the region. Abe is stuck between pressure to uphold the relationship, and angry opposition from Japanese farmers who enjoy high tariff protection and are desperate to keep the country’s markets closed. Without opting out altogether, the only way for Abe to please his constituents is to carve out an exception for Japanese agriculture. This decision, however, would upset other signatories and chip away at the American desire to create a free trade zone in the Pacific.

A departure from the bilateral relationship presents risks for Japan. Not getting along better with China has benefited Abe and his predecessors, and the dysfunctional nature of the relationship has been made easier by American support. For Tokyo, barely acknowledging hyper-sensitive issues involving other Asian countries — such as the Rape of Nanjing in China, and the so-called “Comfort Women” in Korea — has helped keep a small, rotating group of Japanese political elites in power practically uninterrupted for 70 years.

Hyper-conservative voters are a mainstay of support for Abe and his party. These supporters see apologies for World War Two crimes as pandering to the demands of Japan’s Asian neighbors. What outsiders may see as leftover issues from a distant war are red meat to Japan’s conservative voters, and to the powerful corporate heads who support them.

Japan has also benefited from the bilateral relationship by developing a lucrative domestic arms industry that caters to American needs. For example, Japan is building a $1 billion facility for final assembly of Lockheed Martin’s F-35 fighters, and will play a large role in the maintenance of those jets in Asia.

On the U.S. side, America maintains significant military bases across the Japanese archipelago. These facilities served as staging areas during the Cold War, and today help the United States counter China. Japan supports the American position in most international forums (Japan votes with the United States at the United Nations about as often as most European allies), donates cash to development efforts in Afghanistan, and even sent a symbolic clutch of troops into Iraq in 2004.

Navigating these issues may force America to accept less than what it wants out of Japan. Doing so would avoid putting Abe in so many no-win situations that he loses domestic support, and thus becomes ineffectual. Obama would do well to understand this, and to carefully choose which issues to press.

What was once America’s most stable relationship in Asia is moving into the category of “it’s complicated.”

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A lose-lose choice for Hillary Clinton http://blogs.reuters.com/great-debate/2015/04/20/the-looming-threat-to-hillary-clintons-2016-campaign/ http://blogs.reuters.com/great-debate/2015/04/20/the-looming-threat-to-hillary-clintons-2016-campaign/#comments Tue, 21 Apr 2015 04:56:18 +0000 http://blogs.reuters.com/great-debate/?p=39698 U.S. Secretary of State Clinton reacts while testifying on the Benghazi attacks during Senate Foreign Relations Committee hearing in Washington

Secretary of State Hillary Clinton responds to intense questioning about the September attacks on U.S. diplomatic sites in Benghazi, Libya, during a Senate Foreign Relations Committee hearing on Capitol Hill in Washington January 23, 2013. REUTERS/Jason Reed

The big threat to Hillary Clinton’s campaign isn’t coming from a competitor. It’s coming from an issue. And it’s coming now, long before the first primary. Will she be for or against giving President Barack Obama fast-track authority to negotiate trade deals?

Fast track gives a president the power to make trade deals that cannot be amended by Congress. All Congress can do is accept or reject the agreement. Other countries, say fast-track supporters, won’t negotiate with Washington if they know that Congress can amend any deal they agree to.

If he gets fast-track authority, Obama will be in a position to conclude negotiations for the Trans-Pacific Partnership, a mammoth free-trade deal among 12 Pacific Rim nations that represent 40 percent of the world economy. Obama embraced the deal saying, “We have the opportunity to open even more new markets to goods and services backed by three proud words: Made in America.”

But it looks like a tough slog to get Congress to approve fast track. Because Republicans control both houses? No. Republicans support the president on this. They believe in free trade.

Hillary Clinton delivers remarks during the 2015 Toner Prize for Excellence in Political Reporting award in Washington

Former Secretary of State Hillary Clinton delivers remarks during the 2015 Toner Prize for Excellence in Political Reporting award in Washington, March 23, 2015. REUTERS/Joshua Roberts

Obama’s problem is with Democrats. They are horrified by the Trans-Pacific Partnership. They see it as a job killer, like the North American Free Trade Agreement passed in 1993 under President Bill Clinton. A powerful coalition of labor unions, progressives, environmentalists and Latino organizations opposes the new trade agreement. That’s the Democratic Party base.

See Hillary Clinton’s problem? If she supports fast track, it will inflame liberals who will hound her over it all through the primaries. It may even propel a challenge from her left. If she opposes fast track, she will enrage the Obama administration and get blamed if he suffers an embarrassing defeat. She will also tick off Wall Street and risk losing their campaign contributions.

Technically, Clinton does not have to take a position at all. She’s no longer a member of Congress. But she’ll look like a wuss if she refuses to say where she stands on an issue that is galvanizing her party.

Democrats have been divided on trade for a long time. When Congress approved the North American Free Trade Agreement in 1993, most Democrats voted against it. Republicans delivered Bill Clinton’s victory on the trade deal.

Today, Democrats are less divided on trade. They are pretty solidly opposed. Moderate Democrats, who tended to favor free trade in the past, have been disappearing in Congress because of losses to Republicans. House Speaker John Boehner (R-Ohio) says he can deliver most Republican votes for fast track but he will need 50 Democrats to vote with them. Right now, no more than 20 House Democrats are ready to support it.

If Hillary Clinton comes out for fast track, it might get just enough Democratic support to pass. If she opposes fast track, it’s probably doomed. The fate of the measure very likely rests in her hands.

Former U.S. Secretary of State Clinton attends an International Women's Day event in New York

Former Secretary of State Hillary Clinton at an International Women’s Day event at the U.N. headquarters in New York, March 7, 2014. REUTERS/Eduardo Munoz

Most Democrats believe she will come out against it. After all, as a senator in 2002, she voted against giving President George W. Bush fast-track authority. It’s too risky for her to antagonize her party when she just entered the 2016 race. It may even do her some good to part ways with Obama on the issue. That would make it harder for Republicans to argue that a vote for Clinton is a vote for a third term for Obama.

Clinton is running a populist campaign. “It’s fair to say as you look across the country, the deck is stacked in favor of those already at the top,” she said in Iowa last week. Supporting a trade deal would open her up to the charge that she’s a phony.

Trade is not an ideological issue. It’s a populist issue — the people versus the establishment. Ordinary Americans are suspicious of trade deals. Economists have a hard time understanding this, but most people see trade not as an economic issue but as a moral issue.

People think it’s wrong for them to benefit as consumers from lower prices for foreign-made goods if it throws Americans out of work. Will they purchase the foreign-made goods? Of course they will — as long as they’re cheaper. That’s rational economic behavior. They just don’t think they should be allowed to.

Clinton has been all over the place on trade. She supported NAFTA when her husband was president. In her 2008 campaign for the Democratic presidential nomination, she promised to renegotiate it. As senator, she supported Bush’s trade deals with South Korea, Colombia and Panama. But she opposed the Central American Free Trade Agreement in 2005.

As secretary of state, she praised the Trans-Pacific Partnership, writing in 2011, “Our hope is that a TPP agreement with high standards can serve as a benchmark for future agreements.” She says she believes in the principle of free trade but wants Washington to be a tougher negotiator. “I believe in smart trade,” Clinton says, “pro-American trade.”

But this decision doesn’t allow a nuanced position. You have to be either for it or against it.  The best outcome for Clinton would be to come out against it to protect herself politically. And then hope it passes.

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Why the United States is always the loser in any free-trade deal http://blogs.reuters.com/great-debate/2015/04/09/does-the-u-s-pay-too-high-a-cost-for-free-trade-in-the-tpp-pact/ http://blogs.reuters.com/great-debate/2015/04/09/does-the-u-s-pay-too-high-a-cost-for-free-trade-in-the-tpp-pact/#comments Fri, 10 Apr 2015 02:27:34 +0000 http://blogs.reuters.com/great-debate/?p=39391 The YM Bamboo, a container ship operated by the China Ocean Shipping Company (COSCO) is docked at the Port of Oakland in Oakland, California

The YM Bamboo, a container ship operated by the China Ocean Shipping Company docked at the Port of Oakland in Oakland, California, January 14, 2011. REUTERS/Beck Diefenbach

Free trade is an American mantra. The Obama administration’s commitment to winning “fast-track” status for its cherished Trans-Pacific Partnership trade agreement is part of that tradition. But growing evidence shows that granting full trading privileges to low-income countries on the make is usually costly to the United States.

The United States has been in lengthy negotiations with 11 nations around the Pacific Rim, including Australia, Chile, Japan, Singapore and Malaysia. After years of talks, the partners now seem close to an agreement.

That is one reason for the unusual congressional alliance of left-wing Democrats like Senator Elizabeth Warren (D-Mass) with Tea Party Republicans like Representative Walter Jones (R-N.C.) lined up against the trade initiative. Policy-wonk Tea Party fellow travelers, including Representative Paul Ryan (R-Wis.) and Senator Ted Cruz (R-Texas), support the deal — as do many mainstream economists.

Economists cite the great advantage of free trade as a basic doctrine of classical economics. If trading partners concentrate on what they do best, the argument goes, both partners end up better off.

The United States debunked that theory in the 19th century. It sold commodities like iron and cotton to Europe while building high tariff walls to protect its own “infant industries.” By the 1890s, the United States had surpassed Britain in most advanced industries. It was an easy target, because London was dogmatically committed to pure free trade.

Chinese workers arrange socks at a factory in Shanghai.

Chinese workers arrange socks at a factory in Shanghai, August 17, 2005. REUTERS/Aly Song

Recent research helps distinguish between trade and offshoring patterns that have the mutual benefits — and those that don’t. When the trade or offshoring partner is another high-income country, U.S. wages tend to increase. But when its with low-income countries, U.S. wages decline, particularly for unskilled or medium-skilled workers.

These wage effects are not just in manufacturing, but in the same job categories of other industries. Manufacturing generally has higher pay scales than services. Yet as increased imports and offshoring put pressure on manufacturing jobs, there is a domino effect as displaced workers move into lower-paid services. Wages shrink across the board.

The pressure for lower wages when importing from low-income nations has a far greater effect than repercussions from offshoring. It is most striking when China is the partner. For every 10 percent increase in Chinese imports, U.S. wages across the affected jobs fell by 6.6 percent. In almost all cases, the wage reductions hit low-wage workers hardest, particularly non-high school graduates.

U.S. manufacturing employment reached its peak in the late 1970s, and has been generally declining since. There is a clear break in 2000, however, the year China joined the World Trade Organization and began a concentrated, and catastrophic, drive on U.S. product markets.

From 2000 through 2009, the United States lost roughly 6 million factory jobs, or about a third of the total in 2000. There has been a recent modest recovery, 850,000 manufacturing jobs added since 2010 — but too little for much satisfaction.

Daniel DiMicco, chairman of Nucor Corp, speaks during the Steel Success Strategies conference in New York

Daniel DiMicco, chairman of Nucor Corp, speaking in New York, June 19, 2013. REUTERS/Eric Thayer

China’s destructive brand of competition is especially grating. Consider the example of Nucor Corp., one of the world’s most efficient steelmakers. Nucor uses only 0.4 hours of labor to make a ton of steel, says Dan DiMicco, former chief executive, or about $8 to $10 in wages. It relies mostly on scrap steel for its raw material, while China uses iron ore, which is more expensive, and its shipping cost to the United States is about $40 a ton.

Even if Chinese labor were free, DiMicco maintains in his new book, American Made: Why Making Things Will Return Us to Greatness, there is no way the Chinese steel producers could undersell Nucor in its home market. Yet, over much of the past year, low-cost Chinese steel has flooded U.S. markets, which, DiMicco says, is clear evidence of illegal “dumping.” Beijing, of course, says it complies with all fair trade rules.

But China plays by different rules. Its powerful manufacturing enterprises are largely state-owned, and blessed with a host of subsidies, including Party-determined prices for financings, land purchases, taxes and fuel.

Worse than that, in recent years, the Chinese government has been pressuring European and U.S. companies to transfer proprietary technologies as a condition of winning major contracts.

A prime example may be the partnership between the state-owned Commercial Aircraft Corporation of China and a consortium of seven U.S. aerospace companies, led by Boeing Company and General Electric, to build a jumbo jet competitor. All the companies are contributing substantial proprietary technologies to China. GE’s avionics, one of its crown jewels, are a key part of the deal. Advanced avionics, however, are also of keen interest to the Chinese military. GE insists it can prevent any technology leakages to the military, and swears that any evidence to the contrary means termination of the entire project. Sure.

A CRH Harmony bullet inspection train leaves a train station for a railway inspection assignment, in Guiyang

A China Railway High-speed Harmony bullet inspection train leaves a train station in Guiyang, Guizhou province, October 8, 2014. REUTERS/Stringer

Beijing’s record here is not encouraging. China now has the world’s largest high-speed-rail industry, built in record time — after buying equipment from Siemens, Kawasaki Heavy Industries and other Western companies and then reverse-engineering it. China’s state-owned businesses now market their rail systems throughout the world at prices about half that of Western vendors. That’s becoming standard procedure. Most computer deals in China require that the government gets a copy of the vendor’s source code, the key to the success of any technology enterprise.

China is a great country, with extraordinarily talented and industrious people. But the government bureaucracy has been revealed as deeply corrupt, and often pays only lip-service to rules of the road. A few decades ago when a U.S. steel company complained about foreign dumping, one could assume they were seeking protection from more advanced competitors. That is no longer the case, especially with a company like Nucor.

It’s high time that predatory competitors like China are treated with judicious doses of their own medicine. China is not included in the Trans-Pacific Partnership, but its rapid economic progress is a blueprint for every aspiring developing nation. Only when the United States is prepared to ensure fair treatment for its own companies, should Washington offer free trade consideration to yet more budding competitors.

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As free trade pacts expand, U.S. trade deficit soars. Why add one more? http://blogs.reuters.com/great-debate/2015/02/16/as-free-trade-pacts-expand-u-s-trade-deficit-soars-why-add-one-more/ http://blogs.reuters.com/great-debate/2015/02/16/as-free-trade-pacts-expand-u-s-trade-deficit-soars-why-add-one-more/#comments Tue, 17 Feb 2015 04:58:27 +0000 http://blogs.reuters.com/great-debate/?p=37996 U.S. President Obama, Australian Prime Minister Abbott and Japanese Prime Minister Abe meet at the G20 in Brisbane

(L-R) President Barack Obama, Australian Prime Minister Tony Abbott and Japanese Prime Minister Shinzo Abe at the G20 in Brisbane, November 16, 2014. REUTERS/Kevin Lamarque

President Barack Obama has called on Congress to grant him fast-track trade authority for his Trans-Pacific Partnership free-trade agreement. The administration insists the authority, which would give Congress only an up-or-down vote on the agreement, is needed to get the best possible terms from its trade partners along the Pacific Rim.

During his 2008 presidential campaign, Obama promised to renegotiate and improve the North American Free Trade Agreement (NAFTA). But it now looks like what he really meant is to expand on that flawed trade model and extend it to other countries.

Twenty-one years after NAFTA and four years after Obama’s 2011 U.S.-South Korea Free Trade Agreement, there is abundant data documenting how this trade model has been disastrous for most U.S. businesses, farmers and workers.

Since the pacts were implemented, U.S. trade deficits, which drag down economic growth, have soared more than 430 percent with our free-trade partners. In the same period, they’ve declined 11 percent with countries that are not free-trade partners. Since fast-track trade authority was used to pass NAFTA and the U.S. entrance into the World Trade Organization, the overall annual U.S. trade deficit in goods has more than quadrupled, from $218 billion to $912 billion.

The United States now has an annual $177-billion trade deficit in goods with its 20 free-trade partners. Over the past decade, however, U.S. export growth to countries that are not free-trade partners exceeded the growth of free-trade partners by 24 percent.

U.S. President Barack Obama and South Korean President Lee Myung-bak hold a joint press conference in the East Room of the White House

President Barack Obama (R) and South Korean President Lee Myung-bak in the East Room of the White House, October 13, 2011. REUTERS/Jason Reed

Under NAFTA, small U.S. firms’ share of exports to Canada and Mexico has fallen. Had these businesses not lost their share of exports, they might instead be exporting $13.5 billion more each year to Mexico and Canada.

Nearly 5 million U.S. manufacturing jobs — one in four — have been lost since NAFTA and the various post-NAFTA expansion deals were enacted through fast track. These free-trade agreements have fundamentally transformed the types of jobs and wages available for the 63 percent of all U.S. workers without a college degree.

Three of every five displaced manufacturing workers rehired in 2014 are earning lower wages, according to the Bureau of Labor Statistics, with one-third taking a pay cut greater than 20 percent. As the unemployed manufacturing workers began competing for service-industry jobs that can’t be shipped offshore, such as hospitality and retail, real wages have also fallen in these sectors.

U.S. wages, overall, have barely increased in real terms since 1974 — the year fast track was enacted — even as U.S. worker productivity has doubled.

When asked how U.S. workers will fare against Vietnam’s 58-cents-an-hour average minimum wage, Washington trade officials hide behind the wording of the Trans-Pacific Partnership’s labor chapter. Yet this section only rehashes labor standards that President George W. Bush included in his pacts with Colombia, Panama and Peru, which, according to a new Government Accountability Office report, have failed miserably in improving working conditions in free-trade partner countries.

At the same time, cuts in consumer goods prices have not been enough to offset the losses to middle-class wages under these agreements. U.S. workers without college degrees have lost roughly 12.2 percent of their wages — even after accounting for the benefits of cheaper imported goods. This means less, not more, consumer demand for U.S. manufacturing and service-sector firms.

Obama administration trade officials say that this is old news. They insist their agreements are different.

But Obama’s 2011 trade deal with South Korea, which serves as the template for the new Trans-Pacific Partnership, has resulted in a 50 percent jump in the U.S. trade deficit with South Korea in its first two years. This equates to 50,000 U.S. jobs lost. Small-businesses’ exports to South Korea have also declined sharply, falling 14 percent. In just one month, October 2014, the United States had a $3-billion trade deficit in goods with South Korea, the highest on record.

Recent trade flows, economists widely agree, have been a significant contributor to the historic rise in U.S. income inequality. The only debate is about the degree of trade’s responsibility. The Peterson Institute for International Economics, for one, found that trade accounts for 39 percent of the growth in wage inequality.

This makes it particularly perverse that Obama, who’s announced that his priorities are battling income inequality and creating middle-class jobs, is pushing a Pacific region trade pact that replicates the odious NAFTA terms that favor job offshoring and bans responsible “Buy American” procurement preferences.

It’s no surprise that the U.S. Chamber of Commerce praises Obama’s trade agenda because the chamber mostly represents the interests of the largest multinational firms, while running roughshod over the interests of Main Street chamber members.

But the opposition to Trans-Pacific Partnership and Obama administration trade policies by prominent economists and policymakers who supported past free-trade agreements is notable. Former Labor Secretary Robert Reich, who supported NAFTA when he served in the Clinton cabinet, has come out against it, as have pro-free-trade economists such as Paul Krugman, Jeffrey Sachs and Joseph Stiglitz.

Jared Bernstein, Vice President Joe Biden’s former chief economist, has emphasized that without enforceable rules against currency manipulation (a tool other countries can use to unfairly subsidize their exports and undercut U.S. production), the Trans-Pacific Partnership would further increase income inequality and damage U.S. businesses and farmers. Even though 230 representatives and 60 senators now demand currency-manipulation protection in the pact, the White House has refused even to raise the issue.

All this goes a long way to explain why Obama’s quest for fast-track trade authority is facing broad opposition in Congress. This power would irresponsibly empower Obama to sign and enter into the Trans-Pacific Partnership even before Congress votes to approve its terms. It would then guarantee an up-or-down vote within 90 days with only limited debate and amendments forbidden whether or not Congress’ objectives for the pact are met.

What’s inexplicable is why the Obama administration is pushing a trade agenda that so directly undermines the middle-class economic agenda the president says he desires to be his legacy.  The only good news is that broad congressional opposition to fast-track authority may save Obama and his desired legacy from his proposed trade agenda.

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Obama: Going ‘all in’ for the Asian Century http://blogs.reuters.com/great-debate/2014/04/22/going-all-in-for-the-asian-century/ http://blogs.reuters.com/great-debate/2014/04/22/going-all-in-for-the-asian-century/#comments Tue, 22 Apr 2014 21:16:56 +0000 http://blogs.reuters.com/great-debate/?p=30509

The reaction in Asia to the dominance of U.S. power is only surpassed by a fear that the United States is in retreat.

As President Barack Obama traveled to Asia Tuesday for a four-country trip, this fear should be foremost on his mind. What many of Asia’s political and cultural leaders  fear most, however, is the United States retreating inward while distracted by crisis after crisis — from Libya to Syria to Crimea. With China on the brink of becoming the world’s largest economy and the geopolitical puzzle pieces of the China seas seemingly in renegotiation, the Eastern world is asking where Washington stands. This is Obama’s moment to demonstrate the components of his much-heralded, but still largely  undefined, tilt to Asia.

The stakes for Obama’s legacy as a world leader — and for the U.S. position as a Pacific power — could not be higher. The president was right to signal a “tilt” in U.S. policy toward Asia. He now has an important opportunity to carry the Asia pivot through to a conclusion.

Though many U.S. allies wring their hands about the prospect of Washington moving toward Asia and, they fear, away from Europe, Latin America and the Middle East, virtually all nations have been busy “rebalancing” their foreign policy and trade agendas toward Asia.

This does not reflect ideological or geographic preference, but reality. The Western economic powers — including the United States — have been precariously slow to recognize Asia’s rise as not only the new engine of the global economy but also as a potential source of challenge and conflict.

The framework for “world order” that was laid out after World War Two has disintegrated, as the emerging world powers push against Western global structures. While these trends are playing out dramatically on every continent, their most significant implications will likely occur in Asia. Deputy Secretary of State William J. Burns stated this in his recent speech on U.S.-Asia strategy at  Asia Society.

“No region will be more consequential for American interests and for the shape of the global system than the Asia-Pacific,” Burns said, “… Never has there been a moment when it has been more important for the United States to underscore our commitment to the long-term ‘rebalancing’ of our foreign policy toward Asia.”

The most innovative strategic element of Obama’s tilt toward Asia is the Trans-Pacific Partnership (TPP), a free-trade agreement that the administration is negotiating with 11 Asian and Pacific Rim nations that would account for some 40 percent of the world’s economic output.

Securing this agreement will mean the difference between the success and failure of the rebalance toward Asia. For the TPP is integral to locking in the basic conditions for a new age of prosperity on both sides of the Pacific. To be effective, TPP must engage China and India as well.

Some doubt that the 12 TPP countries will be able to strike an agreement. These doubts can’t be taken lightly, despite the skilled leadership of U.S. Trade Representative Michael Froman. Political hurdles in all 12 capitals put a deal at risk.

The United States is one obvious example. Many congressional leaders, reflecting the public’s growing populism, don’t support it. Senate Majority Leader Harry Reid (D-Nev.) for example, has said he won’t even allow a vote to give the president the “fast track” authority he needs to demonstrate to TPP partners he can deliver a formal deal.

I have been on the front lines of U.S. trade negotiations. So I can attest that the fast track is crucial in order to finalize sensitive areas in an agreement.

To build vital momentum for TPP in the United States and abroad, Obama must unequivocally embrace TPP. Waiting until after the November elections to press for “fast track” authority may be smart politics,  but not ideal for the agreement.

The president needs to fully explain the TPP’s economic benefits to Congress and the American public. This could help give the administration more of an opening to secure a narrowly-defined “fast track” authority needed ratify the deal.

Agreeing on the TPP will be a key step toward deeper cooperation across the Pacific. But it is only a first step.

Consider the Bilateral Investment Treaty now being negotiated between Beijing and Washington. While these negotiations may temporarily increase tensions between China and the United States, formalizing the rules for investment can help eliminate trade barriers and create new opportunities for economic growth.

Over the long term, Asians and Americans must go further. The two sides will have an opportunity to convert the win-win gains of trans-Pacific economic cooperation into a starting point for greater political collaboration and also to encourage cooperation on security and crisis management of flashpoints.

This mission — the basic challenge for Asia-Pacific peace in what many call the “Asian Century” — is both critical and daunting. The United States can best position itself for this if Obama announces three priorities on this trip:

First, Washington must truly invest in its rebalance of U.S. policy — expanding not just security investments, but also diplomatic, trade and development engagement and cooperation in Asia.

Second, Washington must recognize that engagement in the Asian Century means supporting the growing influence of Asian nations in world affairs at a level commensurate with their growing economic and political influence. The Obama administration, for example, has called on Congress to authorize proposed reforms to the International Monetary Fund that would increase the representation of emerging markets and developing countries, including rising Asian powers. This crucial change should become a presidential priority after Obama returns from the trip.

Third, government and civil society organizations, including the Asia Society, can do more to open the United States and advance areas of mutual concern, where there is the greatest potential for cooperation and collaboration.

With these priorities realized, the TPP agreement signed and further steps taken to open trade across the region the United States will have finally made a meaningful pivot.

 

PHOTO (TOP): President Barack Obama delivers remarks before presenting the Commander-in-Chief Trophy to the U.S. Naval Academy football team in the Rose Garden at the White House in Washington, April 18, 2014. REUTERS/Jonathan Ernst

PHOTO (INSERT 1): Japanese Prime Minister Shinzo Abe talks to President Barack Obama (R) during the opening session of the Nuclear Security Summit in The Hague, March 24, 2014. REUTERS/Yves Herman

PHOTO (INSERT 2): U.S. Trade Representative Michael Froman (C) speaks to media after meetings with Japan’s Economics Minister Akira Amari (not in picture) in Tokyo, April 10, 2014. REUTERS/Issei Kato

PHOTO (INSERT 3):President Barack Obama holds a tri-lateral meeting with President Park Geun-hye of the South Korea (L) and Prime Minister Shinzo Abe of Japan (R) after the Nuclear Security Summit in The Hague, March 25, 2014. REUTERS/Kevin Lamarque

 

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