Labor's trade philosophy

Union official says labor wants to be constructive partner in trade deals

By: Eric Kulisch
Photo: iQoncept/Shutterstock
   The labor movement is not against globalization or trade, but does have a strong critique about the types of rules that are embedded in trade agreements, Thea Lee, the deputy chief of staff at the AFL-CIO, said during a recent panel discussion on the North American Free Trade Agreement.
   “We want to figure out how we can fix the rules of the trading system,” Lee said at an event organized by the Washington International Trade Association. “It’s important to take into consideration what the impact on jobs is going to be of our trade policy. Our goal is to build a progressive, internationalist framework for trade.
   “We will be in a stronger position than if we stick our heads in the sand and pretend that NAFTA has been a tremendous success and that all we need to do is pick it right back up and move it forward as it is. We need to recognize the issues and the problems that have been clear the last few decades.”
   President Donald Trump rode a populist wave to power, tapping into widespread discontent with job losses, under-employment and wage stagnation, which many blame on corporations outsourcing production to countries with cheap labor. Trade proponents argue that the situation in the manufacturing sector is more complex. Automation, tight credit for business expansion and a slow recovery from the Great Recession eight years ago contributed to manufacturing weakness.
   But economists and policy experts say that much of the economic wealth generated in recent years was concentrated among corporations and the wealthiest Americans, and that the benefits of trade were not evenly distributed. Big metropolitan regions with large concentrations of corporations in areas such as financial services, technology, and health care flourished, while pockets of economic hardship persisted in the Rust Belt and other states.
   Trump called NAFTA the worst trade deal ever, pointing to a $60 billion goods deficit with Mexico as evidence, and is promising to pull out if Canada and Mexico don’t agree to renegotiate terms more favorable to the United States. He has threatened large tariffs on Mexican imports and targeted tariffs of 35 percent on products from companies that moved factories to Mexico.
   There are divided opinions on the benefits produced by NAFTA. Experts say that economic growth in the three nations due to cross-border flows of goods and capital has been minimal, even though overall trade within the continent has more than tripled in the past 23 years since it went into force. That’s because it’s difficult to separate out the trade impact from overall market and regulatory dynamics in economies as large as those in the United States, Mexico and Canada.

The idea that TPP is the model for renegotiating NAFTA is delusional.

   Nonetheless, some industrial sectors such as agriculture and automotive have experienced much higher sales or efficiency gains.
   NAFTA’s real value, proponents say, is that it allows for more efficient and specialized supply chains by enabling companies to take advantage of comparative advantages in each nation and thereby become more competitive on the global market. And, it helped bolster the rule of law in Mexico to make it a more attractive place for investment.
   Unions opposed NAFTA because they believe it favored corporate interests at the expense of workers. They claim the labor side agreements are weak and not enforceable, and that chapters on the investor-state dispute settlement process, intellectual property rights, and financial services are tilted toward investors.
   They also fought the Trans-Pacific Partnership agreement that former President Barack Obama negotiated with 11 other Pacific Rim nations and President Trump abandoned last month before it was enacted. Among their complaints against TPP was that it:

   • Didn’t require full compliance with international labor standards before countries received benefits;
   • Didn’t address currency manipulation, which makes a country’s products cheaper and more difficult for foreign manufacturers to compete against;
   • Let foreign corporations challenge legitimate U.S. laws and regulations, such as for health and safety, through the private dispute settlement system;
   • Allowed state-owned enterprises that often use predatory tactics against foreign competitors, and often have the advantage of government subsidies;
   • Had weak rules of origin that would have benefitted China by allowing large amounts of content in finished products produced by TPP nations; and
   • Prevented the United States from requiring the purchase of American-made products when issuing government contracts.

   “The idea that TPP is the model for renegotiating NAFTA is delusional,” Lee said. “NAFTA was supposed to strengthen the competitiveness of the North American continent vis-à-vis Asia and Europe. Certainly for the United States, that didn’t work out. Our trade deficit with the rest of the world went way up, it didn’t go down.”
   But trade deficits are a function of many factors. The lion’s share of the U.S. deficit is with China, and until domestic production increased in recent years the trade deficit was also impacted by large imports of crude oil that do not involve the manufacturing sector. The exchange rate also impacts the size of the trade deficit, as do domestic savings rates and borrowing of foreign capital.
   Labor groups agree with many broad themes on trade espoused by Trump, including how trade affects good jobs, outsourcing, and the trade deficit.
   “But what I think is missing in the way President Trump has outlined his concerns is that we need to continue to be part of a rules-based system,” Lee said. “The labor movement has demonstrated we will work within a rules-based system to convince our government, to work with other governments, to change the rules we disagree with, not to toss them out in an arbitrary way. [We want] to work in a way that respects our trading partners and global solidarity.”

We don’t say America First. We don’t think countries are winners and losers.

   “We don’t say America First,” she continued. “We don’t think countries are winners and losers. We ask, what kind of an economy do workers want to live in? What kind of protections for workers, the environment, the consumer, would be necessary to have trade policy benefit communities and workers? That’s a different set of questions than just trying to get more trade, or protections for investors.
   “Globalization is about trading goods and services, but also about the movement of money and financial flows across borders and about people. And so the labor movement is concerned about the Trump administration demonstrating the kinds of principles we want to see in terms of our interactions with the rest of the world – that we need to be humane, respectful, and constitutional.”
   The AFL-CIO’s prescription for improving NAFTA includes eliminating investor-state dispute settlements, strengthening and enforcing labor and environmental provisions, addressing currency manipulation, upgrading rules of origin, tightening government procurement to favor domestic materials, upgrading the trade enforcement chapter, and addressing concerns about trucking to make sure Mexican trucks meet U.S. safety standards, Lee said.
   Many trucking interests counter that the cross-border trucking standards are high and that the few Mexican carriers that choose to take advantage of the open border are well-capitalized and run modern, safe fleets.
   “One of most important things we could have done would have been to protect Mexican workers’ rights to organize an independent, democratic union,” Lee said. “We didn’t do that under NAFTA. That was a failure.
   “And that is one of the reasons why the benchmarks shouldn’t be about the volume of trade. Nobody cares about the total volume of trade because that’s not what people wake up thinking about. They think about their jobs, their wages, their living conditions, the cleanliness of the air, the safety of their consumer products. And on that front, NAFTA didn’t fulfill the right rule of law of making sure that workers could exercise their fundamental human rights in the workplace without fear of arrest or violence or being fired. That’s the failure of NAFTA: that it was the wrong rule of law.”