Global trade and the middle class
Above: A Trans Pacific Partnership Protest interrupts a Nancy Pelosi event | PopularResistance.Org
In the early 1990s, when the North American Free Trade Agreement (NAFTA) was being negotiated under the first Bush administration, the term “globalization” was quickly becoming a catchphrase. Economists were increasingly using the word to describe the rapid rise in the exchange of goods, services, capitol and knowledge between countries. The increased interaction between nations and industries was, in part, what compelled leaders to modify the terms of trade relationships.
After Bill Clinton took office, he wrapped up NAFTA negotiations started by his predecessor and marketed the deal as a major economic stimulus for all Americans that would lift trade barriers between the U.S., Mexico and Canada. In a 1993 speech given moments before signing the deal into law, President Clinton said the agreement would be a force for social progress and economic growth and “create the world’s largest trade zone, and create 200,000 jobs in this country by 1995 alone.”
Over the next twenty years, as the global economy grew and became more interconnected, Americans on both sides of the aisle have debated the effectiveness of NAFTA and similar trade agreements. In 1993, then-Vice President Al Gore famously debated former presidential candidate Ross Perot on Larry King Live. Perot argued NAFTA would continue to encourage American companies to seek cheaper labor outside U.S. borders, while Gore insisted U.S. exports would surge.
The trade agreement has since proven to be more of a controversy than an economic or geopolitical victory for the U.S. In the years after NAFTA became law, an estimated 700,000 American jobs were lost, many of them manufacturing positions that went to China. As a result, Asian workers experienced income gains and their American corporate employers saved money by employing cheaper labor.
Today, the debate over free trade agreements continues as President Obama inches closer to his goal of entering the largest trade agreement in history, the Trans-Pacific Partnership, or TPP. The deal includes 12 pacific-rim countries that, together, make up 40 percent of the global Gross Domestic Product (GDP).
The TPP is controversial not so much for its scope, but for the manner in which it’s being carried out—in secret. Everyone from unions and environmental activists to the media and members of congress have complained that the text is classified. What’s more, the few chapters of the document that have been leaked to the public reveal provisions critics say give undue control to corporate interests and put democracy at risk.
For months, the president has been lobbying congress—particularly members of his own party—for support. Although it has not come easily, the president saw a major victory this week when the senate finally approved fast-track authority, allowing him to enter trade agreements with only an up or down vote from congress. And the president isn’t the only one celebrating. Representatives from some of the world’s largest corporations, including Walmart and Monsanto, are involved in the TPP’s negotiations—corporations with policies often criticized for discouraging economic growth for the middle-class. Walmart, for example, is continually attacked for paying low wages that result in workers seeking out public assistance. The company has also refused to let employees organize, a policy that irks labor unions.
Organized labor groups have become one of the loudest rallying voices against the TPP. Like corporations, unions often take heat for their political activities, but there is a fundamental difference between the two. Corporations lobby for the financial interests of a few wealthy stakeholders. Unions, on the other hand, are one of the few organizing bodies with the means to lobby on behalf of working-class Americans. But over time their political efforts have produced fewer and fewer tangible outcomes for the working- and middle-class.
“Fifty years ago workers joined together to get a bigger share of the economy’s gains,” says Robert Reich, professor of public policy at the University of California, Berkeley, and former labor secretary under President Clinton. “Unions not only raised wages, but also improved working conditions for everyone.”
Over the last few decades, large-scale employers have discouraged labor organizing. Meanwhile, growth in the U.S. has slowed and middle-class incomes have stagnated. On top of that, labor groups are being left out of major economic policy discussions, like the TPP, that favor corporate interests instead.
Reich, who publicly opposes the TPP, argues this kind of involvement of moneyed interests in politics is leading to greater income inequality in America. A report from the Economic Policy Institute titled The Trans-Pacific Partnership Is Unlikely to Be a Good Deal for American Workers, supports this point. “Globalization has played a role in the weak wage growth for most American workers and the rise in inequality that has characterized the past generation,” writes author Josh Bivens. “Despite this, however, many economists and policymakers continue to support trade agreements like the TPP.”
This begs the questions, why does Obama support the Trans-Pacific Partnership? The president’s unusual alliance with republicans on the TPP deal has bemused many onlookers. One answer is his political legacy. Every president over the last 30 years has either negotiated or signed a free trade agreement. With the end of Obama’s presidency in sight, the TPP will give him the opportunity to flex his foreign policy muscle. Another answer is the president’s advisors. Some political analysts believe the president is receiving bad advice from U.S. trade representative Michael Froman.
Froman has a long history with both the president and the banking industry. After attending Harvard Law School with President Obama, Froman became chief of staff for Robert Rubin, the treasury secretary under President Clinton. When Clinton’s presidency ended, both Froman and Rubin took executive positions at Citi Group. Froman reestablished a working relationship with President Obama during his first term and, in 2013, became U.S. Trade Representative.
“I think he lives in a bubble,” says Robert E. Scott, an economist with the Economic Policy Institute, of Obama. “The politics of the White House are such that the president has surrounded himself with people like Larry Summer and Bob Rubin and Tim Geithner, who come from Wall Street.”
This kind of close working relationship that the president has developed with banks and other corporate interests may help explain why he hasn’t been able to sell most Americans on the TPP. Remnants of the 2008 global financial collapse linger in the minds of many Americans who have grown untrusting of the banking industry. And high unemployment during the recession has left the middle-class more protective of their livelihoods. A recent NBC survey found that only one-third of Americans prefer to allow free trade so they can buy cheaper products, while two-thirds of Americans would rather protect American industries and jobs by limiting imports from other countries.
The Trans-Pacific Partnership will have enormous implications for the global economy and there’s no doubt some will benefit. Developing nations will expand their exports, and multinational corporations will likely increase production and save money. But globalization is unlikely to slow down, and as history has shown, the middle-class may have to take a hit for the others to succeed.