Tuesday, August 30, 2016

Alphabet Soup, Part III: The TTIP And the Future of American Labor

by B. Lana Guggenheim What is the TTIP? Have you heard of it? If you have, you’re likely mad as hell, and if you haven’t, you’ll soon understand why many are. One of many free trade deals, the TTIP has come under fire as the race for the White House heats up, with populist anger at obscure government deals that seem to harm the average American and benefit only a select few.

In the previous two articles, we examined two other free trade agreements, NAFTA and the TPP. The first article in the series covered the results of NAFTA, a free-trade agreement between the USA, Canada, and Mexico, established in 1994. The results of this trade deal were decidedly mixed, as new markets were opened and trade established, but American manufacturing moved to Mexico, costing thousands of jobs. Free trade agreements have now become a political lightning rod and litmus test, as anger over the sluggish economy continues. Even with this growing animosity however, another trade agreement, the TPP, or Trans-Pacific Partnership, was signed earlier this year.

The TPP was subject to numerous blistering criticisms and well publicized opposition, which were examined in detail in the second article in this series. But these arguments, while they did not prevent the signing of the TPP, are once again front and center among opposition for a trade deal still under negotiation: the TTIP, or the Trans-Atlantic Trade and Investment Partnership. Whereas the TPP focused on Pacific area trade, the TTIP focuses on cross-Atlantic trade, particularly between Europe and the United States.


If passed, the TTIP would create the largest free-trade zone in the entire world, comprising of about half of all global production. President Obama once had hopes to finalize the deal before he left office, but he faces an uphill battle, and the issues are unlikely to be finalized before 2020. Just like with the TPP and NAFTA before it, this deal is marketed as creating opportunities for medium and small businesses; however, it is likely that the biggest winners will once again be the electronics, pharmaceutical, and chemical industries, industry giants that already enjoy the benefits of strong US-EU ties. Like with the TPP, Big Pharma benefits could result in extending patent protections for their drugs and pushing up the prices of medicines worldwide.


As with the TPP, ISDS (or, investor-state dispute settlement) is a major point of contention with the TTIP, and seen as a threat to the democracy of the EU, as many suspect it would give companies leverage to dictate policy to European governments. This is of particular concern to those worried about environmentally conscious legislation. The TTIP would eliminate all restrictions on natural gas exports, which means that the USA would have a larger market for oil derived from fracking, or hydraulic fracturing, itself a highly controversial procedure due to its potential environmental impacts. The TTIP also encourages self-regulation over mandatory energy efficiency legislation, and because it requires energy networks not to discriminate between energy sources, it would prevent legislators from prioritizing renewable energy sources. Some countries, like France, are already under fire from their public from trying to loosen up labor laws, and see the TTIP as a threat to their security on the job.


The United States might seem over-regulated (or at least over-supervisory) in comparison to some Pacific Rim countries, but the EU favors government oversight even more than the USA. EU states also often have stricter environmental laws in place than the United States. Still, some European governments are weak on climate action, such as Ireland, and those states are susceptible to corporate pressure under the TTIP, rather than EU pressure to crack down on harmful emissions and get in line with the Paris Climate Agreement.


Under the TTIP, European farmers would face stronger competition and lower prices, with American factory farms and and corporate food giants standing to gain. That might seem great to Americans, but Europeans aren’t too keen. The food fight is something that Europeans are actually really hung up on, much to American frustration. For example, France is upset about scrapping milk quotas, which could damage the country’s dairy sector, a key driver of its economy.  And while genetically modified crops are perfectly safe, citizens of the Euro-zone have a great deal of skepticism and suspicion towards them, and EU states are allowed to ban GMO cultivation as well as mandate labeling of GMO foods. Still, most of the animal feed in the EU is imported from the Americas, and is overwhelmingly comprised of genetically modified crops, but people seem to get antsier when that food goes to people too.


The EU is also much stricter on pesticides than the USA. The US law says that if you can’t prove it’s harmful, go ahead and sell the product, but the EU law is much stricter, demanding a risk assessment when there isn’t enough scientific data to clear up uncertainty. And this means that the EU and the US disagree about the maximum amount of pesticide residue allowed to be in food. The small, family-owned farms that still are present in Europe also contrast with America’s ranch model, especially as America makes use of growth hormones that are banned in the EU. (Meanwhile, America won’t import EU beef either, but that is due to the mad cow disease that ran across the continent in the 1990s.) Also at issue are the methods to prevent infection on meat and poultry (America washes its poultry meat in chlorinated water; the EU in hot water), and the lack of anything resembling the tightly-regulated “farm to fork” strategy in America. In short, folks are concerned that the TTIP would scrub these stricter food standards to bring the EU in line with American standards.


As it stands, there already are very few trade barriers between the US and Europe. Most tariffs are less than 3%. Therefore, many suspect the TTIP to be about increasing deregulation and opening up the European markets to corporations, and allowing them greater ability to roll back American or European rules that impact profits, but also help protect consumers, not just in the agricultural and food industry, but in digital privacy, and government oversight and regulation of financial institutions. The European Commission says the TTIP would boost the EU’s economy by over 120 billion dollars over 14 years, but Dean Baker, of the American think-tank Center for Economic Policy Research, says gains per household would be very modest (he compares it to finding a quarter on the street), and wider effects could result in net job gains or losses, depending on the model referenced. Indeed, he calls the aforementioned number a best case scenario, which is roughly equivalent to a month’s growth anyway.


There are also fears about the privatization of things that in Europe are state-administered social goods. In England, the debate rages about the future of the National Health Service under the TTIP. While some of these protests are a bit hysterical in tone, others raise points about the difficulty of reconciling such different systems, including the TTIP potentially forcing the NHS or other similar systems in other EU states to allow private US pharmaceutical firms to bid for lucrative contracts, thus paving the way for the privatization of the government health-care system “through the back door.” It also means privatization already undergone would potentially be impossible to restore to public hands, due to investor rights granted with ISDS. Fear of potentially being forced to pay compensation could forestall any rollback on privatization, even if the government wanted to. Parliament has promised however that just like CETA (a similar trade deal, but with Canada), there will be a provision that protects public utilities, like health-care, that can be a state monopoly or limited to a handful of private operators, thus avoiding this scenario. But many folks remain unconvinced, especially in UK, where there is a lot of public attachment to the NHS, as opposed to the rest of the EU, which usually has a more balanced mix of public and private options available. (Fears about the future of the NHS were deliberately stoked in the recent Brexit referendum as well, with pro-Leave folks explicitly stating that the NHS would be safe under their care but not in EU hands, and not post-TTIP hands, versus pro-Remain folks rejecting the notion that NHS would be threatened by the TTIP at all.) The European Commission has made available all negotiating texts, including lists of proposed carve-outs, which explicitly mentions protecting health services that receive government support in whole or in part. And back in March 2015, EU Trade Commissioner Cecilia Malmström and US Trade Representative Michael Froman addressed the issue, saying that no agreement between the US and EU would force anyone to privatize anything, or that once privatized, it can never be re-nationalized. Under the TTIP, if the UK or any other EU state breaks its contract with private healthcare suppliers, then yes, they can be sued. But that is pretty unlikely, and it’d be easier (and smarter) to simply let contracts expire and re-nationalize it after its conclusion anyway. (Despite the Brexit vote, the UK remains part of the EU until the exit negotiations conclude; as of the time of this writing, those negotiations hadn’t even been started.)


Privacy concerns are also a specter. The EU Parliament rejected ACTA (Anti-Counterfeiting Trade Agreement) back in 2012 after a huge public backlash, as folks did not wish for internet providers to monitor their activity online, much less be required to do so. (Many countries in Europe did sign it, but have not ratified it or put it into effect, effectively killing it where it stood.) But it is feared that the TTIP would allow a “back-door” to get the core of those regulations on the books anyway, thus circumventing democracy. The combination of easing privacy laws, plus restricting public access to corporations’ data (especially pharmaceutical clinical trials) would be a disaster for the public, and a boon to corporations trying to sell them things.


And just like NAFTA allowed for manufacturing jobs to move with greater ease out of the USA to Mexico, the TTIP is likely to cause a bleeding of jobs from the EU to set up shop in the USA, where labor standards are lower and unions much weaker. That might be good news for Americans and the businesses that move here, but Europeans are understandably not too keen on losing their jobs.


In addition, the European community, like the Americans were with the TPP, isn’t thrilled with the secrecy shrouding the specifics of the TTIP, even if such is standard practice for these treaties. (This too is seen as anti-democratic behavior, and they kind of have a point, as many Americans felt the same about the TPP.) When there was a leak of sections of the TTIP draft back in May of this year, John Hilary, Executive Director of London-based charity War on Want, said that there was “no way” that TTIP could survive the leak. “The only way that the European Commission has managed to keep negotiations going so far is through complete secrecy as to the actual details of the deal under negotiation...This is surely the beginning of the end for this much hated deal.” That until recently, much of the publicly available text was only through leaks hasn’t endeared many campaigners to the deal, either. Still, even if the text isn’t that bad, the leak might embarrass EU member states away from signing on - an issue for France and Germany, as they are having national elections in 2017. Just after the leak, French premier Francois Hollande said no the TTIP, in part because he is deeply unpopular, and siding against the deal will earn him some points with the public.


President Obama and German Chancellor Angela Merkel in a joint conference about trade, immigration, and other issues in February 2016
And just like with the TPP, government officials who saw the document saw only sections, were under surveillance, and were not allowed to disclose what they read. And for German lawmakers (or any other non-native English speakers), penetrating the dense legal jargon is especially difficult. This has become a toxic issue in Germany, where Greenpeace activists unleashed their trove of draft documents, in a glass case near Berlin’s Brandenburg Gate - a wry commentary on government transparency, or lack thereof.


Globalization has in general come under fire and anti-establishment feeling is high, as it has failed to deliver on its promises of economic stability and growth, especially in the face of a still-present economic downturn. Such feelings are what prompted the Brexit vote, after all. And with the UK leaving the EU, there is one less vocal supporter for TTIP at the European table. Via the European Citizens’ Initiative, which enables EU citizens to call directly on the European Commission to propose legal actions, over 3 millions signatures against TTIP and CETA (which is basically a Canadian TTIP) were gathered within a year.


But the TTIP goes both ways; the USA has stricter financial and banking rules than most European states. Those restrictions were put in place after the financial crisis of 2008 in order to curb bankers’ powers and avoid a similar crisis in the future. Such restrictions were not put in place in the EU, and the UK might be seeking a lifting of these restrictions via the TTIP.

Could lawmakers or a future President actually gut existing trade deals? Trump said he would, but could he actually? Reversing trade policy won’t actually bring any jobs back, and companies tend to go where costs are cheapest anyway. This happened with America’s textile industry. Once a booming, core section of our economy, it moved overseas decades ago, decimating towns across the South - towns that have yet to recover. And that happened without NAFTA or any other trade deal. Trump says he wants to put huge tariffs on Mexican and Chinese imports (35% and 45% respectively), but that won’t make production move back. Those companies would just go somewhere else, likely Vietnam, or Indonesia, or Korea, as the standard of living is lower in these countries, and workers are therefore willing to do the same work for a lower wage. It’s just math.


Besides, slapping on such huge tariffs isn’t exactly easy; it requires an act of Congress, and would violate all the trade agreements the US has with other countries involved in the WTO, over 160 in all. And besides, if the US raises tariffs on imported goods, other countries would retaliate by raising theirs on our goods, which would hurt our economy to the tune of over a trillion dollars worth of exports. Preventing this from happening (or at least, making it very costly) is kind of the point of the WTO in the first place.


If trade is good for the country, why are the benefits not reaching Rust Belt towns, even decades on?  White collar jobs are doing better, and more goods are available for cheaper nation-wide, but blue-collar factory jobs are doing worse and worse - and trade deals exacerbate this. But advancements in technology, such as automation, and increases in productivity also slashed factory jobs - to the tune of about 80% of the total loss - and leaving no other opportunities for low-skilled workers. Another 20% lost was due to trade - and when you’re already hurting, this addition adds insult to injury. The US Chamber of Commerce argues that this automation is the primary engine of job loss, not trade deals, and that the elimination of tariffs and other obstacles boost market access for small and medium sized businesses that would otherwise be shut out of the global market.


“Onshoring,” a term for companies bringing manufacturing jobs back inside the USA, seems like it might help reverse this trend, but in truth, it offers little relief. Such moves, such as when GM opened a plant in Tennessee, or when Whirlpool was moving production from Mexico to the USA, only offer a trickle of new jobs. Most of these plants are in right-to-work states, which means laborers will have a very tough time unionizing, meaning they have much less job security than previous generations who worked in this field. Adjusted for inflation, they earn less too. Manufacturing and other blue-collar jobs are no longer a road to the middle class. There are no “good jobs” to be found here.   

In the end, you can’t stop trade, and attempts to do so would be disastrous. So what can be done? Focusing on the lack of labor protections would be a way to make sure those who do have work aren’t stuck in dead-end jobs that can’t even let them make ends meet.  Or tackling the lack of regulations that promote companies to boost their bottom line, regardless of the human cost. Or focusing on government policies that don’t provide enough avenues to re-employment for displaced workers. Expanding the Trade Adjustment Assistance (TAA) program would be a good start. This program helps workers pay for education and training to find new, better jobs, something that is critical for these blue-collar workers who are out of a job and out of options. However, funds for this program were sharply cut in the 1980s, and its current funding is entirely insufficient to address Americans’ current needs. President Obama and some economists also recommend expanded wage insurance, a sort of unemployment-wage that would offer laid-off workers a portion of their previous salary for a period of several years, which would ease a lot of the economic hardship suffered by older workers who are forced to take a deep pay cut, assuming they are lucky enough to find new employment at all.

Jeffrey E. Garten, Dean Emeritus of the Yale School of Management, states that the goal should not be to reverse trade policy, but that these policies should no longer stand alone. Rather, they must be accompanied by domestic policies that help workers thrive in the new environment, rather than leaving them to languish, as has been the case for the past decades. This can also include a progressive tax policy, better unemployment programs that increase the robustness of the social safety net for the chronically unemployed and underemployed, as well as better job training.

The current economic predicament has been decades in the making, and trade deals are only one complicated part of how we got here. Counterintuitively, these deals are good for America’s overall productivity and income, and boost many industries, while decimating already foundering manufacturing and factory jobs. The benefits of such trade deals are not shared equally. Combating this painful reality and helping America’s blue-collar workers is a lot more complicated than simply opting out of trade deals. Instead, we need a comprehensive economic reform, a series of policies that can start correcting the many factors that led us to abandon so many of our fellows in the first place. To not do so will only hurt us all.

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