Renegotiating NAFTA Would Be a Lot Easier, If We Knew What We Wanted

Stan Sorscher

Stan Sorscher Labor Representative, Society for Professional Engineering Employees in Aerospace

The Trump administration just started the process of renegotiating NAFTA, the trade deal between the US, Canada, and Mexico that became the template for globalization in the 21st Century.

This would make more sense if we knew what we want to renegotiate.

In 2016, voters answered two simple questions,

  • “Who gets the gains from trade?” Not us.
  • “Who do you trust?” Not any politician who told us what a great idea NAFTA would be.

In the period following World War II, gains from productivity were shared broadly and our communities prospered. Not anymore. Since the mid-70’s gains from productivity and trade have gone almost entirely to the top 1%, while many communities declined dramatically.

NAFTA went into effect in 1994. It embodies our failed neoliberal approach to globalization. [“Neo” means new. In the language of economics, “liberal” means free-market.]

In the neoliberal vision, our economy is merged or integrated into the global economy. National identities are blurred, shareholder interests have top priority, legitimate public interests are devalued, and gains go almost entirely to investors. Boon will trickle down, as markets solve all our problems. Government is bad. Power and influence favor those who already have plenty of both.

Trade, more than most policies, picks winners and losers. Trade disrupts industries, reshapes economies, and dislocates communities. American workers lost jobs in steel, autos, textiles, home appliances, electronics and many other industries. Over a million Mexican farmers were displaced by our highly efficient subsidized corn and wheat. Trade deals disrupted communities in Central America, as well.

Mistrust is growing in our political institutions, and establishment leaders. Resentment and feelings of grievance are rising, eclipsing hope and common purpose.

A growing number of economists and policy-makers recognize that our free trade neoliberal approach is exhausted, politically unstable, and increasingly reckless.

David Brooks says Donald Trump is the wrong answer to the right question. The right question is, “When millions of people feel they have been left behind, how should we rethink our policies, including our approach to globalization?”

The Trump administration’s most coherent guidance on trade came from US Trade Representative Robert Lighthizer, who opened the NAFTA renegotiations with this message.

“We must balance the legitimate interests of literally millions of people in our countries — those of farmers, and businesses, and workers and yes, families. … [F]or countless Americans, [NAFTA] has failed.”
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Manufacturing strategy and a new approach to globalization

President Trump endorses industrial policy – an approach where we explicitly take public interest and national interests into account. A manufacturing strategy is the conceptual opposite of neoliberal free-market-free-trade orthodoxy.

Every country in the world has a manufacturing strategy. China, Japan, Korea, Germany, and Denmark have been very successful with theirs. Ours is notably bad. Outcomes from NAFTA-style deals are, by design, disconnected from our national interests.

Most people would happily consider national strategies to rebuild manufacturing.

  • We invest billions of tax dollars in R&D. Publicly funded R&D brought us global communications, the internet, and medical treatments unknown a generation ago. Too often publicly funded R&D is commercialized offshore, creating many jobs elsewhere and only a few in our domestic economy. We could write incentives into our R&D programs that favor domestic production when publicly funded inventions are commercialized. In neoliberal free trade orthodoxy, this is heresy. To most people, it’s common sense.
  • Our infrastructure is a legacy of decades of worthwhile national investments. We have roads, airports, waterways, public universities, national parks, and research labs – created and sustained by public investments. The Bonneville and Tennessee Valley systems brought electric power to large regions of the country. Public investment plays a legitimate role in industrial strategies.
  • Government procurement of goods and services involves many billions of dollars. We could require a certain domestic content when spending tax dollars, which would tip the balance in favor of domestic production. NAFTA and other neoliberal trade deals discourage or forbid such policies. In rethinking our approach to globalization, we would rehabilitate those strategies.
  • We run trade deficits around $500 billion per year, or about $10 trillion cumulatively since NAFTA. That is, each year our spending nets out at about $500 billion for items made by workers elsewhere in the world. Balanced trade would mean about 5 million more good jobs to make those items here. One way to balance trade is to realign the US dollar with other currencies. A “Market Access Charge” or MAC, would tax foreign holdings of US government bonds. If the deficit goes up, the Market Access Charge does, too. When the deficit goes down, the MAC scales back proportionately. This would push the dollar back into alignment with other currencies.
  • Every trade deal promises gains in labor and environmental protections. Each new promise is betrayed before the ink is dry. Canada may propose that Mexico and the US both raise their labor standards. A new approach would prioritize workers’ interests, by suspending new trade provisions under NAFTA 2.0 until each country implements and meets stronger standards for labor and environment.
  • The Sierra Club proposed a border adjustment mechanism based on commitments countries have made to protect the environment. Countries who fail to meet their obligations will see a border adjustment (penalty) on all their products. This gives them a market incentive to meet their commitments.
  • That idea could just as well apply to labor rights, and human trafficking. A country falling short of its commitments for labor rights and human trafficking would see a proportionate border adjustment.
  • We could also give worker organizations standing to file complaints. Under NAFTA, we rely on our trade officials, who have never enforced violations of environmental protections, and have a miserable track record for fighting human trafficking, and enforcing labor rights and human rights.
  • Since NAFTA, foreign investors have had a special dispute settlement system, with very favorable legal standards, sympathetic venues to hear their grievances. In the neoliberal free trade approach, investor rights take priority over public interest. Governments can act in the public interest, but they must pay corporations for damage to their investments. For instance, inequality and climate change are classic market failures. We will need public policies to deal with them. Investors could then demand compensation for their lost opportunity. We should reverse that power relationship, saying that public interest takes top priority. Reversing the NAFTA approach to globalization, we would say that companies bear an investment risk, within legitimate rules established by democratic institutions of government. Top priority would go to public interests, and policies that raise living standards. That has been our legal tradition. We should keep it.

We negotiate trade deals in secret. That is exactly the wrong approach. We should stop and publicly discuss basic questions.

  • Who gets the gains from trade?
  • How can we manage globalization in a way that does as much for workers and the environment it does for global investors?
  • How do we rebuild trust in the way we manage globalization?

Then we will be ready to renegotiate NAFTA.


Reposted from The Huffington Post

Stan Sorscher is on staff at the Society of Professional Engineering Employees in Aerospace (SPEEA), a union representing over 20,000 scientists, engineers, pilots, technical and professional employees in the aerospace industry. He is President of the Washington Fair Trade Coalition, and represents organized labor on the Board of the Puget Sound Regional Council Economic Development District. He was appointed by the Governor to the Board of the Export Finance Assistance Center of Washington. After receiving his PhD in physics from UC Berkeley, he worked for two decades at Boeing, building optical, ultrasonic, and X-ray systems to visualize materials and assemblies. Follow Stan Sorscher on Twitter:


Posted In: Allied Approaches

Union Matters

Freight can’t wait

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities.

A freight train hauling lumber and nylon manufacturing chemicals derailed, caught fire and caused a 108-year-old bridge to collapse in Tempe, Ariz., this week, in the second accident on the same bridge within a month.

The bridge was damaged after the first incident, according to Union Pacific railroad that owns the rail bridge, and re-opened two days later. 

The official cause of the derailments is still under investigation, but it remains clear that the failure to modernize and maintain America’s railroad infrastructure is dangerous. 

In 2019, 499 trains that derailed were found to have defective or broken track, roadbed or structures, according to the Federal Railroad Administration’s database of safety analysis.

While railroad workers’ unions have called for increased safety improvements, rail companies have also used technology and automation as an excuse to downsize their work forces.

For example, rail companies have implemented a cost-saving measure known as Precision Scheduled Railroading (PSR), which has resulted in mass layoffs and shoddy safety protocols. 

Though privately-owned railroads have spent significantly to upgrade large, Class I trains, regional Class II trains and local, short-line Class III trains that carry important goods for farmers and businesses still rely on state and local funds for improvements. 

But cash-strapped states struggle to adequately inspect new technologies and fund safety improvements, and repairing or replacing the aging track and rail bridges will require significant public investment.

A true infrastructure commitment will not only strengthen the country’s railroad networks and increase U.S. global economic competitiveness. It will also create millions of family-sustaining jobs needed to inspect, repair and manufacture new parts for mass transit systems, all while helping to prevent future disasters.

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