Speech | Trade

Trumka to the Center for American Progress: America Needs a New Trade Policy

Washington, D.C.

Thank you, Neera [Tanden], for the kind introduction. I appreciate the good work of the Center for American Progress. I know that the Center has been wrestling with trade and inequality, among many other issues, and we appreciate the spirit of new thinking you have brought to international economic policy over the last few months.

I’m pleased to be here today to talk about trade policy—and, more broadly, how the United States engages in the global economy, and what that means for America’s workers, and for workers around the world.

Because you know, here in Washington, we rehash the same arguments over and over again. This is true of trade in particular. If you close your eyes at a trade event and listen, you might think it was 1999, or 1994.

Back then, nobody really knew what the results of NAFTA would be. Today we do. They’re bad. And that’s why we cannot enact new trade agreements modeled on NAFTA. It’s also why we cannot use an outdated NAFTA-style process for arriving at those agreements, especially not in an election year. I’m talking about fast-track negotiations. That style of trade diplomacy requires trust. But the American people don’t trust the leaders of either party, and for good reason, because both parties can’t seem to kick a disastrous, outdated, failed model of global economic policies.

Now, I say “economic policies” and not “trade policies” for a reason. And it’s particularly important as the Obama Administration negotiates the Trans-Pacific Partnership and the trade agreement with the European Union. They’re called trade agreements, but that’s not what they really are. The real issues our negotiators are sweating over are not tariffs, but governance—rules over investment, intellectual property, consumer and environmental protection, labor rights—issues not inherently trade-related.

You see, NAFTA put corporations in charge of America’s economic strategy -- with the goal of shipping jobs off-shore to lower labor costs. The big trade deals since then used NAFTA as a starting blueprint—from the WTO to our bilateral relationship with China to the recent agreements with Korea, Colombia and Panama.

And while we know there have been many changes in the trade template since NAFTA – especially in the important area of strengthening workers’ rights protections – in way too many other areas, this model has failed to evolve with our complex and dynamic global economy. Over all – this model is simply not working, not here in the United States, not in most of our trading partners. We have a lot of work to do to make this model work for working families – both in changing the rules and learning how to enforce them effectively.

No other country pursues trade deals like we do. Nobody else – not India or Germany, Sweden or China – uses these deals to get rid of good jobs. We have lost more than 60,000 factories in the last dozen years, as major companies created more jobs offshore than at home, and imports outstripped exports year after year. Our current account deficit in 1993 was 1% of GDP. In 2012 it was almost three times that. We run our biggest trade deficit with China—the bulk of those imports is electronics. Many of our top 10 exports to China are basically trash – things like scrap metal and waste paper.

We pursued the strategy that led to structural trade deficits on purpose, because it pitted the workers of our trading partners against our own, and against each other. For their part, our trading partners short-changed their domestic markets in favor of supplying America, so they, too, pushed weak unions, low wages, artificially cheap currency and subsidies for foreign investment like tax-free export zones.

This trade-fueled imbalance fed a glut of global savings. That savings glut in turn funded a bloated global financial system, which gave us the global economic crisis of 2008 and today continues to fuel rising inequality around the world.

For business, NAFTA – and the tax, deregulation, and austerity policies that went with it – seemed great. But 2008 revealed how destructive these economic policies truly are. The model chronically starves the productive sector and working families, while it fuels financial bubbles and busts, after which working people everywhere struggle to provide for ourselves and our families. Economists call it a crisis in global demand.

In the U.S., we also have a crisis of competitiveness, because, ever since the 1980s, big business looked offshore first rather than investing in America as a place to produce anything. Congress fought over every dollar, for everything from primary education and university research to roads, bridges, ports, airports and our social safety net. As a result, we no longer invest in the ideas of the future, and the American Society of Civil Engineers rates our infrastructure a D+. That’s not where America should be.

The net result has been accelerating, radical economic inequality. That’s what it was intended to do. It shifted our GDP’s composition from wages to corporate profits. Ninety percent of America's working people have seen their wages drop in real terms over the past 10 years. Not stay the same. Drop.

Let me give you a real-world example of that impact. Of the workers who have been directly laid off because of off-shoring, the Washington Post said last week, the fortunate ones who found new jobs took on average a 20% pay cut. Think about it—how would you or your family cope with a pay cut like that?

That’s how this global model has killed effective demand. Countries everywhere pushed ahead to push wages down. Look at Mexico. The poverty rate remains higher than 50%, and the minimum wage has lost almost 40% of its purchasing power since the early 1990s. How's that for a bargain?

NAFTA worked too well. It’s still keeping wages low. It’s still subverting the rule of law. The law here guarantees all workers the right to bargain collectively with their employers if they so choose, free of retaliation by both the employer and the government. Yet look what happened when Volkswagen workers in Chattanooga tried to exercise that right. Government officials, starting with NAFTA-advocate Sen. Bob Corker, threatened those workers, saying a new VW assembly line would go to Mexico rather than Chattanooga if the workers voted to form a union.

Maybe that’s why proponents of these outdated agreements no longer say they’re good for everyone, or even most of us. Instead, they say we don’t have a choice. It’s an argument as old as human society – the argument that injustice is inevitable.

It’s old, but wrong. The NAFTA model is not inevitable. We have a choice, and we will choose between the world economy of today—with slow growth, high unemployment and obscene levels of inequality—and the world of tomorrow, of broadly shared prosperity. We will choose between a world of wealth for the 1% with poverty for the rest of us, and a world in which all of us who work hard can enjoy the fruits of our labor.

Yes, there is a better way. And its best advocate is President Obama, on his better days. A few years ago in Pittsburgh at the G20 Summit, President Obama said, and I quote: "We can no longer meet the challenges of the 21st century economy with 20th century approaches." He put an emphasis on making our institutions reflect the realities of our times. He talked about helping people climb out of poverty, about food security and clean and affordable energy, and most of all he talked about jobs in a world with unprecedented levels of unemployment.

President Obama continued to press for jobs, growth and fairness, even as the European Union did the opposite with austerity.

America and the world need to expand on President Obama’s vision, not reject it. We need new policies to spark a virtuous cycle where rising wages fuel demand, not flimsy debt-driven demand but healthy demand, which would in turn spark business investment and more jobs and higher wages in a strong cycle of global growth that works for all our families, for the environment and our communities.

We need a global New Deal, a worldwide program to bring the basic infrastructure of modern society—electricity, water, schools, roads, internet access—to everyone on Earth. It’s the right thing to do, and it would build our economies by giving us more customers.

Yet President Obama has not consistently pursued the vision he laid forth at the G-20. In TPP and in the talks with the EU we see again the old NAFTA template, but with a new, aggressive corporate twist. This has been particularly clear in the European negotiations, whose advocates talk not about tariffs at all but what they call “behind the border barriers.” What they’re talking about are the rules and regulations that create safe workplaces, clean water, safe food and all the things that make life decent and good.

In the Trans-Pacific context, the question is really this: Are we building a trade zone to compete with China or to emulate China? And on what basis? Because it isn’t clear from the current path of negotiations that either of these options can or should succeed. We aren’t going to undercut China by curtailing our own democratic rights and freedoms – and we shouldn’t try! And we aren’t going to build an attractive global model if we keep insisting on the same undemocratic investment provisions – and fail to address labor, environment, and consumer protections in an effective and compelling way.

TPP and TTIP are products of the Obama Administration. And our hope has been that we would see a new template, one that we could support. Yet so far, we see the same corporate-dominated processes, and, in too many respects, the same fundamental outdated framework for both agreements.

Still, I maintain some hope, even for TPP. After the collapse of the Baucus fast track bill, some new thinking may yet occur in the TPP negotiations.

I raise that hope because of the prospect of a more prosperous world in which we have closer ties with Europe and Asia. The goal of labor is not isolation. We want a chance to compete with the world, but only if we compete to produce things people are willing to pay for. We don’t want to see how low we can drive down our living standards.

We know what we’re looking for in these agreements. We want trade agreements to contribute to democratic global economic governance and to promote good jobs, full employment and rising wages.

A key element, of course, is strong labor rights protections so that every worker in every country can exercise fundamental human rights on the job – without fear. So we are looking for every trade agreement to require nations to adopt, maintain and enforce the core labor rights – as agreed by the International Labor Organization – and as set out in the ILO core conventions and their related jurisprudence. These include freedom of association and the right to organize, and bans on child labor, forced labor, and discrimination in employment.

The United States and our trading partners must commit to these basic minimum labor standards, and that means going beyond the so-called May 10 standards put in place during the Bush-era.

We need enforcement, because no rule makes a difference if it can’t be enforced. We want effective redress for abuses.

We also need to ensure that measures designed to protect workers’ incomes, like intellectual property protections, don’t harm the global poor. IP protections—which should promote innovation and serve the public interest—are critical to creating and maintaining jobs. And the U.S. should make sure that other countries respect the innovative work of American artists, actors, writers and inventors. Yet our government should never use free trade deals to limit access to life-saving drugs. A people-centered trade agreement won’t provide special appeal and intervention rights for big Pharma under the guise of promoting trade.

But formal labor rights are only part of the story. We alsoneed rules—enforceablerules of international trade that level the playing field—to protect legitimate domestic regulations and prevent unfair trade.

The most important element of a level playing field is effectively addressing currency manipulation. This happens constantly. Countries manipulate the value of their currency to give an unfair advantage to their exports and to shield their domestic markets from competition. TPP and TTIP must include enforceable mechanisms to address currency manipulation.

But those are only the first steps.

Trade rules cannot become a backdoor attack on the very idea of a public sector, a public sector that does core public functions like providing social insurance, including health care, infrastructure and education, and regulating economic activity in the public interest.

Our governments must be able to act in a time of economic crisis to protect and create jobs.That’s why trade agreements must not interfere with procurement policies like Buy America, and “buy-state” and “buy-local” policies. It’s vital to democracy that government bodies at every level should be able to stimulate their economy, to ensure the purchase of recycled products, to ensure that labor rights are respected and to promote living wages.

We live in a globalized economic environment, and one where the need for rules that protect people and the planet is growing. We simply cannot afford trade rules that push in the other direction, that make the global economy a free fire zone for corporate power, or make it impossible to act effectively to address profound challenges like climate change.

All of these ideas together would put our democratic rights at the center of our economic policies and our trade agreements. Otherwise, we have the NAFTA model thinly disguised tools to increase corporate profits by poisoning workers, polluting the environment and hiding information from consumers.

When a company turns the public interest on its head by claiming that it has a right to hide information—instead of a consumer having a right to know—we know trade policy has gone too far. And yet that is exactly what many global corporations argue when they fight labeling for dolphin-safe tuna, country of origin for beef, or to avoid labeling genetically modified ingredients. These are tough issues—and should be decided by citizens in a democratic fashion, not behind closed doors by trade negotiators or private arbitrators.

In the talks with the EU, the large banks in both economies are trying to use the agreement to weaken financial regulation.

It’s appalling that the global megabanks are trying to deregulate through trade agreements—it has nothing to do with trade and everything to do with avoiding responsible behavior. Instead, financial services provisions of future trade agreements must guarantee the rights of nations to institute capital controls and stabilize the financial system, to protect consumers and depositors. Ultimately, we cannot have a virtuous cycle of rising incomes and investment in the global economy if that global economy continues to be dominated by financial interests.

Just as critical is the case of our environment. Climate policy must be a part of trade policy. Trade deals must recognize and respect democratic decisions about the use of green procurement and resource conservation. Climate change is a real threat, and it cannot be completely solved by national action. Trade agreements must provide border adjustments so that trading partners who act to protect the environment and reduce emissions responsibly are not punished through global trade and investment shifts. Without border adjustments, attempts to deal with climate change in one country will be counter-productive—adding to carbon emissions by pushing economic activity toward more carbon-intensive economies.

And yet U.S. trade policy is completely disconnected from U.S. climate policy. Until U.S. trade policy is included as part of U.S. climate policy, it is hard to see how we will either act effectively on climate or enact public-spirited trade laws.

Finally, the next generation of trade agreements must be ironclad. They can’t include escape hatches, such as allowing imports from countries that don’t comply with the agreements’ standards to be treated as if they were produced under the rules of the agreement. That means there must be strong rules of origin, otherwise we reward the most unscrupulous outsourcing companies over workers and our communities.

If there is one thing we have learned in the 20 years since NAFTA and the original Fast Track, it’s that to achieve any of these measures, trade agreements must be negotiated in an open, democratic and accountable manner.

Trade deals that affect jobs and wages, health care and food security and electricity rates affect us all, and we need to be able to engage citizens to promote, amend or defeat them.

We have that chance with all other legislation—at committee mark-up, when it hits the House floor and when it goes to the Senate. Why can’t we do the same for trade deals? Why do deals like these need to be negotiated in secret? It is hard to avoid the feeling that the answer is simple: No one outside of Washington would support the agreements that have been done under the outdated FTA model. But this time we are not going to be fooled.

As of today, the American labor movement continues to engage in a dialogue with the Obama Administration, with leaders in Congress of both parties and with labor movements and governments around the world in the hope that we can make the TPP and the TTIP into agreements that advance genuine broad-based global prosperity.

But make no mistake about it, old-style trade deals that put Wall Street first and workers last are goners, no matter what kind of rhetoric their advocates toss around.

We are ready to stand with President Obama in realizing the vision of global economic growth and equity. But first he has to decide if that is the vision that will animate his trade policies.

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