Posts Tagged ‘NAFTA

10
Oct
17

Free Trade: Evil or Good?

Free Trade Evil or Good

There is a conflict within the struggling Democratic Party as to whether to support Free Trade or to ban it. Traditionally, for the past 150 years, Democrats have been the political party for the working class, to improve worker’s wages and their working conditions. Looking at the issue of whether you are for workers or against them, it is rather simple: you are either for workers or for the employers (you can’t be both). If you are against workers, then you are not called “Anti-worker”,  but “Pro-Business”. And there is nothing more “Pro-Business” than the issue of Free Trade.

What is Free Trade?

To understand “Trade” let us go back to the beginning – the writing of the U.S. Constitution, written mainly by James Madison, but implemented by Alexander Hamilton, the first Secretary of the Treasury. Part of “Trade” is customs or import taxes (taxes that are levied on products brought in from other countries into the USA). This was one of the first orders of the day. Import taxes did two important things: 1) it brought in a substantial amount of revenue into the US Treasury (in order to pay the back wages of soldiers of the Revolutionary War who had gone unpaid for many years) without individually taxing individuals and 2) it protected fledgling American businesses from being over-run by foreign companies. In fact, Hamilton set the Coast Guard to patrol offshore waters to intercept contraband (untaxed smuggled products).

It was Alexander Hamilton’s vision, as well as George Washington’s, that the United States should encourage manufacturers, especially textiles. This can be best exemplified by the ceremonial outfit worn by George Washington, who, at the first inauguration, wore a plain brown suit of American broadcloth woven at a mill in Hartford. (from Alexander Hamilton p277, by Ron Chernow). At that time, England was a giant manufacturer, holding secrets of manufacturing from competitors. England wanted to keep the US as a natural reserve of raw material and limiting any US manufacturing. It was one of the more important items that American colonists had rebelled against. Funny, the USA is once again becoming less a manufacturing power and more of a reserve of raw material, due to Free Trade.

Now, to more modern times, 1980s, The United States was the disputed king of manufacturing. The beginning of the end was that corporations and big business took over Congress (unfettered lobbying/corruption as it caused in every other country). These big monied business people, in an effort to increase profits while simultaneously decreasing pay for American workers, came up with the concept of “Free Trade”. By eliminating import taxes on products coming from other countries, corporations/big businesses could exploit low wages and decreased standard of living conditions of foreign nations to undercut the price of all products made in the USA, which caused tens of thousands of Americans businesses to fold or to move to  other countries like China or India and millions of Americans to lose their jobs. (7.23 million lost manufacturing jobs since 1979). This has caused the decay of American manufacturing and has hit some areas extremely hard, especially the small rural towns where manufacturing was their main source of revenue.(Globalization when factories close down and towns struggle).

Who is Helped by Free Trade?

Free Trade policies actually do help farmers. It did open more markets for American farmers to send their products. Of course, farmers only make up 1% of the US population. Other winners, CEOs of large companies. More profits, less responsibility. That is why someone like Donald Trump who says “America First”, still keeps his manufacturing plants in China.

The losers: American workers, loss of millions of American manufacturing jobs, decrease of US wages. When you open up the job market to the whole rest of the world, it mean the American worker had to compete against the global workforce of 1,12 billion workers. The worker glut has caused a decrease of American wages and benefits (Invisible Influence of China, Robert Samuelson for the Washington Post). Not only are the workers hurt, but so are the families, the towns, cities and communities as well as the associated businesses with manufacturing. Plus, as the World Trade Organization becomes bigger and bigger, the United States can no longer impose its own safety regulations such as on meat because it makes it unfair for countries with less regulation to compete with the US (The Official End to Country of Origin Meat Labels). So, there are a lot of down sides to Free Trade. Let us not forget the loss of all the revenue to the US Treasury by getting rid of all those trillions of dollars by eliminating the import taxes.

But how about the other winners? Well, the countries that the United States has shipped all their jobs to have certainly been helped. For example, China builds skyscrapers and bullet trains at a rate that we can not even comprehend. Rich Chinese businessman come to the United States and buy up American properties. Poverty is less worldwide.

The main argument for Free Trade is that it brings down costs. While inflation seems to hit everything, in clothing, due to mass production and slave labor, you can buy some clothing at the same price as you could in 1979. But is decreased prices everything? Cheap products have changed people’s philosophy, people now spend terribly unwisely – it has become an uncontrolled spending economy. And overproduction of products is also a bad thing: clothing is manufactured in such an overwhelming volume, 26 billion tons per year to the landfills, that landfills are having troubles taking it all in, while stripping away natural and unnatural resources to make them.

Which Political Party is For Free Trade?

The North America Free Trade Agreement (NAFTA) an agreement between the US, Canada and Mexico was the first Free Trade Agreement.  This was a Republican plan written up by Republicans, started under the administration of George H.W. Bush, voted on by a majority of Republicans and a minority of Democrats. But, sometimes considered a Democratic bill because George Clinton signed it into law. Almost immediately an infinitely larger Free Trade  deal happened, the World Trade Organization (WTO). It should be noted that all Free Trade bills are Republican bills, and they always will be. Even Donald Trump was Free Trade, still is Free Trade, except when he hypocritically says he is not. Free Trade is the Republican platform. Even Breitbart which is “anti Republican establishment” is Pro Free Trade. The Democratic Party is 85% Against Free Trade. And it is quite possible that if there will be a limitus test for the future Democratic Party, it is whether a Democrat is for Free Trade/Pro-Business/Anti-Worker or Against Free Trade/Pro-Worker. If the Democrats want to win back any part of the Senate, House or Presidency, they should all be Pro-Worker. The Democratic motto should be: “All People deserve the right to Life, Liberty, and the Pursuit of Happiness with Good Wages and Benefits.

Economic Forecast

Don’t be fooled, the United States and the world has been in the biggest economic boom ever seen. It has been going on the last seven years, but because the United States is not participating in manufacturing, workers have not seen wages increase. Donald Trump had promised 4% Gross Domestic Product (GFP) growth, but that will never happen without manufacturing which has been left behind. (7 Reasons why Trumps promise of 4% GDP growth will never happen in 2017) In reality we are probably close to the end of this economic tech boom. The stock market is way over valued, just like it always happens before the recession happens. Are the Day Traders afraid? NO. The reason, the big boys have super fast computers and lines of communication that allows them to almost instantaneously withdraw their money before they get hurt, while all the workers with their 401Ks will have to see their retirement plans slowly go down the drain. Not a rosy prediction. The path to a more stable future is to invest in manufacturing, especially making the more expensive technical components and to invest in infrastructure. Doubling down on trickledown economics, giving tax breaks to the rich and decreasing revenue to the Treasury is a sure way to continue on the same path we are on.. The rich get richer, the poor get poorer and the middle class once again becomes the poor class. Final Verdict: Free Trade is a menace to the American working class, but a real boon to the top 1% and other countries.

Remember to buy American, the job you save may be your own.

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20
Jan
17

The Oaf of Office – More USA Jobs or Less?

This is written specifically for Inauguration Day. With Donald Trump being sworn in as the 45th President, the question is whether his administration will be good for the American worker and the Made in USA movement which ultimately means more jobs for Americans.

What Can We Expect for Made in USA jobs under the Trump Administration?

Will the Trump administration increase Made in USA jobs or will the Trump administration continue the Republican doctrine and do the opposite: to decrease good paying jobs in the USA? To predict these two outcomes, we have to know what Trump believes by what he has said (which is sometimes difficult as sometimes he is on both sides of the same issue). We know that he agrees with the ultra-right of the Republican Party on all issues except possibly two: first, the GOP has always been wary of Communism and Russia. Interestingly enough, Trump has expressed the exact opposite of this wariness. Second, the GOP are in full support of Free Trade, exporting US jobs and maximizing profits for the company’s CEOs. While Trump had previously offshored jobs and has his Trump clothing line (and his family’s products) made outside of the U.S, suddenly, in mid-campaign, Trump said that he is against Free Trade treaties.

Policies of the Republicans and Therefore, Trump and its effect on the USA.

So let us quickly look at some of the policies of the Republicans (and therefore, Trump) and see how it would effect US jobs. These include minimum wage, income taxes, Immigration, Free Trade, Energy, Mergers, Economic Growth, Free Press.

Wages and the Minimum Wage

For the past 100 years, the traditional view of Republicans towards business has always been on the side of owners of businesses.  This has not changed. Republicans have always been against all issues that would make the bosses pay more: minimum wage, vacations, 40 hour work week, overtime pay, social security, unions, pensions, employee health care, disability, child labor, worker’s compensation,  and workplace laws that outlaw discrimination or harassment. These issues were fine when the United States was an overwhelmingly run by small businesses. But, since 1980, the USA has become the Mega company capital of the world and many of these giant companies are multi-nationally owned. In fact, large corporations (since 2007) employ more Americans than small businesses (small business being defined as less than 500 employees). The US is so top-heavy (big corporations dominate) that just 6 companies made 50% of all profit in the US in 2015 (according to USA Today) and 28 companies made 50% of the profit to the S & P. So, sometimes it seems ludicrous that the Republicans go to great lengths to protect the mega-Rich, who already have their own lobbyists, but very little for small business owners. So, what about the workers? Workers compensation has been stagnant especially when compared to corporate profits and CEO pay. Workers wages are just starting to go up over the past two years, but many workers depend on the Federal Minimum Wage to make a living. The Minimum Wage has been unchanged since 2007 (as passed by a Democratic Congress), it is still $7.25 per hour (Louisiana and Tennessee do not follow the federal minimum wage). It has been shown by many economists that the minimum wage has not kept up with inflation. And at the present time, an employee working a forty hour week at minimum wage would still put one at the poverty level. Critics (mainly Republicans) have charged that the raising of the minimum wage kills jobs. This has never been proven, in fact, there evidence to the contrary (Business Insider) and (US News).

History of US Federal Minimum wage to Nominal Dollars

History of US Federal Minimum wage to Nominal Dollars

What is the opinion of Trump? He wants to repeal the minimum wage. But, of course, he has flip-flopped on this issue multiple times (see Washington Post Flip-flops on minimum wage). But if Trump follows standard Republican orthodoxy, and many expect that he will, Trump will try to repeal the minimum wage. What does this mean for American workers? The prospects don’t look good. It is assured that the Federal Minimum Wage will not be raised. However, some Democratic states have, on their own, voted to increase their own state minimum wage. These states have shown the greatest economic growth. Growth in these states will be great, because they are innovative, and despite the efforts of the Trump administration.

Income Taxes

Trump has promised to change the tax code. It has always been hard to pin down Trump, especially when what he says does not match what he says on paper. But the written Trump Plan is a basic Republican plan, First, it gets rid of the Inheritance Estate Tax which would help only the top 1%. Second, it decreases the corporate tax rate from 35% to 15%. Third,  it would decrease the rate of the top income makers from 37% to 33%. The group of $91,150 – $110,000 per year  would also get a small tax break from 28% to 25%. There is no change from $37,500 – $91,150. In fact, most may be paying more. (You can see more on the Trump Tax Plan/NPR analysis). The final verdict: This is classic trickledown economics, giving more money to the top 1%. It didn’t work with Reagan did it, it won’t work now. When you give more money to the rich ,they do not spend it (there is no trickledown), they invest it. Additionally with substantially less income coming to the government, the cost to the government is $62 Trillion per year (greatly increasing the deficit). Final Cost to the worker: more taxes paid by the middle class, less money from the corporations, less money from the top 1%, less money for the government to finance infrastructure. In fact, this is the exact same policy that caused the middle class to disappear in the first place.

income-tax

Immigration

Historically, there have always been groups that have hated immigrants: at first, it was directed at the Irish, and then the Germans, then the Chinese and Japanese and then later, the Hispanics. The Republicans haven’t always been about deporting immigrants. For Republicans, this is a relatively new phenomenon. I mean there were always a sub-group of Republicans – the KKK, the John Birch society, the segregationists, and other White Supremistist groups (they had been Democrats until the Civil Rights Acts of 1965, then they became Republicans) whose voices have always been minimal until recently. Now they are quite vocal. The cause of this movement? It happened after President Reagan repealed the Fairness Doctrine in journalism and Media. This is when Right Wing Media went into action. It encouraged prejudiced people who were previously silent to speak out publicly. And this is where Trump has made his connection. Trump loved to inflame this crowd with hatred towards immigrants: He said he would build a wall. And then he said Mexico would pay for it. Of course, it was talk, just saying outrageous things to get people to listen.

trump-minority

The Wall Between the US and Mexico

So, how serious is the possibility of building the wall between the US and Mexico? Even Trump supporters didn’t take this idea seriously, but they loved the hateful rhetoric anyways. Let us look at the 119 mile wall between Mexico and the United States. The Washington Post said that building just the wall would cost $25 Billion (not million- and it doesn’t consider surveillance). But, we know the actual costs are always more than estimated by three to four times. So, that would make it approximately $100 Billion. And Mexico is sure not going to pay for it. So, guess who is going to pay for a wall that won’t keep immigrants out? You are, the American tax payer. Estimated cost per person $308.

trump-wall                                                                                                    The Trump Wall

Republicans know that immigrants are a vital source of labor for certain business especially the farming community. In fact, the Senate had passed a Comprehensive Immigration bill in 2013 (that is right – both Democrats and Republicans worked together). However, some Republican Tea Party members scuttled the bill in the House and now, we are in the same state as before. Final decision: I can’t see Trump getting enough Republican votes to build the wall. Some Republicans are thinking about the future of their party. They know they can’t stay in power as the all-white Party about increasing their chances of getting Hispanics to vote for them. The Republican can’t stay the all-white Party, not without a lot of tricks anyways (like the ones they are already employing – gerrymandering, voter suppression), so they will need to lure some Hispanic voters. Theoretically, what if Trump built the wall , and deports all the ones he said he would (11 million), many industries would be hit hard: agriculture, construction, Home Health, Hotels, Motels, restaurants, landscaping, wine growers, etc. Some anti-immigrants say that this will “free up jobs for Americans.” My experience, Americans don’t take those jobs. When the Great Recession hit in 2009, how many Americans did you see working on the farm or Home Health? Practically none. Americans would rather collect unemployment than do the heavy manual labor that the immigrants do.

Free Trade

Free Trade is a Republican creation, taking root under the Reagan administration. It undermines what our Founding Fathers had started which was, in order to protect fledgling U.S. businesses, the government would levy tariffs on products coming from other countries. The first Free Trade Agreement passed was the North American Free Trade Agreement (NAFTA) which was an agreement between the US, Canada and Mexico. The next Free Trade agreement was a whopper. It was the World Trade Organization (WTO) which brought in tons of more countries, including China. And guess what happened, just as previous President contender, Ross Perot predicted, this created “a giant sucking sound” of American jobs to other countries. By eliminating import tariffs, it made imports much cheaper, American products suffered, businesses closed, and, then, American business owners joined the foreign competition by closing down American factories and sending the jobs to China, Mexico, Vietnam, India, Bangladesh, etc. (where labor is cheap and regulations minimal). Multiple industries in the USA have been hurt, severely injured and many are on life-support. A lot of good paying manufacturing jobs had been eliminated in the United States, which has created a giant vacuum in the US economy – that vacuum is from the loss of the middle class.

Trump had always been a Free Trader, in fact, he has offshored his Trump clothing to places like China and Mexico. He was never against Free Trade until, during his campaign, he had read a survey where people felt it was important that jobs be kept in the USA. During the campaign to whip up this anti-trade talk, Trump had made insinuations that he would raise the tariffs on China.

Buick Envision made in China

Buick Envision made in China

It is interesting that Trump has targeted companies auto companies that have planned to off-shore to Mexico, but does he say anything about China bringing cars into the USA? No. How about the Buick, Chinese – made, Envision? Nope, not a word. Then, there is the new all-electric car, Atieva which just changed its name to Lucid, to make it look like it is American, which is totally financed by Chinese businesses, will Trump comment on this? Nope. Trump will only comment once there is enough publicity to make it worth commenting on it. It is not like he really cares whether it is US made or not.

Will Trump raise tariffs on Imports from China?

So, the question is whether Trump will levy tariffs of 35 or 45% like he threatened. My prediction is No. Trump has too many ties to China (from Time Magazine). He has plans to build 20 Hotels in China over the next 10-15 years and not to mention that the Bank of China is his biggest tenant in Trump Towers. If Trump really infuriates the Chinese government, the Chinese could impound his company that makes Trump clothing and they could jail all of his employees and managers as spies, because totalitarian governments are like that. This is called conflict of interest. Federal policy is being influenced on how it effects hid business personally. Another potential conflict of Interest: The Obama administration has filed a suit against Fiat-Chrysler . Fiat is hoping that can make a deal with the Trump administration. Fiat might be thinking instead of being sued or paying a fine, maybe we could just make a contribution to some Trump business?

So How Will Trump Save American Jobs?

If  import tariffs on Chinese products are not raised, then, how will Trump save American jobs? My prediction is he won’t. What he will do, is what he has been doing since being elected? He will tweet and threaten a company who have had thoughts about building factories in Mexico. (See Ford and Toyota – Washingon Post). Also, see Fiat-Chrysler. In all cases, Trump took credit where no credit was due. He did not change the course of their company. Think about it, do you think corporations make millions of dollars in investment just because of a tweet? This is not a charity auction. (“I bid 30 milllion dolllars to bring jobs back to the USA!”) These corporation have been formulating these plans for years. (In reality, Trump should be thanking Obama for all these actions, but Obama is not one to be a credit hog.) Will he truly go after NAFTA which would hurt his most loyal constituents, the Farmers? Maybe, but Trump has no loyalty and no interest in agriculture.

Will there be serious reforms towards Free Trade? I truly doubt it. Trump will give the outward appearance that he cares. In the meantime, American companies will continue to off-shore, and companies that come back (re-shore of jobs), instead of being little noticed (like the present time), it will be crowed about by Trump who will take all the credit where none was due. One good thing to come out of this is that traditional Republicans like Paul Ryan are looking to decrease taxes on American products that are to be exported, they haven’t gone so far as to say that they will increase tariffs on foreign imports or getting rid of tax exemptions for moving expenses for companies as they move their company from the USA to another country. At least, the Republicans are entertaining some Democratic ideas, but don’t let them hear that.

Other Issues That May effect the Economy

Health Care

Health Care can strongly influence consumer’s pocket book. At the present, Trump and the Republicans are ready to repeal The Affordable Care Act (ACA). If the Republicans do replace the Affordable Care Act with a comprehensive Health Plan that covers everyone, providing good health care at less cost, this would be one of the greatest breakthroughs in the history of American government. But will the GOP take that giant and brave step. Not a chance.

The Evaluation of the Affordable Care Act (ACA)

The ACA did many great things, it insured an additional 20 million Americans, the highest percentage of insured Americans ever in the history of the nation. It controlled expenses, brought down the price of healthcare, paid for preventive health and eliminated exclusion based on pre-existing conditions. But, the ACA wasn’t close to a perfect system. One of the main problems with the ACA was that is was based on the obsolete notion that companies wanted to give their employees health insurance. Today, companies bend over backwards to make sure employees are not full-time and, therefore, does not have to pay benefits). In fact, companies like Macys keeps track to the minute any employee that comes close to qualifying for benefits, and makes sure that it does not happen. My belief was that the ACA was a band-aid to the health care system, to decrease its expenses – to delay the eventual bankruptcy of the nation from health care for several more years.

obamacare-insurance-rates

The Cost of Repealing The Affordable Care Act

There are a couple of problems with the idea of repealing the ACA. One is the Republicans have no replacement policy. Even though Trump says they have a plan and it is close and Everyone will be covered, better care, less cost. This is definitely a case of over-promise and under-deliver. (Especially if Medicare for everybody is off the table.) The other problem with the Affordable Care Act is that it is a Republican idea from the Heritage Foundation. The only “real” thing that the Republicans don’t like about the ACA is that President Barack Obama takes all the credit for it and therefore, for political expediency, it had to be demonized. The idea behind the ACA was to add more competition between the insurance companies (health insurance exchanges) and, therefore, decreases costs. The only wrinkle from the GOP brain trust, thus far, is that the insurance companies can compete across state lines. Wow, what a change. (Oh yeah, Health Savings Accounts which are available in the ACA, great idea). The problem with the ACA and the GOP wrinkle is that insurance companies can drop out of the competition at any time (because many times there are “agreements” between oligopolies) which raises the price of insurance premiums. The fact is the Republicans want to repeal only the name of Obamacare and leave the rest of the system untouched. They don’t want to go back to the extremely expensive  and dysfunctional old system. But that is the only way. So, what the GOP did under the dark of night was to hide the fact that repealing the ACA will cost the nation trillions of dollars, the GOP wrote a resolution that repealed a mandate that The Congressional Budget Office keep track of how much repealing the Affordable Care Act would cost. In the same article, it highlighted:The result of repeal is estimate that $140 billion of federal funding would be cut to states by 2019, resulting in the loss of 3 million jobs by 2021, loss of $1.5 trillion in gross state products and a $2.6 trillion reduction in business output. State and local tax revenues will fall by $48 billion. Obviously, the repeal of the ACA will be very costly, and it is very probable that the average American will be paying a lot more for Health Care. And expect a lot more Americans to declare bankruptcy due to medical expenses. The AP reported than premiums will increase by 25%, that 18 million more people will be uninsured one year after enactment and 32 million more uninsured by 2026. Look at it another way, the Trumpcare model will be so expensive and exclude so many people that it would rapidly drive the nation and individuals into bankruptcy, that the electorate would be willing to give the model of Medicare-for-all model a very serious look many years sooner. (But, the Republicans are very serious of getting rid of Medicare by privatizing it based on a model like Obamacare).

obamacare-repeal-vote-cartoon-luckovich

Energy

Trump has nominated Rex Tillerson, CEO of Exxon, as Secretary of State. What does this mean? Well, detente with Russia, of course. But, with regards to oil, we should expect to see more widespread drilling everywhere including the Oceans, the Arctic and National Parks. Expect more pipeline projects across the United States. And, you will definitely be spending a lot more for gasoline. The price of gasoline is not actually based on supply and demand (as people traditionally think) but rather on speculation (see my blog entry: Wall Street and the price of Oil). The price of oil hit a low in January 20, 2016 at $27 a barrel. Now, with the election of oil friendly politicians, the price of oil has increased to close to $54 per barrel (this is definitely not due to increased demand or decreased supply). It is estimated that in 2017 the cost of oil per barrel will be in the $60s, however, I believe this is severely underestimated and that speculators will push this up much higher. Remember it wasn’t all that long ago when a barrel of oil was $114 (in June, 2014). So, expect to pay a lot more at the pump.

take-me-to-your-leader

Mergers

Trump and the GOP believe in the government staying out of the way when it comes to businesses. We know from history that the natural outcome of unfettered capitalism is monopolies. But since this was outlawed by Theodore Roosevelt, the natural end point is oligopolies (a few companies that own everything). By collusion (oligopolies say instead “a gentleman’s agreement), a few companies can drive prices up without actually competing. For 2017, one can expect many new giant mergers to pass without fight from the Federal government. AT&T with Time-Warner will merger as will Monsanto and Bayer. Even Fortune Magazine has made this prediction with their headline A Trump Presidency Could Unleash a Pharma Merger Boom. So, maybe Pfizer and Allergan could try a try another merger (it was thwarted by the Obama administration). The effect for consumers: Pay More for Less Choice.

merger

Economic Growth

One thing that people forget is that the United States is at near maximal employment, the US economy is very strong (all economist believe this, maybe not political pundits). The economic growth has been steady at 2% per year. Yet, enough people (not a majority) still wanted a change. Here is what Goldman-Sachs predicts for 2017:

Donald Trump promised economic growth of 5-6%. No other economist is coming close to predicting this. It is another case of over-promising and under-delivering. In fact, some are thinking that Trump may slow the economy and Citi group thinks that it is a 50% probability that Trump will not even finish out his term. The next year – there will be growth and it will be all due to the Obama administration. Plus, there is no evidence of weakness in the economy, unlike years previous to The Great Recession. However, after that, it will be Trump’s baby. Sometimes, growth and recession have nothing to do with the President and there are swings that naturally occur or sometimes things occur can effect the economy (9/11). I predict based on the cycles of the economy, that we are due for a “slowing” as we have never seen this many consecutive years of positive growth ever. Certainly, President’s do make a difference. Sometimes it takes several years to really see the effect – but is plain when you evaluate Reagan’s legacy both on the United States and on California, (back when he was governor). The United States and California have never recovered. There is distrust in government, the government tax base is shrinking, infrastructure has almost collapsed. Are there any great infrastructure projects in the USA anymore? (Just compare the USA to China’s incredible growth, we look like Ancient Rome).

Conclusion

Trump’s policies are like Reagan’s. It is Voodoo economics. Bad for everybody except for the 1%. There will be more large corporation mergers, Health Care will become much more expensive, the middle class will have to pay more in income taxes, the Federal deficit will explode, oil prices will increase, the rich get richer and no real change in jobs coming back to the USA. The only potential bright lights for the economy are: Republicans working on adjusting their Free Trade policies and a “big” infrastructure project. The infrastructure project could be done right, but I severely have my doubts with this group of Republicans. As Trump takes the oath of office, he becomes the oaf in office. This inauguration is like scene from a parallel universe, like what if Hitler didn’t attack Russia, or what if we didn’t discover Penicillin. The American public have not grasped that we are living in a great time, but have decided that we needed a “change”. People for some reason can’t grasp the concept that change can be for the worse, sometimes much worse. So, for the people who to vote for a temper-“mental” man without one day of public service, “You reap what you sow”. If the economy goes south, you go bankrupt, you lose your health insurance, well you brought it upon yourself. 70 million Americans voted against your choice. As far as bringing jobs back into the USA, Trump will bring none, not even his Trump clothing line from China.

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Free Press

This last issue does not have to do with economic issues, but there has been a disturbing trend. With the rise of right-wing news groups, Breitbart, Fox News, Alex Jones, it is getting difficult for Republicans to know what is real news and what is fake news. Trump only reads the most extreme right wing news, so he does not know what is real news versus fake news. And if Trump is confronted by the real truth, he belittles the Press. Trump is kicking the Press out of the White House to limit access. He didn’t allow the regular Press to ask questions during his so-called “Press Conference”.He has threatened to sue the Press or jail them like other dictators. In the meantime, they have hired KellyAnne Conway as the Reich Minister of Propaganda (ala Joseph Goebbels). I believe that if he can intimidate the Press, then he can intimidate any Americans who disagree with him. My idea is that all networks should fact-check in real time – which means while a political participant or President speaks, at the same time, in close captioning – it says whether the person is lying. It would be easy because almost all of these TV shows are tape-delayed.

free-pressWe need to support the Free Press and they should be free from the intimidation of a dictatorial President. And we need to stay strong against the Trump and his trolls who threaten violence and vitriol on all who disagree with Don the Con.

 

08
May
16

Does Free Trade Cost U.S. jobs? The Case Of Hersheys and NAFTA

There was a recent survey that asked the question: Does free trade create or cost US jobs? The response was surprising: 43% of those surveyed said that it created U.S. jobs while 43% said that it caused Americans to lose their jobs. I thought this question was already settled. We know that the Free Trade has lost US jobs, most of them well-paying. And this is the major reason why the United States middle-class working class has not received a raise in over 20 years.

So, why would 43% believe that Free-trade  created US jobs? For some of the population it is because they have no or little information about the problem. But it is, also, difficult to see the connection, because it is complicated. For instance, I could name hundreds of examples of companies eliminating  US jobs and relocating them to different countries, but people still can’t see the direct correlation to Free Trade.

I will make the case that Free Trade causes the loss of US jobs very simple. I will follow one Free-Trade rule and one US company to see the impact of US jobs. The Free-Trade rule is the North American Free Trade Act (NAFTA) which decreased import taxes between Canada and Mexico and the United States. NAFTA meant that goods coming from Mexico would be cheaper than they had been, and to take full advantage of this “loophole”, American companies started taking the traditional US jobs and moved them to other countries where the costs of doing business are lower.

The Free Trade Act

NAFTA became law on January 1, 1994. However, the elimination of tariffs was not complete until 10 years later which meant the following: THE LOSS OF US JOBS WOULD NOT BE DETECTED UNTIL AFTER 2004! (that is why you didn’t hear “the giant sucking sound” coming from Mexico right away.

The Company

The company that we are following is Hershey’s chocolate. In 1994, 100% of Hershey’s chocolate was made in USA or Canada. Once NAFTA went into effect in 2004, Hershey’s announced that it was cutting its US manufacturing chocolate to 80% by 2010 (1). This was followed by a slew of US chocolate plant closings: Reading, Pennsylvania(2) – loss of 160 jobs in 2007; Naugatuck, CT(3), loss of 150 jobs, closed 11/16/07; Oakdale, CA(4) , loss of 575 jobs, closed on 2/1/08; Smiths Falls Ontario, Canada(5), loss of 400 jobs (in a town of 9,000)  2008; Hershey, PA(6), the original 1903 East plant, loss of 600 jobs, closed 04/27/2012. And to add insult to injury, Hershey opened its brand new $800 Million plant in Monterrey, Mexico in 2009 with a workforce of 1300 employees(7).

The Original 1903 Hershey's East Plant being torn down on 11/05/2012

The Original 1903 Hershey’s East Plant being torn down on 11/05/2012

Does Hershey’s Still Make Chocolate in the USA?

Hershey’s does still make chocolate in the USA(8). Hershey’s did expand their West Plant in Hershey Pennsylvania in 2012 and still makes Hershey’s Kisses. The West Plant employs about 1,000 people. There are other Hershey’s chocolate owned plants across the United States although none of the products have the label “Hersheys”. The other factories: Ashland Oregon makes Scharffenberger Premium chocolate and Dagoba Organic  (purchased the company in 2005); Robinson Illinois makes Heath bars (purchased in 1986); Hazelton, PA makes Kitkat (contracted with Nestle), Cadbury (contracted with Kraft, 2010) and Cadbury Caramello; Stuart’s Draft, Virginia makes products with peanuts; Lancaster, Pennsylvania makes Twizzlers (purchased in 1977) and Memphis, Tennessee makes mints, licorice and Icebreakers (purchased in 2000 and 2011).

hershey bar

However, their main production plants are outside of the United States. The best known is Monterrey, Mexico. All the above US plant closing were done to move their production to Monterrey, Mexico to take advantage of the NAFTA rules. The Hershey CEO, Richard Lenny said in 2010, that the move to Mexico, would save the shareholders $190 million dollars(9). I had also heard that the Hershey’s CEO gets $4.7 million in salary although I can not substantiate that. Since that time, Hersheys has taken advantage of other Free Trade Rules (namely The World Trade Organization) and has expanded well abroad – China, Brazil, India and Malaysia).

Hershey’s Chocolate Manufacturing Plants Outside of the USA (alphabetic by country)

  1. Sao Paulo, Brazil
  2. Sao Rogue, Brazil
  3. Shanghai, China
  4. Yudond, China
  5. Zhoukou, China
  6. Inner Mongolia, China
  7. Mandideep Madhya Pradesh, India
  8. Juhor, Malaysia (2nd largest)
  9. El Salto, Mexico
  10. Monterrey, Mexico
Hershey's Monterrey Mexico Factory opened in 2009, 1300 employees

Hershey’s Monterrey Mexico Factory opened in 2009, 1300 employees

Can You Taste The Difference Between Mexican Made and US Made Hershey’s Chocolate?

There was a great blog entry that looked at exactly this subject. The blog is called the candyblog. What they did is they looked at some of the Mexican made Hershey’s chocolate: Milk Chocolate miniatures, Special Dark, Krackel, and Mr. Goodbar and compared them to the original American made. The result, not much difference. The reader’s comments, however, were pretty unanimous in condemning Hershey’s for outsourcing US jobs.

The Final Cost of Offshoring US jobs by Hersheys

We know that 1,500 manufacturing jobs in the United States were eliminated by Hersheys, because it is well documented. And Hershey’s did it simply to make more money, even though they knew it was creating a hardship to lots of small town workers. The number of American manufacturing jobs lost by offshoring of Hershey’s may seem small (especially if you are a Wall Street analyst), because it only looks at manufacturing jobs. It does not include associated jobs. Associated jobs are the ones directly related to the manufacturing like marketing, packaging, distribution, administrative, etc.

But, also indirectly- associated effects need to be considered.  These include other business’ loss of income (and other loss of jobs) that are directly related due to the loss of these manufacturing jobs. This would include just about everything in the neighborhood or town, especially in these small towns like Oakdale, CA loss of 575 jobs in a town of 15,000, or Smiths Town, Ontario, loss of 400 jobs in a town of 9,000. For these small towns, more than 40% of that town’s population is affected – this all creates problems with: real estate prices, auto sales, downtown businesses, bars, restaurants, insurance agents, grocery stores, home improvement, doctors, lawyers, schools, Little League, town income, etc.

Don’t forget that Free Trade has had much wider implications for the US economy in general. The below is just one of them – Trade deficit. For more  reasons, see my entry: Why Free Trade is Devastating to the USA?

US Trade Deficit After Free Trade Started

US Trade Deficit After Free Trade Started

Final Message

Not only are all these U.S. Hersheys’ manufacturing jobs and associated jobs gone forever, but all future expansion will be made outside of the country. A message for all the Free Trade economists, your formulas always forget to put in a variable – that there is a finite number of good paying jobs in the world (just like there is a finite amount of resources). This, in essence, means that any expansion outside of the United States comes at the expense of the United States. Buy American, support businesses that hire American workers.

Hersheys’ References

  1. FinanzNachrichten.de25.04.2007 Hershey to Close Plant in Conn.
  2. Lancaster Online April 24, 2007 Hershey to Close Reading Plant
  3. Newstimes.com April 24,2007 Hershey Co. to Close Peter Paul Plant in Naugatuck.
  4. San Diego Union Tribune.com July 13, 2008 Town Draws Candy Maker After Hershey Plant Closes.
  5. CBC News Ottawa Feb 22, 2007 Hershey Confirms Smiths Falls Plant will close.
  6. NPR.org Oct. 6, 2010 Original Hershey Chocolate Factory Set to Close.
  7. Pennlive.com April 30, 2009 Hershey Co. monitors Swine Flu’s impact on Mexico plant; declares products safe.
  8. The Hershey Company.com This is Hershey – Global Locations
  9. Truth or Fiction.com/hershey.
16
Apr
16

Americans Have No Right To Be Angry

Americans really have no right to be angry. Really?! These two newspaper articles prove that we Americans have brought our economic malaise upon ourselves. After so many years and with all of the evidence, a majority of Americans still don’t realize that we have directly caused the middle class to disappear and why all the profits go to the top 1%. The first article is “Americans prefer low prices to items ‘Made in the USA'”. The second article is “Exit Polls: Wisconsin Voters Say Trade Leads to Job Losses.”

Bernie Sanders and Donald Trump have turned conventional politics upside down. A large part of their message is that Americans are sick and tired of losing jobs overseas which has created a decrease in good paying jobs. This has caused an angry electorate. So, why does the angry electorate not decry the Free Trade agreements, or stopping buying slave labor made products?  I think that maybe the angry electorate either has no clue what is causing the problem or are so selfish that since it does not effect themselves personally, it won’t change their actions. I believe it is a little of both.

Is Free Trade Sinking?

Is Free Trade Sinking?

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Source: Poll: Americans prefer low prices to items “Made in the USA” – CBS News

WASHINGTON – The vast majority of Americans say they prefer lower prices instead of paying a premium for items labeled “Made in the USA,” even if it means those cheaper items are made abroad, according to an Associated Press-GfK poll.

While presidential candidates like Donald Trump and Bernie Sanders are vowing to bring back millions of American jobs lost to China and other foreign competitors, public sentiment reflects core challenges confronting the U.S. economy. Incomes have barely improved, forcing many households to look for the most convenient bargains instead of goods made in America.

Employers now seek workers with college degrees, leaving those with only a high school degree who once would have held assembly lines jobs in the lurch. And some Americans who work at companies with clients worldwide see themselves as part of a global market.

Nearly three in four say they would like to buy goods manufactured inside the United States, but those items are often too costly or difficult to find, according to the survey released Thursday. A mere 9 percent say they only buy American.

Asked about a real world example of choosing between $50 pants made in another country or an $85 pair made in the United States – one retailer sells two such pairs made with the same fabric and design – 67 percent say they’d buy the cheaper pair. Only 30 percent would pony up for the more expensive American-made one. People in higher earning households earning more than $100,000 a year are no less likely than lower-income Americans to say they’d go for the lower price.

“Low prices are a positive for US consumers – it stretches budgets and allows people to save for their retirements, if they’re wise, with dollars that would otherwise be spent on day-to-day living,” said Sonya Grob, 57, a middle school secretary from Norman, Oklahoma who described herself as a “liberal Democrat.”

But Trump and Sanders have galvanized many voters by attacking recent trade deals.

From their perspective, layoffs and shuttered factories have erased the benefits to the economy from reduced consumer prices.

“We’re getting ripped off on trade by everyone,” said Trump, the Republican front-runner, at a Monday speech in Albany, New York. “Jobs are going down the drain, folks.”

The real estate mogul and reality television star has threatened to shred the 1994 North American Free Trade Agreement with Mexico and Canada. He has also threatened to slap sharp tariffs on China in hopes of erasing the overall $540 billion trade deficit.

Economists doubt that Trump could deliver on his promises to create the first trade surplus since 1975. Many see the backlash against trade as frustration with a broader economy coping with sluggish income gains.

“The reaction to trade is less about trade and more about the decline in people’s ability to achieve the American Dream,” said Caroline Freund, a senior fellow at the Peterson Institute for International Economics. “It’s a lot easier to blame the foreigner than other forces that are affecting stagnant wage growth like technology.”

But Trump’s message appeals to Merry Post, 58, of Paris, Texas where the empty factories are daily reminders of what was lost. Sixty-eight percent of people with a favorable opinion of Trump said that free trade agreements decreased the number of jobs available to Americans.

“In our area down here in Texas, there used to be sewing factories and a lot of cotton gins,” Post said. “I’ve watched them all shut down as things went to China, Mexico and the Philippines. All my friends had to take early retirements or walk away.”

Sanders, the Vermont senator battling for the Democratic nomination, has pledged to end the exodus of jobs overseas.

“I will stop it by renegotiating all of the trade agreements that we have,” Sanders told the New York Daily News editorial board earlier this month, saying that the wages paid to foreigner workers and environmental standards would be part of any deal he would strike.

Still, voters are divided as to whether free trade agreements hurt job creation and incomes.

Americans are slightly more likely to say free trade agreements are positive for the economy overall than negative, 33 percent to 27 percent. But 37 percent say the deals make no difference. Republicans (35 percent) are more likely than Democrats (22 percent) to say free trade agreements are bad for the economy.

On jobs, 46 percent say the agreements decrease jobs for American workers, while 11 percent say they improve employment opportunities and 40 percent that they make no difference. Pessimism was especially pronounced among the 18 percent of respondents with a family member or friend whose job was offshored. Sixty-four percent of this group said free trade had decreased the availability of jobs.

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It is strange that the party that has always supported the Free Trade Agreements are more likely than the Democrats to look unfavorably towards the Free Trade agreements. It is, also, paradoxical, that any Bernie Sanders supporters would support the Free Trade policies as he has been the only candidate who has consistently been against the Free Trade policies.
If you want to know more about the consequences of Free Trade, see my concise blog entry Why Free Trade is Devastating to the USA.
The United States is by no means out of the woods when it comes to offshoring jobs to other countries – companies are closing down plants in the United States and moving to other countries every week, see Carrier, Ford. While multi-national companies like Tyson Chicken continue to shut down all their US plants while expanding to other countries, like Hershey’s Chocolates did soon after NAFTA passed. The USA is bringing back some jobs back from other countries, but it is a trickle. And do not forget that it is quite likely that your own jobs is potentially offshorable in the next five years. According to the Congressional Research Service 25% of all service US jobs (or 40 million jobs) may be offshored. That is on top of the manufacturing jobs that are continuing to be offshored.
Spread the word: Buying Made in USA is very important and Free Trade Agreements are THE reason why we are losing so many good paying jobs.
22
Mar
16

Why Free Trade is Devastating to the USA

Why Free Trade is Devastating to the USA

1) The Original Idea

This is a quick look at Free Trade. I am not against trade. Trade between countries is beneficial as long as all the countries follow the rules. Historically, all countries have placed import taxes of products coming into their countries to protect their own businesses from being destroyed. Some import taxes have been much higher than others. So, in order to improve trade, Free Trade Treaties were created (only 25 short years ago) which basically repealed the import tax. Theoretically, if agreements between countries with the same standards- like the USA and Canada – were created, this would be a good idea.

Free Market Tonic

2) The Problem

The problem with the real life treaties is that the countries do not have similar economic conditions or moral convictions. A third world country will always have a lower cost of living, little regulation in the treatment of workers, unregulated working conditions and no protection of the environment  which creates a great advantage in making very inexpensive products compared to developed nations. In addition, many countries have been breaking the underlying principals of trade: some countries have: 1) de-valued their monetary units towards the U.S. dollar (thereby gaining an advantage in exporting into the US); 2) have persistently engaged in the practice of dumping – making so much a product that it artificially lowers prices and puts the other country’s businesses out of business; and 3) have been using slave labor and childhood labor.

3) Manufacturing Towns Take a Big Hit

As the Free Trade Advocates like to say so easily about Free Trade Treaties, there will be some “losers”. It was predicted that some manufacturing would be hurt, but nobody thought for a second that it would be this severe. It was acknowledged that major manufacturing cities would get hit – they were. (Think of Detroit and Flint, Michigan). But so were the small towns.

NAFTA would create jobs

Within 8 years after NAFTA (North American Free Trade Act) passed, 700,000 American jobs were sent to Mexico. Here is a classic example of NAFTA: Hershey’s Chocolates no longer make any chocolate in the United States, it is all made in Mexico. As Hershey’s offshored all of its US jobs to Mexico. It has created numerous manufacturing ghost towns of cities like Oakdale, CA, Robinson, IL, Hazelton, PA, Stuart’s Draft, VA  Naugatuck, CT and, Hershey’s PA. From 1994 to 2015, the Labor Department certified that more than 216,000 workers in North Carolina were displaced by global economic pacts and qualified for assistance — making it the hardest-hit state in the country. (Ref 1).

Loss of US manufacturing jobs 1980-2012. NAFTA 1994, WTO 1995, China joins WTO 2001

NAFTA 1994, World Trade Organization 1995, China joins WTO 2001

4) The Loss of U.S. Manufacturing and Other Jobs

The loss of manufacturing jobs is sometimes called deindustrialization.  Since 1998, not only have we lost a “net” 8 million manufacturing jobs to offshoring, we continue to shed manufacturing jobs very fast almost at the same rate as we can create new ones. Also, Free Trade Advocates never mention (among many other things) is that we have lost many “associated” manufacturing jobs, like transportation, affiliated jobs, and community jobs that serviced the manufacturing workers which is usually equal to 2.5 to 3 jobs per manufacturing job. In addition (totally separate from manufacturing), there are the millions of service jobs that have been offshored to other countries just so large corporations can make greater profits.

chinas import

The winner of Free Trade: China. Loser:United States

5) Free Trade Lowers Middle Class Wages

One thing that both Republicans and Democrats can agree on is that middle class wages have been stagnant, and most agree that it is due to disastrous Free Trade Treaties. (Interesting reading, Jared Bernstein’s article: The Era of Free Trade Might Be Over. That’s a Good Thing. – The New York Times). The reason wages are not increasing: 1) manufacturing used to be good paying jobs, but now we have much less manufacturing jobs and the “new” manufacturing jobs that are coming back are paying less; and 2) almost all jobs can be readily off-shored, so it makes it difficult to ask for raises. In fact, 25% of all service jobs or 40 million US jobs could be sent overseas in the next few years. (Ref 3).

6) Which Party Likes Free Trade Treaties?

So, who is to blame for these Free Trade Treaties? Although they are considered “bi-partisan”, it is really more partisan. You can decide for yourself. The North American Trade Agreement NAFTA) was started by Bush’s father, George H.W. Bush in 1990 and signed into law by President Bill Clinton in December 9, 1993 after being ratified by the House 234- 200 (Yeas: 132 GOP, 102 Dems, Nays: 43 GOP, 156 Dems) and the Senate 61-38 (Yeas: 34 GOP, 27 Dems, Nays: 10 GOP, 28 Dems).

Fast Track

The Trans-Pacific Partnership Pact (TPP) which will probably pass during the lame duck session (see my entry When Will the TPP Become Law)  has had a similar vote. In order to help pass the TPP, Fast Track (meaning you can not filibuster or add amendments to the the TPP), also known as the Trade Promotion Authority (TPA) was added. The vote in the Senate: passed 60-38 (Yeas: 47 GOP, 13 Dems; Nays: 7 GOP, 31 Dems & Ind.). The House vote: The vote was 218-208 (Yeas: 190 GOP, 28 Dems, Nays: 50 GOP, 158 Dems).

One of the things that have made Republicans so mad (besides listening to right wing media) is that their political party has consistently made their lives worse by supporting Trickledown economic theories, with the worst one being the Free Trade Treaties. And yet, the Republicans want to pass an even bigger one, the TPP, which is expected to cost the US 2 million jobs in just one year. (Ref 2).

stop the TPP

7) Other Criticisms of Free Trade

There are many arguments besides economic against Free trade policies. First, Free Trade heavily favors large corporations destroying infant industries as well as the small and medium sized companies. It undermines long-run economic development – it is difficult to revive manufacturing ghost towns, and difficult to plan for growth when American jobs can be offshored at any time. Free Trade has definitely caused income inequality, and environmental degradation.

Born to Work Picture from the Daily Beast in 2009

Born to Work
Picture from the Daily Beast in 2009

Free Trade is supportive of countries sticking to their native practices which often means supporting child labor and working in sweatshops where workers get no benefits in often poorly ventilated and dangerous work environments.

Bangladesh factory collapse

Bangladesh Clothing factory collapse

Free Trade has definitely caused the race to the bottom, wage slavery, accentuating poverty in poor countries, harming national defense, and forcing cultural change. One additional criticism is that it allows large corporations to ignore local, state and governmental rules and laws: U.S. Appeals WTO Ruling on Meat Labeling Laws – where the American Meat Institute refused to label their meats as to where the originated. The Congress has successfully repealed the Country of origin labeling law this past winter. Instead of raising global standards, free trade tries to lower standards of countries that are more advanced. We need to stop all of these Free Trade Treaties, because they are devastating to the USA in so many ways.

free-trade-at-last-cartoon

19
Feb
16

When will the TPP become Law?

When Will The TPP Become Law?

This blog entry is whether the Trans-Pacific Partnership which passed the Senate and the House and signed by the President will become law.

The Trans-Pacific Partnership Treaty (TPP) is a “Free Trade Agreement” between the United States and the following countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, Thailand, Vietnam.

In general, the Free Trade Agreements, although loved by corporate America, are felt to be major reasons for the downfall of the American economy causing the loss of the American middle class, the greatest wealth inequality since the 1920s, the devastation of American manufacturing, and the race to the bottom.

tpp shipping

The Bumpy Road of the TPP into law.

The Trans-Pacific Partnership started as a small Trade agreement between the United States and Brunei, Chile, New Zealand and Singapore back in 2005 under President George W. Bush. Similarly, The North American Trade Agreement NAFTA) was started by Bush’s father, George H.W. Bush in 1990 and signed into law by President Bill Clinton in December 9, 1993 after being ratified by the House 234- 200 (Yeas: 132 GOP, 102 Dems, Nays: 43 GOP, 156 Dems) and the Senate 61-38 (Yeas: 34 GOP, 27 Dems, Nays: 10 GOP, 28 Dems).

Since the original agreement, the TPP has expanded to more countries, the biggest and latest one is Japan. One interesting note, the text (the details) of the TPP had been kept secret for many years, it was only made public in November, 2015, months after Congress had passed it. And, don’t you think that it is strange that such an enormous agreement involving 40% of the world’s GDP that there is hardly a word about it in the media?

The Tricks of Congress

Because the TPP is not popular with the public, it is extremely difficult to just introduce the Trans-Pacific Partnership Treaty as a simple stand-alone bill, because it could be filibustered or it could be threatened or weakened by all sorts of Amendments. So, how do you get around that? The first step was the creation of “Fast Track.” Fast Track is a special rule where members of the Senate are unable to filibuster, unable to add amendments and can only vote up or down. It was created in 1974 under President Gerald Ford and is almost used exclusively in trade agreements like NAFTA. However, Fast Track has became a dirty word and so, in 2002, Congress changed the name to the Trade Promotional Authority  (TPA). As more countries signed onto the agreement, Congress finally brought up the TPA (Fast Track) for the TPP for a vote in May 2015. Going through the Senate first, even with its GOP majority, Big Business forces were afraid that it would not pass. So, in order to get more Democratic votes, the Senate coupled it with another law. This law was the Trade Adjustment Assistance Enhancement Act (TAA) – which would give compensation to workers who would be displaced by the TPP. The TPA-TAA (after barely getting past a filibuster) passed the Senate on 5/21/15 by a vote of 62-37 (Yeas: 48 GOP, 14 Dems, Nays: 5 GOP (including Rand Paul), 32 Dems & Independents (including Bernie Sanders).

The Counter Offensive by The Democrats

The bill passed by the Senate had specifically coupled the TPA with the TAA, meaning that the House had to pass both bills. House Republicans, were, then, surprisingly defeated when the Democrats voted to defeat the (Democratic favored bill) TAA on a vote of 126 – 302. Because the TAA lost, the coupled TPA became a symbolic vote. This was approved by a margin of 219-211 on June 11, 2015. It was a stunning defeat and for a moment it looked like the TPP was sunk.

Revenge of the Establishment and the GOP

The majority of the House of Representatives  (ironically, the Party of No) would not take “NO” as an answer. They went back to the drawing board and tried a gamble (based on conversations of members of the House and the Senate). The House decided to de-couple the bills and see if the TPA (the Fast Track Authority) could pass alone and have it sent to the Senate where it could possibly pass – with the TAA (Worker Relief) coming later. The vote to decouple the bill and send the TPA to the Senate occurred on June 18, 2015. The strategy worked. The vote was 218-208 (Yeas: 190 GOP, 28 Dems, Nays: 50 GOP, 158 Dems).

The ultimate showdown vote came down to the Senate on June 23, 2015. This issue was to pass the TPA solely on its own.. After much arm twisting from the Obama Administration, the TPA (Fast Track) passed 60-38 (Yeas: 47 GOP, 13 Dems, Nays: 7 GOP, 31 Dems & Ind.). With the TPA passed by the Senate by itself, there was no absolute need to pass the TAA (Worker Assistance plan). But, since President Obama said he wanted the TAA passed and had the power to veto the deal, the House of Representatives allowed the TAA to a vote which passed 286-138 on June 24, 2015.

TPA is signed by President Obama

The President signed the TPA and the TAA on June 29, 2015.

On February 3, 2016, all of the Trade Ministers have signed the Trans-Pacific Partnership in Auckland, New Zealand under the cover of night. Trade Representative, Michael Froman, signed for President Obama.

Where Do We Go From Here?

The Trade Promotion Authority (TPA) and The Trade Adjustment Assistance Enhancement Act (TAA) have both passed the Senate and the House and has been signed by the President. So, isn’t it the law? Well, not quite.

The next step for Obama will be to send Congress the legislative text of the agreement, which he is expected to do sometime before June. Once he does that, it starts a countdown clock: House and Senate lawmakers will have 90 legislative days—that’s days the chambers are in session—to formally vote on it.

Because Congress passed the “fast-track” bill last summer, lawmakers can’t change or amend any of the language in the version of the agreement that Obama sends to them. They must vote only to ratify it, or not, in its entirety. If Congress votes to ratify it, then Obama signs it, and it goes into effect—and becomes fully enforceable—30 days later.

So When will The TPP Become Law?

At the present time, the President has enough votes in both the Senate and in the House to pass now – since both Houses are under a GOP majority. However, the TPP is very unpopular with the public (and for good reason). Both Democratic Presidential candidates said they are against it. Senator Bernie Sanders actually has always voted against the TPP/TPA. Senator Clinton was not in office to vote on the TPP, she was previously for it, but, now, on the campaign trail she says she is against it. If she becomes President of the USA, would she approve it or veto it? I can not be sure, but it is more likely that it will pass even before she takes office. What if the Republicans win the Presidency? Only one GOP Presidential candidate even mentions the TPP and that is Donald Trump. The other are definitely for the TPP (even Ted Cruz who once voted against the TPA (Fast Track) only when he knew there were enough votes to pass, because just the month before, he voted for the TPA).

Because of the unpopularity of the TPP with the public and because it is an election year, votes at this time of the year will have severe consequences in November. Because of this, Senate Majority Leader, Mitch McConnell, and Speaker of the House, Paul Ryan, will not bring up the bill to be ratified until after the November elections. That is right, the TPP will be passed during the lame duck session, the time after the November election and before the new members are sworn in to office in January, 2017. Talk about your dirty tricks.

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TPP stop

 

Why are Free Trade Agreements Bad for the US economy

The reasons why the Free Trade Agreements are bad for the US economy are this: 1) the Free Trade treaties, like the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO), eliminate import taxes of products into the United States, making foreign products much cheaper; 2) By agreeing to deal with these (less civilized) foreign countries, their countries, because their standard of living is so low, often pay workers (slave labor) extremely poorly without any benefits, so their products are much cheaper; 3) these countries devalue their money (which artificially makes the imports even cheaper); 4) because the Free Trade Agreements have banned quotas of imports into the country, these countries are legally able to “dump” (produce voluminously) and make imports even cheaper; and 5) American CEOs have taken advantage of these “rules” (which were made for their benefit) and have closed down American manufacturing plants, threw out millions of American workers, and move their manufacturing to places like China, Mexico and Vietnam – which makes our Trade Deficit outrageous – The US is losing $1 billion a day just to China.

Stop the TPP and save American jobs.

30
Jan
16

What’s Our Duty to the People Globalization Leaves Behind?

What’s Our Duty to the People Globalization Leaves Behind?

by Steven Rattner on January 26, 2016 in The New York Times

The title is interesting, isn’t it? When you mention the word “globalization”, your mind immediately says, “Oh, Oh, this is about economics, this must be a story written by an economist.” But then the title talks of a duty to people who have been left behind. This is never, ever, a subject of modern day economics. Economists think only about money, not about the “true costs.”

This story is about a writer who goes and visits a Free Trade Think Tank (yes they do exist). Click the link below to see the whole article and a couple of the graphs that I could not reproduce.

Thanks to The Alliance of American manufacturing for pointing out this article. For the bullet points see the end of the article.

Source: What’s Our Duty to the People Globalization Leaves Behind? – The New York Times

 Workers at a Kia factory in Pesqueria, Mexico. Credit Susana Gonzalez/Bloomberg

Workers at a Kia factory in Pesqueria, Mexico. Credit Susana Gonzalez/Bloomberg

A FEW days ago, I visited the shiny headquarters of the Peterson Institute for International Economics on “think tank row” in Washington — basically, the locker room of the Team Globalization and Free Trade cheering squad.

I was there to take part in a discussion of an old friend’s outstanding book on the subject, Steven R. Weisman’s “The Great Tradeoff: Confronting Moral Conflicts in the Era of Globalization.”

After praising Steve’s book, I emphasized that I had paid attention in economics class and understood that globalization incontrovertibly has benefited not only the world but also the United States. That’s in part because trade permits Americans to buy goods at lower prices; the added purchasing power helps our economy expand faster.

But I soon pivoted to my experience working in the Obama administration on the auto rescue, an experience that had seared into me the sense that intermingled among the many winners from globalization were a substantial number of losers.

So far, so good. Then I went rogue and uttered two blasphemous words: “Ross Perot.” He had a point, I said heretically, when he campaigned in 1992 against the landmark North American Free Trade Agreement, saying that it would result in a “giant sucking sound” of jobs headed south to Mexico.

A cool breeze drifted toward me.

As I looked out at my audience, I realized that the room was filled with winners — folks who, from all appearances, earned their livings from intellectual labor. Neither their jobs nor their wages were in jeopardy as countries ranging from Vietnam to Colombia became more competitive with us.

I pressed on.

Last year, according to the recent figures, our nation added 2.65 million new jobs. Just 30,000 of them were in manufacturing. So much for the widely trumpeted renaissance of Made in America.

At first glance, the automobile industry looks to be in better shape. From the depths of the crisis in 2009 through 2013, employment in the auto manufacturing sector in the United States rose by 23 percent, to 690,000 from 560,000.

That sounds pretty good, I said, except that employment in the Mexican auto sector rose to 589,000 from 368,000 during the same period, an increase of 60 percent. I’m happy that 221,000 more Mexicans got jobs, but let’s be honest: Absent open borders, many of those jobs would have been in America.

The wage picture looks even worse. Since January 2009, inflation-adjusted private sector wages across the economy have risen by 2.5 percent. In the fields of education, health and information, they are up by more than 3 percent. Meanwhile, in manufacturing, pay has fallen by 0.8 percent, and in the auto sector, by 12.7 percent.

“Last point,” I said to the 100 or so guests: Average manufacturing compensation costs (includes wages and benefits) in the United States in 2012 were $35.67 per hour; in Mexico, they were $6.36 per hour. “And American auto executives will tell you that the productivity they get in Mexico is at least as good as what they get in the United States.”

My central argument was not that we should close our borders or retreat from the world; it was that we need to be sensitive to the losers and try to help. The point — well illustrated in Steve’s book — is that globalization is not only an economic matter but also a moral one.

Presently, the institute’s blunt director, Adam Posen, used his final moments to shut me down, declaring that the “fetishization” of any industry was “immoral.” The problem of manufacturing is technology, he declared flatly.

Blaming technology is a common refrain from economists who hate the thought that globalization is not the world’s unambiguous salvation.

Sorry, Adam, I thought silently, having been afforded no time to respond. If technology were the source of manufacturing workers’ woes, productivity would be rising sharply, which it surely isn’t (notwithstanding claims by some economists that official statistics have been understating efficiency gains).

“Don’t blame the robots for lost manufacturing jobs,” read the headline in a blog post last spring by two scholars at the venerable Brookings Institution.

I have never forgotten a powerful article I read in Foreign Affairs in 2007 that called for huge tax redistribution, both as a moral matter and as a mechanism for ensuring political support for free trade. (The authors were hardly left-wing shills — one had served in the administration of President George W. Bush.)

That still sounds like the right idea to me.

It’s not only morally wrong to fail to help those on the losing end of globalization, but it will also end badly politically, as the ascendant candidacy of Donald J. Trump illustrates.

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Editor’s Comments

There are many economists who still believe that Globalization, Free Trade, minimal government intervention, and Trickledown economics-  the cornerstones of “Extreme Capitalism” – is still good for the USA. However more and more economists are abandoning this 40 year old economic theory after many years actual implementation, they have seen the error in their ways. Hallelujah!

  • Comparison of auto manufacturing jobs

USA  2009          2013                    % increase

560,000              630,000                23%

Mexico 2009     2013

368,000             589,000                60%

  • Number of new American manufacturing jobs for 2015 – 30,000 jobs (out of a total of 2.65 million new jobs in USA for 2015)
  • % decrease in pay – 0.8% in American manufacturing
  • % decrease in pay – 12.7% in American auto manufacturing

 

  • Economists never pay attention to the human costs of globalization.
  • Economists would like to blame technology instead of offshoring for the loss of American jobs.

 

Extreme Capitalism economists always downplay the impact of American job loss on American citizens – of course, they are economists – people are just numbers to them. However, these economists do not want to appear like they are callus and uncaring, that is why they hypocritically say that the loss of  American jobs is due to technology. Wrong! Those new 223,000 automobile manufacturing jobs in Mexico used to be American jobs, they were not lost to technology. All those millions of new jobs in  China, they were lost American jobs. Why do you think we have stubbornly low economic growth here in the USA?  Because we offshore millions of jobs each year more than we create. Think of the economy as a bucket – the fuller it gets – the better the pay of workers and more money going into the US economy, but since the Extreme Capitalism policies of the 1980s, we have a sieve instead of a bucket. There is finite number of jobs that can be created each year and if you distribute them all over the universe there is much less available for the USA.

We need to stop offshoring, we need to stop Free Market Treaties which eliminate import taxes and allows dumping of foreign products onto our shores putting US businesses at a disadvantage and putting many of them out of business. Buy American.




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