Working In These Times
Why Obama’s Export Plan Is Doomed
Hint: 'Free trade' agreements are not key to creating good jobs
On the frigid day of February 13, 2008, outside a General Motors plant in Janesville, Wis., Barack Obama gave a rip-roaring speech so powerful it may have sealed his crucial state primary victory and allowed him to capture a majority of Wisconsin's white working-class voters.
Obama memorably denounced "a Washington where decades of trade deals like NAFTA and China have been signed with plenty of protections for corporations and their profits, but none for our environment or our workers, who've seen factories shut their doors and millions of jobs disappear." He also decried "a failure of leadership and imagination in Washington, the culmination of decades of decisions that were made or put off without regard to the realities of a global economy and the growing inequality it's produced."
So Obama's call this week for ratification of three "free trade" agreements with South Korea, Panama, and Colombia (the land of death squads for unionists) was surely met with bewilderment in Janesville. The town's workers are facing a 14.2% unemployment rate, with 2,800 GM workers discarded when the corporation closed the plant just before Christmas 2008.
What can possibly account for this sudden change of heart and fervent embrace of "free trade"?
OBAMA PROCLAIMS PUSH FOR EXPORTS
Obama's answer to the question seems to be that the trade deals—part of his National Export Initiative— will contribute to his plan for doubling U.S. exports over the next five years and producing 2 million new well-paying jobs:
For a long time, we were trapped in a false political debate in this country, where business was on one side and labor was on the other. What we now have an opportunity to do is to refocus our attention where we’re all in it together.
Obama argues that both corporations and workers have an interest in expanding sales of U.S. products abroad, as export jobs pay higher than average. Only through "free trade" agreements can the U.S. gain unfettered access to these markets, Obama said.
But there are fundamental problems that severely undercut the credibility of Obama's formula for economic renewal:
1) CORPORATIONS AVOID U.S. JOB CREATION: The pattern of the last decade—where corporate America created almost zero net job growth in the U.S. compared with 22% to 38% growth every decade since 1940—is likely an indication of a deeply-entrenched aversion to generating employment growth in the U.S., according to economist William K. Tabb, author of The Amoral Elephant and other works on globalization.
Allen Sinai, chief global economist at the research firm Decision Economics, put it bluntly “You basically don’t want workers. You hire less, and you try to find capital equipment to replace them."
2) LOST CAPACITY TO EXPORT: How can the U.S. double exports when so much of its productive base has been hollowed out by corporate investment decisions?
"It will take time for any growth of exports to add jobs in America," points out economist Jeff Faux in The Global Class War. "Thirty years of a shrinking industrial base will not be reversed quickly. Many products are no longer made in the United States," as corporations have increasingly relocated their production facilities to low-wage offshore sites like China, Mexico, Central America, Vietnam and countless other locations.
America has ceased to produce any number of products, rangning from consumer electronics and appliances to much more complex and sophisticated equipment needed for clean energy and mass transit. Along with losing these industries, the U.S. has ceased to make most railroad and other mass-transit equipment, papermaking equipment, shoe-making equipment, large metal castings necessary for military equipment, and a host of other products, notes labor scholar Frank Emspak of the University of Wisconsin.
One telling fact: the number one U.S. export headed for China out of the giant port at Long Beach Calif.: recycled cardboard and paper products, which is
used to make boxes for new electronics and other products shipped to the United States.
3) U.S.-OWNED PLANTS OPERATING ABROAD: U.S. firms have accelerated the trend of serving foreign markets by locating offshore rather than exporting from US plants.This trend is so entrenched that major manufacturers like GE demand that their suppliers also relocate to be near their plants in Mexico, as economist Tabb pointed out.
More than two-thirds of what U.S. corporations sell overseas now actually originates from their plants located abroad. As the New York Times' Louis Uchitelle reported, U.S.-based corporations' "overseas sales, which have risen to more than $2.2 trillion annually in recent years, dwarf the nation's exports of roughly $1 trillion." While the output of overseas U.S. plants has nearly tripled in the past 15 years, exports from U.S.-located factories have grown much more slowly.
Given the strength of this pattern, how can Obama imagine a return of production to the United States withouth much sterner measures toward corporate America?
4) CHINESE CURRENCY MANIPULATION: Dean Baker of the Center for Economic and Policy Research maintains that the issue of currency revaluation must be resolved before the U.S. can imagine re-capturing more of the global market.
But the U.S. Treasury Department just declined to cite the Chinse government for currency manipulation, as Scott Paul of the American Association of Manufacturers—a business group critical of global outsourcing—outlined this week:
It's clear that China's announcement before the G-20 last month was nothing more than a charade, but the Administration seems to have fallen for this rather unbelievable promise. ...
We will never double exports unless we stop China's cheating.
5) 'BETTER-PAYING' MYTH: The claim that export paying jobs are better-paying than average is a a specious one, since "both export and import jobs are usually in manufacturing, while the average jobs are in the low-paying service sector," point out Sarah Anderson and John Cavanauah in The Field Guide to the Global Economy.
In fact, "wages are actually higher in those industries where import competition is growing than in those industries where exports are growing fasted (such as agriculture and services."
6) SPECIAL STATUS FOR KOREAN INVESTORS: Lori Wallach, director of Public Citizen’s Global Trade Watch Division, has noted how the Korean FTA is worse than many previous FTAs: It gives Korean investors uprecedented power to challenge democratically-established U.S. laws affecting a range of protections for American workers, consumers, investors, and the environment:
[The Obama administration} has inherited a leftover Bush Korea trade pact text that includes the same outrageous foreign investor rights as North American Free Trade Agreement (NAFTA) plus the strongest dose of financial deregulation ever contained in a U.S. trade pact. ...
[T]here are nearly 200 Korean firms already in the U.S. that would be empowered to attack our environmental, health, financial reregulation and other laws in foreign tribunals and demand taxpayer compensation.
I hate to say it, but there is virtually no reason to expect that Obama's plan for export expansion will succeed on its own terms. In fact, it will likely cost more jobs lost overseas and undermine wages at home.
So whatever happened to Obama's concern about "millions of jobs disappear[ing]" and "the growing inequality" that he spoke about so movingly back on the campaign trail in Janesville?