NAFTA

Barone is Right: Appeasing Protectionists Is a Bad Idea

by Ivan Osorio on October 5, 2011

in Deregulate to Stimulate, Economy, Labor, Politics as Usual, Trade

President Obama is finally sending three pending trade agreements — with South Korea, Colombia, and Panama — to Congress for a vote. The three trade deals were ready for this moment before Obama entered the White House. So what’s taken so long?

Quite simply, as Michael Barone notes in his Washington Examiner column today, the president wanted to avoid angering his political allies in organized labor.

[Obama] could have sent [the treaties] 985 days earlier; negotiations were completed in 2006 and 2007. Or, if he were concerned they’d be deep-sixed when his fellow Democrats controlled Congress, he could have sent them 274 days earlier when Republicans took over the House.

To be sure, they are opposed by many labor union leaders and congressional Democrats. There is a nostalgia among many union and party old-timers for the days, more than 30 years distant, when the auto and steel workers’ unions had nearly 2 million members.

Now each has less than half a million. But the old-timers seem to feel that somehow something like those olden days can be brought back if they oppose FTAs.

Indeed. In the new CEI OnPoint, “Free Trade without Apology,” CEI Adjunct Fellow Fran Smith and former CEI Research Associate Nick DeLong document how  efforts at appeasing organized labor — in the hopes of blunting union opposition to trade deals — have been not only ineffective, but harmful.

Union leaders have taken all concessions they’ve been offered only to ask for more. This has led to trade agreements becoming weighted down with provisions governing labor and environmental issues (to appease environmentalists) which have nothing to do with trade. And those provisions have only gotten longer and more onerous in each subsequent agreement.

Organized labor’s success in getting labor issues included in trade negotiations is a relatively recent phenomenon. The 1985 U.S.-Israel free trade agreement was the last American trade deal that did not include labor and environmental provisions. Since that time, the U.S. has entered into 10 free trade agreements covering 17 countries.

Eight years after the Israel agreement, the Clinton administration, as part of a deal to ratify the North American Free Trade Agreement (NAFTA), pushed Mexico and Canada to sign the North American Agreement on Labor Cooperation (NAALC) and North American Agreement on Environmental Cooperation (NAAEC) as side letters to the trade pact. That was the first time that labor and environmental objectives were directly linked to international trade negotiations. From that point onward, interest groups of various stripes have lobbied hard to include a host of irrelevant political agendas in trade negotiations. Organized labor and environmental groups have been especially active in this effort.

The NAFTA labor provisions were still not enough to satisfy Big Labor. Four years after the labor cooperation agreement was passed, the AFL-CIO stated in a public comment that the agreement had been “ineffective in promoting the concerns of workers beset by stagnant wages and job insecurity.” Rather than appease, the NAFTA labor provisions only whetted the union leaders’ appetites. To this day, unions continue to pressure Congress for more stringent labor obligations in current and future agreements.

It’s time to end this game, which only advantages protectionist lobbies.

For more on trade, see here and here.

Stimulus Money Went to Prisoners and Dead People

by Hans Bader on October 8, 2010

in Economy, Employment, International, Politics as Usual, Stimulus to Nowhere, Trade, Zeitgeist

17,000 prison inmates received checks courtesy of the $800 billion stimulus package, notes the Associated Press.  $18 million in checks went to dead people.

The stimulus also contained giveways to wealthy trial lawyers, who are some of the biggest donors to liberal politicians.  It expanded welfare and largely repealed welfare reform.  It has paid for abandoned bridges to nowhere and unnecessary government buildings in cities with rapidly shrinking populations.

The Obama administration claims the stimulus created or saved lots of jobs, but those jobs exist only in their imagination.  The administration’s own web site showed tens of thousands of phantom stimulus jobs being created in 440 imaginary congressional districts.

As noted earlier, the stimulus package actually destroyed thousands of real world jobs by triggering trade wars that killed jobs in America’s export sector (for example, the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that triggered massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).   Unemployment rose rapidly after passage of the stimulus package.

CEI Podcast – October 7, 2010: Trade, Jobs, and Korea

by Ryan Young on October 7, 2010

in Economy, Podcast, Trade

Have a listen here.

CEI Adjunct Fellow Fran Smith talks about the EU-Korea free-trade agreement that takes effect next year, and why the U.S.-Korea FTA stalled, to the economy’s detriment. Fran also talks about NAFTA’s impact on jobs, and why imports are a good thing.

Mexico’s Retaliation — A Good Idea?

by Fran Smith on August 17, 2010 · 1 comment

in International, Legal, Trade

Cato’s Dan Ikenson posted today in favor of the trade retaliation measures announced by Mexico in response to the U.S. refusal to open its market to Mexican trucks, as the U.S. had agreed to do under the North America Free Trade Agreement.  Dan details the 15-year history of U.S. intransigence–which involves labor unions, environmental groups, and Congress putting up road blocks.  This recent move by Mexico expands the list of products that will have punitive duties imposed, since their earlier imposition of tariffs didn’t get the U.S. moving.

As a general rule,  I don’t support trade retaliation for a host of reasons — the first being that the measures end up harming people, the consumers in Mexico who have their choices restricted or face rising prices on those goods, and the U.S. exporters, who likely will face falling Mexican demand for the affected goods. Retaliation may also harden the opposition to free trade in the U.S., especially among the NAFTA-haters — the labor unions and environmentalists.

Trade retaliation also can escalate in a tit-for-tat fashion.  “We’ll find something we can get you on,” whether it be a pseudo-phyto-sanitary standard or some other non-tariff approach.

In favor of the Mexican retaliation, a solid argument could be made that the U.S. has acted egregiously in not living up to its NAFTA commitments over a 15-year period.  And Dan Ikenson has made a convincing case. A trade agreement is a contract, with procedures included for settling disputes relating to the agreement.  Mexican followed the rules, brought its complaint, and a NAFTA panel unanimously ruled in favor of them in 2001.  But, the U.S. delayed and tried to wiggle out of its commitments. So Mexico does wear the “white hat” in this dispute, and its actions are justified in the context of NAFTA.

What I’m concerned about is how the labor unions will use this and spin it — with calls of  “unfair” and “unsafe”– to further undermine support for free trade.  Already, the Teamsters’ Jim Hoffa has asked the president to challenge Mexico on the tariffs and said the only way to solve the problem is to not to open the U.S. borders to “unsafe” Mexican trucks but to “renegotiate” NAFTA.  And the labor unions have been running the trade show in Washington, with Congress’ advice and consent.  They have held up the three pending free trade agreements with Panama, Colombia and South Korea, and labor unions’ latest trade attack is focused on Guatemala for not abiding by their labor commitments in the Central America Free Trade Agreement.  They are flexing their muscles for the battles to come.  And it doesn’t bode well for progress on free trade.

Nobel Prize Winning Economist Says Obama Policies Delaying Economic Recovery

by Hans Bader on January 8, 2010 · 3 comments

in Deregulate to Stimulate, Economy, Employment, Energy, Environment, Global Warming, Health and Illness, Healthcare, Insurance, International, Labor, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Stimulus to Nowhere, Trade

In the Wall Street Journal, Nobel Prize-winning economist Gary Becker and others explain how President Obama’s policies are delaying and retarding the inevitable economic recovery, keeping unemployment high even though the recession Obama inherited was similar to others in the past that gave way to rapid recoveries:

In terms of U.S. output contractions, the so-called Great Recession was not much more severe than the recessions in 1973-75 and 1981-82. Yet recovery from the latest recession has started out much more slowly. For example, real GDP expanded by 7.7% in 1983 after unemployment peaked at 10.8% in December 1982, whereas GDP grew at an unimpressive annual rate of 2.2% in the third quarter of 2009. Although the fourth quarter is likely to show better numbers–probably much better–there are no signs of an explosive take off from the recession. …

In terms of discouraging a rapid recovery, other government proposals created greater uncertainty and risk for businesses and investors. These include plans to increase greatly marginal tax rates for higher incomes. In addition, discussions at the Copenhagen conference and by the president to impose high taxes on carbon dioxide emissions must surely discourage investments in refineries, power plants, factories and other businesses that are big emitters of greenhouse gases.

Congressional ‘reforms’ of the American health delivery system have gone through dozens of versions. The separate bills passed by the House and Senate worry small businesses, in particular. They fear their labor costs will increase because of mandates to spend much more on health insurance for their employees. The resulting reluctance of small businesses to invest, expand and hire harms households as well, because it slows the creation of new jobs and the growth of labor incomes. …

Even though some of the proposed antibusiness policies might never be implemented, they generate considerable uncertainty for businesses and households. Faced with a highly uncertain policy environment, the prudent course is to set aside or delay costly commitments that are hard to reverse. The result is reluctance by banks to increase lending–despite their huge excess reserves–reluctance by businesses to undertake new capital expenditures or expand work forces, and decisions by households to postpone major purchases.

Several pieces of evidence point to extreme caution by businesses and households. A regular survey by the National Federation of Independent Businesses (NFIB) shows that recent capital expenditures and near-term plans for new capital investments remain stuck at 35-year lows. The same survey reveals that only 7% of small businesses see the next few months as a good time to expand. Only 8% of small businesses report job openings, as compared to 14%-24% in 2008, depending on month, and 19%-26% in 2007.

Obama’s $800 billion stimulus package, which failed to cut unemployment, is now pressuring states to raise taxes, thanks to costly requirements it imposed on states at the behest of powerful public-employee unions.

Obama claimed the stimulus package was needed to prevent the economy from suffering from “irreversible decline,” but the Congressional Budget Office admitted that the stimulus package actually would shrink the economy “in the long run.”  Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.  The Obama Administration claims credit for creating imaginary jobs in non-existent Congressional districts.

As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent this year. The reality is that it passed 10.3 percent in October. So now the stimulus books are being cooked to mollify an anxious public worried that real-world jobs continue to disappear and angry that Obama has thrown almost $1 trillion down the stimulus rathole.”

The stimulus package actually destroyed thousands of real world jobs by triggering trade wars with Canada and Mexico that killed jobs in America’s export sector (the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that led to massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).  It also is wiping out jobs by inflicting costly mandates on state governments (such as repealing welfare reform, and imposing costly “prevailing wage” regulations and expensive racial set-asides).

The stimulus package has since spawned countless examples of government waste and corruption.  Recently, Obama fired an inspector general, Gerald Walpin, who uncovered millions of dollars of waste and fraud in the AmeriCorps program, including by a prominent Obama supporter, endangering the Obama supporter’s ability to administer federal stimulus spending in Sacramento.  Obama’s alleged justification for firing the inspector general turned out to be false.

Don’t Worry about Trade Deficits

by Ryan Young on December 5, 2009

in Economy, International, Personal Liberty, Regulation, Trade

Here’s a letter I sent recently to the New York Daily News:

December 3, 2009

Editor, New York Daily News
450 W. 33rd Street
New York, NY 10001

Washington, D.C.: In his December 3 column, “On jobs front, President Obama needs to show a little audacity,” Errol Louis worries about America’s trade deficit. He shouldn’t.

I run an ongoing trade deficit with my local grocery store. I import food from them every week. They have never purchased a thing from me in return. Even so, we both benefit. I’d rather have their food than my money, and they’d rather have my money than the food on their shelves. This is true even if an international border separates us.

If Mr. Louis is as worried about trade deficits as he says he is, he would never again set foot in a grocery store, start growing his own food, and engage only in barter transactions. If he doesn’t, he is either misinformed, or else he doesn’t really believe what he writes.

Ryan Young
Warren T. Brookes Journalism Fellow
Competitive Enterprise Institute
Washington, D.C.

Stimulus Package Creates Imaginary Jobs, Destroys Jobs in the Real World

by Hans Bader on November 17, 2009 · 4 comments

in Agriculture, Deregulate to Stimulate, Economy, Employment, International, Labor, Legal, Personal Liberty, Politics as Usual, Precaution & Risk, Sanctimony, Stimulus to Nowhere, Trade

President Obama’s $800 billion stimulus package creates imaginary jobs, while destroying ones in the real world.

Billions from the stimulus are being spent on creating tens of thousands of imaginary jobs in 440 phantom Congressional districts, according to the government’s own web site:

Just how big is the stimulus package? Well for one, it has doubled the size of the House of Representatives, according to recovery.gov, which says that funds were distributed to 440 congressional districts that do not exist. . . . The web site operates on an $84 million budget and is tasked with monitoring the distribution of the $787 billion stimulus package passed by Congress–which, for the record, counts 435 members–in early 2009.

The site’s monitors, however, are not too savvy about America’s political or geographic landscape. More than $2 million was given to the 99th District of North Dakota, a state which has only one congressional district. In order to qualify for 99 districts, North Dakota would have to have a population of about 60 million people, almost 24 million more people than California.

From ABC News:

Here’s a stimulus success story: In Arizona’s 15th Congressional District, 30 jobs have been saved or created with just $761,420 in federal stimulus spending. At least that’s what the website set up by the Obama Administration to track the $787 billion stimulus says.

There’s one problem, though: There is no 15th Congressional District in Arizona; the state has only eight Congressional Districts.

There’s no 86th Congressional District in Arizona either, but the government’s recovery.gov Web site says $34 million in stimulus money has been spent there.

In fact, Recovery.gov lists hundreds of millions spent and hundreds of jobs created in Congressional districts that don’t exist.

The Washington Examiner says that “75,000 jobs” Obama has claimed credit for are “clearly imaginary” or “highly doubtful.” Readers can view its interactive map of “Inflated Jobs by State.”

As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent this year. The reality is that it passed 10.3 percent in October. So now the stimulus books are being cooked to mollify an anxious public worried that real-world jobs continue to disappear and angry that Obama has thrown almost $1 trillion down the stimulus rathole.”

The stimulus package actually destroyed thousands of real world jobs by triggering trade wars with Canada and Mexico that killed jobs in America’s export sector (the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that led to massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).  It also is wiping out jobs by inflicting costly mandates on state governments (such as repealing welfare reform, and imposing costly “prevailing wage” regulations and expensive racial set-asides).

Obama claimed the stimulus package was needed to prevent the economy from suffering from “irreversible decline,” but the Congressional Budget Office admitted that the stimulus package actually would shrink the economy “in the long run.”  Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.

The stimulus package has since spawned countless examples of government waste and corruption.  Recently, Obama fired an inspector general, Gerald Walpin, who uncovered millions of dollars of waste and fraud in the AmeriCorps program, including by a prominent Obama supporter, endangering the Obama supporter’s ability to administer federal stimulus spending in Sacramento.  Obama’s alleged justification for firing the inspector general turned out to be false.

“Millions of jobs are at stake on both sides of the border”

by Marc Scribner on August 10, 2009

in Deregulate to Stimulate, Economy, International, Trade

So says British Columbia Premier Gordon Campbell. At a meeting of Canada’s provincial premiers held in Regina, Saskatchewan, last week, slapping retaliatory tariffs on U.S. goods was barely averted.

Harper and his Trade Minister Stockwell Day scored an important victory Friday when provincial premiers finally agreed not to retaliate. “We’ve made it clear we won’t ask the U.S. for anything we are not willing to give the U.S.,” said British Columbia Premier Gordon Campbell, who attended a meeting of premiers held in Regina, Sask. this week.

For months Canada’s premiers, who are that country’s equivalent of state governors, have spoken out forcefully against the Buy-American clause, which requires that stimulus-financed public works projects use American materials. But until now they have been unable to agree on reciprocity. Since most government procurement happens at the provincial and municipal levels, this lack of consensus has allowed Washington to easily deflect Ottawa’s efforts to secure an exemption from its Buy-American position.

Failure to make a deal on procurement has already cost Canadian companies billions of dollars, and spread pain far beyond the stimulus business. “Buy American has created a trade chill,” says Jayson Myers, president of Canadian Manufacturers & Exporters, the country’s largest trade and industry association, noting some U.S. companies are dropping Canadian suppliers to avoid filing waivers that prove they are playing by the new rules.

While a trade war with Canada doesn’t seem to be on the immediate horizon, Canadians are rightfully upset by the Obama administration’s and Congress’s belligerent and idiotic trade agenda. This week, President Obama is meeting with Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon in Guadalajara to discuss the future of North American relations. Unfortunately, the press and most observers are already declaring the chances of progress on trilateral trade dead on arrival.

As the global recession drags on, expect more outrage from the United States’ global trade partners. CEI’s Ryan Young mentioned a few potential future trade flashpoints in a post this morning. For a good crash course on the absurdity of “Buy American,” see Reason.tv’s short video, Is Your iPod Unpatriotic?, which brilliantly debunks the tired, baseless claims of protectionists.

No “hysteria” about trade — just some facts

by Fran Smith on March 19, 2009

in Odds & Ends

I admire Dan Ikenson’s work on trade issues at Cato. Usually I agree with his views. A notable exception is his post yesterday on Cato’s blog – “Too much hysteria about trade.”

No, Dan wasn’t hitting the current climate of China-bashing or the Teamsters’ on-going campaign against Mexican trucking and NAFTA or the “Buy American” provisions in the stimulus bill. Dan instead was taking to task newspapers like the Washington Post that have been warning readers about the rising tide of protectionism in this world economic downturn.

He writes:

The fact of the matter is that there isn’t any discernible trend toward protectionism in the United States or in the world right now. World leaders issue warnings about the consequences of protectionism, but there are not trends. There are incidences, but no trends.

He uses now-US Trade Representative Ron Kirk’s Senate testimony as evidence of the Obama Administration’s support for open trade and for enforcement of trade rules.

I beg to differ. Kirk’s testimony, of course, reiterates President Obama’s Trade Agenda, which, while including some good rhetoric about the importance of open trade, strongly endorses the need to focus on non-trade issues in trade agreements, such as those involving labor and the environment. Here’s what Kirk said:

I respectfully submit that two strong steps toward restoring domestic confidence in open markets are a real and renewed commitment to enforcement of our trade rules, including those addressing labor and the environment,

And –

. . . to ensure that the way we promote trade reflects our country’s values about economic progress and justice, including through the advancement of internationally recognized labor and environmental standards.

Such issues, as Jagdish Bhagwati has often written, really act as non-tariff trade barriers and force poorer countries to adopt our regulatory schemes in these areas (to “level the playing field”) even when they don’t have the resources.

Dan may not realize that U.S. policymakers such as the Energy Department Secretary and others are seriously considering imposing carbon tariffs on countries (read China and India) that aren’t taking appropriate steps to restrict carbon emissions. Again, that would be a good way to level the playing field and improve U.S. competitiveness. Not protectionism?

Food safety is another area where protectionism may rear its ugly head under the guise of protecting consumers but actually setting detailed standards that may rely more on procedures than the safety of the end product. A bill recently introduced in the House could easily be used to block foreign competition.

And let’s not forget the stimulus package and the infamous “Buy American” provisions, which mandate that any company receiving government funding has to use “made in America” goods, such as iron and steel. The stimulus legislation also restricts companies receiving bailout funds from hiring foreign workers and restricts those firms receiving Trouble Assets Relief Program (TARP) funds from hiring foreign nationals holding H-1B visas unless they can prove they could not hire U.S. citizens instead.

The Obama Team’s emphasis on enforcement issues seems benign to Dan. But take a look at what Rep. Sander Levin, head of the trade subcommittee of the House Ways and Means Committee is cooking up on trade enforcement. Besides promising lots more WTO complaints, the legislative plan is to put back in place provisions on U.S. antidumping and countervailing duties that were changed under President Bush because they weren’t WTO-compliant. But don’t interpret that as protectionism, Levin was quoted as saying, since its purpose is to “enforce the rule of law and the openness of markets.”

“Hysteria” about trade protectionism?  Think it’s not coming from the media, Dan, but from trade protectionists.

Ron Kirk’s Texas origins may temper trade stance

by Fran Smith on December 19, 2008 · 2 comments

in International, Trade

Selecting former Dallas mayor Ron Kirk as the nominee for U.S. Trade Representative sends a signal that perhaps President-elect Obama will temper his anti-trade stance in the face of real-world economics. Kirk, a two-term elected mayor of Dallas, doesn’t have much trade experience, but he is a native of the U.S.’s largest exporting state, with Mexico and Canada — those nasty NAFTA partners — as Texas’ major export destinations.

The nominee for one of Obama’s Cabinet positions holds a law degree from University of Texas School of Law and early on in his career worked for Senator Lloyd Bentsen both in his Senate office and when Bentsen was appointed Treasury Secretary by President Clinton.

Kirk served as Texas’ Secretary of State for one year, before running for mayor of Dallas and winning the election. He was reelected by a large majority in 1999, but left after two years to run unsuccessfully for Sen. Phil Gramm’s vacated Senate seat. He is now a partner in the law firm Vinson and Elkins.

What might provide perspective to Kirk’s trade stance is that he comes from a state that has been a powerhouse in exports. State figures show that exports totaled $168.16 billion in 2007. According to a Dallas Fed report,

Compared with the nation, Texas exports a larger share of its output, depends on exports for more of its jobs, sends more sophisticated products overseas and employs higher-skilled workers in export-related jobs. The state has been instrumental in the surge of overall U.S. trade; its port activity has grown more than twice as fast as the nation’s in the past decade.

Although Texas is an export leader, the report noted that state should be more diversified in both its export markets and the goods and services it provides to foreign markets.

The Texas job situation is also buoyed by its exports. Government figures show that 5.5 percent of all non-government jobs in the state are export-related, and 20 percent of Texas’ manufacturing jobs depend on exports, compared to 17 percent for the nation.

With these and other data demonstrating the economic and employment benefits of trade, one would hope that the in-coming U.S. Trade Representative won’t be too anxious to embrace protectionist policies that might stifle more open trade and economic growth.

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