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What If We Did Trade Right?

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Reposted from the Huffington Post

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What If We Did Trade Right?

Stan Socscher  |  November 29, 2012  |  Huffington Post

Everyone I know is in favor of trade done right.

Recently, I heard a congressman explain how investors interpret that.

From that perspective, trade is done right when the investor’s property is protected from capricious foreign governments who might snatch property. I think he meant Hugo Chavez or Fidel Castro — China, or maybe Peru. I got the impression that in 1917, Bolsheviks left a deep, traumatic scar on the collective investor psyche. But let’s walk through this, because I think it has a strong streak of truth.

Our congressman put this into context, saying it took America 200 years to act in the public interest while protecting business and property rights. When we build a freeway, we seize private property for the public good, then pay owners fair compensation. We regulate cigarettes, set emissions standards for automobiles and power generating stations, and we want assurance that drugs are safe and effective.

Our 200-year process found a balance between public and private interests. How? We had a strong civil society — an active free press, public advocacy, and political power in the hands of organized workers, environmental groups, and public health advocates. Our political process held elected officials accountable, at least from time to time.

Since we did it in our domestic society, the logical leap was that our trade agreements would produce a similar outcome. Done right, we could have clean air, clean water, good schools and roads, a strong middle class, stable political institutions, and investors could make lots of money. Globalization would be fine indeed, if we follow our domestic history.

Except we’re not.

Instead, global trade agreements go overboard in protecting investor rights. “Free trade” deals largely exclude public interest, devaluing the environment, labor rights, human rights, public health and financial regulation. The interests of global investors are elevated to top priority, and effectively decoupled from the public interests in every country where trade agreements operate.

18 Responses to “What If We Did Trade Right?”

  1. Tom T. says:

    It is ironic that the U.S.’s largest capitalized corporation based on stock price was involved into what amounted to China’s oligarch run labor camp, Foxconn. We have exported our labor values and for that matter our environmental standards to be sunk on the other side of the world. All for profits. The purpose of an economy is not to make oligarchs out of the worst of us, but to give every person wishing to engage in the economy a chance to make a living.

    Thanks Sara, for another good article.

  2. Tom T. says:

    The oligarchs are in the catbird seat and the taxpayer is paying for the ability of corporations to go global but keep domestic markets.

    http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?emc=na&_r=0

    • Bruce Bishop says:

      Tom,

      You are correct, but what is our government doing/going to do about this?

      If it is not the job of our government to protect us from this, what is its purpose?

      • Tom T. says:

        Bruce, I agree. Our government is not protecting its citizens and instead allows the talk of “competing globally” meaning lowering our standard of living to that of Foxconn workers. Apple did not need to make such margins on their great products by using Foxconn’s Chinese labor while we have trade continual trade deficits. China is buying U.S. jobs from the likes of Apple and many other companies who want access to U.S. markets but want to use what amounts to prison labor from China. China captures much of the foreign earnings by manipulating its currency.

        What the U.S. should do with foreign policy is say, hey, trade with us but don’t game the system. As far as states go, the Supreme Court (if you listen to Jeffrey Toobin) is decreasing the Interstate Commerce Clause which allows Congress to set rules that all states have to follow regarding commerce. Absent national commerce, states could reject other state’s goods (this is not a very good idea at all) and have their own people in their states make their own goods thus boosting employment. The same with local governments. Basically the oligarchs are gaming the system for their own benefit. I would, if I were a state, increase revenues for all goods from companies who are playing this game.

        California or a big state like that does exactly this when they set pollution standards for vehicles on their roads. It has made U.S. manufacturers pass a standard or they don’t get to sell in the state. All companies eventually decide whether they want to have national or international markets and our politicians should set that standard and not allow oligarchs to game politicians who are willing to sell their public for the benefits of having that business in their state.

        Tom T.

        Until our politicians have a larger view of what is really happening, we won’t have change.

        We can not fix our business problems by having the govt., local state and federal, trade the public good for economic activity. This really just scarfs off of other areas of the country and the oligarchs have positioned policy for their benefit although it is detrimental to the sum of Americans.

        • Tom T. says:

          Let me put it more simple. States should look at companies who are getting government benefits to locate in other states and tax them a similar amount to do business in their state.

          The U.S. should look at foreign trade in the same manner (until we get out of these trade deficits).

          Companies would soon stop this nonsense of blackmailing local and state governments.

          Tom T.

        • Mo says:

          Every State having a state bank like North Dakota has would be a big help in creating jobs and keepiing money spent within states. North Dakota deposits their tax revenues in their own bank and works with local community banks to fund industrial activity within state. North Dakota is one of the only states to have regular budget surpluses. Additionally it has had a regular growing GDP, low unemployment, and low bankruptcy rates. Of course some will claim their growing economy is due to their oil boom; yes the oil boom has helped their economy but other states have more natural resources than North Dakota yet have more unemployment.

          Currently most states deposit their tax revenues in large money center banks that are some of the biggest advocates for offshoring. Why keep tax revenues in a bank that may lend the money out of state or to a company that offshores jobs?

          Additionally manufacturers could create their own bank and deposit revenues and encourage workers to to have their wages deposited into the bank to recycle funds within that sector. State banks working with a commercial manufacturing bank would go along way in evening the playing field with countries that have industrial banks and development banks that provide unlimited amounts of credit to their manufacturing sectors.

          • Tom T. says:

            Mo, I would apply your example to the United States as a whole. This would stop investors from going to the cheapest cost world wide. I would do it a little differently than you suggest. I would limit their market access if we were running trade deficits (I like Buffet’s plan Bruce keeps bringing up) and let the investors deal with a loss of that market. They would soon stop selling out the U.S. public interest for their own private interests.

            Tom T.

  3. Joe Brooks says:

    “A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States.

    Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors.

    Great reference, Tom T. The Balkanization of the US. These strategies by Multi Nationals who are partnering with protectionist slave labor governments that pummp up their profits have long term and very negative effects. The local governments cannot compete with State Capitalist nations.

    Regionalism/Privatization in local government refers to the elimination of small local governments [the officials most Americans can actually contact and that have a stake in local prosperity and affairs] with mergers of large cities in cooperation with corporate interests to compete with other “regions” in the state they are in or throughout the USA.

    Article I, Section 10 of our Federal Constitution prohibits the state governments, without the consent of the Federal Congress, from collecting Tariffs on goods imported into the states. Likewise, Article I, Section 9 prohibited the Federal Congress from assessing tariffs or taxes on goods exported from any state. This is why you pay no tax/tariff when purchasing from another state, the Founders made Interstate Regionalism illegal, to promote National unity and identity.

    Regionalism is how Red China/India, Mexico, etc. want us to operate at all levels of Government, to divide the USA, diminish States rights, individual rights, local government would vanish, the local school systems would be run by the corporate city-state, citizen complaints would take much longer to be addressed, if at all, and US slave labor citizens would be at each others throats for their next meal, pushing wages further down.

    Historically, the corporate city-states will begin to act independently, resulting in upheaval, leading to the break up of the country, regional/privatized laws and treaties and easy incursions by larger states. Sounds like Utopia.

  4. Joe Brooks says:

    “I don’t see it as giving up anything,” said Mr. Hitt, who worked at BMW in the 1990s and helped it win $130 million from South Carolina.
    Today, Mr. Hitt is the state’s secretary of commerce. South Carolina recently took on a $218 million debt to assist Boeing’s expansion there and offered the company tax breaks for 10 years.

    Mr. Hitt, like most political officials, has a short-term mandate. It will take years to see whether the state’s bet on Boeing bears fruit.

    In Michigan, Gov. Rick Snyder, a Republican in his first term, has been working to eliminate most business tax credits but is bound by past awards. The state gave General Motors $779 million in credits in 2009, just a month after the company received a $50 billion federal bailout and decided to close seven plants in Michigan.

    G.M. can use the credits to offset its state tax bill for up to 20 years. “You don’t know who will take a credit or when,” said Doug Smith, a senior official at the state’s economic development agency. “We may give a credit to G.M., and they might not take it for three years or 10 years or more.”

    One corporate executive, Donald J. Hall Jr. of Hallmark, thinks business subsidies are hurting his hometown, Kansas City, Mo., by diverting money from public education. “It’s really not creating new jobs,” Mr. Hall said. “It’s motivated by politicians who want to claim they have brought new jobs into their state.”

    General Motors is becoming China Motors. Forget the spin. The evidence is clear and convincing. Did U.S. taxpayers save GM for China? Listen to the candid comments of GM’s CEO. http://www.youtube.com/watch?v=Lvl5Gan69Wo&feature=youtu.be

  5. Will Wilkin says:

    Without protectionist trade policy designed to keep industry in the USA by making imports more expensive than domestic production, the only way to attempt to entice corporations to stay or build in country is through the tax breaks and other subsidies described in the comments above. I think we have the policy backwards.

    A better way would be to start with a general tariff across the board so it would be relatively simple and predictable. THEN, after the general tariff has its general effects, we could use less tax breaks and other subsidies in a much more targeted, strategic way, as a secondary tool to ensure we are building those exact industries key to American prosperity for decades to come.

    We need to combine protectionism with development so that we don’t just protect ourselves into non-competitiveness. Development would start with infrastructure, especially telecommunications and other systems where the US has fallen far behind European and Asian competitors. Corporations evaluate many factors when deploying capital in long-term investments like big factories and R&D labs. Clyde Prestowitz in his book Betrayal of American Prosperity gives examples of how far behind we’ve fallen, and notes that cutting edge corporations very much want the best infrastructure as part of their productivity environment.

    “Doing trade right” won’t be properly defined until our national political discussions come to a consensus on what outcomes we want our policies to produce. Imagine if instead of arguing over policies, we took a few months off to just discuss the OUTCOMES we want. Here I would propose world-class manufacturing and support industries at the center of a full-employment economy. Full employment would maximize productive use of our labor force and reduce the need for social safety net to the disabled and retired. Right and left should be able to agree on that, or even better, shed those polarizing identities altogether and converge on a new American patriotism where we are all on the same American team, working together to build our common prosperity and long-term maximum development of the potential of each American to become economically productive and, at least experientially, self-sufficient. Of course at the systemic level there is no such thing as self-sufficiency, that is where policy must step in an make the environment where individuals can then find opportunities to apply their talents and interests and effort.

  6. Joe Brooks says:

    “Development would start with infrastructure, especially telecommunications and other systems where the US has fallen far behind European and Asian competitors”

    Will, I agree with your assertions, under the American System, taxes were extraordinarily low, until 1913.

    The breakup of Bell, which I witnessed very closely, was a self defeating move. I agree some competition should have been fostered, but leaving us unable to compete with Huawei is moronic. The anti monopoly laws have not been applied in a reasoned and beneficial to the US manner for 40 years.

    http://www.cbsnews.com/video/watch/?id=7424702n

  7. Will Wilkin says:

    What am I, banned?

  8. Will Wilkin says:

    Okay, here is something else I may have wasted time trying to post here:

    Hi Joe, Thanks for link to great article on legacy of Bell Labs. Don’t we still at least have a National Institute of Science, National Institute of Health, etc? Don’t we still have a great university system?

    If I were Prez, I’d seek nominations for and appoint a National Commission on Innovation to use govt grant money and policy to encourage our university and corporate labs to research problems coordinated towards solving big, history-changing problems, such as “innovation” meant in the Bell Labs sense rather than Apple app sense. If we had a national consensus on the outcomes/goal;s we want in terms of what kind of society and what kind of economy, we could then put our innovation centers to work as an essential part of a larger strategic national vision, realized through Industrial Policy. R&D encouragements and coordination being only one aspect of Industrial Policy, which itself means a governing vision to drive all policies (trade, tax, regulation, public investment, etc).

    Some history-changing national projects that could anchor a full-employment economy centered around world-class manufacturing:

    1) National Energy Independence through 100% Renewable (clean) energy on US-made technology. This includes: a) rebuilt electrical grid compatible with intermittent power sources like wind and solar, b) domestic manufacturing and continuous R&D of all the hardware, from solar cells to solar modules to grid-level energy storage systems and transformers, buried storm-proof power lines, etc.

    2) A new transportation system, including mass transit, EVs and exploring any other promising ideas, from hydrogen storage and fuel cells to new materials.

    3) National Energy efficiency conversion of our buildings, from commercial and industrial and residential, through weather-proofing, insulation, doors & windows, and other renovations.

    National goals and projects such as the above would do a lot more than put people to work, although I am talking about ten million or more new jobs in manufacturing, construction, engineering and research, plus all the service industries that would support those. After all, as Keynes once noted, digging holes and filling them back in again also provides jobs –and I would liken our country’s expenditures on military domination of the globe, on mass incarcerations, and on massive unemployment benefits all akin to digging holes and filling them in again, i.e., creating purchasing power through wages or benefits but contributing little or nothing to actual standard of living through consumables or capital goods geared to long-term civilian quality of life.

    By contrast, national goals like the ones I enumerate above would qualitatively transform in beneficial ways our productivity, our relationship to the environment, and our relationship with other nations. Full employment in constructive purpose would increase the wealth of the nation, in short-term and long-term ways. Additionally, think of the psychological transformation of millions of people going from unemployed with no hope to being able to pay their way with the satisfactions of working and with new hope for our children because our country is again on the right track.

    • Joe Brooks says:

      “National goals and projects such as the above would do a lot more than put people to work, although I am talking about ten million or more new jobs in manufacturing, construction, engineering and research, plus all the service industries that would support those”

      Hey Will, I was not aware you are a Henry Clay Whig! Just kidding, but just a little.

      We have had many such projects, I was in High School when US citizens landed on the Moon. Without these projects, we are just another Banana [corn/wheat/recycled junk car to China] Republic.

  9. Mo says:

    Tom if every state had their own state bank like North Dakota has where tax revenues get deposited into; it would be like the USA as a whole was acting in their self interest. Every state knows better than Washington economically what’s in their best interest.

    A state bank would allow states to pay lower interest rates to fund infrastructure investments and give states a better ability to keep funding going for state programs people need and want. The only problem that may still cause issues is inflation of the money supply. If Washington keeps printing money to fund wars and other malinvestments, it may cause states still to have budget deficits because future costs will be higher than expected due to the inflation. But at least with states having their own bank, they would have more options in how to keep their economy stable.

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