Free Trade AgreementsHiggenbotham wrote: ↑Sun Jul 16, 2023 11:54 amAngus Deaton is describing the social pain that comes from not having a strong connection to employment. He is referring to the US workers who don't have college degrees. A lot of their jobs that help maintain a positive self-image were moved offshore via free trade agreements, destroyed by various types of regulations promoted by corporate lobbyists, destroyed by Wal-Mart as small retail businesses and downtowns were destroyed, destroyed by bailouts to large corporations who require college degrees in their job descriptions even when not necessary, destroyed by covid lockdowns, etc.
https://prospect.org/health/fabulous-fa ... ins-times/Trade Policy and Politics
Trade policy constitutes a version of industrial policy. The North American Free Trade Agreement had far less to do with trade than with investment policy, ensuring that in Mexico, U.S. companies and banks could repatriate profits, extend U.S. patent and copyright protections, and once and for all end any Mexican government temptation to expropriate their property.
Initially, Clinton had tried to straddle the fence on a trade pact viewed skeptically by organized labor and most congressional Democrats. NAFTA had been negotiated during the Bush administration but required a legislative vote to go into effect. The Clinton campaign endorsed NAFTA in October 1992 but sought to make it palatable by including labor and environmental protections. These proved exceedingly weak, which turned the AFL-CIO and much of the Democratic Party base against the agreement. Aside from any long-term employment consequences—the “giant sucking sound” made famous by Ross Perot—Clinton made a disastrous political miscalculation when his administration chose to undermine labor-liberal unity and scramble the partisan landscape by pushing NAFTA through Congress with more Republican votes than Democratic.
This was the kind of mistake Reagan had never made. Although free trade was official Reagan ideology, his administration actually orchestrated an ad hoc industrial policy that appeased key political and economic constituencies. Many complaints came from older industries like textiles, steel, auto, and motorcycles, long bastions of GOP or Dixiecrat support. They were being inundated by East Asian and especially Japanese imports. Reagan’s Commerce Secretary Malcolm Baldrige and his deputy, Clyde Prestowitz, therefore challenged the free-trade orthodoxy still favored by the State Department, which was willing to sacrifice U.S. industries in order to sustain Cold War allies in Asia.
The Reagan administration slapped a quota on Japanese motorcycles during the first term that did much to save Harley-Davidson, after which Treasury Secretary James Baker negotiated a dollar devaluation in 1985, the so-called Plaza Accord, that made all manufacturing exports more competitive. Reagan’s trade negotiators also pioneered a way forward in one of the world’s most strategic industry sectors. Americans had invented the semiconductor, but a strategy of continuous innovation did not lead to manufacturing competitiveness. American chip makers were stand-alone enterprises, while in Japan, large, capital-rich companies invested in computer chips as but one part of a larger high-technology endeavor. By the early 1980s, they had penetrated the U.S. market to devastating result. Intel’s Robert Noyce estimated that between 1984 and 1986, chip manufacturers lost $2 billion and laid off 27,000 workers. In response, the Defense Department ponied up half a billion to fund a new research consortium, Sematech, in effect a government-sponsored cartel that dampened domestic competition and stressed manufacturing prowess. Meanwhile, Prestowitz and other trade negotiators adopted a tough bargaining posture that stopped Japanese dumping of its chips on the U.S. market and mandated that Japanese companies must purchase 20 percent of all their chips from foreign producers, most in the United States.
Dozens of Rust Belt Democrats were defeated in the 1994 elections, dragging down others, including House Speaker Tom Foley, who had sided with the administration over NAFTA.
Clinton proved unwilling to build upon this Reagan-era precedent. Although his administration tried to open Japan to American products, agricultural ones in particular, this effort encountered fierce resistance from those rural agricultural interests that bulwarked Liberal Democratic Party (i.e., conservative) rule there. It failed. But Mexico was another story. Unlike Japan, which was then the second-largest industrial economy in the world, Mexico’s GDP was but 4 percent that of the United States. The U.S. had more of a free hand there, and ratification of the trade pact late in 1993 generated a template for U.S. approaches to globalization and the incorporation of many developing nations in that new order.
The Democrats were profoundly divided about NAFTA. Many in the administration, even liberals like Reich, thought globalization inevitable and that the best defense of American living standards would come through domestic investment in a high-skilled workforce, a hyper-productive set of industries, and the social and supportive physical infrastructure. Reich believed labor-intensive textile and apparel manufacturing would inevitably leave the United States. In their place would arise high-productivity, high-wage manufacturing and service industries, because “the fundamental fault line running through today’s workforce is based on education and skills.” The problem with this perspective was that while productivity, as well as education, was indeed low throughout most of Mexican—and Asian—manufacturing, key export-oriented firms in the developing world had demonstrated the capacity to produce high-quality goods with low-wage and poorly educated workers. Because of a devaluation of the peso in the early 1980s, Mexican wages in real purchasing power terms had actually declined some 30 percent by the end of the decade. “Why should companies invest in a high-skill, high-wage strategy in the United States,” asked the widely quoted industrial relations expert Harley Shaiken in 1993, “when a high-skill, low-wage strategy is available in Mexico?”
House Majority Leader Richard Gephardt shared that outlook. He came out of a still industrial, still highly unionized St. Louis, and Gephardt harbored presidential ambitions—one reason why in the last years of the George H.W. Bush administration, he reluctantly and cautiously backed “fast track” authority, hoping that a new, more liberal administration might include labor and environmental side deals with real teeth. Bill Clinton kept such hopes alive when on October 4, 1992, he endorsed NAFTA, but insisted that the trade deal had to be part of a “larger economic strategy” designed to raise the incomes of American workers and protect their jobs and environment. During the next year, Gephardt worked closely with the AFL-CIO to make NAFTA’s labor clause something more than an assertion that each nation should enforce its own, often inadequate, labor laws.
“NAFTA, with the addition of the supplemental accord, is a groundbreaking agreement,” U.S. Trade Representative Mickey Kantor said in announcing the completion of a NAFTA deal on August 13, 1993. “For the first time a free trade agreement covers workers’ rights and the environment.” The devil was in the details. The United States extracted a nonbinding commitment by the Mexican government to tie its minimum-wage structure to increases in productivity and growth in the Mexican economy. Fines for violation of labor rights were possible at the end of a long process of consultation, but the tribunal set up by NAFTA would have no power to compel a government to pay or penalize a particular employer. Within hours of the Kantor announcement, a coalition of labor union leaders, consumer advocates, and environmental groups had denounced the accord.
Gephardt too called the side agreements “not supportable,” and in a speech to the National Press Club on September 21, 1993, he announced that he would vote against the pact. Gephardt argued that genuinely fair trade was a contradiction in terms when applied to nations whose social structures and economic policies were incompatible; the wage differential across the Rio Grande was 8 to 1. In the absence of significant outlays for retraining and job creation, Gephardt warned of “downward pressure on wage agreements, holding down our standard of living. And they face that argument not only from Mexico, but from China and other places around the world.”
Labor-liberal opposition to NAFTA would therefore be staunch in Congress, backstopped by polls showing that a majority of Americans opposed the agreement. More importantly, the Clinton administration was at the very least divided on timing, with Hillary Clinton, among others, pushing for a postponement of the NAFTA fight until after the congressional health-care battle. But Bill Clinton pushed ahead. The White House set up a war room, headed by William Daley, a banker and youngest son of Chicago’s legendary mayor. The administration soon pulled out all the stops, making side deals to get the votes of representatives with citrus, flat glass, wine, and other interests that might be harmed by competition from Mexico. And when the flamboyant and erratic Ross Perot became the face of NAFTA opposition, the White House was not displeased.
The House passed NAFTA by a vote of 234 to 200 on November 17 and the Senate followed three days later with 61 in favor and 38 against. In both chambers, more Republicans voted for the trade agreement than Democrats, an ominous fissure in liberal ranks. Edward Kennedy backed Clinton, declaring, “All of the problems that working families face … will be even worse if NAFTA is defeated.” But other liberals like Senator Don Riegle of Michigan voted no, concluding, “This is a jobs program for Mexico, and my Lord, we need a jobs program for America.” Clinton thought he had secured a marvelous bipartisan victory, but Rust Belt voters and their elected representatives spurned the trade compact. Clinton “seriously split the electoral base of the Democratic Party and has alienated swing voters,” concluded Lawrence Mishel and Ruy Teixeira of the progressive Economic Policy Institute. More than two decades later, NAFTA was still a resonant and unpopular symbol for Trump to use against the Clintons.
Dozens of Rust Belt Democrats were defeated in the 1994 elections, dragging down others, including Tom Foley, the House Speaker, who had sided with the White House on NAFTA. Capturing the House for the first time in 40 years, GOP conservatives stepped into the policy vacuum engendered by liberal disarray. Newt Gingrich and a new cohort of freshmen Congress members moved the GOP decisively to the right, Perot ran for president once again, and on the extreme right pundit Pat Buchanan offered a foretaste of Donald Trump when he deployed culture war rhetoric to denounce a Bush-Clinton “New World Order” that stood for globalization, multiculturalism, and a devaluation of American nationality.
https://www.amazon.com/Fabulous-Failure ... 0691245509