Archive for the ‘Fast Track’ category

Pacific Trade Debacle

June 14, 2015

Democrats joined together this week to thwart President Obama’s request for fast track negotiating status on the proposed trade deal among 14 Pacific rim countries. Apparently responding to strong requests from organized labor and environmental groups, Democrats voted overwhelmingly to deny fast track status. Hmmm.

Opponents claim the Trade bill will cost American jobs. I wonder where these people have been over the past twenty years as American company after company has outsourced American jobs to lower wage countries? The consequence has been increased profits for American businesses and huge downward pressure on the average American worker.   To the positive side, it must be recognized outsourced jobs has contributed to a steady low inflation rate (read lower cost of living). So what can be so bad this time?

Outsourcing works (in economic terms) when the country losing the jobs reemploys the workers in other more productive activities. Even though 20 years sounds like a long time, America’s work force has not upgraded itself enough to find gainful work for too many of those outsourced. Accordingly it can be understood why Americans would be worried when Unions tell them how bad this Trade legislation will be.

The only problem is that no trade bill is worse!

Post World War II, the United States possessed over 60% of the worlds manufacturing capacity. Finding a manufacturing job was like finding a local bar, they were everywhere. Business leaders, anxious to make a buck bid against each other in order to attract and retain workers. This became the norm and few people thought that life could or would be different.

During this post war time plenty of countries (like most of Europe, Japan, India, and many Latin and South American countries all engaged in some form of restrictive, protective Trade arrangements. Each of these countries tried to protect their favored industries against “foreign” competitors. Imagine France protecting its industries from German or Spanish ones. That’s like New Jersey building borders against goods from Pennsylvania or New York. The bottom line has been that those trade barriers lead directly to low quality, high prices, and economic stagnation.

The same fate awaits America if we ignore Pacific rim trade.

A far better use of the opponents’ time would be to establish rules on what American businesses can do with overseas profits if outsourcing does occur. Outsourced labor is creating profits for American companies by either lowering the cost of products imported and sold in the US or simply creating new profits in a US subsidiary overseas, or both. Currently that subsidiary’s profit is housed in the lowest tax jurisdiction outside the US and remains there avoiding US taxes. No one wins on that deal.

Taxing US corporate profits attached to our soured jobs and dedicating these revenues to retraining labor might be a useful outside the box move.

Forgetting the greed aspects of business (especially American style), the idea that the US can go it alone ignoring access to 40% of the world’s markets on equal basis is ludicrous. Experience has taught us that we can not expect business leaders to consider the best interests of American labor also.

So, tell me again why the President should not negotiate with fast track authority?