Clinton on the Trans-Pacific Partnership: Is she committed to a new trade paradigm?

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by Michael Sean Winters

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Sen. Bernie Sanders endorsed former Secretary of State Hillary Clinton yesterday, the specter of doing anything to enable Donald Trump to get the keys to the White House wearing down Sanders' resistance faster than any negotiations over the party platform. At their first joint campaign event, Clinton vowed to pursue several of the policies Sanders supported during their primary battle, and she specifically mentioned opposition to the Trans-Pacific Partnership (TPP).

We have that pledge on film, and unless Mrs. Clinton wishes to begin her presidency by giving the American people an additional reason to question her trustworthiness, she had better keep that pledge. But, then what? Trump opposes TPP too but he seems eager to fight a war of protectionism, his bellicosity being his only mode of expression. What is needed, and what Clinton could provide if she wishes to unite the Democratic Party and really transform the economy in ways even her husband did not, is to find a new paradigm for trade. And, she can start by looking at the conversation held recently at the AFL-CIO headquarters, where an all day conference called "Trading Up" was held. You can find video of the conference here.

In his opening speech, AFL-CIO president Richard Trumka, speaking just a few days after the Brexit vote, set the issue of trade in its proper political context:

The Brexit vote sent a message that was pretty loud and pretty clear -- that we have to make democratic societies work for working people. You can't let Wall Street and the city of London run everything and then expect voters to say well it's okay. We face this issue over and over and over again -- with austerity, with tax policy and yes, with trade deals. From Brussels to Washington, policymakers must understand that if we want to defend democracy from both the radical right and the out of touch elites, working people must help write the economic rules.

This is key. A democratic society cannot long ignore the desires of its people. It is the elites who do the ignoring who bring on the pitchforks. People who are moved to desperation do desperate things. Those of us who wish to change the way trade is conducted are not the radicals. Just as FDR was not the enemy of capitalism but the man who saved capitalism from its own excesses (and its own champions!), those like Trumka who warn against the ugly consequences of our current trade practices are the real defenders of economic freedom, no matter what the Koch Brothers and their allies say to the contrary.

In calling for a new approach to trade, Trumka was seconded by the speakers on the first panel which examined trade and the economy. Thea Lee, deputy chief-of-staff at the AFL-CIO began by arguing that the usual framing -- free trade versus protectionism -- misunderstands how these trade deals really operate. "TPP is 1000 pages of corporate protectionism," she said. She posed some difficult questions for those who usually claim the free trade mantle: How do we harmonize regulations between countries? Do we default to the lowest common denominator? She recalled speaking with a former treasury secretary who admitted we need a new trade paradigm, but he wanted it after TPP was ratified. She correctly insisted we need that new paradigm beforehand.

Dean Baker, from the Center for Economic and Policy Research, discussed how the issue of trade has been shaped by "Big Pharma," the large pharmaceutical companies that dominate the manufacture of new drugs. "Patents expire for a reason," Baker asserted, noting that trade agreements keep them alive, sometimes producing a 10,000 percent tariff. Doesn't sound like free trade to me? Baker pointed out that the U.S. spends $430 billion per year on drugs and that we could spend one-tenth of that but for trade deals extending the patent protection of big drug companies. The next time you hear someone say we can't afford to invest in infrastructure or in more affordable college or in new vocational training, remember that these trade deals are leaving about $390 billion on the table.

Baker also noted that U.S. proponents of TPP and other trade deals argue that "they protect our intellectual property. But, it is not 'ours.' It is Pfizer's or Merck's or Microsoft's." Later, in the Q-and-A, Baker addressed the concern that drug companies would not invest in new research without the patent protections, he pointed out that the government funds about $30 billion in research each year and that figure could be doubled or tripled, and we would still save money as a nation.

Robert Scott from the Economic Policy Institute discussed currency manipulation and the models used to evaluate trade deals. China currently holds $5 trillion in U.S. assets, which "keeps the dollar up and tilts the playing field." Scott called currency manipulation the "single biggest cause of the trade deficit" and argued that it depresses the wages of the average U.S. non-college worker by some $1,800 per year. Still think free trade is free? And China is not the only country that tries to manipulate currency rates: Japan, Singapore and Malaysia all do the same, and unlike China, they are signatories of TPP. Scott raised some interesting questions about how economists model the effects of trade deals, noting that the standard practice always assumes full employment, which is an abstract assumption not rooted in reality, and, that in the model, the unemployed always find employment elsewhere but in the real world, that is not how it works. Here I could not help thinking of the frequency with which Pope Francis states that reality is more important than ideas, one of the core tenets of Catholic social doctrine.

Michigan State University's Joseph Guzman had the unenviable task of defending TPP, and he made a strong case for American leadership on the world economic stage. He did not explain how a bad trade deal strengthens that leadership and, more generally, he did not persuade.

Thomas Palley, senior economic policy adviser at the AFL-CIO, summed up the challenge facing policymakers: "We need to bury the neoliberal trade and globalization paradigm." He fiercely criticized the Obama administration's economic models, noting that "the gains from the trade deals are built in to the models, but not the costs, and the gains are modest even by the administration's own estimates. TPP can't be saved." He warned against the political device of promising an infrastructure package, which America needs to be sure, but is a distinct and unrelated question from TPP.

Perhaps Palley's most important point to Catholic ears was his concern that the neoliberal free trade agenda is a framework that "masquerades as a trade agenda but is in fact a global governance agenda." This is not all about abstract economic theory, which would be bad enough if the abstractions are clung to so tightly we ignore the reality on the ground. It is about power. "It is exploitation by global arbitrage," Palley said, a phrase that got almost all heads nodding.

What usually strikes me when I go to one of the conferences downtown is how starkly different is the language of most policy experts from the language of Catholic social doctrine. But, when you go to an event with organized labor, that difference shrinks. They may not use the same language, but the language they use is deeply moral, suspicious of abstractions at the expense of real world consequences, focused on the human person more than on the "laws of the market" or, for that matter, the laws of the state. There is a more honest admission of what we would call original sin and they call power, greed and self-interest, than you find in other progressive circles. I feel at home. And, the hope is that if Hillary Clinton meant what she said yesterday at her rally in New Hampshire with Sen. Sanders, she will increasingly feel at home questioning what was once a key tenet of orthodoxy for the New Democrats her husband championed. As I have written previously, in the early 1990s, there were reasons to hope the effects of globalization would be benign. But, she needs to show that she understands the downside of globalization and put forward a vision, a paradigm to use the word most cited at the Trading Up conference, that makes non-college workers know that there is a place of them in the future of the American economy too.

[Michael Sean Winters is NCR Washington columnist and a visiting fellow at Catholic University's Institute for Policy Research and Catholic Studies.]

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