Making sense of NAFTA and its replacement

Stan Sorscher

Stan Sorscher Labor Representative, Society for Professional Engineering Employees in Aerospace

In 2016, Donald Trump’s trade message was very simple: the North American Free Trade Agreement (NAFTA) was the worst trade deal ever negotiated. He has renegotiated NAFTA, rebranding the deal as the United States-Mexico-Canada Agreement (USMCA). We never quite understood his objection to the original NAFTA, and we don’t understand how USMCA fixes it. You need to squint to see the difference between NAFTA and its replacement.

“I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me,” Trump has said. His gut instinct said NAFTA was bad. Unfortunately, gut instinct is typically simplistic, often impulsive, and by definition not strategic or coherent.

We need to think of our domestic policy and trade policy together. Tariffs, like trade deals, make sense only as tools within a larger coherent strategy. Trade policy should reinforce the principles in our domestic policy. If trade policy is not working, it’s a fair bet that our underlying domestic policies aren’t either.

Since 1980, the prevailing political message has been, “Markets will solve all our problems. Government is the problem.”

The term for this is neoliberalism. “Neo” means new. In the language of economics, “liberal” means “liberated” or free from regulation. Neoliberalism “frees” markets by shrinking government, dismantling social programs, and cutting investment in education and research-and-development.

Many of our biggest problems — climate change, growing income inequality, health care, food safety, and workplace safety — are textbook market failures. Neoliberalism responds with its universal prescription — make business succeed and well-being will trickle down to the rest of us.

NAFTA is a direct reflection of those principles. In free trade orthodoxy, investor interests are more important than public interests. The NAFTA model blurs national identities and national boundaries, devalues the idea of public interest, and merges our domestic economy into the global economy.

GE, Apple, Exxon, General Motors and other large global companies move production to low-wage countries, putting the short-term interests of their investors above the long-term well-being of everyone else. By design, NAFTA helps global companies do that.

The consequences are predictable — deindustrialization of our economy, inequality, a scary weakening of social cohesion, and political instability.

NAFTA cannot be “fixed” incrementally. We need a new approach to our domestic policies, and a new trade policy to match. Domestic policies are the dog that wags the trade policy tail.

China has approached globalization very differently. Their “Made in China 2025” strategy is a comprehensive manufacturing strategy that targets 10 industries of the future. China’s One Belt One Road program is an equally impressive global infrastructure strategy that strengthens China’s export strategy.

We used to make public investments in infrastructure, education, and research in new technologies.

Prior to 1980, we had national strategies to invest in education, infrastructure, and R&D. We took stewardship of the environment and made workplaces safer. We managed those important public interests, in balance with investor interests, using national strategies.

In the ’30s, the Great Depression discredited laissez faire capitalism. President Franklin D. Roosevelt felt huge popular pressure to “do something.” He introduced the New Deal, which was fundamentally a statement that government played a legitimate role in managing the economy — to address market failures and improve well-being.

 

The New Deal was a trial-and-error exercise in industrial policy, with some steps forward and some steps back. We strengthened rights for workers, created the Securities and Exchange Commission to regulate corporations, modernized the role of the Federal Reserve, brought electricity (infrastructure) to rural America with the TVA and Bonneville Power Administration. We built airports, bridges, tunnels, levees, waterways, and other public works, we opened national parks, and established social safety net programs like Social Security, unemployment insurance, and workers’ compensation.

In the post-war period, we created the Marshall Plan which rebuilt Europe’s economy, to our advantage. A generation of soldiers went to college with the GI bill. We built the interstate highway system, passed Medicare and Medicaid, successfully managed the space program, subsidized higher education generally, and invested billions in basic science and R&D. Perhaps our last great exercises in industrial policy were public investments that led to the Internet, GPS, and global communications.

Social cohesion improved with civil rights legislation, rights for women, and fair housing. We created the EPA, with a mandate for clean air and clean water. These national policies raised living standards, and shared prosperity (with significant exceptions).

We need to acknowledge several principles:

●  The neoliberal approach is exhausted socially, politically and economically.

●  The purpose of an economy is to raise living standards and improve well-being generally.

●  The purpose of a political system is to make sure the economy raises living standards and improves well-being generally.

●  Every country has its national identity and legitimate national interests.

●  Legitimate national interests can build social cohesion. You can have national interests without being nationalist.

●  Every country in the world has an industrial policy. Japan, South Korea, and Singapore made extraordinary leaps from third-world status to first-world status, using well-crafted national strategies. China has elevated industrial policy to a fine art. Germany, the Nordic countries, and others have pretty good ones. Ours sucks.

●  Industrial policy is the philosophical opposite of free trade. The U.S. Trade Representative’s General Counsel once explained that his job under neoliberal trade rules was to search the earth for industrial policies and oppose them. That’s why NAFTA cannot be fixed incrementally.

●  We need national strategies to address the defining problems of our time: inequality, deindustrialization of our economy, and climate change.

THEN, we can write a new trade policy that manages legitimate national strategies in the global economy.

Democracies settle such questions in elections.

In 2016, Donald Trump defeated 16 establishment rivals in the primaries, and one more establishment rival in the general election. His voters wanted someone who would fight for them, not leave them behind. That is a political fact.

The Green New Deal could be our next big industrial policy — with trial-and-error like Roosevelt’s New Deal of the 30’s. We have obvious infrastructure challenges that will require public investment. Curiously, the most interesting items in USMCA are modest industrial policies.

Our health care system is arguably among the 3 or 4 biggest market failures in human history. We could approach public health with a coherent strategic national policy that makes us more competitive economically.

New policies for taxation, patents, intellectual property, corporate governance, and local economic development could leverage production in the U.S.

The 2016 election broke the spell of “free trade” neoliberalism. In 2018, candidates won with policies that put people first. Candidates for 2020 are just now proposing serious national strategies for the economy and environment. We will see more.

Trying to “fix” NAFTA incrementally is futile. First, we need to see national policies that will rebuild our economy, raise living standards, and improve well-being. Then we can write a trade policy to match.

***

Reposted from The Stand

Stan Sorscher is on staff at the Society of Professional Engineering Employees in Aerospace (SPEEA), a union representing over 20,000 scientists, engineers, pilots, technical and professional employees in the aerospace industry. He is President of the Washington Fair Trade Coalition, and represents organized labor on the Board of the Puget Sound Regional Council Economic Development District. He was appointed by the Governor to the Board of the Export Finance Assistance Center of Washington. After receiving his PhD in physics from UC Berkeley, he worked for two decades at Boeing, building optical, ultrasonic, and X-ray systems to visualize materials and assemblies. Follow Stan Sorscher on Twitter: www.twitter.com/sorscher

 

Posted In: Allied Approaches

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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