Even Mainstream Economists Starting to Admit that "Free Trade Agreements" Are Anything But ...

George Washington's picture

Trump and Sanders have whipped up a lot of popular support by opposing “free trade” agreements.

But it’s not just politics and populism … mainstream experts are starting to reconsider their blind adherence to the dogma that more globalization and bigger free trade agreement are always good.

UC Berkeley Economics professor Robert Reich – Bill Clinton’s Secretary of Labor – wrote last month:

Suppose that by enacting a particular law we’d increase the U.S. Gross Domestic Product. But almost all that growth would go to the richest 1 percent.

 

The rest of us could buy some products cheaper than before. But those gains would be offset by losses of jobs and wages.

 

This is pretty much what “free trade” has brought us over the last two decades.

 

I used to believe in trade agreements. That was before the wages of most Americans stagnated and a relative few at the top captured just about all the economic gains.

 

Recent trade agreements have been wins for big corporations and Wall Street, along with their executives and major shareholders.

 

***

 

But those deals haven’t been wins for most Americans.

 

The fact is, trade agreements are no longer really about trade.

Indeed, while it’s falsely called a “trade agreement”, only 5 out of 29 of the Trans Pacific Partnership’s chapters have anything to do with trade.  And conservatives point out that even the 5 chapters on trade do not promote free trade.

Reich continues:

Worldwide tariffs are already low. Big American corporations no longer make many products in the United States for export abroad.

 

***

 

Google, Apple, Uber, Facebook, Walmart, McDonalds, Microsoft, and Pfizer, for example, are making huge profits all over the world.

 

But those profits don’t depend on American labor – apart from a tiny group of managers, designers, and researchers in the U.S.

 

To the extent big American-based corporations any longer make stuff for export, they make most of it abroad and then export it from there, for sale all over the world – including for sale back here in the United States.

 

The Apple iPhone is assembled in China from components made in Japan, Singapore, and a half-dozen other locales. The only things coming from the U.S. are designs and instructions from a handful of engineers and managers in California.

 

Apple even stows most of its profits outside the U.S. so it doesn’t have to pay American taxes on them. [Background.]

 

This is why big American companies are less interested than they once were in opening other countries to goods exported from the United States and made by American workers.

 

They’re more interested in making sure other countries don’t run off with their patented designs and trademarks. Or restrict where they can put and shift their profits.

 

In fact, today’s “trade agreements” should really be called “global corporate agreements” because they’re mostly about protecting the assets and profits of these global corporations rather than increasing American jobs and wages. The deals don’t even guard against currency manipulation by other nations.

 

According to Economic Policy Institute, the North American Free Trade Act cost U.S. workers almost 700,000 jobs, thereby pushing down American wages.

 

Since the passage of the Korea–U.S. Free Trade Agreement, America’s trade deficit with Korea has grown more than 80 percent, equivalent to a loss of more than 70,000 additional U.S. jobs.

 

The U.S. goods trade deficit with China increased $23.9 billion last year, to $342.6 billion. Again, the ultimate result has been to keep U.S. wages down.

 

The old-style trade agreements of the 1960s and 1970s increased worldwide demand for products made by American workers, and thereby helped push up American wages.

 

The new-style global corporate agreements mainly enhance corporate and financial profits, and push down wages.

 

***

 

Global deals like the Trans Pacific Partnership will boost the profits of Wall Street and big corporations, and make the richest 1 percent even richer.

 

But they’ll bust the rest of America.

Similarly, the New York Times reports:

Were the experts wrong about the benefits of trade for the American economy?

 

***

 

Voters’ anger and frustration, driven in part by relentless globalization and technological change … is already having a big impact on America’s future, shaking a once-solid consensus that freer trade is, necessarily, a good thing.

 

***

 

The angry working class — dismissed so often as myopic, unable to understand the economic trade-offs presented by trade — appears to have understood what the experts are only belatedly finding to be true: The benefits from trade to the American economy may not always justify its costs.

 

***

 

In a recent study, three economists — David Autor at the Massachusetts Institute of Technology, David Dorn at the University of Zurich and Gordon Hanson at the University of California, San Diego — raised a profound challenge to all of us brought up to believe that economies quickly recover from trade shocks. In theory, a developed industrial country like the United States adjusts to import competition by moving workers into more advanced industries that can successfully compete in global markets.

 

They examined the experience of American workers after China erupted onto world markets some two decades ago. The presumed adjustment, they concluded, never happened. Or at least hasn’t happened yet. Wages remain low and unemployment high in the most affected local job markets. Nationally, there is no sign of offsetting job gains elsewhere in the economy. What’s more, they found that sagging wages in local labor markets exposed to Chinese competition reduced earnings by $213 per adult per year.

 

In another study they wrote with Daron Acemoglu and Brendan Price from M.I.T., they estimated that rising Chinese imports from 1999 to 2011 cost up to 2.4 million American jobs.

 

“These results should cause us to rethink the short- and medium-run gains from trade,” they argued. “Having failed to anticipate how significant the dislocations from trade might be, it is incumbent on the literature to more convincingly estimate the gains from trade, such that the case for free trade is not based on the sway of theory alone, but on a foundation of evidence that illuminates who gains, who loses, by how much, and under what conditions.”

 

***

 

The case for globalization based on the fact that it helps expand the economic pie by 3 percent becomes much weaker when it also changes the distribution of the slices by 50 percent, Mr. Autor argued.

 

***

 

The new evidence from trade suggests American policy makers cannot continue to impose all the pain on the nation’s blue-collar workers if they are not going to provide a stronger safety net.

 

That might have been justified if the distributional costs of trade were indeed small and short-lived. But now that we know they are big and persistent, it looks unconscionable.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
lakecity55's picture

Haha, "free trade" for the Oligarchs, lost jobs and poverty for 'Muricans!

It's starting to get so "free" even the Mexicans are losing jobs!
***
The Rothschild's, via the East India Company, did what you what call an inventory of the world's resources once ocean going exploration began in earnest. They catalogued via their merchant ships any resource they could eventually possess or control.

Over the last 300 years, companies have been created, alliances made, re-made and modified, and Trade has been on their terms through a number of trading firms.

In our time, NAFTA, etc are their contemporary vehicles to dominate the world economy.

The famous quote that "...as long as I control a nation's money..." does not really refer to the control of any individual nation, but its inclusion into a borderless international corporation: back full circle to the East India Company, a Monopoly.

These Elites need a world government under their management.
The Peoples of the world want and need Nationalism, thus the conundrum we are in today in an age of satellite communication and international merging of banking/finance.

The monopoly of Media, bought politicians of every country, mulitnational corporations need to be ended. The Internet, like the Printing Press, has given a Tool of Freedom to The People.

Support those who are Nationalists in your own country! This is the money quote!

True Freedom is achieved only by small to larger groups of Individuals.

Use it or Lose it!

 

 

luckylongshot's picture

That people are now starting to realise that economists are not to be trusted is a sign that the veil of confusion is starting to lift. Economists have sat quietly while a group of criminals headed by the Rothschilds took over the western world. They did not object when the right to create money was taken away from the public. They did not point out that what we call fractional reserve banking is in reality a mix of counterfeiting and accounting fraud wrapped up in a Ponzi scheme, with the sole purpose of transferring all the public wealth into the pockets of those running the scam. While it is very late to be waking up to what is going on, it is still possible to avoid humanity becoming serfs but it will take some effort.

are we there yet's picture

Can we outsource Hillary to China, or the island Lesbos.

Dr. Bonzo's picture

Free Trade is a canard. Fair Trade is what we need.

PoasterToaster's picture
PoasterToaster (not verified) Mar 19, 2016 9:26 PM

The only true free trade is when the "governments" do nothing and people are free to do business without interference.  Treaties between Nation States are agreements to restrict the populations of their respective countries for the benefit of cartels. 

It's an international mafia, and "governments" are the largest gangs of thieves and murderers on the planet. 

Heterodox economics's picture

Another disturbing apect of the Trans-Pacific Partnership Agreement is that, if enacted, it would make intellectual property laws more restrictive.

There is excellent analysis that shows that the best policy for society as a whole is to make IP laws LESS restrictive.  For example, by allowing more works to go into the pubic domain, more derivative works will be created, which will increase wealth in society.  

Here is  good piece by the Electronic Frontier Foundation about IP laws in the TPPA:

https://www.eff.org/issues/tpp

PoasterToaster's picture
PoasterToaster (not verified) Heterodox economics Mar 19, 2016 9:26 PM

The world would be a better place if "IP" laws did not exist at all.

silverer's picture

Free trade agreement. They just left out two words in that phrase: "for all"

gregga777's picture

The core problem in the United States of America is that the criminally dishonest politicians and appointed officials are NEVER held accountable for their disastrous policies. The political parasites win even when the American People lose disastrously. The political parasite class do the Oligarchs bidding and subsequently greatly profit through receiving bribes. That's why voting in rigged elections will never change anything in America. The criminal Oligarchy, crony capitalists, banking gangsters and Con Street financial system scammers own the United States Feral government because they own both criminal political parties. The electoral system is rigged and voting is a meaningless and pointless distraction. The only solution is to burn it all down to the ground and start over according to a strict interpretation of the United States Constitution.

Solio's picture

Look at all of those people living in boxes!

Take those boxes!!

Big Stapler's picture
Big Stapler (not verified) Mar 19, 2016 4:28 PM

My unionized mail man makes $55K (starting pay). He works maybe four hours a day (and goofs off the rest); and that's maybe four days a week (he skips deliveries often). He gets 6 weeks vacation per year. Oh, and when he is actually doing the job he is paid to do, he mis-delivers pieces of mail every single week. My neighbors and I get together on weekends and re-deliver all his mistakes to the proper address.

Nurses at the nearby hospital make $45K starting pay, and lets just say their job requires quite a bit more skill. They do 12 hour shifts and get roped into unpaid overtime almost every shift.

Predictably, the quality of nursing over the last decade has plummeted. Nurses can make more money, in less hours, with less chance of being sued, by taking just about any other job.

Delivering mail to the wrong address four days a week doesn't require a person to take on thousands in student loans that subsidize losers like Robert Reich sitting around mouthing off at a university.

A$$holes like Reich worked overtime during the Obama regime to put US gun manufacturers out of business, and destroy the jobs of hundreds of lathe operators, drill press operators, etc -- jobs that don't require a college degree, but require a lot of skill and paid (past tense) good manufacturing wages.

Reich and his ilk replaced those $60/hr jobs with $11 Walmart greeter jobs -- and he is actually clueless enough to think this is a good thing.

I notice jackass central economic planners like Robert Reich always manage to blame other countries, trade agreements, billionaires, the boogey-man. Any way they can avoid taking responsibilty.

Central economic planners like Bernanke, Krugman and Reich have created a system where hard working people get regulated and sued and buried in debt -- while Reich and his fellow welfare cases get paid more and more to do practically nothing.

I'll bet the losers in academia NEVER acknowledge how little they contribute.

Not talking about people who actually teach courses (which are a minority of university staff).

Talking about the know-it-all central planners -- Bernanke, Krugman, Reich, etc. Parasites who make sure the post man gets paid more to screw up the mail than any job that requires actual skill.

Want to screw up the Chinese economy beyond recovery? Send over all the central planning a$$holes like Reich and Bernanke and Krugman. China's economy would be decimated within a year.

monad's picture

Its about seizing and consolidating power. These are all techno-feudal enclosue acts.

https://www.youtube.com/watch?v=38PqcYhj06Y

Motorhead's picture

"Apple even stows most of its profits outside the U.S. so it doesn’t have to pay American taxes on them."

But if you are a U.S. citizen living overseas, the tax man will get you (which is messed up).

How many U.S. citizens gave up U.S. citizenship last year?

Joe A's picture

So called free trade agreements are races to the bottom. That is why my dear fellow European ZH'ers, please sign the petition against TTIP: stop-ttip.org (sorry dear fellow American ZH'ers).

Although the petition already closed you can still sign. TTIP is 'negotiated' in secret. Action groups do not have access to the negotiations but lobbyists and corporations have. And the EC is heavily lobbied by them, see also corporateeurope.org

Members of the European Parliament are allowed to look into the secretive agreement but under very strict security measures and they can't say what is in it but many of them have come out saying is is undemocratic and will lead to an erosion of social, labor and environmental rights. It is a corporate take over of a continent.

frankly scarlet's picture

"All goods and services are produced by labour. The "ism" under which they are made only describes who gets to appropriate the majority of the surpluses as wealth creation" Under crony capitaism that would be the cronies. Under communism it is supposed to be the community. Under socialism it is supposed to be society in all its stratifications. Under fascism it is the government and corporate elites. FTAs are the ratification in law of crony capitalism as that is who appropriates the majority of the surplus, This surplus is what is called capital.

NoBillsOfCredit's picture

I like how you hide the failure of communism and socialism by using the words "supposed to". True Capitalism has no corporations or other artificial limited liability entities. Capitalism works long term but none of the others do. That said, there is no true Capitalism practiced anywhere in the world that I know of. That is the problem. Oh, managers and professionals are also "labor".

autofixer's picture

Free Trade Agreements are simply worded in an Orwellian fashion to hide the fact that they are Internationalist redistribution schemes. The Corporations have been handed the rope with which they will hang themselves.  V.I. Lenin was a little off on that.  The corrupt Trump will be the Crony Capitalist that will finish Marx's vision of the collapse of Capitalism. Forward to the Worker's Paradise! It all ends in a whimper.  Poof. 

NoBillsOfCredit's picture

So, how is Trump corrupt? He donated to both parties to influence the government. Is that not the goal of everyone who donates to politicians? He has to stay in business no matter who is in government positions. The fact is that the government has stuck its nose where the Constitution does not authorize. Therefore, people react to that and have to play the game. Trump will probably get a chance to change that in favor of the American people. The mainquestion is:Will he? Of those who are left he is the only reasonable choice giving the current situation.

VWAndy's picture

 No there are other choices. You may not like them? But dont fool yourself the choices are still there.

 Please tell me you are not pinning all your hopes on the election processes? Cuz the last guy elected was the anti war guy.

NoWayJose's picture

What free trade means to a big corporation:

1. I get to borrow cheap money in the US and sell stock

2. I get to use that money to build factories anywhere in the world, where I can find cheap labor and low taxes

3. I get to close my US factories with few hassles from government

4. I get to ship my cheaper products back to the US without fear of tariffs

5. I get to move my HQ to another country with even lower taxes

6. I only need to give a few million dollars to Congress to make all this come true

Antifaschistische's picture

FREE TRADE Agreements are about rule making.

I am a believer in free trade.  Because I'm a believer in freedom of choice.  and if I want to buy a pair of shoes from Italy I ought to be able to find an Italian shoe seller, send them money, pay the $25 in freight and get my shoes.  That is "free trade" in it's purest form.

This is what we used to be able to do between the US and Canada.  Until NAFTA.  Shipping something to Canada via UPS was like shipping something to Seattle or Michigan.  The day NAFTA hit that all changed.  Shipping rates eventually tripled and the time it took to get a package to Calgary went from 3 days to 12 days.

NoBillsOfCredit's picture

So long as the money is debt based IOU nothing's there is no free trade. Additionally imposts, duties and excises are supposed to be the revenue source of the federal gvt. Not capitation taxes. Your compensation is not income to you under the law. So, we need import taxes which in turn shift the burden of government support to wealthier people who voluntarily buy the imports while at the same time support a healthy domestic economy. We do not NEED any foreign trade to prosper but we do need to dramatically, like 90%, reduce the burden of government.

beaglebog's picture

 

 

All true.

 

However, in a Free Market, there could exist no such entity as the "Corporation".

 

Corporations are products of the State-bastardized market-place.

ToSoft4Truth's picture

Eh....  if you want to be wealthy stop worrying about the others.  Get in on the 'ground' floor.  Start growing ‘synthiburgers’ in your basement - next to the weed trees  - and sell them to these hungry heathens we are surrounded by. 

overmedicatedundersexed's picture

mega corps and pols all getting rich off these deals..so what if the ave joe in usa gets fucked..

the one most important economic data point always missed by economic geniuses :

Corruption and CRIME..figure that in your stupid trade models. and the real world becomes much clearer.

ToSoft4Truth's picture

We all saw how those Ranch-hands who crossed Reid ended up. 

overmedicatedundersexed's picture

threaten as Trump has the "trade deals" and every wall streeter,mega international corp, and paid off pol ,getting the gravey of payoffs and corruption and the use of slave labor..and we see how they will do anything to stop him, with just a hint he might change the trade balance..makes it very clear, does it not??

hillary supported every agreement and now is wealthy - just coincidence..

Canoe in the Desert's picture

Ross Perot during his 1992 campaign for President said if NAFTA is passed you will hear the "giant sucking sound" of jobs out of the USA. How right he was.

beaglebog's picture

 

 

Free Trade ... is the absence of Government intervention.

 

Anything else is just bullshit.

 

 

Not a one of us has ever experienced a Free Market of any significance.

overmedicatedundersexed's picture

beaglebog, is free trade any relative to corruption and buying of politicians?, just wondering if you understand : todays trade agreements made many , cough cough, Clinton's rich..

protecting jobs of the citizens was once a mandate of .gov. no longer

beaglebog's picture

 

 

Lots of people can buy influence.

 

What is influence?

 

It's the power to compel others, using the violence of the State.

 

Politicians can only degrade a man's freedom to trade. They can never enhance it.

NoBillsOfCredit's picture

The god of "free trade" means the smart unscrupulous will rip off the less experienced and less intelligent. International "free trade" sucks.

Winston Churchill's picture

Genuine free trade is labelled smuggling by Govt.

RichardParker's picture

The angry working class — dismissed so often as myopic, unable to understand the economic trade-offs presented by trade — appears to have understood what the experts are only belatedly finding to be true: The benefits from trade to the American economy may not always justify its costs...

James goldsmith tried to warn the sheeple back in 1994

https://www.youtube.com/watch?v=4PQrz8F0dBI

 

A Dollar Short's picture

They are the complete melting of the American worker into US government dependance for life.

NoBillsOfCredit's picture

Or until the government runs out of other people's money.

RaceToTheBottom's picture

When you print, you never run out of future tax payers money....

PoasterToaster's picture
PoasterToaster (not verified) Mar 19, 2016 12:06 AM

Trade agreements are a pledge between rival States to control their respective tax cattle in ways beneficial to the oligarchs that own the States.  There is nothing free about this, and the trade mentioned is incidental to the activity.  It's all about control and making free action by individuals "illegal". 

You need permission from the overlord to transact business; a license from the State is simply permission to do that which is otherwise "illegal". (License to kill? lol)  That's why claims of the US being a free country are made into an instant joke when you look at how people think of business- begging for a license to do business means that the mafia is running the show.  And people demand regulations like this because they have been told it makes them safer, somehow.

The language is all backwards from the way most people see the world.  Kinda funny, that.

 

Vendetta's picture

Does anyone ever remember an actual full on debate regarding the pros and cons of so-called 'free trade' in the political arena?  I haven't ever seen or heard a real debate about it ... its always been 'this is what we're going to do'...

MeBizarro's picture

Sure there was with NAFTA for nearly a year before it passed and it was incredibly terse.  The powers that be including the GOP and the New Democrats (Clinton and his ilk) learned their lesson to never, ever do that again or risk true public angst. 

I despise Trump on many counts and he has little actual Executive power to alter free trade agreements but one of the huge reasons he resonates with people is that illegal immigration has notably affected wages & employment in certain industries & free trade agreements have been a huge net negative for most Americans.

Just look at the myriad of wealth and income statistics for American households across demographics the past 15 years.  90% of Americans have seen a stagnation or outright decline in their wages let alone the various increases in the cost of living since then. 

kiwimail's picture

Interesting interviews with the Donald on youtube from 25 years ago everyone should watch. A good one to start with is Opra https://www.youtube.com/watch?v=MOKi5YeNtRI A real shame he hasn't ran sooner.

RopeADope's picture

All you have to do is read Nassim Taleb to understand that the Harvard prophets of horseshit were actually destroying economies.

FGH's picture

This is the problem with these Marxist liberal fools like Robert Reich, who we all know as a pathetic Clinton shill from way back: They peddle their foul lies and try all in their power to "change the world" and when they do, but don't like the results, they just "change their opinion". 

FUCK ROBERT REICH

11b40's picture

If you disagree with what he wrote, then FUCK YOU.