Trump’s Hypocrisy on NAFTA
Tim Wise and Paul Jay discuss how Trump’s call for import taxes would lead to trade wars and that his commitment to high profits is at odds with his plans to keep jobs in the US
PAUL JAY, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.
The NAFTA, free trade agreement, between the US and Canada and Mexico, was sold to the peoples of North America as something that would strengthen the middle class of all three countries. Instead, it helped create squalid, low-wage industrial zones in Mexico and devastated much of the manufacturing sector in states like Ohio, Michigan, Pennsylvania, and New York. It made US companies rich, taking advantage of the lower wages both in Mexico and the pressure those low wages put on American wages. It cost jobs in the US and failed to raise living standards in Mexico.
Trump is mostly right, that for American workers, NAFTA has, in many key industrial sectors been a disaster. But what about his solutions? His major proposal is to erect a tariff wall to go along with his physical wall along the border. That would make it not worthwhile for US corporations to move manufacturing to Mexico. In other words, as he says, in this quote:
DONALD TRUMP: And if you saw the people, because they have a video of the announcement that Carrier is moving to Mexico, okay? I’ll tell you what, I would go right now, to Carrier, and I’m would say, I am going to work awfully hard. You’re going to make air-conditioners now, in Mexico. You’re going to get all of these fourteen hundred people that are being laid off. They’re laid off, they were crying, it was a very sad situation. You’re going to go to Mexico, you’re going to make air-conditioners in Mexico. You’re going to put them across our border with no tax. I’m going to tell them right now. I am going to get consensus from Congress and we’re going tax you when those air-conditioners come. So stay where you are or build in the United States because we are killing ourselves with trade packs that are no good for us and no good for our workers.
JAY: If Trump’s solution amounts to what many experts say would be a global trade war, then what would a real solution in the interest of American workers look like?
Now joining us is Timothy A. Wise. He’s in Cambridge, Massachusetts. Tim is the director of the Land and Food Rights Program at Small Planet Institute. He also directs the Research and Policy Program at the Global Development and Environment Institute at Tufts University. Thanks very much for joining us, Tim.
TIM WISE: Pleasure to be here, Paul.
JAY: So, first of all, what do you make of the basic critique, and of course, Donald Trump, there’s nothing original in Donald Trump’s critique of NAFTA. In fact, in one of the papers you wrote, you quote President Obama. Who in 2008, as a candidate says NAFTA has to be re-negotiated. Of course he never did but it seems when people run for president, they critique NAFTA and once they get in, they don’t. But the basic critique Trump is making has merit. Does it not?
WISE: It does, I think crediting Trump with that critique is part of the discourse of this election. Bernie Sanders had a far more coherent critique. It’s entirely justified. We have seen, in part, because of such trade agreements, that working class incomes have stagnated or deteriorated while multi-national firms have seen record profits with rising productivity that has not been shared with workers on this side of the border or on our northern or southern borders, either.
JAY: The critique, I think, people have heard whether it was Sanders or Trump and, frankly, many trade unions and others, but then what is the solution? The idea of protectionism, what other choice do American workers have, than some kind of protectionism, to prevent this from happening further and try to rebuild some of the industrial sectors in some of these states that have been so weakened?
WISE: Donald Trump’s use of this idea of some sort of a blanket tariff on Mexican or Chinese products is ludicrous. I don’t think anyone gives it any serious credibility, at all. You don’t slap across the board, tariffs on products. You, to the extent that tariffs have any important role in restoring US competitiveness or US jobs, it would be very selective. It would be specific to industries and it would be part of a much larger set of policies that some referred to as managed trade. That includes a lot of other measures that relate, much more, to rebalancing, re-leveling the playing field between workers and capital, between workers and multi-national firms. The agreements now heavily favored multi-national firms and drive down wages and working conditions and reduce the number of jobs for workers on either side of the border.
JAY: One of the critiques at NAFTA back at the time it was being negotiated, and since, is that if you’re going to have free movement of capital, if you’re going to have free movement of being able to move manufacturing as one pleases, and then sell the products back into the country that the manufacturing moved from, then the only just thing is to also have free movement of people, so that if you don’t have free movement of peoples as you did in the European Union, that you’re going to always maintain this crazy wage disparity. So it’s a drive to the bottom in wages, which of course is the design of the current NAFTA because it was driven by corporations who have done very well out of all of this. The problem for Donald Trump in this is that his policy’s the exact opposite. To build this great wall and in theory try to stop people from coming up, which will continue this wage disparity and not only by forcing wages in Mexico to stay where they are but it also continues this pressure of people that are in the country who are undocumented, working for slave-like wages cause they’re afraid to get organized into unions.
WISE: I think that’s right. I’ve written before kind of everything that you need to know about what’s wrong with NAFTA. You can understand by looking at Smithfield, the pork producer. Smithfield took advantage of massive productions, obstacles in Mexico to incentives and thereby moved a lot of its slaughterhouse operations to Mexico. It took advantage of the driving down of feed costs for its pork as corn and soybean prices were driven down. It took advantage of lowering cost of production in making pork. It was exporting to Mexico, even cheaper. It used that same reduction in tariffs on that imported feed to cut its production costs in its Mexican plants. Putting both corn famers out of business, in Mexico and pork producers out of business in Mexico.
And the people who lost their jobs on their farms, where did they go? There weren’t jobs being created in Mexico, they were being created, guess where? North Carolina, in Smithfield plants. So, undocumented workers flowed north, flow into North Carolina as a low wage, easily exploited, undocumented work force. And undermined union efforts in places like the Tar Heel plant in North Carolina where, miraculously they united to form a union anyway.
JAY: I mean the other thing that’s contradictory or hypocritical of Trump is that the fundamental fight here is, do we, as a society, as an economy, want higher wages or do we want lower wages? And obviously big corporations, on the whole, there may be the odd exception, but generally speaking corporations want lower wages here. They use free trade to get there. Trump clearly defends profit as the supreme objective. You can’t have both. You can’t defend profit as the supreme objective and then say you’re going to defend the wages of American workers.
WISE: Well, it’s the classic “trickle down” argument that what’s good for corporations is what’s good for workers. They way that theory works, doesn’t work at all in practice, is that you free business from taxes, regulations, and all the rest. As Donald Trump likes to claim, you’re going to create huge new industries and jobs and so it’s going to create jobs. And of course it doesn’t work that way.
JAY: It’s not like capitalist is short of capital, that they have no money to invest. The biggest problem right now is they don’t know what to do with the money, they have so much of it.
WISE: That’s right. I think the more far-reaching proposals coming from labor organizations and others are recognizing that, particularly since the financial crisis, that it’s a crisis of demand that is related to the declining buying power of workers. So the long-term solution to regenerating dynamic economic growth and improve livelihoods and improve standards of living is to rebalance that. To raise standards of living by raising wages, by creating more jobs and better jobs. And the resulting demand will be what drives the economy, not export markets that multi-national firms can get down wages in their host countries.
JAY: I mean, we should first of all make it clear that Hillary Clinton won’t even critique NAFTA and recognize its been such a disaster for working people. Obviously, her husband passed it when he was president. She shouldn’t get a pass here. At least, Trump, even if it’s for hypocritical reasons or whatever populist nonsense reasons, at least, he’s critiquing NAFTA. Clinton’s not even doing that.
But there is something in Trump’s proposal, at least it raises a serious question. Does there not have to be some kind of protectionism for American workers? I know there’s an argument, which says, and it’s a good argument, that American unions should be far more proactive in helping Mexican workers get organized into unions. Whether its funding Mexican unions or perhaps in other ways. But all that being said, don’t American workers have a right to have their jobs protected? How else do you do that, with at least, some kind of selective trade tariff?
WISE: I think most economists, even labor economists argue that that would be tactical and selective, as part of a larger trade strategy. I mean even the AFL-CIO doesn’t, in its trade recommendations, doesn’t emphasize that it’s one of the most important tools. They emphasize increasing workers’ bargaining power. They emphasize making sure that the valuation of currencies is appropriate and not just foreign currencies like China’s, but of our own. Because we can be our own worst enemy when it comes to contributing to our trade deficits. They want to see our trade deficits come down, as they should. That means producing more in the United States.
But the way to produce more in the United States isn’t just, or mainly, by slapping tariffs on other products. It’s by investing in the United States, and investing in things that need to be done here. Like building infrastructure. That’s one of the key areas in which a lot of US jobs would be created through US investment. They could be created in relatively high wage.
JAY: I know the Steelworkers union, if I understand it correctly, has advocated some form of tariff or at least some kind of penalty against Chinese steel. Which they claim is unfairly taking advantage and dumping steel into the American market.
WISE: And that’s certainly where tariffs can be justified. In two ways. One is as a strategic and usually temporary measure to allow an industry to become competitive. That’s the “developing country” argument. But it can apply to strategic industries that a developed country would want to stimulate but also as a defensive measure. Tariffs can be really important defensive measures.
They were negotiated into NAFTA for Mexico on corn imports. Mexico, unilaterally, declined to enforce them. Mexico could have, as US corn was being dumped into Mexico at below-cost prices. Mexico had the right, under NAFTA, to actually impose countervailing tariffs that would have offset that competitive advantage that harmed so many Mexican farmers. And Mexican government declined to do it. That would have been an entirely justified and appropriate use of tariffs.
JAY: Okay thanks very much for joining us Tim. I guess it really comes down to, if there is a renegotiating of NAFTA is the objective really to raise wages in the United States or not? And so far, it’s hard to believe that either person running for president in this election, at least in the two main parties, would open up NAFTA negotiations in a way that would effectively raise wages cause, as I’ve said, it would means lowering profits. Perhaps Jill Stein in the Green Party might entertain that idea. I’m not sure whether Gary Johnson has talked much about NAFTA or not. If you’re out there, Gary Johnson, come let us know.
WISE: One thing I would say in conclusion, though, is that it’s much harder to go back and renegotiate a treaty that’s already been passed than it is to not pass a bad treaty, a bad trade agreement. The TPP, Trans-Pacific Partnership is on the table now. The Transatlantic Trade and Investment Partnership is on the table now. Those, Hillary Clinton has formally opposed, at least the TPP, and her feet should be held to that fire. There should be no lame duck vote on it, even though President Obama is advocating that. She should weigh-in heavily on that, that she is going to stand by her commitment to insist on higher standards for trade agreements. That’s a good place to start.
JAY: Thanks very much for joining us, Tim.
WISE: Thank you, Paul.
JAY: Thank you for joining us on The Real News Network.
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