How Trade Policy Failed US Workers – And How to Fix it

A new report from the Global Development Policy Center in collaboration with the Groundwork Collaborative and the Institute for Policy Studies examines U.S. trade policy and performance in the Trump and COVID-19 era.

The report examines U.S. trade policy prior to the pandemic and reveals an approach heavily focused toward the interest of the financial sector and large national corporations. Secondly, the authors review current U.S. trade agreements – including the new US-Mexico-Canada (USMCA) Agreement and the Trump administration’s current trade war with China – examining their impact on U.S. workers and the hard-hit states Ohio and Michigan. 

Key Findings:

  • Recovery in Michigan’s manufacturing sector slowed under Trump to one percent each year on average, down from 4.4 percent under Obama.
  • Total employment growth in Michigan during the three full years of Trump’s presidency was by far the lowest in a decade.
  • The trade deficit has soared since Trump took office from Obama, rivaling the George W. Bush administration trade deficits.
  • Ohio manufacturing wages declined during the Bush administration, recovered slightly under Obama, and declined again under Trump.
  • Trump’s trade wars undoubtedly contributed to the sharp slowdown in the Ohio’s employment growth observed in 2019.
  • U.S. and global trade policy has enabled extensive offshoring in the pharmaceutical and medical equipment industries and severely diminished production in the U.S.
  • By a nearly 9 to 1 margin, Ohio manufacturers reported being negatively impacted by Trump’s trade tariffs in 2019.
  • Despite Trump’s China-bashing, U.S. firms invested $14 billion in China in 2019 — more than the year Trump was elected
  • Trump’s own administration expects the economic impact of the USMCA to be negative.
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Workers in hard-hit U.S. states have been devastated not only by years of pro-corporate trade policies, but also by policies that scapegoat China and other countries instead of providing real security to workers. 

A more cooperative international approach based on guaranteeing rights for workers in all countries could remove incentives for employers to shift jobs to places where workers are less protected. And it could create larger domestic markets to sell goods and services in more countries, leading to more shared prosperity.

The authors note that, “In this time of crisis, we need a new trade policy more than ever to support an economic recovery from the pandemic and to start building an equitable economy that is resilient to future crises. A new policy must shift bargaining power away from corporations and towards working people to create an economy that works for everyone, not just special interests.”

Key priorities for reform: 

  • An immediate moratorium on all international trade and investment rules that restrict government responses to the crisis. These include intellectual property rules that limit the availability and affordability of medicines and medical equipment, as well as trade rules against policies that subsidize industries or regulations that promote public health.
  • Renegotiation of all trade rules that constrain pro-worker and pro-environment domestic policy agendas. Recovery from the pandemic will require significant support from the government for job creation and health and social services. Many current trade rules forbid policies like these. These need to be suspended and then renegotiated. 
  • Strong new enforcement mechanisms to hold individual corporations accountable for violations of labor, human, and environmental rights. U.S. trade agreements put the responsibility for protecting these rights and standards on governments. However, it is usually private firms that commit the violations and they, too, must face real penalties. 
  • Elimination of monopoly protections for essential medicines and new rules that encourage innovation and cooperation in the pharmaceutical and medical product industries. 
  • Incentives for goods and services that prevent, mitigate, and help adapt to climate change. Trade rules should complement domestic agendas for a just transition to a clean energy economy that does not leave workers behind. 
  • Elimination of investor-state dispute settlement. This anti-democratic system allows private foreign corporations and investors to sue governments over public interest laws and regulations. It also encourages the offshoring of U.S. jobs by restricting the ability of foreign governments to improve labor and environmental regulations.
  • A new mechanism for screening foreign investments to ensure they contribute to real security. This would go beyond “national security.” We also need to ensure foreign investors make concrete commitments to providing decent jobs and benefits for local workers and communities, particularly vulnerable groups, in an environmentally sustainable manner. 
  • Elimination of trade and investment rules that prevent policymakers from controlling footloose capital. Without a full toolbox of financial tools, governments are limited in their ability to prevent crises like the 2008 crash and the economic impact of the current pandemic from spreading. 
  • Renegotiation of trade deals to include effective penalties for tax dodging by multinational corporations and the wealthy. The U.S. government should work with global partners to forge an international agreement to stop the global race to the bottom in corporate taxes and allow countries to raise the revenue needed for recovery and to finance inclusive societies for the future. 
  • Overhaul of the current anti-democratic trade policy-making process. Corporate lobbyists have called the shots on trade policy for too long. A new trade policy must expand the power of workers and other public interest stakeholders over decision-making and oversight. 

The report was produced by Sandra Polaski, Senior Research Scholar at the GDP Center, Sarah Anderson, Director of the Global Economy Project at the Institute for Policy Studies, John Cavanagh, Director of the Institute for Policy Studies, Kevin Gallagher, Director of the GDP Center, Manuel Pérez-Rocha, Associate Fellow of the Institute for Policy Studies, and Rebecca Ray, Senior Researcher at the GDP Center.

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