The Trans-Pacific Partnership would make things worse for America’s middle class
October 18, 2015 12:00 AM
By John. H. Dunn
The Trans-Pacific Partnership trade agreement is deeply flawed. This is not a liberal or conservative issue. This is the large multinational corporations and agribusinesses against the small- and middle-market companies that create jobs. This is about workers losing jobs and the continuing income gulf between the lower middle class and the highly educated.
I teach an introductory economics course at Robert Morris University in Moon. I believe that the theory of comparative advantage we explain to students — the theory that says countries benefit by trading goods and services they are best at producing for those that other countries are better at producing — is not working. That is because governments and corporations in foreign countries are ignoring the exploitation of workers and the environment to achieve the cost advantages the theory predicts.
There have been misconceptions about the nature of work, the availability of jobs and the ability of education to uplift our labor force.
Certain trends have been applauded, such as service jobs replacing those in manufacturing, as if getting out of “dirty” manufacturing plants and mills is progress. But manufacturing is now clean and pays far more than jobs in the retail trade and other services.
Yes, college graduates on average earn much more in a lifetime than high-school graduates. But we cannot expect some massive rising up of the lower middle class by virtue of higher education, but rather must consider what opportunities are available for the person who does not want to, or cannot, advance beyond high school.
The United States is far more heterogeneous than Japan or countries in Europe and has been far more welcoming to immigrants. But you cannot expect most first-generation immigrants, or most people growing up in poverty with no family experience with higher education, suddenly to improve their economic status by going to college. What most of them need are decent-paying jobs that require only a high-school diploma. Yet they have been abandoned by so-called “free trade,” which has eliminated many of those jobs.
Due in significant part to trade policy, the United States has seen the near eradication of good-paying jobs for high-school graduates. Generations ago they went into construction or semi-skilled manufacturing, as in steel-making, textiles, apparel, furniture, carpet and toys. Those jobs provided gainful employment that could support a family and a stepping stone to skilled jobs (such as those in chemical and automotive manufacturing) as well as the dignity of work versus welfare.
It’s much easier to step up from a semi-skilled job than it is from a fast-food job. But the conventional wisdom was that low-wage nations should do the semi-skilled factory-type jobs. The result has been the sending of living-wage U.S. jobs to Mexico and Asia.
The conventional wisdom also said America would sell aircraft, high-tech hardware and software, assorted services and agricultural goods to its trade partners. Yes, but middle-class America has barely benefited.
In the early years of the civil-rights movement, whites and blacks working side by side in semi-skilled industries made more money than they ever had. I worked in those mills in South Carolina and saw better race relations in the 1960s there than in parts of New England where I was raised.
Greenwood, S.C., saw workers of all races pulling themselves up and taking pride in their work. Good race relations depend upon equal opportunity. But by 2010, Greenwood County’s unemployment rate hit 24 percent, the worst in the nation. Since 1950, U.S. manufacturing’s contribution to our GDP has declined from to 12 percent from 27 percent and its proportion of the labor force has shrunk to 9 percent from 24 percent.
High-school graduates used to get jobs in the mills in Pittsburgh. But heavy industries like steel have suffered almost as much as the semi-skilled industries. Foreign governments weaken their currencies and encourage below-cost dumping of their products in other countries.
What can our companies do about it? Bring a case to the International Trade Commission. But, even if they win, high legal and management costs, and interim job cuts or plant closures, make the process expensive and meaningless. You may win one trade battle, but the war is lost.
If we have crime problems, we don’t have to petition our police forces to do something. They are proactive. The FDA does not have to wait until people die to protect consumers against dangerous foods or drugs. Shouldn’t our government be able to step in as needed to enforce our trading partners’ commitments?
All the promises of the North American Free Trade Agreement were broken. The Trans-Pacific Partnership agreement promises that environmental, labor and intellectual-property regulations will be enforced. How? Nothing in it would prevent currency manipulation from undoing everything.
There is a big difference between GE building a turbine plant in Asia to serve the Asian market and Silicon Valley companies developing products here, manufacturing them offshore and then importing them back to America. There reportedly are 180,000 IT engineers developing technology in California. Then many of the products they create will be built by companies like Foxconn, a contract manufacturer with more than 2 million employees in Asia, many of whom work in unhealthy conditions.
I recently attended a party for high-school graduates in a typical, broken ex-steeltown in Western Pennsylvania. Where will they work? The only answer that the TPP agreement offers is financial assistance to workers, since it assumes U.S. jobs will be lost. What do we tell them?
John H. Dunn is president of John H. Dunn and Co., a business consultancy, a member of the Pittsburgh Business Advisory Council for the Federal Reserve Bank of Cleveland and an adjunct faculty member at Robert Morris University. He lives in Sewickley.
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