John Buell

Corporate Trade Treaties and the Revenge of the Deplorables

Why did the “deplorables” in those key swing states desert the Democratic Party? For starters, Clinton’s deplorables were the voters Barack Obama once contemptuously stereotyped as being lured away by “guns and Bibles.” In these unfortunate phrases both Democrats manage two demeaning insults. In a manner reminiscent of the crudest Marxism they treat religion and gun culture as some sort of opiate of the masses. And on the economic plane they neglect a set of deeply felt grievances for which the leadership of their party has been largely responsible.

One positive aspect of President Trump’s protectionist agenda has been a renewed and deeper examination by academics and activists of not only NAFTA but also the whole rationale for expanded international trade.

Modern trade treaties were only in part about the exchange of raw material or finished goods across borders. Even before NAFTA and WTO many goods and services were subject only to very low tariffs. Most modern trade agreements are concerned with the movement of capital, both factories and finance, and with the protection of these assets from any possible forced expropriation. And this highly loaded term assumes a very wide meaning, including any regulation that might reduce the values of an asset. International trade has thus become one of the most potent tools in the war against environmental regulations and minimum labor standards. Investor State Dispute Resolution panels, operating behind closed doors, can levy fines on governments for any regulation deemed costly to a corporation’s profits.

Dean Baker points to a recent example of deregulatory initiatives masquerading as trade treaties. Several cities and states are looking to require junk food makers to post health warnings on their packages. The industry has responded by seeking to forbid such warnings by including such a prohibition in a new NAFTA. Baker adds:

“If you’re wondering what this has to do with free trade, the answer is nothing. However, it is a beautiful example of an industry working to use a trade agreement to subvert the democratic process to advance its interests in a trade deal. If the junk food industry gets its way, the resulting pact will then be blessed as a “free trade” deal. The Washington Post and all the other beacons of the establishment will then proclaim their support for the new NAFTA and denounce opponents as Neanderthal protectionists.”

Trade treaties are mislabeled. They are the extension of the modern neoliberal’s total faith in markets and deregulation to the global economy. This faith in deregulation does reveal one of the paradoxes of the neoliberal worldview. Smoothly functioning international markets depend on powerful national governments or even international bodies to enforce fines and the trade conditions set out in the treaties. The “property” to be defended is itself complex and contested. Intellectual property, such as drug patents held by US corporate interests, is itself arguably an entity Adam Smith would have regarded as a conspiracy in restraint of trade. Free trade isn’t free, and these agreements should be labeled corporate trade treaties. Corporate trade applies market discipline to workers and consumers even as it protects the wealthy and privileged. Imposing big pharma’s patent protection standards on the rest of the world has a disastrous effect on world health and slows both domestic and international economic growth.

Here in the United States these agreements have been marketed to the working class via a misleading narrative. The promise was that US workers and corporations could specialize in whichever of their domestic technologies and products they were best at and trade with other nations specializing in their best technologies and products. A win/win situation would result. This of course is the economics 101 comparative advantage. Translated into the language of everyday politics, the promise became that some of the most physically demanding tasks would be outsourced to developing economies, and high tech employment would expand.

This of course bore no relationship to the economic drama that unfolded. Deindustrialization turned the once prosperous Midwest into the rust belt. There were jobs to replace heavy industry, but at often less than half the wages and lacking any benefits. As Dani Rodrik, an economist at Harvard University’s Kennedy School points out, for very small gains in productive efficiency large redistributions from workers to owners were imposed. Worse still trade treaties liberalizing the flow of financial capital have increased economic instability to the detriment of working and middle class citizens throughout the Western world.

But more than this shear economic statistic is involved. The corporate establishment that profited from these trends and the neoliberal academy never acknowledged the displacement and the pain that had flowed from their model. Worse still they treated trade critics as ignorant yahoos who didn’t understand comparative advantage. This intellectual arrogance, an unwillingness even to attempt to see the world through the other’s eyes, does as much to explain the Trump phenomenon as do the rusting factories..

As Baker puts it,” In fact, we’ve seen the social Darwinist face of the Democrats behind the faux caring mask, with their lack of interest in the opioid crisis, their open contempt for the working class, and their insulting “Let them eat training” solutions to the loss of good, stable jobs. A 2016 Wall Street Journal story describes that these programs are typically counterproductive:

“Government efforts for laid-off workers haven’t helped much. Washington’s formal program to retrain workers hurt by import competition, called Trade Adjustment Assistance, pays for two years of college tuition and extends unemployment-insurance payouts.

“A 2012 evaluation ordered by the Labor Department found that program participants, especially those older than 50, generally made less money four years after starting the program than those who didn’t sign up. The others went back to work more quickly.”

What one might add to this story is that once students move beyond economics 101, they learn that those quaint and simple stories of comparative advantage only pertain to a set of narrow and very limited circumstances. (Full employment, no externalities, no information asymetries etc.)

More advanced theories recognize that even genuine free trade may exacerbate inequality, underemployment, and externalities, but they then go on to suggest remedial policies that address these concerns while preserving the essence of free trade.

These corrective policies, however, are complex and debatable. Most neoliberals and corporate lobbyists stick to the simple fantasies of comparative advantage lest the electorate become skeptical about the virtues of “free trade.” Better to mislead than to open up a broader debate. Is it any wonder many working class citizens despise liberals?

John Buell lives in Southwest Harbor, Maine, and writes regularly on labor and environmental issues. Email jbuell@acadia.net.

From The Progressive Populist, May 1, 2018

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