Comments on Trans-Pacific Partnership, By Gilles Stockton — Are we really are the dumb cowboys they think we are?

Comments on Trans-Pacific Partnership

Because both Bernie Sanders and Donald Trump oppose ratification of the Trans-Pacific Partnership (TPP), the national media is finally paying attention as to why millions of Americans are uneasy about what are called free trade agreements (FTAs). However, rather than clarifying, the news programs discussing trade agreements tend to confuse the issue. A recent interview that I listened to on the radio juxtaposed a spokesman for a labor union against a pro-corporate economist. The labor spokesman pointed out that millions of jobs have been lost as a result of outsourcing. The economists countered that many of those jobs would have been lost regardless, due to changes in technology and automation. Besides, he said, that low cost imports benefit everyone.

While it is true that we are all guilty of buying cheap imported stuff that we often do not need, and it is also true that there are entirely new technological industries and high levels of automation, but there is no doubt that outsourcing manufacturing to low wage – low regulation countries has put millions of Americans out of work or in jobs where you cannot make a living. What the economist did not acknowledge is that as a result of the trade agreements, American based manufacturing has not had a level playing field in the global economy. We see the results in the trade deficit which since 1994 has added up to 10.8 trillion dollars. This is real money that has left this country forever. Money that could have provided good incomes for working American families and tax revenues to repair decaying roads and bridges.

The non-level playing field comes primarily from two sources: currency manipulation and how value added taxes (VAT) are treated under the trade agreements. China has mastered the art of currency manipulation, artificially making their products less expensive in the American market while keeping American products out of their markets. The trade rules technically oppose currency manipulation but there does not seem to be a workable mechanism to do anything about it.

A value added tax (VAT) is a type of national sales tax used by 137 countries to pay for such things as national infrastructure, education, and health care. The United States is one of very few countries in the world that does not use the VAT. The world average for the VAT is 17% on the value of items at retail. The problem comes because the trade rules allow a country to rebate the VAT on exports and impose it on all imports.

Instead of employing a VAT, the United States pays for education and infrastructure through locally levied property, sales, and income taxes. Under the trade rules these cannot be subtracted from exports or added to imports. In addition, U.S. companies provided health care as part of the compensation benefits, while most countries in the world have much more affordable national health care systems paid for by the VAT. American based manufacturers are in the absurd position of not only paying for the health care of their own employees but for the healthcare of their foreign competitors as well. The same is true for infrastructure and education in the competitor’s nation. The result is that in the global market, items manufactured in the United States sell on average for 17% more than the same item manufactured by any other country that uses the VAT system.

It therefore should come as no surprise that America has lost millions of manufacturing jobs through non-fair free trade agreements. The results are stagnating incomes for middle class Americans; wages in the service sector insufficient to live on; while the international 1% has gathered all of the profits from increased productivity and trade.

That is just the harm caused to our economy by un-fair trade rules, we have in addition the whole question of loss of national sovereignty. Last year the World Trade Organization (WTO) ruled that the United States cannot require country of origin labels on retail meat. As a result of the trade agreements, the citizens of the United States have lost the right to decide what information is allowed when purchasing food. This is absurd.

We also see the loss of national sovereignty in the pending action in the WTO to compensate the TransCanada Corporation for profits they allegedly lost because the permit for Keystone XL Pipeline was denied. The purpose of the pipeline was to transport Canadian tar sands oil sludge to Texas to be refined. Refineries could be built in Canada or North Dakota but by sending the crude to Texas makes it easier for Big Oil to play the world market against the US market for the refined product. The result would be higher gas prices. In order to build the pipeline, TransCanada, a foreign corporation, would have had the right to condemn the property of US farmers and ranchers, many of whom did not want the liability of a pipeline crossing their land.

In essence what the trade agreements have done is free trans-national corporations from social responsibility in any of the countries in which they manufacture or sell. As a result, corporations are able to avoid taxes, ignore labor laws, disregard product safety regulations, and overlook environmental standards. The trade agreements have effectively freed trans-national corporations from any control or restraint by any nation state, including ours.

Back in 1993, I was with a group of ranchers who went to Washington, to voice our worries about the pending North American Free Trade Agreement (NAFTA). Then Senator Max Baucus (now ambassador to China) told us that we were simply mistaken and if any problems arose, he would have them fixed. Twenty-two years later every one of our concerns proved true and nothing has ever been done to reform anything.

Naturally our main issue was the effects that NAFTA would have on the cattle industry. As each successive trade agreement has been negotiated we have been told that the new trade agreement will increase our beef exports. Of course what we end up with is more imports instead. If we believe their stuff about the TPP now, then we really are the dumb cowboys they think we are.

If we are to get out of this mess that our Presidents, Congress Persons, and Trade Negotiators have made for us, there are a number of things that need to change:

· Impose a “tariff in lieu of Vat” on imports equal to that countries VAT and rebate that revenue to firms sending exports to VAT countries.

· Control runaway inflation in health care costs by allowing individuals to opt into the government employee health plans or Medicare. In addition, let people order medications from Canada (competition is a good thing and Big Pharma ought to have the opportunity to experience a little bit of it).

· Establish a real method to sanction countries guilty of currency manipulation.

· Give US citizens standing to participate directly in WTO tribunal cases.

· Allow US citizens to sue in both ours, and foreign courts, for violations of labor, product safety, and environmental standards.

International trade has always been an integral part of this nation’s economy. The competition that trade provides improves efficiency and innovation. That said, the citizens of this country deserve trade agreements that are fair. I hear the pro-free trade agreement crowd say that those who oppose the ratification of the TPP are just naïve protectionists and that the TPP will not in fact effect much either way. How could a trade agreement negotiated in secret with no citizen input but with all major trans-national corporations at the table possibly be fair or balanced. If as they admit, the TPP will not have a significant effect on trade levels, let’s reject the treaty. Our trade negotiators can then go back to the table and come up with an agreement that gives the American people a fair deal that was democratically negotiated and that restores the Constitutional right to govern ourselves.

As for impacts on the cattle industry, every beef producing country in the world wants access to our market. I am not sure why because we do not have much of a competitive market left. Even the packer toadies have noticed that following this latest crash in the market, there are no longer enough independent feeders left for price discovery. The international packers have succeeded in vertically integrating their supply chain into a non-priced captive supply. Cattle and beef imports are an important part of their price controlling system.

There is a relatively simple solution to this state of affairs that was proposed by Senators Tester, Johnson, and Enzi. The Captive Supply Reform Act never got anywhere in Congress because cattle producers did not push for it. I guess that many cowboys thought that if they could avoid taking a stand that someone would fix the market for them. They were right – someone has.

Gilles Stockton
Stockton Ranch
Grass Range, Montana
406 428-2183