Monthly Archives: January 2019

From the farm bill to grocery bills, the government shutdown is affecting how America eats

Stories from a shutdown—from food safety and hog nuisance lawsuits to EBT payments and “shutdown specials” at D.C. restaurants.

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On Twitter, federal employees and others affected by the ongoing government shutdown are sharing their #shutdownstories—and, not surprisingly, many of them are focused on food. That isn’t just because people anticipating missed paychecks are worried about their grocery bills, though concerns about hunger appear to be widespread. Many have described making tough choices between fuel, meals, and medical care.

And it goes beyond basic sustenance. A USDA science tech reported not being able to enter a government greenhouse to water plants, a setback she said would ultimately cost scientists a year of work. A woman about to close on a new house described being left in limbo, thanks to a USDA rural development loan now delayed indefinitely. (“The only wall(s) I care about are the ones that support the roof I want my children to be able to live under,” she wrote.) A farmer who moonlights as a federal contractor said the shutdown would “cost me $500 a day,” making it impossible to “hire, purchase and grow.” And at USDA headquarters, reports are that staff refrigerators are all but emptied out.

Here’s how the shutdown continues to affect:

Food safety. In a primer first reported by Food Safety News, Alliance for a Stronger FDA (ASFDA), a nonprofit advocate, explained that the shutdown may significantly affect oversight of the food supply. During the current “lapse period,” ASFDA wrote, the Food and Drug Administration (FDA) will be hobbled, though still able to perform “activities necessary to address imminent threats to the safety of human life.” According to the document, 41 percent of FDA’s employees will be furloughed (about 7,000 people). While the agency’s most critical public health responsibilities won’t be affected—with staff on hand to handle key duties like emergency inspections and drug shortages—other, more routine work will be suspended. That could cause issues.

“Food safety will be particularly hard-hit, including the furloughing of workers in charge of routine inspections,” according to the document, though FDA will still be staffed to handle urgent and high-risk recalls and outbreaks of foodborne illness.

The brand-spanking-new farm bill. Congress spent most of 2018 intensely haggling over the farm bill. Then, two days after President Trump signed it into law on December 20, the government shut down. Now, says Anna Johnson, policy manager of the Center for Rural Affairs in Lyons, Nebraska, “should be one of the busiest times at the U.S. Department of Agriculture (USDA): they have hundreds of pages of new marching orders in the new farm bill.” Instead of poring through those pages, though, some USDA employees are likely at home, reading Peoplemagazine.

Farm payments. There’s something of a 50/50 split here: some continue, others are on hold. Market Facilitation Program payments, for example, which relieve commodity producers whose access to export markets has been stymied by the recent retaliatory tariffs, will go out. So will payments related to conservation easements. But rural development loans and grants for housing, community facilities, utilities, and businesses will not continue. Processing of payments for existing grants to support research, education, and agricultural extension services have been halted, too.

Native communities. New York Times report on January 1 said that Native communities from New Mexico to Michigan are facing empty food pantry shelves as a result of delayed federal funds they rely on to keep their food assistance programs in operation. Those funds, which were guaranteed by treaties negotiated generations ago, can be as much as $100,000. Said Kevin Washburn, the assistant secretary for Indian Affairs under President Barack Obama: “Indian Country stops moving forward” during a shutdown, “and starts moving backward.”

Nuisance lawsuits. For months, we’ve been following developments in North Carolina, where residents of rural counties have targeted Smithfield Foods, the world’s largest pork producer, with a series of nuisance lawsuits. The suits allege that the plaintiffs’ home values—and their quality of life—have been destroyed by the stench and poor air quality in the areas surrounding the company’s operations. Turns out, there’s a shutdown angle here, too: The fifth of more than two dozen such lawsuits, according to the Associated Press, has been postponed by a federal judge because jury pay can’t be guaranteed.

Free lunches. As Congress has increasingly failed to keep the government open in recent years, “Shutdown Specials” have become something of an institution in Washington, D.C.-area restaurants. During 2013’s shutdown, Pork Barrel Barbecue offered to feed furloughed federal workers free sandwiches—a promotion that became a viral sensation, ultimately leading the restaurant to hand out more than 1,300 cost-free sandwiches. The Washington Business Journal takes a look at the current state of this trend, asking whether it still makes economic sense for restaurants to offer handouts when the government gets shuttered so often. Unsurprisingly, it’s a mixed bag. Yes, it can get expensive to give free food to D.C.’s vast horde of federal workers—one company, &pizza, reported giving away 6,000 pies this year. The upside? Our nation’s bureaucrats like to drown their sorrows—who wouldn’t?—and drink sales can offset the revenues lost.

Taken From: https://newfoodeconomy.org/government-shutdown-food-system-snap-ebt-farm-bill/

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Unions See Pick For House’s Top Trade Job As Test For Democrats In Populist Era

“We are at a crossroads,” according to a labor union official.

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The fate of the North American Free Trade Agreement lies in the hands of the Democratic-controlled House, whose approval President Donald Trump will need to enact a revised version of the 25-year-old accord.

 

Now organized labor, an influential foe of free trade agreements, wants to make sure a trusted friend shepherds that process in the House so that its voice is fully heard.

Several major labor unions are pressing Democratic House leaders to make Rep. Bill Pascrell of New Jersey ― who had been the ranking Democrat on the Ways and Means Committee’s subcommittee on trade when Republicans ruled the House in the last Congress ― the new chairman of that subcommittee.

 

Pascrell, a union ally, is keen to ensure Trump ratifies a fundamentally pro-worker North American trade agreement. Labor leaders consider the current revisions an improvement on the status quo, but believe it can still be toughened to help workers.

But Reps. Earl Blumenauer (D-Ore.) and Ron Kind (D-Wis.), both of whom are seen as friendlier to recent international trade agreements, are also vying for the top post.

 

Blumenauer and Kind declined the ranking member position in the last Congress, but they have slightly more seniority than Pascrell.

 

“Pascrell’s done a great job as ranking member. He’s attuned with our concerns in our approach to trade,” said Shane Larson, legislative director for the Communications Workers of America.

 

CWA, which represents over 100,000 call center and manufacturing workers whose jobs are vulnerable to offshoring, is coordinating its push for Pascrell with other manufacturing unions. These include the United Steel Workers, the International Brotherhood of Teamsters, the United Auto Workers and the International Association of Machinists, according to a union official familiar with the effort. (Aside from CWA, none of the individual unions agreed to comment about their efforts.)

 

“There is a consensus in general that Pascrell would be a better chair of the subcommittee,” said the union official, who requested anonymity to speak freely.

“Putting a free trader as chair of the subcommittee sends a very bad message to the main constituency on [trade] reform: the labor movement,” the official said.

 

A particular concern for organized labor and like-minded experts at Public Citizen’s Global Trade Watch, a consumer group skeptical of past trade policies, is Blumenauer and Kind’s support for the fast-track authority ensuring an up-or-down vote in Congress on any trade deal negotiated by the president.

 

The GOP-controlled House approved the fast-track power, known as Trade Promotion Authority, in 2015 over the objections of the overwhelming majority of the House

Democratic Caucus and its leadership.

Critics of TPA argue that it deprives Congress of the essential right to debate and amend trade agreements before an up-or-down floor vote.

 

Many Democrats also viewed the vote on TPA as a de-facto referendum on then-President Barack Obama’s 12-nation Trans-Pacific Partnership trade deal, since Obama planned to eventually use TPA to pass the TPP.

Obama and other proponents of the TPP insisted it would be a net benefit for the U.S. economy by opening markets for U.S. exports. They also argued that the deal would provide a key check on Chinese power in the Pacific Rim.

 

But labor unions, as well as many public health, consumer and environmental groups, opposed the mammoth trade deal on the grounds it would provide lopsided benefits to corporations at the expense of workers, consumers and the environment.

 

With organized labor’s blessing, House Democrats had the votes to block the 2015 consideration of TPA in the chamber. But against the wishes of Democratic leaders, a group of eight Democrats ― including Blumenauer and Kind ― backed a congressional “rule” clearing the way for a vote on fast-track authority. The rule passed by five votes, making the support from those eight Democrats essential.

 

Trump, of course, immediately shelved the Trans-Pacific Partnership upon taking office and named as U.S. trade representative Robert Lighthizer, known for his tough stance of trade issues. That has given skeptics of international trade deals in both parties a chance to beat back a decades-long bipartisan consensus in favor of agreements that they consider unduly deferential to corporate interests.

Trump’s renegotiation of NAFTA virtually dissolves the controversial international arbitration system enabling corporations to challenge domestic laws in signatory countries. The deal would also require 40 percent of cars and 45 percent of trucks to be made by workers earning $16 an hour in order for those vehicles to be imported into the U.S. without tariffs.

 

But unions and their Democratic allies fear that another provision protecting the right of Mexican workers to unionize, which they see as essential to boosting Mexican wages, is not likely to be enforced.

 

“For us, underlying all of this is the outsourcing of jobs,” Pascrell told HuffPost in a recent interview.

If a new deal strengthens labor protections in Mexico, he added, “then we’ll keep jobs here.”

 

By contrast, naming Blumenauer or Kind to head the subcommittee would turn the clock back to the time when multinational corporations had more influence over trade policy in both parties, according to Lori Wallach, director of Public Citizen’s Global Trade Watch.

 

“The corporate trade agenda is under threat in a way that the corporate lobbies hope a Blumenauer or a Kind could try and … change,” Wallach said.

Kind is unlikely to be tapped for the top trade position ― it likely didn’t help that last week he voted against California Democrat Nancy Pelosi becoming House speaker.

But organized labor and other critics of free trade deals worry that Blumenauer has a fighting chance at getting the nod.

In a Tuesday interview with HuffPost, Blumenauer vehemently defended his record on trade. He noted his votes against the Colombia and Central America free trade agreements, and his successful efforts to ramp up enforcement of trade deals, including a crackdown against illegal logging.

 

“I have no intention of picking a fight with Bill Pascrell. But if you look at our records … [mine is] much more in line with what much more of the Ways and Means Democrats and… the caucus as a whole [supports],” Blumenauer said. He later acknowledged that his support for TPA broke with most of the caucus.

 

Although Blumenauer teamed up with Sen. Ron Wyden (D-Ore.) in 2015 to promote a TPP-style agreement to expand export markets for U.S. goods and services, he insisted that he never came out in support of the text of the TPP as it finally stood.

Organized labor is attempting to flex its muscle on trade policy at a time when the Congressional Progressive Caucus and outside progressive activist groups are engaged in a more public bid to shape the assignments for powerful House committees.

 

The co-chairs of the CPC leveraged their endorsement of Pelosi’s speakership for a promise that they would receive proportional representation ― 40 percent of seats ― on five top committees: Ways and Means; Energy and Commerce; Appropriations; Financial Services; and Intelligence.

 

But unlike the CPC and its allies, who have openly marshaled grassroots support for their efforts, the unions have limited their lobbying for Pascrell to closed-door discussions with leadership.

 

In 2016, Trump narrowly won Wisconsin, Michigan and Pennsylvania ― three states that cost Hillary Clinton the election ― at least partly thanks to his opposition to trade deals. Democrats now have an opportunity to seize the populist high ground as they debate the NAFTA revisions and seek to improve them, according to CWA’s Larson.

 

“We are at a crossroads. This is an opportunity for Democrats to say, ‘We’re for trade, but we’re for responsible trade,’ against Trump’s knee-jerk rhetoric,” Larson said. “Blind opposition to Trump shouldn’t lead them to be suddenly quote-unquote pro-trade … because those voters are still looking for someone to protect their jobs.”

Taken From: https://www.huffingtonpost.com/entry/labor-unions-bill-pascrell-earl-blumenauer-trade-subcommittee_us_5c34f985e4b0116c11f1011d

Mexico misses USMCA deadline for labor reforms; bill could move in Feb.

The Mexican Congress failed to meet a Jan. 1 deadline to pass legislation to establish labor reforms called for in the U.S.-Mexico-Canada Agreement, with a bill introduced last month in the Chamber of Deputies unlikely to be addressed until February.

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An annex to USMCA’s labor chapter says Mexico must adopt legislation establishing, among other things, “(i) an independent entity for conciliation and union collective bargaining agreement registration and (ii) independent Labor Courts for the adjudication of labor disputes.” The deal said the bill had to be passed by Jan. 1, adding that “entry into force of the agreement may be delayed until such legislation becomes effective.”

But the draft legislation, obtained by Inside U.S. Trade, is dated Dec. 22 and was introduced by the MORENA party in the Chamber of Deputies on Dec. 30. The next regular session of the Chamber is set for February. While a special session will be held in mid-January, Mexican media reports say the labor law is unlikely to come up, with lawmakers set to debate national security legislation.

If passed by the Chamber of Deputies, the bill will head to the Mexican Senate.

The implementation of Mexican labor reforms has been a key issue for U.S. Democratic lawmakers weighing whether to back USMCA. U.S. Trade Representative Robert Lighthizer said in December that he expected a vote on the deal’s implementing bill “within the next few months.”

Specifically, Democrats have, among other requests, called for enforceable labor provisions that address Mexican wages, job outsourcing to Mexico and so-called “protection contracts.”

The 204-page legislation addresses labor union “democracy” and freedom of collective bargaining, gender issues and “fundamental rights,” and new “labor justice,” according to an informal translation of the document.

Among its provisions is one that would broaden and clarify the powers of a “Labor Court” to “to achieve execution of labor judgments,” the document states. It would also address an “old claim of the workers of the field to be included minimum professional wages, which is why it is provided that the National Commission of Minimum Wages shall fix minimum wages professionals of said workers, considering the physical wear and tear caused by working conditions and salaries and benefits perceived by workers of establishments and dedicated companies to the branch of agricultural products.”

The legislation would also recognize and delineate the “right of workers to organize freely in the form and scope that they decide,” the document states, and would establish “principles of autonomy, equity, and democracy, legality, transparency, certainty, gratuity, immediacy” in the registration and “updating of union directives.”

The draft also includes transitional provisions that “constitute a critical path that must lead to a successful transition,” such as the establishment of mechanisms aimed at contemplating “the costs of operation, the necessary infrastructure, the training programs of the staff of the new jurisdictional and administrative bodies and the necessary coordination with the various institutions and public entities, national and international organizations, including the Liaison Unit that the Secretariat of Labor integrate[s] for such purposes.

Taken From: https://insidetrade.com/

Revamped TPP goes into effect

The 11-country Trans-Pacific Partnership went into effect on Sunday after being ratified by seven countries.

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The agreement, now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, will cut tariffs among the 11 members — and, according to U.S. industry groups and many lawmakers, make American goods less competitive.

The deal has been ratified by Australia, New Zealand, Japan, Vietnam, Canada, Mexico and Singapore. The remaining four — Brunei, Chile, Peru and Malaysia — are expected to follow suit in the new year.

U.S. lawmakers have also continued to support U.S. participation in CPTPP. Sen. Thomas Carper (D-DE) said earlier this month that the Trump administration’s decision to withdraw from the pact was “crazy.”

“For years my top priority was the Trans-Pacific Partnership, and if I could somehow resurrect that and put Humpty Dumpty back together I would do that in a minute,” he said. “I think one of the biggest mistakes we will have made in terms of trade policy, economic policy in this country in recent years, is backing out of the TPP and letting it collapse.”

In a Monday statement, Farmers for Free Trade lamented what it called “the beginning of an era of lost opportunity for American farmers and ranchers.” The group cited beef, poultry, grains and dairy as products that will face an “immediate disadvantage.”

“While America stands on the sidelines, countries that directly compete with our farmers – including Mexico, Canada, Australia and New Zealand – will begin to receive the tariff-free benefits of a trade agreement the U.S. once stood at the center of,” the statement continued. “Our farmers and ranchers will continue to be at a competitive disadvantage until we reengage with trading partners across the globe and rejoin the many nations that are providing their farmers with the benefits of multilateral trade agreements like CPTPP.”

The U.S. earlier this month released negotiating objectives for the bilateral deal it is seeking with Japan, the biggest CPTPP country. U.S. agriculture groups have long said an agreement with Japan was urgently needed to counteract CPTPP and other deals that will disadvantage U.S. agricultural products in particular.

Taken From: https://insidetrade.com/

The Battle Over NAFTA 2.0 Has Just Begun

Progressives must fight strategically to improve it—if they don’t, the consequences could be devastating.

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After over a year of renegotiations of the North American Free Trade Agreement by the United States, Canada, and Mexico, the NAFTA 2.0 textsigned on November 30 revealed improvements for which progressives have long campaigned, the addition of damaging terms that we oppose, and critical unfinished business.

It’s no surprise that the administrations of Donald Trump, Justin Trudeau, and Enrique Peña Nieto failed to deliver a transformational replacement for the corporate-rigged trade-pact model that NAFTA hatched in the early 1990s. But if progressives secure swift and certain enforcement of the agreement’s new labor standards—and succeed in incorporating some other key improvements—the final package that will head to Congress in 2019 could end some of NAFTA’s continuing, serious damage to people across North America. And that would be a big deal.

The status quo, with NAFTA helping corporations outsource more US jobs to Mexico every week after nearly 1 million have been government-certified as lost to NAFTA, is not acceptable. Nor are the ongoing Investor-State Dispute Settlement (ISDS) attacks on environmental and health safeguards, or the corporate exploitation of Mexican workers, who today face $1.50-an-hour manufacturing wages that are unlivable and lower in real terms than before NAFTA. Neither withdrawing from NAFTA nor maintaining NAFTA 1.0 will raise wages in Mexico, which must be done to stop the offshoring that transforms middle-class jobs into sweatshop jobs.

This explains why congressional progressives, unions, groups like Public Citizen, and others who have fought decades of bad trade deals did not respond to the signing ceremony with an opposition campaign, but rather with demands for further improvements. Thanks to the midterm elections, only a version that can win significant Democratic support will get through Congress. That creates an opportunity we must seize. The signing of the NAFTA 2.0 text was just one step in a long process. Phase two of the battle to replace NAFTA has begun.

Trump’s claim to have created a totally different kind of agreement is a deceitful sales pitch, similar to those used for decades by US presidents to hawk previous trade deals. No one should refer to NAFTA 2.0 by using Trump’s preferred “US-Mexico-Canada Agreement” (USMCA) rebrand.

The NAFTA 2.0 framework, like previous agreements, sets limits on domestic consumer safeguards and grants protectionist monopoly rights to Big Pharma. Appallingly, the 164 countries that are members of the World Trade Organization—including the United States, Mexico, and Canada—are captured under this regime, NAFTA or not.

But “free trade” agreements like NAFTA include corporate goodies, like ISDS, that extend beyond the WTO rules. This is why fighting for improvements to NAFTA 2.0 matters. Analyses by unions and Public Citizen provide a road map for the improvements still needed.

On the upside, NAFTA’s outrageous investor privileges and ISDS tribunals are dramatically reined in under NAFTA 2.0, after hundreds of millions in taxpayer funds have been paid to corporations using the regime to attack public-interest policies. The new text terminates ISDS tribunals between the United States and Canada, which will prevent significant future damage. Most ISDS cases under NAFTA have involved US or Canadian corporations attacking the Canadian or US government, and all but one of the ISDS payouts over environmental issues involved US firms challenging Canadian policies.

For Mexico, ISDS is replaced by a new approach: Whereas ISDS allows investors to skirt domestic courts, the new process requires investors to use such courts to resolve disputes with a government until the highest available domestic court rules, or until two and a half years pass with no resolution. In the latter case, an investor can seek compensation—but only for limited claims in which “an investment is nationalized or otherwise directly expropriated through formal transfer of title or outright seizure,” or for discriminatory government actions against an established investment.

The five other investor protections in NAFTA that have resulted in almost all payouts so far are eliminated in the new agreement. These are also the protections that made it cheaper and less risky to outsource US jobs to Mexico. Additionally, NAFTA 2.0 eliminates the “right to invest,” which companies use to launch ISDS attacks if a government refuses to authorize an environmentally damaging mine or other proposed investment.

The new text also includes important procedural reforms. Those reviewing claims under NAFTA 2.0 cannot simultaneously represent corporations suing governments, which is not the case under the ISDS process. Also, investors can only be compensated for losses they can prove, with “inherently speculative” damages banned; previously, investors have obtained huge sums premised on their claims that expected future profits would be lost.

Taken From: https://www.thenation.com/article/nafta-congress-2019/

 

Trump Didn’t Kill the Global Trade System. He Split It in Two.

Allies find relations modestly tweaked, despite the president’s rhetoric, while relations with China are entering a deep freeze

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Photo by Julius Silver on Pexels.com

 

When Donald Trump entered the White House on a platform of defiant nationalism nearly two years ago, many feared he would dismantle the global trading system the U.S. and its allies had built over the past 70 years.

He hasn’t. Instead, he is presiding over its realignment into two distinct systems. One, between the U.S. and its traditional, democratic trading partners, looks a lot like the system that has prevailed since the 1980s: free trade with a smattering of quotas and tariffs like those Ronald Reagan once deployed.

The second reflects an emerging rivalry between the U.S. and China carrying echoes of the Cold War. On trade, investment and technology, the U.S. is moving to undo some of the integration that followed China’s accession to the World Trade Organization in 2001.

There are two big questions hanging over this realignment. The first is deciding how far the U.S. is prepared to decouple from China. The U.S. has given China until March 1 to avoid higher tariffs by addressing complaints it discriminates against foreign companies and steals their technology. Mr. Trump is counting on a deal that avoids a trade war. But many in his administration and Congress don’t trust China to make the necessary concessions and would likely advocate a sharper break.

Deep Ties

The second question is whether the U.S. can persuade allies to join a united front to contain China. Other countries don’t relish the choice. Their economic ties to China are far greater than they ever were to the Soviet Union during the Cold War.

Nor are the ideological choices as clear cut. China isn’t waging an ideological struggle against the West as the Soviet Union did, and Mr. Trump, while enacting policies reminiscent of President Reagan, lacks Mr. Reagan’s commitment to alliances and free trade. Defense Secretary James Mattis’s decision to resign after Mr. Trump’s decision to withdraw troops from Syria underscores the president’s ambivalence toward international engagement.

Two years ago, it was easy to predict a grimmer fate for the global trading system. Mr. Trump campaigned as a protectionist willing to tear up trade agreements and raise tariffs to shrink the trade deficit and bring back factory jobs.

In his first week he withdrew from the unratified 12-nation Trans-Pacific Partnership. He prepared to pull out of the U.S.-Korea Free Trade Agreement (Korus) and the North American Free Trade Agreement. Earlier this year he imposed steep tariffs on imports of steel and aluminum, using a little-used national security law, and threatened the same for autos.

Today, Korus and Nafta have been replaced by updated agreements(one not yet ratified) that look much like the originals. South Korea accepted quotas on steel. Mexico and Canada agreed to higher wages, North American content requirements and quotas for autos.

These represent a step back from free trade toward managed trade, but they will have little practical effect: The limits on how many cars Mexico and Canada can ship duty-free to the U.S., for example, exceed current shipments. Mr. Trump hasn’t stopped threatening auto tariffs, but for now his officials have elected instead to seek broader tariff reductions with Japan and the European Union.

Meanwhile, the U.S. trade deficit that incenses Mr. Trump has grownduring his presidency, especially with China and Mexico, as a strong American economy sucks in imports. His exhortations to manufacturers to bring jobs back to the U.S. have largely fallen on deaf ears.

Douglas Irwin, an economist and trade historian at Dartmouth College, calls these results the “status quo with Trumpian tweaks: a little more managed trade sprinkled about for favored industries. It’s not good, but it’s not the destruction of the system.”

Mr. Trump’s actions so far affect only 12% of U.S. imports, according to Chad Bown of the Peterson Institute for International Economics. In 1984, 21% of imports were covered by similar restraints, many imposed by Mr. Reagan, such as on cars, steel, motorcycles and clothing.

This is testament to something Mr. Irwin has identified in two centuries of American trade policy: Both protectionism and free trade breed powerful constituencies invested in the status quo. Mr. Trump’s protectionist instincts go only so far when Congress, business and the national security establishment don’t share them.

Yet the status quo with China is crumbling. Businesses have grown disillusioned with China’s restrictions on their activities, forced technology transfer and intellectual-property theft, all aimed at building up domestic competitors at foreign expense. Meanwhile, legislators in both parties are alarmed at increased military assertiveness and domestic repression under President Xi Jinping.

Dan Sullivan, a Republican senator from Alaska, personifies these broader forces reshaping the U.S. approach to the world. Mr. Sullivan has followed the rise of China for decades—as a Marine sent to the Taiwan Strait in 1996 in a response to Chinese provocations; as an official in George W. Bush’s National Security Council and State Department; and for a time as Alaska’s commissioner of natural resources.When Mr. Xi visited the U.S. in 2015, Mr. Sullivan urged his colleagues to pay more attention to China’s rise. On the Senate floor, he quoted the political scientist Graham Allison: “War between the U.S. and China is more likely than recognized at the moment.”

Last spring, Mr. Sullivan went to China and met officials including Vice President Wang Qishan. They seemed to think tensions with the U.S. will fade after Mr. Trump leaves the scene, Mr. Sullivan recalled.

“I just said, ‘You are completely misreading this.’” The mistrust, he told them, is bipartisan, and will outlast Mr. Trump.

While delivering one message to China, Mr. Sullivan gave a different one to the administration and its trade negotiators: Don’t alienate allies needed to take on China.

“Modernize the agreements but stay within the agreements,” he says he counseled them. “Then we have to turn to the really big geostrategic challenge facing our country and that’s China.”

His was one voice among many urging Mr. Trump to single out China for pressure. Presidents Obama and George W. Bush sought to change China’s behavior through dialogue and engagement. Obama officials had begun to question engagement by the end of the administration. Last year, in its National Security Strategy, the Trump administration declared engagement a failure.

The Trump administration regards economic policy and national security as inseparable when it comes to Beijing, because China’s acquisition of Western technology both strengthens China militarily and weakens the U.S. economically.

“We don’t like it when our allies steal our ideas either, but it’s a much less dangerous situation,” said Derek Scissors, a China expert at the American Enterprise Institute whose views align with the administration’s more hawkish officials. “We’re not worried about the war-fighting capability of Japan and Korea because they’re our friends.”

Rating the Neighbors

The administration has yet to publicly explain its goals. In 1946, at the start of the Cold War, diplomat George Kennan made the case for containing the Soviet Union in his famous “long telegram.” The Trump administration hasn’t done anything comparable for China. One reason might be that administration officials are divided. Mr. Trump appears torn between wanting to halt China’s rise at any cost and hoping for “a big and very comprehensive deal” that lifts the cloud of a trade war.

Michael Pillsbury, a Hudson Institute scholar close to the Trump team who has long warned of China’s strategic threat, sees three plausible scenarios. At one extreme is a new cold war with drastically curtailed economic ties. At the other, the U.S. and China resolve their tensions, continue to integrate and run the world together.

Between those extremes, Mr. Pillsbury sees a more likely and desirable middle path—a transactional U.S.-China relationship of the sort that prevailed during the 1980s in which the two decide, case by case, when to do business and when to decouple.

Though administration officials haven’t publicly embraced such a policy, their actions conform to it, most clearly in their intensified efforts to find, publicize and punish wrongdoing by Chinese companies and state actors.

The U.S.’s request to Canada to extradite an executive of Chinese telecom giant Huawei Technologies Co., like an earlier case against smart-phone manufacturer ZTE Corp., is for allegedly violating Iran sanctions. The cases also have the effect of clipping the wings of Chinese national champions. Meanwhile, Congress this year expanded the administration’s authority to block foreign investments in the U.S., especially in technology, and stop exports that transfer U.S. technology abroad.

While the fate of U.S. tariffs on Chinese imports hinges on current negotiations, some companies, from Lennox International Inc., which makes heating and cooling systems, to shoe manufacturer Steve Madden Ltd. , said they are shifting supply chains out of China, further decoupling the two economies.

“Many companies are…pursuing a ‘China plus one’ strategy, in which current China production remains largely in place but the marginal dollar of new investment goes into countries with lower labor costs,” Dan Wang, an analyst at research firm Gavekal Dragonomics, recently wrote to clients.

The U.S. is stepping up efforts to draw its other trading partners into a united front to take on China. U.S. Trade Representative Robert Lighthizer and his EU and Japan counterparts have launched an effort at the WTO to crack down on China’s domestic subsidies and its technology-transfer requirements. The Group of 20 nations agreed at their recent summit to reform the WTO to address complaints it doesn’t adequately police China.

U.S. and domestic concerns have prompted Australia, New Zealand, Japan, Britain and Canada to restrict or consider restricting Huawei equipment in their telecom infrastructure, in particular for the next 5G mobile phone standard.

The U.S. is also seeking to wall China off from future trade deals. It insisted the pact replacing Nafta include a clause letting the U.S. quit if either Canada or Mexico signs a free-trade agreement with a “non-market economy,” i.e., China.

This realignment is fraught with risks—for the U.S., China and the broader global economy—beyond any short-term hit to growth.

The first goes to the heart of Mr. Trump’s goal. If his aim is to hold back China’s advance, economists predict he will fail. China’s innovative capacity has expanded dramatically. China now accounts for 18.6% of articles in international scientific journals, according to one study, and nearly a quarter of global venture-capital investment, according to another.

Indeed, some China experts fear that the U.S., by adopting a more adversarial approach, weakens China’s reformers and strengthens its nationalist factions, making conflict more likely. They predict China will intensify its pursuit of technological self-sufficiency.

Tom Linebarger, chief executive of engine maker Cummins Inc.,represents the Business Roundtable, which supports a crackdown on China’s discriminatory trade practices but not a decoupling of the two economies. “The only thing worse than an unlevel playing field is no playing field at all,” Mr. Linebarger said.

Persuading other countries to hold China at arm’s length will be harder than containing the Soviet Union. China accounts for 11% of world exports, whereas the Soviet Union in the 1980s accounted for less than 3%, not counting to Eastern Europe. China is 22% of Japanese imports and exports; the Soviet Union was less than 1%. Many of China’s close neighbors depend far more, economically, on China than on the U.S.

“The assumption behind some of the cold war, containment, decoupling rhetoric you hear rests on a fallacy—that such a strategy is deliverable in the 21st century given the integrated nature of the global economy and the role of China,” said Kevin Rudd, a former Australian prime minister who now heads the Asia Society Policy Institute think tank.

U.S. officials note that China’s aid, such as its Belt and Road infrastructure program, often saddles recipients with debt. Yet the U.S. offers no alternative, said Mr. Rudd.

Some of Mr. Trump’s trade policies undermine the united front he wants against China. He hasn’t sworn off protectionism against U.S. allies, promising to withdraw from Nafta even if its replacement isn’t ratified by Congress. His steel and aluminum tariffs, most of which remain in place, outraged such allies as Canada.

U.S. officials play down such frictions as easily worked out. Abroad, they are seen as more serious. Canadian ambassador to the U.S. David MacNaughton said he told U.S. trade negotiators that if Mr. Trump carried through on his threatened 25% tariff on Canadian autos, it would fundamentally change bilateral relations for the worse for years to come. In a letter accompanying Nafta’s replacement, the U.S. agreed not to levy the tariffs.

Even among advocates of decoupling with China, a recurrent worry is that the current administration isn’t up to the task. Said the American Enterprise Institute’s Mr. Scissors: “We can blow this. And if we blow it, we’ll get a world economy that’s poorer than it should be, with all the distortions and inconsistencies that come from unpredictable U.S. policy.”

Taken From: https://www.wsj.com/articles/trump-hasnt-killed-the-global-trade-system-instead-he-split-it-in-two-11545842217

Proposed USMCA Is Just Trumped Up Version of Old NAFTA Treaty

Trade bill unwittingly incentivizes U.S. car makers to locate their production facilities in Mexico

NAFTA-protest

NAFTA, the North American Free Trade Agreement, was the brainchild of Ronald Reagan when he first ran for president. Following years of negotiation, an agreement between Canada, Mexico, and the United States was signed (by President Clinton for the United States) in December 1993 and finally took effect on January 1, 1994. The trade deal reduced tariffs or taxes on goods shipped within the continent, promoting trade and economic growth in North America. For these reasons, most economists generally support the NAFTA framework—plus or minus concerns over human rights and environmental protection.

But trade agreements are not just about trade; they are also about building relationships between nations so they are less likely to go to war and more likely to support each other when required by geopolitical considerations.

NAFTA certainly has flaws, and not everyone is a NAFTA fan. When running for president, Donald Trump called NAFTA “the worst trade deal ever approved in the United States.” He blamed the U.S. trade deficit on NAFTA, even though the large majority of the U.S. trade deficit is with China, and the U.S. has run an $8 billion trade surplus with Canada for years. And he vowed to negotiate a better deal for the United States if elected.

On August 27, the president announced his new agreement—a deal with Mexico; then Canada came aboard on September 30. Trump calls the new agreement USMCA (for the U.S., Mexico and Canada); actually it is an only slightly modified NAFTA, or NAFTA 2. Remarkably, it is a worse bargain for the United States than the NAFTA it proposes to replace. Nevertheless, with his finely tuned sense of modesty, the president called USMCA “the most important trade deal we’ve ever made, by far.”

There are only three new provisions in USMCA—one primarily concerning dairy, one concerning cars, and one concerning future trade agreements. Otherwise, it is NAFTA.

First, dairy. USMCA gives American dairy farmers greater access to the Canadian market, so more Wisconsin cheese will get sold in Canada. In return, the United States gives Canadian dairy producers greater access to the United States, so that more Quebec cheese can be sold here. This will reduce domestic sales by Wisconsin dairy manufacturers. Overall, it is not clear who will come out ahead. Likely it will be a wash.

The second change, the one trumpeted by the president, is the feature of the proposed treaty that is least favorable to the United States. Trump wants to increase the fraction of each car that gets produced in the United States. USMCA won’t accomplish this. Although the new rules are complicated, here is how it’s supposed to work.

To encourage auto production in the United States, USCMA stipulates that at least 75 percent of a vehicle (up from 62.5 percent today) must be produced in North America to qualify for duty-free treatment. This encourages automakers to produce auto parts in North America rather than elsewhere. To encourage production in the United States, USMCA requires that more and more parts (reaching 40 percent in 2023) comprising each automobile be made by workers earning at least $16 an hour—a low figure for the U.S. economy but far higher than Mexico’s average wage of $4 per hour. Vehicles that fail to meet these two conditions are subject to a 2.5 percent tariff.

However, instead of leading to greater production in the United States, this provision will encourage firms to outsource more car production to Mexico in order to remain competitive. Here’s why.

Consider a car that costs $25,000 to manufacture (close to the average cost), with more than 40 percent of production (the Trump threshold) taking place in low-wage Mexican factories. A 2.5 percent tariff means car dealerships will pay $625 more to get each car, an increase that will be passed on to consumers. In order to avoid having to charge this premium, President Trump thinks that auto manufacturers will move production back to the United States.

But there is another possibility. Once we reach the tariff threshold, more jobs may be shifted to Mexico to compensate for higher costs due to the tariff. U.S. auto workers on average make $20 per hour more than Mexican auto workers. Given this wage differential, moving 30–35 hours of production per car from the United States to Mexico saves $625, or the cost of the USMCA tariff. There will be no additional tax penalty for doing this, since the 2.5 percent tariff is imposed because more than 40 percent of parts are already made in low-wage Mexican factories. There are no further costs of moving production to Mexico, yet there are gains from lower production costs.

It should be clear why Mexico readily agreed to USMCA.

Unlike our president, President Obrador understood that once we hit the 40 percent threshold, U.S. firms have incentives to
shift more auto production and more jobs to Mexico.

Understandably, Canada was reluctant to go along with a deal that would hurt it as much as it hurts the United States because its wages are close. It finally caved in under the threat of larger tariffs and losing access to the U.S. market.

Another problem with USMCA is that it doesn’t address our real trade problem right now—Trump’s tariffs.

Aluminum and steel tariffs work against creating jobs in the United States. They make it more expensive to manufacture cars in the United States and harder to sell them abroad or at home (since foreign cars are not subject to the tariff). Not only is the U.S. auto industry hurt; any firm manufacturing goods in the United States using aluminum or steel loses its competitive advantage because the tariffs raise its production costs.

Moreover, other countries have retaliated by placing tariffs on U.S. motor vehicles, so cars manufactured in foreign countries are relatively cheaper. To remain competitive, manufacturing plants located in the United States have to move abroad. Ironically, some production is already going to China. BMW announced it will move SUV production from South Carolina to China; other firms will follow. And what goes to China will stay in China.

It is unclear why President Trump would make such a poor deal. Probably he wanted to brag about ending NAFTA; and any deal he can put his name on is better than nothing.

Alternatively, this may be his negotiating strategy. The third major provision of USMCA keeps Mexico and Canada from negotiating an independent trade deal with China because they can lose their favored access to the U.S. markets if they do so. President Trump may want to do all the negotiating, either convinced that only he can get the United States the best deal, or determined to get all the credit, or both.

The problem is that rather than gaining the trust and cooperation of U.S. allies when negotiating with China, Trump is assembling a coalition of the unwilling and the bullied. This won’t strengthen Trump’s negotiating position. And because USMCA is already such a bad deal for the United States, it shows China that if you simply let Trump have the bragging rights you will come out way ahead.

There is still hope. Before becoming law, USMCA must be passed by Congress. And Congress may recognize USMCA for what it is—a worse trade deal than NAFTA and a bad deal for the United States—and then have the courage to vote it down.

Taken From: https://washingtonspectator.org/pressman-usmca/

Trade deal with Canada, Mexico could delay arrival of cheaper generic drugs, critics warn Michael Collins

WASHINGTON – Makers of expensive brand-name drugs scored a victory when the United States’ new trade deal with Canada and Mexico included language preventing generic copies of their prescription medicines from hitting shelves for at least a decade.

bunch of white oval medication tablets and white medication capsules

Photo by Pixabay on Pexels.com

The protections granted to pharmaceutical companies could complicate efforts to win congressional approval of the trade agreement in Congress. Consumer groups and some lawmakers fear the market restrictions would delay efforts to get cheaper medicines to those who need them most.

“This trade agreement, if left in its current form, will keep drug prices high in the United States to the detriment of our nation’s patients, job creators, workers and taxpayers,” nearly three dozen organizations wrote in a letter to U.S. Trade Representative Robert Lighthizer in November.

On Capitol Hill, the pharmaceutical language is under close scrutiny as Congress prepares to take up the trade agreement next year. House Democrats, who will return to the majority in January, are likely to demand changes to the deal if it is to win approval. The drug provision is among those sections targeted for revision.

If approved as it is, the trade deal “would not only raise drug prices in Canada and Mexico but would tie Congress’ hands, preventing us from enacting essential reforms needed to lower prescription drug prices,” said Rep. Jan Schakowsky, D-Ill., one of the lawmakers demanding that the provisions benefiting large pharmaceutical companies be stricken.

Under U.S. law, pharmaceutical makers are given 12 years of market protection for their drugs, which essentially provides them with a limited monopoly against competition from manufacturers of generic medicines. Canada grants drugmakers eight years of market protection, and Mexico provides five.

The U.S.-Mexico-Canada Agreement, a trade deal reached between the three countries in late September after months of negotiations, would provide drugmakers with a minimum of 10 years of market exclusivity.

That will mean a longer wait time for residents of Canada and Mexico before generic copies of drugs will be available. In the USA, the time frame won’t change since the 12 years enshrined in law exceeds the minimum required under the trade deal.

Pharmaceutical companies argued that the 12 years of market exclusivity granted under U.S. law strikes the right balance between the need to get effective new drugs to the market while protecting manufacturers’ risk and investment in developing them.

“When the U.S. and other countries protect innovation, it leads to the discovery of more new medicines, better health outcomes and increased competition,” said Jay Taylor, vice president of international advocacy for the Pharmaceutical Research and Manufacturers of America, orPhRMA.

“There needs to be a balance between encouraging competition and incentivizing innovation – and we think the (new trade deal) is a positive step in the right direction toward ensuring balance abroad for the biopharmaceutical sector,” Taylor said. “Implementing strong intellectual property standards in our trade agreements will help us pave the way for new treatments and cures for patients around the globe.”

Consumer groups, trade unions and others countered that giving drugmakers a minimum 10-year monopoly stifles competition and discourages other companies from developing cheaper generic drugs or biosimilars, which are complex, almost identical copies of an original prescription drug manufactured by another company.

“Biosimilars are so important because these are the affordable versions of some of the most expensive drugs in the world,” said Jeff Francer, general counsel of the Association for Accessible Medicines, which advocates for improved access to safe and effective medicine.

In the USA, consumer groups and generic-drug makers have pushed Congress for years to lower the market exclusivity period to seven years. The minimum 10-year requirement in the trade deal “would lock us in in the United States and handcuff Congress from using a tool that could bring prices down,” Francer said.

“Folks who are invested in prescription drug affordability should demand that the 10 years in the treaty either be removed or brought down to a number like seven,” he said.

Other organizations that raised concerns about the minimum requirement in the trade deal include AARP, the American Federation of Teachers, the AFL-CIO and the American College of Physicians.

Several Democrats in Congress, including Massachusetts Sen. Elizabeth Warren, Oregon Sen. Ron Wyden and Ohio Sen. Sherrod Brown, sounded the alarm about the pharmaceutical provisions in the trade deal.

“The senator has long opposed big pharma’s role in writing our drug policy, including our trade agreements, to boost their bottom line at the expense of American families,” Brown spokeswoman Jennifer Donohue said. “And he will take advantage of any opportunity, whether through domestic legislation or our trade agreements, to lower the cost of drugs for American consumers.”

Schakowsky said the trade deal will keep drug prices high and inaccessible for too many Americans.

“We must eliminate big pharma provisions that will increase pharmaceutical profits at the expense of patients,” she said.

Taken From: https://www.usatoday.com/story/news/politics/2018/12/27/trade-deal-us-canada-mexico-pact-may-delay-arrival-generic-drugs/2299536002/