Trade Agreements With Mexico And South Korea Turned Out To Be Disasters For US: So Why Pursue TPP And TAFTA/TTIP?

from the follow-the-money dept

Two massive trade agreements currently being negotiated — TPP and TAFTA/TTIP — could potentially affect most people on this planet, either directly or indirectly through the knock-on effects. Like all such agreements, they have been justified on the grounds that everyone wins: trade is boosted, prices drop, profits rise and jobs are created. That’s why it’s been hard to argue against TPP or TAFTA — after all, who doesn’t want all those things?

But given their huge impact, and the fact that trade agreements are also used to impose a range of policies on countries that are certainly not in the public interest there — for example making it harder for generic drug manufacturers to offer low-cost medicines — it seems reasonable to ask what the evidence is that entering into these agreements really does deliver all or even some of those promised benefits.

An article in US News provides statistics that show that two major trade agreements — the North American Free Trade Agreement (NAFTA) and the South Korea-US Free Trade Agreement (KORUS) — have not only failed to deliver, but have been disastrous for the US. As regards NAFTA, for example, here are figures from a Reuters column it cites:

The United States ran a $1.6 billion trade surplus ($2.6 billion in today’s dollars) with Mexico in 1993, the year before NAFTA. Last year [2011], the United States ran a $64.5 billion deficit.

That might have been a one-off, were it not for the following facts about KORUS, reported here by the Economic Policy Insitute (EPI)

In the year after the agreement took effect (April 2012 to March 2013), U.S. domestic exports to South Korea (of goods made in the United States) fell $3.5 billion, compared with the same period in the previous year, a decline of 8.3 percent. In the same 12-month period, imports from South Korea (which the administration consistently declines to discuss) increased $2.3 billion, an increase of 4.0 percent, and the bilateral U.S. trade deficit with South Korea increased $5.8 billion, a whopping 39.8 percent.

But maybe the trade agreements are generating jobs at least. Nope. Here’s what happened with NAFTA:

Bill Clinton (1993) and his supporters claimed in the early 1990s that the North American Free Trade Agreement would create 200,000 new jobs through increased exports to Mexico. In fact, by 2010, growing trade deficits with Mexico had eliminated 682,900 U.S. jobs

Well, what about KORUS?

When the U.S.-Korea Free Trade Agreement was completed in 2010, President Obama said that it would increase U.S. goods exports by “$10 billion to $11 billion,” supporting “70,000 American jobs from increased goods exports alone”

Here’s what actually happened:

Using the president’s own formula relating changes in trade to jobs, the growth in the trade deficit with South Korea in the first year since KORUS took effect likely cost more than 40,000 U.S. jobs

So where does this leave TAFTA/TTIP? Well, the European Commission’s FAQ on the subject refers to some research it commissioned:

One of the studies on which the Commission’s impact assessment was based was an independent report commissioned by the EU from the London-based Centre for Economic Policy Research. The study, entitled ‘Reducing barriers to Transatlantic Trade’, outlines the economic effects of a for both the EU and the US.

It suggests the EU’s economy could benefit by €119 billion a year — equivalent to an extra €545 for a family of four in the EU. According to the study, the US economy could gain an extra €95 billion a year or €655 per American family.

But the EPI is doubtful:

A much more likely outcome, based on North American experience under NAFTA, is that production workers in all the member countries will suffer falling wages and job losses (Scott et al. 2006), while U.S. and EU investors will profit handsomely, reinforcing the rapidly rising share of profits in corporate and national income that has taken place over the last decade in the United States (Mishel 2013).

That also provides an explanation as to why the US government is so keen to push ahead with TPP and TAFTA/TTIP when all the available evidence suggests that both are likely to be harmful for the US economy overall. Despite that fact, certain influential groups still stand to profit “handsomely”, and therefore have lobbied the politicians hard to engage in such talks anyway.

Unfortunately, much of those profits will be paid for by losses incurred by ordinary members of the public through lower wages and unemployment caused by a new “race to the bottom” and increased outsourcing. These are precisely the people who, by an interesting coincidence, are never allowed to comment on or even see what is being negotiated when these agreements are being drawn up in their name. Strange that.

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Comments on “Trade Agreements With Mexico And South Korea Turned Out To Be Disasters For US: So Why Pursue TPP And TAFTA/TTIP?”

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25 Comments
ECA (profile) says:

only way to trade.

IS to have something they WANT..

NOW what could we have that THEY WANT and will trade to CORPS in the USA for?

Over valued Dollars??
Over priced metals?
Wood?

WHAT do we have that mexico WANTS??
JOBS??
GRAINS??
thats about ALL we got, unless you want to sell them OIL..

The value of materials is 1/2 the price as the USA has..
but the goods sell as IF’ they were made in the USA..

Anonymous Coward says:

Re: only way to trade.

iPads and windows licenses. Both rely on having to charge a royalty for mexican companies to copy it.

USA is a net importer of oil, so I don’t think that is gonna fly. Even if USA ramps up oil drillings, the cost would probably start to burn since it would tank the worldwide price. Not to mention the green energy, making oil slightly less valuable each year…

The dismantling of tariffs is crashing the western worlds economies. To soften the effect we instead get privaticed protectionism in the form of IP! IP is getting blown up to a saviour of our way of living along with legal minimum demands getting thrown in to force the cheapest competitors out for at least a short amount of time.

In the end, we will have to face the music: The western way of living is not gonna be what defines the future.

Anonymous Coward says:

oh, meant to say that like the ridiculous rules, laws and law suits by and for the entertainment industries, it’s more about control than anything else! that and ensuring no other country is allowed to supply items like cheap drugs instead of really expensive US made ones! keeping the control and US companies more profitable, even at the expense of multiple deaths, is the important thing

Anonymous Coward says:

Finally, an article with real world facts and figures about the impact Free Exploitation Agreements have on global economies.

The whole idea behind FEA agreements, is to make as much money as quickly as possible. Here’s how FEA agreements enabled corporations to do this.

1. FEA got rid of almost all American import tariffs, allowing corporations to employ foreign workers at low labor costs, and export the products these workers produce, back into America tariff free.

2. America had a healthy economy with well paying jobs, even for middle-class families. FEA effectively drained all the money from these families and destroyed most of their jobs, by manufacturing products at low cost over seas, then importing the low cost products into the American economy and marking the price up on these low cost products by 100-200%. Despite this huge markup in price, the foreign products were still sold for cheaper than American made goods, and were 1-2 times more profitable as well.

This went on for a little over a decade, which brings us to the present day.

Now we see China projecting a 7.5% economic growth rate. Their growth rate figures are way down for the double digit figures they were posting just last year, or the years before.

This is due to American’s not having the incomes they once had before FEA was enacted. So now American backed companies in China are seeing their export volumes fall, due to weakened American spending power.

Just like any get rich quick scheme, it only works for the short-term, and collapses in the mid to long-term. That’s besides the point though, because the individuals exploiting this system have already made their fortune, and the America’s weak economy only drives down the cost of purchasing anything. So now these rich bastards can buy anything they want in America for half price and borrow money at 0.01% interest rates (thx Fed Reserve), while the rest of us are struggling just to stay afloat.

So there you have it, a breakdown of Free Exploitation Agreements, and how they work in principle.

Anonymous Coward says:

“It suggests the EU’s economy could benefit by ?119 billion a year — equivalent to an extra ?545 for a family of four in the EU. According to the study, the US economy could gain an extra ?95 billion a year or ?655 per American family.”

Sorry to state the obvious flaw in the maths, but if we are solely trading with the US where is all this extra money coming from? Or are we just going to print some more notes off?

Guardian says:

usa is done for

if you htink pressure on acta was bad wait till people stick the nsa up your ass and say fuck tpp….

any and i repeat any govt moving it forward when the usa wants it is gonna pay dearly

all this is , is the ability to increase the spy network

DO YOU HEAR ME YOU FUCKWITS
its secret cause that is one aspect you dont get to know of…..using copyright and trade as the front for all the spying.

out_of_the_blue says:

You list the Populist points, but don't reach obvious conclusion.

That “trade agreements” are just more lies by The Rich, especially bankers, to intentionaly undermine US economy so that they can take it over. I suppose you balk at that because of myths you were taught that The Rich are meritorious and beneficient rulers, that anything labeled “free” is good, and to pooh-pooh “conspiracy theories”.

Anonymous Coward says:

Re: You list the Populist points, but don't reach obvious conclusion.

But the people pushing for protectionism of domestic industry are ‘teh rich’ owners of said domestic industry. So I guess when stuck between a rich and a wealth person you push in whatever direction seems most contrarian no matter how non-nonsensical?

MacCruiskeen says:

Well, the ending of you article pretty much answers the question at the top, doesn’t it? It happens because a relatively small group of powerful and influential people want it to happen. All the public-facing blah-blah is just that: blah-blah. Hence, closed-door, secret negotiations. By the time anybody gets to see what’s going on the deal will be done. Corporations don’t want to just be people, they want to be _stateless_ people, beholden to no one, answering to no one. Governance is an obstacle to rapid wealth extraction, so governance must be removed. The fact that those who are entrusted with the role of governance will so willingly hand over the keys is distressing to say the least (but not, at this point, surprising).

Lorpius Prime (profile) says:

Seriously?

Techdirt’s gotten me on board with the need for serious IP reform and opposition to IP chapters in trade agreements by making economically sound arguments.

This, however, is protectionist crap.

Please, please, please don’t undermine your credibility by arguing that legacy IP corporations deserve to fail in the market if they can’t adapt to competition from new technology, but that legacy manufacturers ought to be immune from competition from overseas.

Anonymous Coward says:

Re: Seriously?

I concur. The problem with these treaties is that they’re free trade agreements in name only – they apply a number of protectionist controls in other nations that operate in favor of the most powerful parties involved, and without any significant transparency for or input from the people to whom they apply.

While all of these agreements have tremendous problems, the idea of free trade between nations is not what I find troubling.

Ramon Creager (profile) says:

Re: Seriously?

“Protectionist crap”? Nice misdirection. This isn’t about “free trade” at all. TTIP & TPP are “The Big Rock Candy Mountain” for multinational corporations. Every thing they could wish for in their most fevered dreams is there, local and sovereign governments and the will of local peoples be damned. You don’t want your water to be poisoned by frackers? Too bad, you’re interfering with their God given right to present and future profits. You have a dispute with them? You can take it to their kangaroo courts, where the issue will be decided by anonymous corporate lawyers. This is no exaggeration, if you’ve been paying any attention. And it certainly is not free trade.

Ramon Creager (profile) says:

Hasn't worked out so well for Mexico either

In fact it has destroyed the Mexican lower classes. And then we get all bent out of shape when drug cartels take over, jobless and landless peasants try to come here for work, etc. etc. etc. ad-nauseum.

What really gets me about what is happening these days is how the elites, whose ideology and credibility have been totally destroyed by the crash of 2008 and their reaction to it, are able to double down on every evil thing that has brought us to this point.

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