Making News: New Trade Article on Lifezette.com – & More!

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IndustryWeek, Jobs, Lifezette.com, Making News, manufacturing, TPP, TPP. Trans-Pacific Partnership, Trade, wages

I’m pleased to announce the publication of my latest freelance article.  The piece, which appears today on Lifezette.com, reports on a U.S. trade agreement partner that could be violating a key commitment in its deal with the United States.  It also explains why the resulting dust-up undermines claims that America’s recently negotiated Pacific Rim trade deal (The Trans-Pacific Partnership, or TPP) is truly enforceable.

In addition, I was quoted in this Lifezette piece August 6 correcting some of the enthusiasm expressed for last Friday’s monthly U.S. jobs report

And on that Friday, IndustryWeek covered my findings about manufacturing wages rising even though the sector remains mired in a jobs recession.  Click on this link to read.

Keep checking back at RealityChek for news of more media appearances and upcoming events!

 

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(What’s Left of) Our Economy: Big Business Still Favors A TPP Fast Track – for Everyone Else

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Business Roundtable, Congress, fast track, Michael Froman, National Foreign Trade Council, Obama, offshoring lobby, Orrin Hatch, Paul Ryan, Ted Cruz, TPA, TPP. Trans-Pacific Partnership, Trade, Trade Promotion Authority, {What's Left of) Our Economy

A funny thing has happened to the Offshoring Lobby groups that pushed so hard (and successfully) for Congress to give President Obama fast track trade negotiating authority. Now that they’ve seen the text of the Trans-Pacific Partnership (TPP) trade deal whose passage they’ve also urged, several have decided they don’t like the core provision of fast track trade negotiating authority.

Central to the case for fast track – now officially known as Trade Promotion Authority (TPA) – is that preventing Congress from monkeying around with the final text of trade agreements negotiated by presidents and their aides is vital to persuading America’s interlocutors to negotiate seriously. If American lawmakers could amend the deal at will, why would foreign leaders put forward their best offers, especially if they might anger powerful domestic constituencies?

That’s what U.S. Trade Representative Michael Froman has made unmistakably clear. In a late-2014 article in Foreign Affairs, Mr. Obama’s chief trade diplomat wrote, “By ensuring that Congress will consider trade agreements as they have been negotiated by the executive branch, TPA gives U.S. trading partners the necessary confidence to put their best and final offers on the table.”

The Republican leaders who have supported the president’s trade agenda agreed as well. According to Senate Finance Committee Chair Orrin Hatch of Utah, TPA “allows for trade deals to be submitted to Congress for an up-or-down vote, an incentive for negotiating nations to put their best offer forward for any deal.” And before he was elected Speaker and chaired the House Ways and Means Committee, Wisconsin’s Paul Ryan contended (in an article co-authored with Texas Republican Senator and current presidential candidate Ted Cruz, “By establishing TPA, Congress will send a signal to the world. America’s trading partners will know that the U.S. is trustworthy and then put their best offers on the table. America’s rivals will know that the U.S. is serious and won’t abandon the field.”

When Congress was considering fast track, moreover, leading business groups strongly echoed this line. As specified in a statement from the Trade Benefits America coalition that spearheaded the pro-fast track lobbying campaign, fast track historically ”has provided our trade negotiating partners with a degree of comfort that the United States is committed to the international trade negotiating process and the trade agreements we negotiate.”

One of the coalition’s major members, the National Foreign Trade Council (NFTC), was even more explicit: “Without U.S. trade negotiating authority, other countries will be unwilling to negotiate with the United States for fear that U.S. commitments and concessions would not hold weight.  In particular, they would be unwilling to put important politically sensitive concessions on the table.”

Last week, however, some of these organizations were changing their tune. In a statement calling for Congress to pass the TPP, the Business Roundtable declared that it also wanted to administration “to quickly address the remaining issues that impact certain business sectors in order to ensure the broadest possible benefits to all sectors of U.S. business, which will enable the broadest support possible for the TPP.” Huh? It’s true that Congress can attempt to clear up purported ambiguities in the text when it writes implementing legislation, but as for changing the text itself? Sorry, but that’s a no-no under TPA. Unless the Roundtable wants to reopen the entire negotiation?

Similarly, the NFTC reported that it is “encouraged by discussions that are underway between Congress and the Administration to address provisions in the agreement in order to further improve trade and investment liberalization, and strengthen the system of international trade and investment disciplines and procedures, including dispute settlement, for all of American business. Early resolution of areas for improvement identified by the business community will speed approval by Congress in 2016.”

With due respect, what on earth are they talking about other than the aforementioned clarifications and interpretations that unfortunately are entirely unilateral, and have no standing under the new TPP regime?

It seems that when the Offshoring Lobby touted the importance of banning Congressional amendments to TPP, it meant all amendments except its own. You can’t blame its organizations for seeking such blatant favoritism; it’s their job. Now we’ll see if Congress believes that enforcing the principle of equality under the law is its job.

(What’s Left of) Our Economy: New Trade Data Wreck Case for TPP & Fast Track

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China, exports, free trade agreements, GDP, growth, imports, Jobs, Korea, manufacturing, TPA, TPP. fast track, TPP. Trans-Pacific Partnership, Trade, Trade Deficits, Trade Promotion Authority, {What's Left of) Our Economy

As President Obama’s trade agenda heads to Congress, new government figures show numerous U.S. trade deficits in trade policy-sensitive areas hit new annual or monthly records in 2014, including China, manufacturing, Korea and non-oil goods in both inflation- and non-inflation-adjusted terms. Since all deficit deterioration reduces U.S. growth and hiring, Congress should reject the President’s proposed new deals, as well as his request for new fast track negotiating authority, and focus on devising a new trade strategy that will strengthen, not weaken, the recovery and job creation.

Here are the highlights of this morning’s Census Bureau report on December and full-year 2014 U.S. Trade:

>The combined U.S. goods and services trade deficit surged in December by 17.12 percent on a monthly basis – the biggest such increase since the 24.36 percent rise in July, 2009, at the very beginning of the current economic recovery. The $6.81 billion deterioration, from an upwardly revised $39.75 billion to $46.56 billion, was also the biggest absolute increase on record.

>The December deficit, the highest monthly figure of 2014 and the worst since November, 2012, pushed the annual goods and services shortfall in 2014 to $505.05 billion – 6.02 percent higher than 2013’s total of $476.39 billion.

>The U.S. merchandise trade deficit with China fell by 5.47 percent in December, but the $28.30 billion gap brought the annual shortfall to a new record $342.63 billion – 7.51 percent higher than the previous record of $318.71 billion, set in 2013. U.S. goods exports to China increased only by 1.88 percent on year, the slowest rate since the recession year 2009.

>The U.S. trade gap in manufacturing hit a new all-time high in 2014 as well. The monthly deficit increased by 5.34 percent in December, from $62.47 billion to $65.81 billion, bringing the annual shortfall to $733.90 billion. That figure topped 2013’s then-record deficit of $646.77 billion by 13.47 percent.

>U.S. manufacturing exports rose by only 0.85 percent last year, to $1.19338 trillion.

>America’s merchandise trade deficit with new free trade partner Korea decreased by 20.72 percent in December, with the $2.224 billion total representing the smallest since August. But the annual deficit worsened by 21.24 percent, to a new record $25.06 billion. In 2012, when the deal went into effect (in March), the U.S. Merchandise deficit was $16.64 billion. The Obama administration calls the U.S.-Korea Free Trade Agreement its model for the proposed Trans-Pacific Partnership (TPP).

>U.S. goods exports to Korea rose by 6.78 percent from 2013 to 2014, but the much larger amount of merchandise imports increased by 11.57 percent.

>Since 2012, U.S. merchandise exports to Korea are up only 5.39 percent, while American imports have risen by 18.17 percent, meaning that the goods deficit has increased by 50.65 percent.

>The U.S. non-oil goods deficit also hit monthly and annual records both before and after inflation. The inflation-adjusted non-oil figure is especially important, since it is part of the real gross domestic product calculation. And both figures represent that portion of U.S. trade flows that are significantly shaped by the kinds of trade agreements, and other trade policy decisions, that Congress is likely to consider this spring.

>The December inflation-adjusted non-oil goods trade deficit of $49.98 billion was the highest monthly total on record. Because this figure has been strong all year, the annual 2014 total of $551.80 billion was also the biggest ever recorded.

>By contrast, the full-year 2014 inflation-adjusted oil deficit of $114.01 billion beat 2013’s previous record low of $132.20 billion by 13.76 percent. This trade shortfall has dropped annually since 2005.

>Before inflation, the U.S. oil trade deficit in December rose on a monthly basis by 27.05 percent, from $11.59 billion to $14.72 billion. But on an annual basis, this trade deficit decreased by 18.65 percent, from $232.13 billion to $188.84 billion – the lowest level since the recession year 2009.

>Overall, U.S. goods and services exports fell in December by 0.78 percent, from $196.43 billion in November to $194.88 billion, the lowest monthly total since April.

>For the full year, combined U.S. exports increased by 2.86 percent, to a new all-time high of 2.345424 trillion from 2013’s $2.280194 trillion.

>U.S. total imports hit a new annual record, too – $2.850471 trillion. That performance topped the previous record of $2.756586 billion, set in 2013, by 3.41 percent. On a monthly basis, combined American imports increased by 2.23 percent in December, to an $244.44 billion – another all-time high.

 

(What’s Left of) Our Economy: Does Jack Lew Believe in America Decoupled?

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currency, decoupling, dollar, Financial Crisis, G-20, Global Imbalances, globalization, Jack Lew, recovery, TPP, TPP. Trans-Pacific Partnership, Trade, {What's Left of) Our Economy

Is the Obama administration starting to recognize that, contrary to decades of willful blindness and therefore needlessly counterproductive policies, the United States can do quite nicely economically without much help from the rest of the world? That’s surely an exaggeration. But some awfully suggestive clues can be found in Treasury Secretary Jack Lew’s testimony to Congress today.

At first glance, the relevant passages in Lew’s prepared remarks on President Obama’s new budget sounded like the longstanding conventional wisdom about America’s economic fate being inseparable from the world’s. The Financial Times certainly thought so, headlining its report on the House Ways and Means hearings, “US economy cannot go it alone, says Jack Lew.”

Dig deeper though, and you see how misleading (though not necessarily intentionally) the FT phrasing was. Lew decidedly did not say that America couldn’t go it alone because its own growth would falter without better growth abroad. He said that:

“While the recovery in the U.S. economy has helped to drive global growth, the rest of the world cannot depend on the United States to be the sole engine of growth.  At the recent G-20 meeting in Brisbane, there was agreement that more needs to be done to stimulate domestic demand around the world.  Our strength allows us to maintain our leadership in the global community, and while we must lead by example, we cannot do it alone.”  

The reference to the G-20 – a quasi-formal grouping of the world’s 20 largest economies – may have amounted to Lew simply repeating a longstanding American warning (which never seems to go beyond rhetoric) that the United States can’t long power global growth without producing the kinds of record economic imbalances that can lead to financial crises – and did so in 2008.  But Lew never referred to any of those considerations.

What’s left is a declaration by the Treasury Secretary that what the United States is unable to accomplish by itself isn’t sustaining its own recovery. In fact, in sync with President Obama’s assessment in his State of the Union address, Lew said that this recovery “appears” to be self-sustaining. The only remaining obstacle he mentioned was domestic – the lingering effects of recent Washington political gridlock. Instead, what’s left is a Lew statement that what America can’t do singlehandedly is stoke the rest of the world’s recovery.  At least by implication, he suggested that the U.S. economy has in fact become decoupled from the world economy.  

As I’ve written, given the nation’s immense wealth (both natural and human-made) and still-dynamism-friendly social structure and economic institutions, America’s capacity for such decoupling (i.e., domestic-based prosperity) has been staring policymakers in the face for its entire history, but has only been studiously ignored since the 1930s. Nowadays, it seems at least as strong as ever. Yet so far, globalist dogma still seems to be trumping the facts.

Thus the president’s policy continues taking a tack exactly opposite the one suggested by Lew’s words (assuming they were carefully chosen). Although the rest of the world is lagging America economically, Mr. Obama is working to tie the nation more closely to the slowpokes with the Trans-Pacific Partnership (TPP) and the rest of his trade policy agenda. Lew of course incongruously endorsed these measures as an “important component of our growth strategy.” In addition, there’s no sign that the administration is entertaining second thoughts about a thoroughly boneheaded decision reported by The New York Times last fall – to allow the dollar to keep rising against the currencies of America’s leading trade partners.

For a country believing itself to be tightly tied to growth elsewhere, this approach – which would enable other economies to trade their way to faster growth by ramping up sales to the United States while reducing their U.S. imports – at least embodies a certain logic. But for the country described today by Lew, the decision makes no sense – unless you believe that the U.S. economy is just strong enough to keep growing short-term without better global growth, but not strong enough to keep up the pace over any significant timespan.

Indeed, if this is their thinking, how do Lew and the president think they’ll continue even the current recovery’s lackluster pace if they wink at trade-and currency-related hits to growth? Are they counting on faster global recovery to kick in just in time? These would add up to one heckuva riverboat gamble.

So the burden of proof remains squarely with the optimists to show that some genuinely strategic lights are going on in the ranks of senior U.S. leaders. Conveniently, the upcoming TPP fight will be a genuinely momentous test. If the administration flunks – meaning that it finishes the deal and successfully steers it through Congress – the links between America’s economy and the world’s could grow broad and deep enough to ensure sluggish-at-best domestic growth for many more years.

Those Stubborn Facts: Trade Deals MIA in Obama State of the Union Follow-Ups

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fast track, Obama, State of the Union, Those Stubborn Facts, TPA, TPP. Trans-Pacific Partnership, Trade, Trade Promotion Authority, TTIP

# of words on trade, TPP, fast track in Obama State of the Union: 191

# of words on trade, TPP, fast track in Obama State of the Union follow-ups in Idaho, Kansas, and on radio: 0

(Sources: “Remarks by the President on Middle-Class Economics – Boise, ID,” Office of the Press Secretary, The White House, Speeches & Remarks, Briefing Room, October 21, 2015, http://www.wh”remaritehouse.gov/the-press-office/2015/01/21/remarks-president-middle-class-economics-boise-id; “Remarks by the President on Middle-Class Economics, University of Kansas – Lawrence , KS,” January 22, 2015, ibid., http://www.whitehouse.gov/the-press-office/2015/01/22/remarks-president-middle-class-economics-university-kansas-lawrence-ks; and “Weekly Address: Middle-Class Economics,” January 24, 2015, ibid., http://www.whitehouse.gov/the-press-office/2015/01/24/weekly-address-middle-class-economics)