“Comparative advantage.” It used to mean that one region can grow bananas, another region can grow cotton. So they trade, and both regions can have cotton AND bananas. That is not what the term means today. Now it means low wages and lack of environmental protection.
In the US we (used to) have democracy. When people get to say what they want, they say they want good wages, good schools, good infrastructure, protect the environment, good courts, things like that. These of course cost money, but they money comes from the advanced business environment supported by good schools and infrastructure… So the prosperity from businesses growing due to good infrastructure and schools and courts etc is the fruit of democracy.
In places without democracy people are told they can’t have those things so wages are low and there is no cost to protect the environment.
If we let companies just close factories here and open them there and bring the same goods back to sell in the same stores, what we have done is made democracy a “comparative disadvantage.” “Free trade” lets those companies escape the costs of good wages and protecting the environment while still enjoying open access to the good market that democracy had created.
“Free trade” turns democracy into a comparative and competitive disadvantage. Over time it erodes the tax base that gave us good schools and infrastructure — the fertile soil in which businesses can grow. Also known as “look around you.”
The Trans-Pacific Partnership (TPP) is likely to come up for a vote in the “lame-duck” session of Congress that follows the November presidential election. Will the Democratic Party vote to put the platform on record against this, or will corporate interests win out yet again? This is an either-or, whose-side-are-you-on moment that will define the election campaign.
If the Democratic National Committee does not put TPP opposition into the platform it will lead to a public, televised convention floor fight.
Will The Democratic Party Platform Oppose A Lame Duck TPP Vote?
This weekend the full Democratic platform drafting committee meets in Orlando. Delegates will be debating an amendment offered by columnist and progressive activist Jim Hightower, a Sanders delegate, putting the party on record opposing a vote on the TPP during the “lame-duck” session of Congress that follows the election.
The amendment calls for striking platform language that effectively blesses Democrats who “have expressed support for the agreement” and replaces it with this: “It is the policy of the Democratic Party that the Trans-Pacific Partnership must not get a vote in this Congress or in future sessions of Congress.”
Presidential candidates Hillary Clinton, Bernie Sanders and Donald Trump have all announced opposition to a TPP vote in the lame-duck session, but Wall Street interests, corporate groups like the Chamber of Commerce, many Republicans – and, unfortunately, President Obama – are pushing for this anyway.
Despite statements of opposition to the TPP from both Clinton and Sanders, a subset of the committee recently voted down the proposal to oppose the TPP. A majority of delegates (all Clinton backers) expressed concern that this would bring the party in opposition to President Obama.
If the committee does not put this into the platform this weekend, there will be enough convention delegates opposing the TPP to guarantee a “floor fight” – a televised debate and a vote – over this at the convention. The outcome is fairly certain because all Sanders delegates support this amendment, and it is almost unthinkable that Clinton delegates will vote against Clinton’s own stated opposition to the TPP.
Progressive Coalitions Deliver Petitions To Pelosi, Platform Committee
A coalition of progressive organizations on Thursday delivered hundreds of thousands of petition signatures asking House Democratic Leader Nancy Pelosi to declare her opposition to a lame-duck TPP vote. The coalition includes organizations ranging from Campaign for America’s Future to People’s Action to MoveOn to CREDO to Daily Kos and Demand Progress.
On Friday, another coalition will deliver more than a million signatures to the platform committee itself, demanding that it add an amendment opposing a lame-duck TPP vote.
The coalition hosted a Thursday press call featuring radio and TV personality Ed Schultz. Shultz began the call, saying this is about support of middle-class families in this country. He said there has never been a more damaging trade agreement than the TPP. Speaking to the platform committee, he said, “If you are for American families and want to correct course of inequality you have to oppose this deal. … This is not about Obama’s legacy, this is about American families that are struggling.”
Also on the call, Murshed Zaheed, vice president and political director of CREDO said that its members have signed over 1 million petitions to stop the TPP, and have made over 50,000 calls. “There’s a reason every major presidential candidate opposes TPP,” he said. “TPP is an undemocratic corporate power grab.”
“This also a political battle,” said Campaign for America’s Future co-founder Roger Hickey. “Tomorrow we are hoping that members of the Democratic platform committee will amend the platform and put the Democratic Party clearly on record against a lame-duck vote. … Without this, it allows Donald Trump to continue to say Democrats are not serious.”
A Lame Duck TPP Vote Insults Democracy
The “lame duck” is a term used for the Congressional session between the election and the next Congress. People who follow politics understand that political accountability to constituents is at its absolute lowest at this time. Senators and representatives who have been voted out (many for supporting the TPP) and are looking for lobbying jobs, and those who were re-elected with corporate money and need to repay their donors, will be voting. Members who were elected because of their opposition to the TPP will not yet be sworn in and voting. This all happens two years before there is any chance for the public to hold members of Congress accountable.
With the TPP enormously unpopular, with candidates Clinton, Trump and Sanders all opposed, with 83 percent of Democrats in Congress voting against fast-tracking the trade agreement last year, the lame-duck Congressional session is the best chance for corporate interests to push TPP around the interests of democracy. So they are going to try to do exactly that.
Leaders should care deeply about the will of the public, not scheme to subvert it. This push for a vote on TPP after the election is an insult to democracy. It is an insult to our economy. It is an insult to the candidates. It is an insult to voters. Don’t do it.
Whose Side Are They On?
It is clearly time for Democrats to decide and declare whether they are on the side of working people and the American middle class, or on the side of Wall Street, giant multinational corporations, the Chamber of Commerce and other corporate lobbying interests. They have to decide if they are on the side of the 99 percent 1 percent. They have to decide if they are on the side of protecting the environment or protecting corporate profits.
Hillary Clinton and Bernie Sanders have said they oppose the TPP. The Democratic Party platform should reflect this and go on the record that Democrats oppose a rigged “lame-duck” vote.
Donald Trump is selling himself as the champion of working-class voters. He says Democrats and their presumptive presidential nominee, Hillary Clinton, are selling them out with trade deals. But Trump is just a fraud.
Unfortunately, President Obama is pushing the Trans-Pacific Partnership (TPP) agreement and Clinton is not confronting him for doing so.
That has to change – fast. Clinton must publicly, directly and loudly challenge President Obama and demand that he withdraw TPP from consideration by Congress.
Trump’s Trade Speech
Trump’s speech on trade and “globalization” issues attempted to frame Clinton and Democrats as being on the side of the “Wall Street” forces that have pushed low-wage policies on working-class Americans. He is using the upcoming and hated TPP being pushed by President Obama as an example of this, saying Clinton is only “pretending” to oppose TPP in order to get votes.
From the speech:
The legacy of Pennsylvania steelworkers lives in the bridges, railways and skyscrapers that make up our great American landscape.
But our workers’ loyalty was repaid with betrayal.
Our politicians have aggressively pursued a policy of globalization — moving our jobs, our wealth and our factories to Mexico and overseas.
Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.
[. . .] The people who rigged the system are supporting Hillary Clinton because they know as long as she is in charge nothing will ever change.
In Trump’s usage, the words “trade” and “globalization” mean one and only one thing: moving American jobs and factories to low-wage countries. This movement of jobs in recent decades, pitting American workers against exploited workers who are paid squat and can’t do anything about it, has been used as one lever to intentionally create unemployment, break the unions and force down wages. (Inflation panic leading to Federal Reserve interest rate increases, deficit scares leading to austerity — especially the refusal to spend on infrastructure – and obstruction leading to minimum wage stagnation are others.)
Trump is appealing to disaffected working class workers who used to vote Democratic, but have seen their jobs shipped out of the country and/or their wages cut or stagnate. These workers see Democrats as complicit in adopting free-trade deindustrialization policies. The North American Free Trade Agreement (NAFTA), pushed and signed by President Clinton, has become a catchall symbol of this disaffection with free-trade policies, but Democrats are generally seen as having done little to fight such policies.
President Obama contributed to the problem by campaigning with a promise to renegotiate NAFTA, then reneging on this promise once elected.
Pressing his staunch opposition to trade deals, Donald J. Trump escalated his attacks on the U.S. Chamber of Commerce on Wednesday, saying it was “totally controlled by the special interest groups.”
“They’re a special interest that wants to have the deals that they want to have,” he told a packed arena at a rally here, to whoops and cheers. “They want to have T.P.P., the Trans-Pacific Partnership, one of the worst deals, and it’ll be the worst deal since NAFTA.”
[. . .] saying the Chamber was “controlled totally by various groups of people that don’t care about you whatsoever.”
Obama Pushing TPP As Election Nears
Clinton has said she is opposed to TPP, and opposed to letting TPP come up for a vote in the “lame duck” session of Congress that follows the election. But as Trump makes trade a centerpiece of his campaign, her opposition and trade focus has not been particularly vocal. She has not asked Democrats in Congress to oppose the TPP, and thanks to past Democratic betrayals many in the public just do not believe her.
Unfortunately, as the election nears, President Obama is pushing and pushing hard to get the TPP passed. Doing this directly conflicts with Clinton’s need to show that Democrats are on the side of working people and provides Trump with powerful ammunition.
Making matters worse, efforts to write TPP opposition into the Democratic Party platform were voted down – by Clinton delegates. Unlike Trump, Democrats do not appear to understand how much this matters to voters.
The recent “Brexit” vote should serve as a warning to Democrats to take issues like this more seriously. Working-class voters in the UK voted to leave the European Union (EU) for reasons similar to the appeal Trump is making to working-class voters here.
Analyzing the “Leave” vote in “A Working-Class Brexit,” University of Kent Professor Tim Strangleman writes the following. As you read it, substitute “Democrats” for “Labour”, “Bill Clinton” for “Blair”, “elites supporting free trade agreements” for “remain”, “anti-TPP” for “leave” and “Trump” for “UKIP”:
Resignation, despair, and political apathy have been present in many former industrial regions since the wholesale deindustrialisation of the … economy in the 1980s and 1990s. The election of the Blair-led Labour administration … masked the anger felt in these areas as traditional labour supporters and their needs were often ignored, while traditional Labour supporters were used as voting fodder. Over the … years of Labour power, that support ebbed away, first as a simple decline in votes, but gradually turning into active hostility to the Labour party. Many embraced the UK Independence Party (UKIP).
…for unskilled workers with only a secondary school education, three decades or more of neo-liberalism has left deep scars socially, politically, and culturally, with little hope or expectation that anything would change for the better.
This opposition, so skillfully drawn on by the leave campaign, is in part a working class reaction not only to six years of austerity but also to a long and deep-seated sense of injustice and marginalisation. Most of the remain side, which was a cross party grouping, didn’t seem to understand this before the referendum and, even more depressingly, doesn’t seem to understand it fully now. A stock characterisation of working-class people who intended to vote leave was to label them as unable understanding the issues, easily manipulated, or worse, racist ‘little Englanders’.
Doesn’t this sound just like the working-class voters in places like Ohio, Michigan, Indiana, Pennsylvania and other “deindustrialized” parts of the country? These voters used to reliably vote for Democrats, the party that watched out for working people. Donald Trump is appealing directly to these voters. Democrats should not dismiss these voters as “ignorant” or “racist.”
Trump Is A Fraud On Trade
The Economic Policy Institute’s (EPI) Robert Scott, speaking to VICE, summed up why Trump only appears to have the correct analysis on trade:
“Like a drive-by shooting, he fires enough bullets, he’s going to hit some things that might look like a policy that works,” Scott told VICE. “But it doesn’t have a coherence.”
“The problem with NAFTA is that we failed to effectively help Mexico develop as part of the agreement,” Scott continued. A good model, he said, was what wealthier European nations did for their neighbors like Greece and Spain decades ago, pumping money into their economies to create new markets for goods, thus making a Pan-European economy possible.
“We could create such a vision and implement a truly united North American economy that worked for everybody but nobody’s put that on the table,” he said. “Certainly Trump is not talking about that—he’s talking about building walls.”
It’s true that the way we have undertaken globalization has hurt the vast majority of working people in this country—a view that EPI has been articulating for years, and that we will continue to articulate well after November. However, Trump’s speech makes it seem as if globalization is solely responsible for wage suppression, and that elite Democrats are solely responsible for globalization. Missing from his tale is the role of corporations and their allies have played in pushing this agenda, and the role the party he leads has played in implementing it. After all, NAFTA never would have passed without GOP votes, as two-thirds of the House Democrats opposed it.
Republican efforts to drive wages down are the real culprit here:
Furthermore, Trump has heretofore ignored the many other intentional policies that businesses and the top 1 percent have pushed to suppress wages over the last four decades. Start with excessive unemployment due to Federal Reserve Board policies which were antagonistic to wage growth and friendly to the finance sector and bondholders. Excessive unemployment leads to less wage growth, especially for low- and middle-wage workers. Add in government austerity at the federal and state levels—which has mostly been pushed by GOP governors and legislatures—that has impeded the recovery and stunted wage growth. There’s also the decimation of collective bargaining, which is the single largest reason that middle class wages have faltered. Meanwhile, the minimum wage is now more than 25 percent below its 1968 level, even though productivity since then has more than doubled. Phasing in a $15 minimum wage would lift wages for at least a third of the workforce. The most recent example is the effort to overturn the recent raising of the overtime threshold that would help more than 12 million middle-wage salaried workers obtain overtime protections.
Trump in his “trade” speech also called for getting rid of corporate taxes and getting rid of regulations on corporations. He also opposes having any minimum wage at all. Trump and the Republicans are hardly friends of working people.
Opposing TPP Must Be In The Democratic Platform
British elites were surprised when working-class voters decided to “Brexit” and “Leave” the EU. They had been more-or-less complacent about the anger that working people are feeling out there as jobs leave the country, wages are stagnant or falling, work hours get longer for those who have jobs, and the rich just get richer.
Voting against opposition to TPP in the Democratic platform shows that Democrats appear to have the same complacency on trade.
Democrats must get this right. They have to stand up for working people and demand that our trade policies start helping people instead of hurting them. That starts with Clinton demanding that the president withdraw TPP from consideration by Congress.
Clinton must pledge to renegotiate all of our trade agreements, this time with labor, environmental, consumer, human rights and other “stakeholder” groups at the table. This is the best way to show the public that she is on their side.
Here are ways to help Democrats get to the right place on this, and put TPP opposition in the platform:
“There is no doubt that we are being destroyed by stupid “free trade” agreements. Trade deals have harmed most American industries, including agriculture. The US share of global market in livestock and poultry declined from 2011 to 2015 despite more trade deals. America’s ranch and red meat industry has in fact, worse trade performance with the 20 trade agreement countries than with the rest of the world. Watch this video and learn more about how “free trade” is actually rigged trade. “
Economists are still arguing over whether moving our jobs out of the country affects what the people still here get paid. Yes, really.
For example, Jared Bernstein in The Washington Post looks at different studies of the effect of moving jobs out of the country. One study, by economists David Autor, David Dorn and Gordon Hanson (referred to by Bernstein as “ADH”), was published in January by the National Bureau of Economic Research. The other, by economist Josh Bivens at the Economic Policy Institute, was published in 2013. Both found that moving jobs out of the country hurt the wages of not just the affected workers but everyone in the surrounding area. The question is, does this wage-depressing effect spread outside the local area?
Bernstein writes, “The analytic question is twofold. First, are American workers really hurt by trade competition, and second, if so, are there spillovers to those not directly in competition with imports?”
Going into the West Virginia primary, former Secretary of State Hillary Clinton has come out in opposition to a “lame duck” vote on the Trans-Pacific Partnership (TPP). This takes her beyond her previous statements mildly opposing TPP. Clinton also made a strong statement criticizing our country’s trade agreements in general.
As reported in The Hill, in “Clinton opposes TPP vote in the lame-duck session,” Clinton replied to a questionnaire from the Oregon Fair Trade Campaign, which consists of more than 25 labor, environmental and human rights organizations. When asked, “If elected President, would you oppose holding a vote on the TPP during the ‘lame duck’ session before you take office?” she replied, “I have said I oppose the TPP agreement — and that means before and after the election.”
There has been concern that TPP will come up for a vote in the lame-duck session of Congress after the election, and before the next Congress is sworn in. This special session enables votes with little accountability to the public. Members who have been voted out can vote in ways that help them get lobbying jobs and members who were re-elected with corporate money can reward their donors.
Is it really “extreme” to think we should have fair trade policies?
The New York Times on Tuesday published a story by Nelson D. Schwartz and Quoctrung Bui, “Where Jobs Are Squeezed by Chinese Trade, Voters Seek Extremes,” reporting that, “research to be unveiled this week by four leading academic economists suggests that the damage to manufacturing jobs from a sharp acceleration in globalization since the turn of the century has contributed heavily to the nation’s bitter political divide.”
By “sharp acceleration in globalization since the turn of the century” they mean millions and millions of manufacturing jobs, and more than 60,000 factories, all moved to China since 2000 to take advantage of China’s non-democracy that allows exploitation of workers and the environment. (But China doesn’t really “trade” with us by buying things, resulting in a record $365.7 billion trade deficit with China just last year.)
Yes, much of Donald Trump’s message has a white nationalist and anti-woman character to it. But here is a warning: If Hillary Clinton is going to be the Democratic nominee she had better get tough on trade – and mean it.
One of Donald Trump’ main elements of appeal to his voters – if not the main appeal – is his stance on trade and bringing jobs back to America. It is a winning message and Clinton is waaaayyyy behind the curve on this.
Much Of Trump Appeal Based On Trade
Much of Trump’s campaign message is about how our country’s trade deals have wiped out jobs. On Day 1 much of his speech announcing that he was running was about trade. From the transcript, here is some of the trade talk:
The Bush administration negotiated the Panama free trade agreement without addressing Panama’s bank and corporate secrecy. Panama has little to “trade” with the U.S., so maybe leaving secrecy out of the agreement wasn’t an accident; it was the point. It provided a stamp of legitimacy and protections for “investors” moving their money to Panama.
Panama Trade Agreement
The Panama–United States Trade Promotion Agreement, negotiated by the Bush administration, was finalized by the Obama administration and went into effect in 2012. The U.S. Trade Representative (USTR) website promotes the agreement as removing “barriers to U.S. services, including financial services.” It removed some duties and tariffs on U.S. exports and phased out others, like agricultural goods and technology products. It provided “protections” for U.S. “investors.”
Hillary Clinton has a credibility problem when it comes to our country’s trade policies and the resulting enormous, humongous trade deficits that measure job loss – especially with regard to the Trans-Pacific Partnership.
But Clinton has a chance to shore up her credibility with Democratic voters on this issue. It comes as President Obama, Wall Street and the multinational corporations are preparing to grease the skids for pushing the TPP through Congress in the post-election “lame duck” session.
Clinton, Credibility And Free Trade
Following months of demands that she take a position on the trade agreement, Clinton stated during an October PBS Newshour interview (just before the first debate with candidate Bernie Sanders) that TPP could, “… end up doing more harm than good for hard-working American families whose paychecks have barely budged in years.”
Unfortunately for Clinton, few believe she means it. The business community, for example, sees Clinton’s position as simple posturing to voters for the election, believing she will switch back to supporting the agreement immediately after the election, as Obama did on NAFTA after promising throughout the 2008 campaign to renegotiate the agreement.
Buckeye State voters in both parties delivered wins to trade-friendly candidates on Tuesday—and denied them to a pair who staked their claims on pledges to oppose new deals, starting with the Trans Pacific Partnership. That outcome was in doubt after Ohio’s neighbors to the north in Michigan last week voted for reality-show billionaire Donald Trump and Vermont Sen. Bernie Sanders, the most aggressive trade foes in the field.
But in Ohio, Hillary Clinton and home-state Gov. John Kasich prevailed.
The business community doesn’t believe for a minute that Clinton really opposes TPP.
Working-class voters have a similar problem, solidly identifying Clinton with free-trade positions. Candidate Bernie Sanders has used this perception against her, winning Michigan and Wisconsin and gaining on her in Ohio and other states. These wins were a result of campaigning as a candidate who will restore balance to our country’s trade policies, as opposed to Clinton as a candidate favoring agreements that send jobs out of the country and who has even said such offshoring “is probably a plus for the economy in the long run.”
President Obama Presents Clinton With An Opportunity To Restore Credibility
President Obama is presenting Clinton with an opportunity to restore her credibility on TPP. Politico’s Morning Trade reported on Monday that the Obama administration is ramping up “a process” for “pushing for TPP approval in Congress.”
The escalating anti-trade rhetoric emerging from the presidential election isn’t striking any fear in the heart of President Barack Obama or decreasing his willingness to send the TPP to Congress for approval, Commerce Secretary Penny Pritzker said in an interview with Pro Trade’s Doug Palmer.
“This president is not intimidated and he’s not afraid to act here,” she said. “We have a process we have to go through first. We reviewed the process this week, so we could understand all the steps. This president is fully committed to TPP, as is our administration and, frankly, as is the business community.”
Pritzker said she met with the CEOs and former CEOs of Caterpillar, Boeing and the Campbell Soup Company in recent days to talk about “the efforts their companies are going to make” as well as the efforts of the Business Roundtable, which Caterpillar CEO Doug Oberhelman chairs. She added that businesses are “raring to go” when it comes to pushing for TPP approval in Congress.
Also in Monday’s Morning Trade, another Obama official says “there will be an opportunity to get TPP done this year,” likely meaning after the election:
National Economic Council Director Jeff Zients argued forcefully on Friday for Congress to approve TPP. … “So I am very confident that there will be an opportunity to get TPP done this year, and we’ve got to do everything we can to get it done because, if we don’t, there’s no guarantee when we’ll have our next shot,” he said, arguing the trade deal matters to U.S. workers and businesses. “I can assure you it matters to this president, which is why he will be doing everything he can to get TPP done.”
Obama’s push for TPP therefore harms Clinton as she tries to be seen by voters as the Obama successor. Voters hate the TPP. Having that threat of its passage after the election hanging out there only harms Clinton in the eyes of the electorate. Candidate Clinton has an opportunity to address her TPP credibility problem by asking Obama to withdraw TPP from consideration by Congress, and calling on her supporters and endorsers in Congress to join her in demanding that the agreement be withdrawn.
Should our own government help oligarchs, billionaires and their corporations, criminals and terrorists hide their loot, launder their funds, and drain countries and their governments of needed revenue? Or should our government try to help stop this?
So far our government has too often been on the side of the bad guys.
Criminals, drug cartels, human traffickers, arms dealers, tax evaders, corrupt politicians, terrorists, oligarchs and plutocrats can use anonymous, secret shell corporations in tax-haven countries to stash, launder and hide their money. There are trillions of dollars of hidden wealth, much of it accumulated through crime and corruption. The secrecy is draining governments around the world of badly needed tax revenue, and it is enhancing and accelerating poverty and inequality.
A new report finds that around the world the extremely wealthy have accumulated at least $21 trillion in secretive offshore accounts. That’s a sum equal to the gross domestic products of the United States and Japan added together. The number may sound unbelievable, but the study was conducted by James Henry, former chief economist at the consultancy McKinsey, an expert on tax havens and offshoring. It was commissioned by Tax Justice Network, a British activist group.
The Panama Papers
The Panama Papers exposé by The International Consortium of Investigative Journalists has helped expose how certain countries enable the world’s plutocrats, outlaws, corrupt leaders, terrorists, warmongers, and the rest of the worst to use tax havens and anonymous shell corporations to hide their wealth, dodge taxes, dodge sanctions and even drain the wealth of countries. The reporting so far shows that just one Panama company had created up to 215,000 offshore shell companies for 14,153 clients. The reports link 143 politicians (or their families and close associates) to the use of tax havens to shield huge amounts of money. Again, this is from just one company in just one tax-haven, anonymous shell corporation-enabling country.
This also exposes how our own government is sometimes a party to enabling, even encouraging this activity. Our own government allows anonymous shell corporations here at home, and does not fight countries that enable them abroad when it negotiates so-called “trade” agreements that are supposed to lay down rules for financial interaction.
So-Called “Trade” Agreements, For Example
Our government negotiates what are called “trade” agreements with other countries. These negotiations are an opportunity to set up the rules for financial interactions between countries.
The 2012 U.S.- Panama Trade Promotion Agreement is promoted by our own U.S. Trade Representative’s office as “a comprehensive free trade agreement that provides elimination of tariffs and removes barriers to U.S. services, including financial services.” This agreement was an opportunity to fight global tax evasion, shell-corporation secrecy and other results of Panama’s bank and corporate secrecy. We could have negotiated to require an end to bank secrecy and shell corporations. But bank and corporate secrecy were not even part of the negotiations.
This demonstrates how the warped priorities of our “trade” process are hurting not just U.S. citizens and government but all citizens and governments.
Before the Panama trade agreement was approved, individuals, organizations and even politicians warned repeatedly that the agreement would enhance the ability of corporations and individuals to hide wealth and taxable income from governments and criminal investigators.
In 2011, Vermont Senator Bernie Sanders, for example, gave a speech on the Senate floor opposing the trade agreement, warning that Panama’s entire economic output at the time was obviously too low to be of any benefit to American workers. “Then why would we be considering a stand-alone free-trade agreement with Panama?” Sanders said the real reason for the agreement is that “Panama is a world leader when it comes to allowing wealthy Americans and large corporations to evade taxes.” He said it “will make this bad situation much worse.”
It’s so easy for U.S. corporations to set up an offshore tax haven in Panama, an intern could do it. Really! To make this point, Public Citizen’s Global Trade Watch division had one of its interns call up some Panamanian law firms for advice on starting up a shell company.
“Panamanian corporations basically pay no taxes on foreign-derived income,” one man explained to the intern, Jessica. Another said: “You’re protected by the strictest banking secrecy laws in the world,” thereby “totally removing you from the legal trail.”
Public Citizen was warning that the Panama Free Trade Agreement (FTA) did not fight and in fact further enabled the secrecy:
“It would give investors registered in Panama new rights to challenge U.S. anti-tax haven regulations and other initiatives for taxpayer-funded compensation,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch division, in an interview with The Huffington Post.
… Tucker said that the Panama FTA would compromise the Obama administration’s recently-announced crackdown on tax havens, which the president said would save $210 billion over the next decade. (A 2008 Senate report estimated that the U.S. loses $100 billion to tax havens every year.)
With so many groups and individuals warning that the Panama agreement would boost the ability of people and corporations to dodge U.S. taxes using subsidiary shell corporations and secret bank accounts, the Obama administration announced in 2010 a “Tax Information Exchange Agreement with Panama.” This agreement had a loophole letting Panama to set aside tax transparency provisions if Panama decides they are “contrary to the public policy” of Panama. Of course, Panama invoked the loophole because so much of Panama’s income comes from bank secrecy, tax-free status and the ability to set up anonymous Panama shell corporations.
This week Public Citizen’s Lori Wallach issued a statement on the revelations in The Panama Papers:
“Nearly five years after the U.S.-Panama Free Trade Agreement (FTA) vote, the Panama Paper leak proves once again how entirely cynical and meaningless are the American presidents’ and corporate boosters’ lavish promises of economic benefits and policy reforms from trade agreements. The top promise about the benefit of the U.S.-Panama FTA was that it would end Panama’s financial crime secrecy protections and tax haven and money laundering activities, but what this leak shows is that, if anything, Panama’s outrageous financial crime facilitation has intensified while the FTA’s investor protections and official U.S. stamp of approval have increased inflows of dirty money to Panama.
The silver lining in the Panama Papers scandal is that the world’s attention is being focused on a global problem in which the wealthy and powerful act beyond the reach of law, playing by a different set of rules from the rest of us. The United States does not have to go it alone in addressing this problem. But our elected officials, and the people running to be our next president, should lead. Supporting legislation that supports more transparency would be a start.
Countries that allow banking secrecy, the formation of anonymous shell corporations and tax-haven status should be considered rogue, outlaw countries. There should be international sanctions against individuals and corporations that do any business with such countries. There certainly should not be “free trade” agreements with such countries.
Harmonizing international tax law and prohibiting anonymous shell corporations should be at the center of our trade negotiations. Unfortunately, our corporate/billionaire-dominated trade process appears to have worked toward just the opposite. We the People and all of trade’s stakeholders – labor, consumer, human rights, environmental, democracy and other such groups – need to have seats alongside our businesses and government representatives at the trade negotiating table.