Category Archives: Trade

TPP: A Deregulation Treaty Not A Trade Treaty

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The upcoming Trans-Pacific Partnership (TPP) agreement is using a process that is rigged from the start. It is not being negotiated by governments for the benefit of their people, it is being negotiated by executives (or future executives/lobbyists currently in government) largely for the benefit of the giant corporations they serve. The process has these giant corporations “in the loop” but groups citizens, working people, consumers, the environment, human rights groups and especially democracy are not part of the process. That can only go one way: if you don’t have a seat at the table you are on the table — the meal.

Chile’s TPP Negotiator Quits, Warns Citizens

Rodrigo Contreras, Chile’s lead TPP negotiator recently up and quit to warn people of the dangers this agreement poses to everyone except the giant multinational corporations. In The New Chessboard, (English translation) Contreras warns that the TPP is solidifying multinational corporate control over the Internet, copyrights, patents (especially drug patents), and in particular warns that the giant financial interests are solidifying their current control over the regulatory process. He writes that this will block countries that are trying to “restore the space for applying financial safeguards. In these circumstances it does not makes sense to further liberalize capital flows, depriving us of legitimate tools to safeguard financial stability.”

In particular Contreras warns that smaller countries face a threat from this agreement’s solidifying of the con trol of the giant multinationals, concluding,

It is critical to reject the imposition of a model designed according to realities of high-income countries, which are very different from the other participating countries.Otherwise, this agreement will become a threat for our countries: it will restrict our developmentoptions in health and education, in biological and cultural diversity, and in the design of public policiesand the transformation of our economies. It will also generate pressures from increasingly active socialmovements, who are not willing to grant a pass to governments that accept an outcome of the TPPnegotiations that limits possibilities to increase the prosperity and well-being of our countries.

Yves Smith at Naked Capitalism, in Chile’s Recent Lead Negotiator on Trans-Pacific Partnership Warns It Could Be a “Threat to Our Countries”, gives us a look at the context of what it means for a country’s TPP negotiator to quit and sound the alarms. She writes that this is “a statement of principle that comes at considerable personal cost” and that “his call to Latin American negotiators has deep-sixed his chances of getting another senior government role or being retained by large companies as a lobbyist or advisor.”

A job as a lobbyist or advisor to the multinationals is the golden goose that drives the negotiators. The last US negotiator, Ron Kirk, recently left that post to join the law firm Gibson Dunn where he will advise giant multinationals, probably for free. (Just kidding, he isn’t doing it for free.) The Financial Times notes that “Other former US trade representatives, including Charlene Barshefsky and Mickey Cantor under President Bill Clinton, also joined law firms after their tenures in government.” They probably also are not advising giant multinationals for free, either.,

Smith at Naked Capitalism notes that, “Some of Asian participants in the negotiations (particularly Japan) are also believed to have serious reservations about the provisions of the TPP that would weaken national sovereignity by allowing corporations to challenge laws and regulations as violations of the TPP.”

Americans are also reacting to the threat that the TPP poses to national sovereignty — government’s ability to control the wealth and power of the giant multinationals. Bloomberg News yesterday, in Wall Street Seeks Dodd-Frank Changes Through Trade Talks warns that, “U.S. bankers and insurers are trying to use trade deals, which can trump existing legislation, to weaken parts of the Dodd-Frank Act designed to prevent a repeat of the 2008 financial crisis.”

The Bloomberg report gets into some specific problems that watchdog groups see. For example, “The trade talks could easily become a Trojan Horse,” said Marcus Stanley, the policy director for Americans for Financial Reform, a group that includes labor unions, civil rights organizations and consumer advocates.

Trade agreements, once signed, override national sovereignty and limit a country’s ability to regulate giant corporations. The Bloomberg report noted that the financial industry is already trying to use existing trade agreements to roll back regulations required by the 3-year-old Dodd-Frank law,

The financial services industry has already invoked international trade rules in its bid to weaken proposed regulations, notably the Volcker rule that would ban proprietary trading. Named after former Federal Reserve chairman Paul Volcker, the rule is a signature part of Dodd-Frank.
The U.S. Chamber of Commerce sought a review of the rule by U.S. trade authorities, arguing it violated existing agreements.

So the financial industry is trying to use the upcoming TPP to overturn portions of Dodd-Frank and other rules in other countries they see as restricting their power.

Senator Elizabeth Warren spoke of this at a recent Senate hearing:

Fix The Process

The process that we use to negotiate our “trade” agreements needs to be changed to relect that this country is supposed to be run by We, the People. The current secrecy must give way to an open, transparent participative process that serves citizens, workers, the environment, consumers, human rights and other considerations of all the stakeholders.

The way the process is currently set up, the giant multinationals have a seat at the table, and they are salivating as they await the main course. We the People and our silly laws and regulations that are in the way of the profits of the 1% are being prepared to be served up. And a fine meal we will be.

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

Apple Avoiding Billions And Billions Of Dollars In Taxes

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Apple (like many giant, multinational corporations) has been avoiding paying the taxes they owe to the country by setting up foreign “subsidiaries” in tax-haven countries, and moving jobs and profit centers out of the country. They have accumulated billions upon billions of dollars in these tax havens. Now they want a special tax break to reward them for doing that.

Tomorrow the U.S. Senate Permanent Subcommittee on Investigations is scheduled to hold a hearing titled “Offshore Profit Shifting and the U.S. Tax Code – Part 2 (Apple, Inc.)” with Apple’s Tim Cook. Apple is holding more than $100 billion in tax haven countries, to evade U.S. taxes. At the hearing, Cook (2011 compensation $378 million) is expected to offer a proposal for changes to the corporate tax system.

Cook’s proposal is likely to be for a “tax repatriation holiday” and a “territorial tax system,” both of which mean giant, multinational companies like Apple will pay less in taxes, people like Cook will have even more money, and We the People will end up with higher taxes, fewer good schools and good roads and police and teachers and the other things government does to make our lives better. As a bonus, this makes giant multinationals that move jobs and profits overseas even more competitive against smaller American companies that keep jobs and profits here and do not have foreign “subsidiaries” located in tax havens.

New Report On Apple’s Tax Avoidance

Citizens for Tax Justice (CTJ), Americans for Tax Fairness (ATF) and the AFL-CIO held a conference call today to talk about a new report by CTJ, “Apple Holds Billions of Dollars in Foreign Tax Havens,” documenting Apple’s offshore tax avoidance. The report states that,

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Deficit Fixed. Now Fix The Job Gap, Wage Gap And Trade Gap

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The deficit is now down 60 percent as a percent of gross domestic product. It is down more than the deficit hawks Alan Simpson and Erskine Bowles asked for. This rapid reduction is seriously hurting the economy and jobs, but demands for cuts continue. It is time for Congress and the President to “pivot” to focusing on our real problems: the jobs gap, the wage gap and the trade gap.

Mythical Deficit Problem Solved

The “deficit problem” is man-made. When Bill Clinton was president we were paying off the debt. George W. Bush turned Clinton’s budget surpluses right around, calling deficits “extremely positive news” because they would later force cuts in government. Ronald Reagan’s “strategic deficits” began a strategy to make the borrowing appear so bad that the public would be panicked into allowing cuts in the things government does to make our lives better – so the wealthy few could have even more wealth and power. (Reagan tripled the national debt, Bush doubled it again.)

So after Bush we had a problem. When ‘W’ left office the budget deficit was $1.4 trillion. Then after Obama took office Wall Street and the right started terrifying the public about deficits and outlining their “solutions”: Cut government, cut regulation of the giant corporations, cut entitlements, cut investment in infrastructure, privatize public assets, cut the safety net, etc… Cut the things that government does to make our lives better (government spending) and cut the things government does to protect us from the immense power of the insanely wealthy and their giant corporations.

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Upcoming Trans-Pacific Partnership Looks Like Corporate Takeover

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You will be hearing a lot about the upcoming Trans-Pacific Partnership (TPP) agreement. TPP’s negotiations are being held in secret with details kept secret even from our Congress. But giant corporations are in the loop.

TPP is a “trade” agreement between several Pacific-rim countries that is actually about much more than just trade. It will be sold as a trade agreement (because everyone knows that “trade” is good) but much of it appears to be (from what we know) a corporate end-run around things We the People want to do to reign in the giant corporations — like Wall Street regulation, environmental regulation and corporate taxation.

One-Sided Process

The TPP process appears to be set up to push corporate interests over other interests. The TPP is being negotiated in secret, so what we know about it comes from leaked documents. Even our Congress is being kept out of the loop. But 600 corporate representatives are in the loop while representatives of groups that protect working people, human, political and civil rights and our environment are largely not in the loop.

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Beware the New Corporate Tax-Cut Scam: LIFT Is A Big LIE

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First it was Fix the Debt, with tax-dodging corporations “leading the charge for massive new corporate tax cuts paid for with cuts to Social Security, Medicare, and Medicaid.” Now there’s a new “LIFT America coalition,” pushing for massive, massive corporate tax cuts, without bothering about cutting benefits. LIFT stands for “Let’s Invest for Tomorrow,” but as Citizens For Tax Justice (CTJ) points out, it really ought to be called LIE, for “Let’s Invest Elsewhere.”

The executives who run the giant multinationals want to be let off the hook for paying taxes on profits they make outside our borders. As an Apple executive said to The New York Times, giant multinationals “don’t have an obligation to solve America’s problems.” And to prove it, American corporations are holding $1.7 trillion in profits outside the country – just sitting there – rather than bringing that money home, paying the taxes due and then paying it out to shareholders or using it to “create jobs” with new factories, research facilities and equipment.

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Important Bipartisan Currency Bill Introduced In House

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A new bill was introduced in the House today to fight currency manipulation, including China’s. The bipartisan Currency Reform for Fair Trade Act was introduced by Representatives Sander Levin (D-MI), Tim Murphy (R-PA), Tim Ryan (D-OH), and Mo Brooks (R-AL). This bill would treat undervalued currency as a subsidy under U.S. trade law, meaning we could apply tariffs to goods from countries that do this.

A nearly identical bill passed the House overwhelmingly in the 111th Congress and had 234 bipartisan cosponsors in the recent 112th Congress after passing overwhelmingly in the Senate. But Speaker Boehner refused to allow a vote, and the bill did not become law.

Currency Manipulation

Some countries go to great lengths to keep their currencies “weak” relative to where currency markets say they should be set. This means goods from these countries cost less than goods from countries with “stronger” currencies. This gives companies making things in these countries a competitive advantage in world markets, and the jobs and factories flow to those countries. It costs these countries money to accomplish this, but they get it back by gaining all those jobs and sales of goods and services.

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Is Ths Where The (Middle-Class) Money Went?

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Tuesday’s post, 40% Of Americans Now Make Less Than 1968 Minimum Wage, was updated with this chart:

The chart shows that wages used to go up as productivity went up, but in the 1970s they decoupled. Productivity kept going up but wages stagnated.

Now, here’s another chart. This chart shows that financial-sector and non-financial-sector compensation used to rise together, but in the late 70′s / early 80′s they decoupled. Financial-sector compensation took off, while non-financial-sector compensation did not.

Correlation isn’t causation, but just sayin’…

In the post, 40% Of Americans Now Make Less Than 1968 Minimum Wage, I wrote this about that:

This means the gains went … somewhere else. See if you can guess who got them? (Hint: it’s the 1%; this is one driver of the terrible income and wealth inequality.) This breakoff of wages from productivity growth is partly (largely?) the result of trade agreements that pit Americans against exploited workers in non-democracies. This weakened the bargaining power of unions, moved factories and industries out of the country, devastated entire regions of our country — and gave the giant multinational corporations, Wall Street and the billionaires the leverage they needed…

(*Click charts for sources.)
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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

Tom Friedman Explains The Problem With The Economy

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Tom Friedman says the way to get the economy moving is with a “grand bargain” that “slows the growth of both Social Security and Medicare entitlements” along with “reform” that cuts taxes for the rich and corporations.

Tom Friedman says this will provide “certainty,” so companies will have “confidence” and will invest and hire.

You see, the problem isn’t high unemployment leaving people out of the economy, resulting in businesses not having enough customers coming in the door. That is not the reason businesses don’t feel confident enough to expand and hire.

And the budget problem isn’t because Bush doubled the military budget after Reagan did the same, after cutting taxes on the rich… And never mind that the budget didn’t have a deficit before those things… And never mind that they said they were “cutting the government’s allowance” and “starving the beast” in order to manufacture a deficit crisis so they could scare people into cutting the things we do to make our lives better. Never mind that they said that was the plan…

The real problem with our economy is that regular working people have too much, and the wealthy and their corporate masks have too little.

And we need a “Grand Bargain” imposed on us from the top, instead of just going with the results of the election we just had or all of the polls in which people said they want JOBS, higher taxes on the wealthy and corporations, military spending decreased, and better retirement and health care packages for regular people…

Tom Friedman thinks the wealthy people at the top should be making the decisions, not the people.

Surely anyone can see the wisdom in that, right?

And yes, this post is in the category “Plutocracy”

Update: TRADE DEFICIT. Dean Baker at CEPR says the problem is the trade deficit, in The Educate a Cab Driver, Educate Thomas Friedman Campaign:

Our cab driver could also explain to Thomas Friedman how a trade deficit of 4 percent of GDP (also $600 billion in annual demand) affects the economy. The national income accounting that students learn in intro economics is that GDP = consumption + investment +government spending + net exports. If we have a trade deficit of $600 billion then we need to have the other categories fill that gap to get the economy back to full employment.

In the last decade the demand created by the housing bubble filled the gap created by the trade deficit. In the 1990s the demand created by the stock bubble filled the gap created by a somewhat smaller trade deficit. Now we have nothing to fill the gap. And if anything Friedman’s remedies go in the wrong direction.

Fix The Trade Deficit, Fix The Economy.

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Yet another report is out showing how the trade deficit is costing us millions of jobs and hurting our economy. This report has specific numbers: between 2.2 million and 4.7 million U.S. jobs, between 1 percent and 2.1 percent of the unemployment rate and a gross domestic product increase of between 1.4 percent and 3.1 percent.

These are real numbers that were carefully calculated. This is a real problem that is hurting people, hurting small and mid-sized companies, hurting communities, hurting our tax base and hurting our ability to make a living in the future. And there are real solutions available to fix the problem.

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Reporters: Ask About The TRADE Deficit

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Government spending is We, the People doing things to make our lives better. Trade deficits are caused by billionaires and their giant corporations pitting America’s working people against exploited people who have no say, so they can drive down our wages and pocket the difference. Have you noticed that the people who are making the most noise about the budget deficit tend to be the same crowd that’s benefiting from the ruinous trade deficit?

Budget vs trade deficit… You can learn a lot about how our country’s media and policy apparatus works by taking a good look at the way the two are handled. One — pushed by the billionaires and their giant corporations — gets all the attention. The other — the cause of the destruction of our middle class — gets none.

Reporters and others: you should ask policymakers what they plan to do about the trade deficit — that’s the one that really is hurting the country.

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If You Want To Reform Something, Reform The Trade Agreements

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When you hear anyone from the big multinationals or Wall Street using the word “reform,” watch out! The way they use the word, it means give them more and We, the People get less. They want to “reform” Social Security, “reform” Medicare and “reform” the income tax code. And now they want to “reform” the taxes corporations pay on money made outside the US. It’s like “reforming” an oak tree with an ax.

$420 Billion In Taxes Owed

American corporations are holding a lot of (their shareholders’) cash “outside of the country.” (But not really outside.) HOW much money are we talking about? Approx $1.2 trillion as of last March. This is money these companies have made in international profits, owed to their shareholders or potentially used for investment in US jobs, facilities and equipment. But they won’t bring the money back to the US because they would have to pay taxes if they did. Instead they are holding it “outside of the country” and pushing for “reform” — meaning let them out of their tax bill. If this $1.2 trillion were repatriated and taxed at the full corporate tax rate of 35% this would bring an additional $420 billion to the treasury for We, the People to use to rebuild our infrastructure, etc.

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Why Voters Need To Know About #Sensata

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Right now a company named Sensata is moving equipment out of a factory in Freeport, Ill. and shipping it to a factory in China. Sensata will be laying off all of the American workers, but first they are making the workers train their Chinese replacements. The workers’ last day is the day before our election. Here’s the thing: this company is owned by Bain Capital, and Mitt Romney — who says he is against shipping jobs to China — will make a fortune from the move to China.
The Sensata employees have set up a camp outside the factory that they call Bainport and are trying to stop the Bain trucks that are moving the equipment out for shipment to China. These soon-to-be-jobless workers have asked Romney to come help them.
This is a tremendous opportunity for Mitt Romney. As the former head of Bain Capital and with all the visibility of a presidential campaign, he could step in and help these workers. It offers him the chance to demonstrate to voters that he means the things he says on the campaign trail, and is not just saying these things to get votes. But Romney has refused.
Mitt Romney says on the campaign trail that he will crack down on China and is against companies shipping jobs to China. These are very popular positions to take — the public overwhelmingly wants to see things made in America again, and understands that China’s trade cheating is costing us dearly. So a candidate for president would certainly say he is for doing this. But when it comes time to show that he will actually means it and will do something about it, it looks as though Romney is not doing it. These workers have asked for his help, but he won’t do it. Voters should know about this, and make up their own minds about whether Mitt Romney means what he says, or just says what he needs to say to win.

Bain Capital And Sensata

Mitt Romney started the “private equity” firm Bain Capital. Bain’s business model is to purchase companies using “leveraged buyouts” that borrow huge sums using the purchased company’s own assets as collateral, uses the borrowed money to immediately pay itself, then cuts costs by doing things like sending jobs to China, cutting wages and manipulating tax rules to cut taxes owed, along with standard big-business practices like consolidating business units, taking advantage of economies of scale not available to smaller competitors, squeezing distribution channels for price cuts, and other practices that bring competitive advantages. (See So DID Mitt Romney Really “Create Jobs” At Staples? and Truthout: Romney & Company Shipped Every Single Delphi UAW Job to China.) After reorganizing the purchased companies and cutting costs — namely: you — Bain then “harvests” them for profit.
One company that Bain Capital purchased — after Romney’s time as CEO — is Sensata, a sensor manufacturer that makes key components for our automobile supply chain. Sensata then announced it is closing the factory in Freeport, Ill., and sending all of the manufacturing and jobs to China. This is significant because China is engaged in an effort to capture the automobile manufacturing supply chain, and sensors are a key strategic chokepoint. China built a factory for Sensata, and offers other incentives to the company to move manufacturing there.
So Bain is currently moving all of the equipment out of the Freeport factory, preparing to shut it down and lay off all of the American workers. Bain/Sensata brought in Chinese workers and made the Freeport workers train them. Bain/Sensata is moving the equipment out of the Freeport factory and shipping it to China right now.
The Sensata employees heard Romney on the campaign trail, and somehow got the idea that he opposes sending our jobs to China just because he says that he opposes sending our jobs to China. So the Sensata workers asked him to come to Freeport/Bainport and help them. Read on to learn about Romney’s response to the Sensata workers, and how Romney is actually making big money right now from shipping their jobs to China.

“The week before they came they took the American flag down outside the plant. The week after they left they put it back up.”

Romney Making A Fortune From Sensata Sending Jobs To China

While Mitt Romney no longer manages Bain Capital, he still has millions of dollars in Bain funds and will personally make a fortune from this company moving to China – both from profits and from tax breaks. (What you and I consider a fortune, Romney might consider a drop in the bucket.)
A must-read news report by Sharon LaFraniere and Mike McIntire in The New York Times explains. As Romney Repeats Trade Message, Bain Maintains China Ties (emphasis added, for emphasis),

Mr. Romney also has millions invested in a series of Bain funds that have a controlling stake in Sensata Technologies, a manufacturer of sensors and controls for vehicles, aircraft and electric motors that employs 4,000 workers in China. Since Bain took over the operation in 2006, its investment has quadrupled in value. Bain continues to own $2.6 billion worth of Sensata’s shares.
Two years ago, Sensata bought an operation that made automobile sensors in Freeport, Ill. At the first meeting with the plant’s 170 workers, Sensata managers announced that by the end of 2012 all the equipment and jobs would be relocated, mostly to Jiangsu Province. Workers have staged demonstrations, pleading for Mr. Romney to intervene on their behalf.
Chinese engineers, flown to Freeport for training on the equipment, described their salaries as a pittance compared with Freeport wages. Tom Gaulrapp, who has operated machines at the factory for 33 years, said he fears he will go bankrupt after he loses his job on Nov. 5.
“This goes to show the unbelievable hypocrisy of this man,” he said of Mr. Romney. “He talks about how we need to get tough on China and stop China from taking our jobs, and then he is making money off shipping our jobs there.”

Please read the entire New York Times report, As Romney Repeats Trade Message, Bain Maintains China Ties. There is much more there about Romney, China, Bain and the huge gap between what Romney says on the campaign trail, and how Romney made his current $400,000/week income and how Bain Capital still makes its money.
Also see this Huffington Post report, Mitt Romney Gets Tax Break Off Firm Sending Jobs To China,

According to his recently released 2011 tax returns, Romney transferred $701,703 worth of Sensata stock to the Tyler Charitable Foundation, a 501(c)3 tax-exempt nonprofit controlled by Romney. The gift is listed on page 323 of the pdf, on form 8283 (below).
Moving the stock to his nonprofit brings Romney twin benefits. First, he gets to deduct the full value of the stock. At a 35 percent tax rate, that’s nearly a $250,000 benefit. At 15 percent, it’s just over $100,000.
Second, Romney is able to avoid paying capital gains taxes on the stock price increase. Romney’s returns list no cost for the stock, and indicate he obtained them as part of a partnership interest in Bain. Avoiding capital gains taxes on the full increase would save an additional $100,000. In 2010, Romney gifted $170,000 worth of Sensata stock to his charity, saving $25,000 in capital gains taxes that year.
Cheryl Randecker, a Sensata worker facing an imminent layoff, said, “I could pay off my house with that [$25,000], and he doesn’t need it anyway.”

So there you have it. Mitt Romney says he opposes sending jobs to China, and says he will “crack down” on China. But he refuses to do things that he could do right now that would make an actual difference right now. And it turns out that right now he is making big money from Sensata and other companies that are sending people’s jobs to China right now.
Laying off American workers – usually shipping the jobs to China – and pocketing their wages for themselves is the story of the rise of the wealth of the 1%, and the decline of the American middle class. It is the Romney/Bain/Sensata business model. And the remaining workers have to do the jobs of the laid-off workers, often for lower pay, and are threatened with losing their jobs, too, if they don’t like it.

Economic Traitor?

This is an advertisement titled “Economic Traitor,” that is being aired by superPACs Workers’ Voice and Patriot Majority, based on Sensata:

Click here to see all of CAF’s coverage of Sensata.
Bain Of Our Existence – The Go-To place for stories and info about Bain Capital.
For more information, photos and stories from the Sensata workers, please visit bainport.com.

For Fun

From UnitedNY, if Bain Capital was your psychologist:

PATIENT (LYING DOWN on couch): I think he’s depressed. I mean, he is a good kid but he just keeps to himself. I can’t get him to talk or spend time with the family and barely does any chores.
BAIN: Have you consider outsourcing? (hold shot of PATIENT)
PATIENT (confusion) You want me to outsource my son? (TURNS HEAD towards BAIN in surprise)
CUT to Bain face
BAIN: Yes, you can find some very obedient children in China or Bangladesh, even the Philippines.
(P.S. The reason I use #Sensata in the titles is because on Twitter the “hashtag” helps get the word out.)
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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