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The Farce of the Deal: Trump, the TPP and trade

Commentary by Dave Schneider |
February 7, 2017
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On Jan. 23, President Donald Trump signed an executive action withdrawing the U.S. from the Trans-Pacific Partnership (TPP) trade deal. Negotiated by then-president Barack Obama, the TPP would have standardized trade between the U.S., Japan, Mexico, and nine other countries in the Pacific Rim, lowering tariffs and regulations between countries to favor corporations. The agreement drew heavy criticism from labor unions and environmental groups, who argued the TPP would hurt workers and hamper efforts to address climate change.

Trump's executive action on trade has a lot of people confused, and it's understandable. Like he did on the campaign trail, Trump has played off his executive order as ‘anti-establishment’ and ‘shaking up Washington.’ After all, Wall Street and corporate America wanted the TPP passed, along with most Democrat and Republican leaders.

But Trump immediately filled his cabinet with billionaires and corporate executives, who generally support the same 'free trade' deals he criticized. For instance, Trump's pick for treasury secretary, former Goldman Sachs executive Steve Mnuchin, is a major free trade proponent, as is investment banker Gary Cohn, who will head up Trump's National Economic Council. Even Vice President Mike Pence built his political career supporting free trade. So what the hell is going on, exactly?

First off, Trump's executive order on the TPP barely drew a yawn from Wall Street, much less a harsh condemnation. Investors priced this move into the stock market months ago. Support in Congress for the TPP dried up even before Trump's unlikely victory in November 2016 due to widespread opposition to corporate outsourcing. To Wall Street, Trump's order was just a formality.

An offer he can't refuse: Opposing free trade deals important to Trump's victory

Wall Street has accepted the TPP isn't happening. The 2016 election pitted two candidates who represented Wall Street, and the billionaire, Donald Trump, won. While Trump now acts as the political representative for monopoly capitalism in the U.S., it's important to remember that he was not their first choice to win either the GOP primary or the presidency. Wall Street largely favored Clinton in the election, fearing Trump's unpredictable behavior and some of his populist rhetoric. Even Trump himself didn't expect to survive past the first few caucuses and primaries, according to campaign sources.

But from literally the first day of his campaign, Trump made repealing trade deals a defining issue. Along with building a wall along the U.S. border with Mexico, opposing trade deals became his signature platform point. Both Trump and Democratic candidate Bernie Sanders campaigned against free trade, and this message resonated with many working class voters. It's one of the major reasons why Trump trounced the field of typical corporate Republicans in the primary and mobilized enough votes to win Rust Belt states in November.

Trump had to kill the TPP. He's already walking back on other promises that were completely farcical - making Mexico pay for the wall; repeal-and-replace the Affordable Care Act on the first day; deport all undocumented immigrants. He's already made peace with Wall Street and corporate America - and they with him - but opposing free trade agreements struck a particular nerve with a massive part of Trump's mass base. He can't afford to turn them against him this early, especially in the face of giant street protests.

Bring the jobs back: Lies and damned lies

Trade deals have hurt workers on all sides of the U.S., Mexican and Canadian border. Beginning in the 1980s, Ronald Reagan launched an offensive against unions and struck down restrictions on trade. Wall Street began to buy up manufacturing businesses, outsource operations, cut jobs, bust unions, and slash wages and benefits. Corporations stepped up manufacturing goods in Third World countries because of lower wages, fewer labor laws and little to no regulations on safety or pollution. This continued into the 1990s under Bill Clinton, who signed the North American Free Trade Agreement (NAFTA) between Mexico and Canada, and into the 2000s.

From the signing of NAFTA in 1994 to 2015, the U.S. lost about 4.5 million manufacturing jobs total. Outsourcing and trade agreements contributed to this trend as corporations imported cheap goods manufactured in the Third World.

However, the major source of U.S. manufacturing job losses was automation, not trade agreements as Trump claims. Technological innovations and robotics in the last 30 years phased out millions of jobs, which lowered labor costs while raising productivity - and profits. Rising wages in developing countries, where U.S. companies exploited cheap labor for decades, has made outsourcing manufacturing operations less profitable and riskier. As a result, quite a few companies have already moved manufacturing operations back to the U.S. They simply employ less workers.

Trump's populist talk about the decline of good manufacturing jobs touched on real anger felt by workers, who saw their wages and standard of living decline because of capitalist greed. But he can't and won't deliver on his promises to "bring manufacturing jobs back" from Mexico, China and other countries - jobs largely eliminated by automation. Instead, Trump plans to viciously attack unions, wages and benefits with National Right to Work legislation and more, all in the name of corporate profits.

Rise of the machines: Using automation to boost profits, hurt workers

Contrary to Trump's claims, manufacturing output in the U.S. today is actually double that of 1979 when adjusted for inflation, totaling $1.91 trillion in 2015, according to the Department of Commerce. But while the industry produces more, it employs fewer workers due to automation. For example, auto manufacturers like General Motors employ roughly a third of their 1979 workforce despite producing far more cars.

Even when productivity increases in the U.S., the workers don't see the benefits. From 1975 to 2015, productivity increased about six times more than wages, according to the Economic Policy Institute. In other words, corporations rake in greater profits from automation and technological progress while workers lose jobs and wages.

Far from pushing a comeback of well-paid manufacturing jobs, Trump and his cabinet of billionaires plan to further leverage automation against workers. Andy Puzder, the former fast food CEO of CKE Restaurants and Trump's pick for labor secretary, strongly supports using robotics and technology to eliminate even more jobs. In 2014, Puzder argued for replacing workers with robots since, in his words, robots are "always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex or race discrimination case." For Puzder and other fast food CEOs facing pressure from workers in the Fight for $15 movement, they see automation as a weapon against labor's demands for higher wages and benefits.

Trump and war against China: Wall Street's long-term policy

Wall Street had already accepted the fact that the TPP wasn't going to pass. To them, the trade agreement was never particularly important as a purely economic initiative. In the short and medium term, most economists projected it would actually amount to a net loss for the U.S.

The real value of the TPP to Washington was as a long-term foreign policy maneuver: a centerpiece of Obama's so-called ‘Pivot to Asia.’ Long-term, the overall policy of the U.S. is preparing for a war with the People's Republic of China. Most of Wall Street favored the Obama administration's approach of boxing out China in Southeast Asia and Latin America and positioning military pieces for war, all while avoiding direct conflicts in the meantime. They hoped the TPP would keep countries like Malaysia, Singapore, Vietnam, Mexico, New Zealand and Peru from aligning with China, bribing their national capitalists with unrestricted access to U.S. markets and investment.

Trump, along with a huge section of industry, has something different in mind. They also plan on war with China, but they favor ramping up economic and military aggressions sooner rather than later. Steve Bannon, an avowed white nationalist advisor to Trump, recently placed in charge of the National Security Council, said on his radio show in March 2016, "We’re going to war in the South China Sea in five to ten years." Other key officials in Trump's cabinet, like commerce secretary nominee and billionaire Wilbur Ross, favor taking adverse economic action against China. Trump himself threatened to label China a "currency manipulator," slap tariffs on Chinese imports, and risk a trade war.

Energy corporations like Exxon-Mobil - who’s former CEO Rex Tillerson now runs the state department under the Trump administration - want to speed up the time table for confronting China. In Africa, South America and even parts of Europe, Chinese investment continues to grow, which threatens U.S. energy corporations' control over key petroleum and natural gas reserves in countries like Angola and Nigeria. The Obama administration's gradual pivot to Asia offered few immediate benefits for the fossil fuel industry, especially in light of expanding domestic energy production in natural gas and shale oil.

Similarly, the auto industry and other domestic manufacturers viewed the TPP with skepticism. While weaker regulations in the agreement could have boosted car exports, industry executives also feared an influx of cheap imports, especially from Asia. With rising wages in many developing countries and automation driving down production costs, the promise of exploiting cheap overseas labor isn't as attractive to corporate executives as it used to seem.

Rather than large, multilateral free trade deals like the TPP, Trump has signaled moving towards a series of bilateral trade agreements between two countries. Britain seems particularly willing to take this approach with the U.S., following the country's vote to leave the European Union last year. Seeking to take advantage of the instability to the E.U. caused by far-right and fascist parties running for elections across the continent, many monopoly capitalists in the U.S. believe bilateral agreements grant them greater flexibility in consolidating their power in a rapidly changing international order.

The master of optics

Far from benefiting U.S. workers, Trump's protectionist trade policies are war preparation measures. Proposals to waive taxes on the repatriation of overseas corporate profits aim at bringing capital back to the U.S. in order to insulate the economy from the effects of war. Tariffs on foreign imports further incentivizes the return of manufacturing by negating the benefits of cheap overseas labor and speeding up the drive towards automation. These policies benefit big business and hurt working people, who will bear the heaviest burden from a trade war with China in the form of higher prices on basic goods.

Before becoming president, Trump was best known for his shameless self-promotion and antics on his reality TV show, The Apprentice. As a grand showman with an eye for spectacle, Trump is particularly useful to the class of monopoly capitalists that rule the U.S. for selling their agenda to the public.

Trump's game is optics designed to mask his pro-billionaire, anti-worker agenda. In a much publicized deal with Carrier corporation’s management shortly after the election, he claimed to have struck a deal to save 1100 jobs from outsourcing. It came or later that Trump's deal was a farce, saving less than 800 jobs - many of which were not manufacturing jobs - while granting the already profitable company an additional $6 million in tax cuts. When critics pointed out this deceptive corporate handout, Trump used it as an opportunity to attack United Steelworkers 1999, the union that represents Carrier workers in Indiana, and blame them for outsourcing.

Similarly, Trump took to Twitter - his mass propaganda outlet of choice - to criticize auto manufacturers like Ford and General Motors over plans to outsource factories to Mexico. When corporate executives at both companies announced plans to expand operations in the U.S., Trump claimed victory again. Never mind that both companies had abandoned their outsourcing plans months before due to market demand and further automation. Trump used the moment to boost his ‘anti-establishment’ public image, even while Ford CEO Mark Fields praised him for "pro-growth policies" and pursuing "what's right for our business."

Meanwhile, Trump has signaled an aggressive employer offensive against organized labor. He seeks to throw millions of working people off their health insurance, and opposes minimum wage increases.

The TPP would have hurt working people in the U.S. and the other 11 countries that signed on to the deal. Unions lobbied against it, and widespread opposition to Wall Street and corporate America killed support for the agreement in Congress - long before Trump took office. From that perspective, this is a victory.

But it's not a victory delivered by Trump. Workers in the U.S. need to see Trump's so-called opposition to free trade agreements and ‘anti-establishment’ rhetoric for what it really is: the farce of the deal.