Politico Agenda: Levin -- What’s still wrong with the TPP

Oct 1, 2015

Trade negotiators are meeting right now in Atlanta to continue work on the Trans-Pacific Partnership agreement, a sweeping new trade deal that would cover a dozen countries that represent 40 percent of the world’s GDP. One of the many sticking points relates to automobile manufacturing—specifically a complicated numbers-based arrangement known as the “Rules of Origin,” which entangled the last round of TPP negotiations in late July. The rules would set the benchmark for how much of any given product—whether an auto part or a finished vehicle—must come from TPP nations to be covered by the trade agreement.

The intensity of the controversy around the “Rules of Origin” reflects the economic importance of the automotive industry to the United States and the other countries involved in the negotiations. Japan, for instance, wants a loose rule, allowing its manufacturers to source cheaper inputs from Thailand or China, instead of from TPP countries. I support a strong rule, which ensures that the benefits of the agreement accrue to the countries that are part of the agreement.

To fully appreciate what’s at stake, it’s worth looking at what has occurred in auto manufacturing since another major trade deal: NAFTA. In the two decades since it took effect, a major integration of the U.S. and Mexican auto industries has occurred, and Mexico has become the seventh largest producer of vehicles worldwide. By the end of this year, Mexico will send to the U.S. more vehicles than Canada or even Japan. Its strength has become a trade challenge for the U.S.: When NAFTA was negotiated, the U.S. had a trade surplus with Mexico which some predicted would continue. Today, the U.S. trade deficit with Mexico in cars, trucks, and automotive parts is over $63 billion per year.

Mexico’s comparative advantage in auto manufacturing is significantly constructed on the fact that Mexican industrial workers are paid 1/5th as much as their American counterparts, or less. They do so in a system where the laws are in violation of international worker rights standards and where the system is thoroughly stacked against workers.

That status quo has been locked in for 20 years as U.S. jobs have left for Mexico and U.S. wages have felt downward pressure from this unfair competition. And while there are efforts in American collective bargaining agreements to minimize this impact today, there is no reason to think the trend will change unless there are some fundamental changes brought about by the TPP.

I SPENT THREE days in Mexico in August, and what I found graphically illustrated how entrenched is the system, and how out of compliance it is with the obligation to provide for basic, internationally recognized labor rights.

There are two major obstacles standing in between workers and rights in Mexico: protection agreements and labor boards. A protection agreement is a device to protect a company from any real union or collective bargaining agreement. Workers have no say in the terms of these agreements, often constructed before a company has any employees. And when employees have

complaints or violations to report, those are taken to the labor board—where the employer, the government, and the phony union established by the protection agreement work in collusion, leading to a corrupt system.

In theory, TPP could be a powerful lever to change this. The agreement includes enforceable worker rights and environmental standards that were first negotiated in an agreement on May 10th, 2007, by House Democrats. But the simple inclusion of this language, known as the May 10th Agreement, isn’t enough—the example of Mexico shows that countries must bring their laws and practices into compliance before Congress votes on TPP.

Unfortunately, the Mexican government officials I met, while acknowledging that some of these changes require changes to their constitution, insist that they be done outside of the context of the TPP negotiations. And our own government waited far too long to begin discussions with Mexico on what changes would be required to bring their laws into compliance.  

How should we resolve these issues? The answer reflects in part one’s approach to globalization.

If you believe the advantages of trade and globalization are so beneficial in themselves that they will work out problems on their own, then you’re satisfied with the status quo. In effect, you’re relying on the 19th-century Ricardo model of comparative advantage, or an international version of "trickle down" economics.

On the other hand, you can also see trade agreements as a tool to shape globalization and raise standards. This is the approach House Democrats have been taking; that’s why we drafted the May 10th Agreement. That 2007 agreement also addressed the availability of medicines, finding a balance between protection of intellectual property and the ability of poorer citizens to have access to needed medicines, including generics of all types.

Several of these issues still remain unresolved in the TPP. It will not work to nibble around the edges on these issues or others that need a real resolution. I left Mexico a few weeks ago worried about industrial workers unrepresented or misrepresented and those harassed or worse when they tried to raise their voices. And the continued impoverishment of the agricultural workers whom I met who are paid a tiny fraction of what we in the US pay every day for the fruits of their labors.

It also certainly won’t work to nibble around the edges in Vietnam or Malaysia. Workers in Vietnam get thrown in jail for organizing, where the single national “union” and the Communist party are one and the same. The plight of the 4 million migrant workers in Malaysia, many laboring without any protection or rights in a form of indentured servitude, is well-documented and a point of tremendous controversy since the State Department mistakenly decided to upgrade Malaysia in its human trafficking report—without evidence of significant changes on the ground—to satisfy the requirements to “fast-track” TPP in Congress.

All of these and some others raise the basic question of whether the TPP will be built around meaningful standards as the basis of international competition. It is not enough to say “settle for less now, and use the dispute settlement system to bring systemic change later.” Such an approach validates and solidifies the status quo.

WHEN CONGRESS IS presented with the deal, it will only get one vote – an up-or-down, yes-or-no judgment on the deal. We won’t be able to strike provisions we don’t like, or send it back to the negotiating table.

That’s why it matters so much what negotiators are pushing for now. Imagine if 20 years ago we had insisted that Mexico change its labor laws and our two economies had integrated on the basis of rising standards. Now we have a chance. The Administration likes to say that TPP offers an opportunity to renegotiate NAFTA, but we are still far from that goal. Our negotiators shouldn’t be rushing to finish the deal while these very important issues remain unresolved.

The stakes are too high for American workers. International trade and competition can and must be built on a more human condition for all of us. 

The original op-ed was posted in Politico Agenda here.

114th Congress