TPP on the Ropes: Trucks, Cheese and Drugs

Talks in Maui between 12 nations trying to hammer out a trade agreement known as the Trans-Pacific Partnership foundered last Friday. Good news for the overwhelming majority of workers, but bad news for the power elite who run the show. Even if new negotiation dates could be established and the sticking points smoothed over, any final TPP agreement would most likely be pitched into 2016 and the thick of U.S. presidential and congressional elections. And since free-trade agreements are broadly unpopular across the spectrum of voters from the radical left to the Birchite right, a delay in substantive action on the TPP until sometime in 2017 is the safest bet.

This is not preventing legacy junkie John Kerry from trumpeting the benefits of the TPP to his Singapore hosts, as Michael Gordon reports this morning in "Kerry Hails Progress Toward Trans-Pacific Trade Pact, Despite Delays":

“No country can expect its economy to grow simply by buying and selling to its own people,” Mr. Kerry added. “It is just not going to happen. It defies the law of economics. Trade is a job creator and prosperity builder, period.” 

The trade pact has been a top priority for the Obama administration, which has proclaimed a policy of focusing more on Asia as part of a “rebalancing” of American interests. 

The White House had hoped that Congress’s passage in June of “fast track” negotiating powers would pave the way for concluding the accord, which would be the largest regional trade pact in history. 

But the 12-nation talks have been snagged by differences over access to agricultural markets and protections for drug companies, among other issues. Trade ministers meeting in Hawaii failed to reach a final agreement on Friday, raising concerns that the discussions would be extended into the politically charged presidential election campaign in the United States. 

Mr. Kerry acknowledged in his speech that the negotiations had been tough and that there were still “details to be hashed out,” though he did not discuss any of the obstacles to progress or suggest how they might be overcome.

To understand why trade -- in particular, these large, multinational, corporate-managed trade agreements -- is not always a job creator all one need to is read a story written last month by Bill Vlasic, "Wariness as Auto Industry Eyes Mexico for Growth." In order to win huge concessions from the United Auto Workers, Ford is making plans to move its successful and lucrative compact-car production line from Michigan across the border -- thanks to previous trade agreement, NAFTA -- to Mexico:

DETROIT — The unlikely comeback of the American auto industry has generated tens of thousands of new jobs at Fiat Chrysler, Ford andGeneral Motors. 

But as the United Automobile Workers union enters talks on new contracts with the Detroit car companies, perhaps its biggest worry is losing vehicle production to lower-wage nations like Mexico. 

Ford, which starts negotiations with the union on Thursday, stunned U.A.W. leaders this month with its unexpected decision to move small-car production from a Michigan assembly plant in 2018 to an undisclosed location. 

The union’s president, Dennis Williams, bristled when asked last week to comment on the possibility that Ford may send the work to Mexico. 

“I will save my comments on Ford for when we open up negotiations,” Mr. Williams said. “But it is always concerning to me when any company invests outside the United States.”

The rapid growth of the Mexican auto industry has been a growing source of concern for the union, particularly because many of the products built south of the border are destined to be sold in American showrooms. 

Auto plants in Mexico are on track to export about 70 percent of their production this year to the United States, according to the Mexican Automobile Industry Association trade group. 

And automakers are stepping up their investments further to take better advantage of cheaper labor costs and Mexico’s attractive trade environment, made possible by pacts like the North American Free Trade Agreement. 

Companies like Toyota and Volkswagen are constructing new plants in Mexico, and Ford and G.M. have announced big new investments in existing facilities there. At the same time, the number of unionized manufacturing plants in the United States has remained largely static. 

“In the past two years, there has been about $19 billion in new investments announced for Mexico,” said Harley Shaiken, a professor at the University of California, Berkeley who has studied the growth of the Mexican auto industry. “This raises enormous competitive issues for the U.A.W.” 

Mr. Williams has consistently criticized decisions by American companies to invest in Mexico, where autoworkers are paid as little as $9 an hour compared with the top U.A.W. wage of $28 in the United States. 

“They’re using cheap labor, and they’re shipping products here to sell,” Mr. Williams said at a press briefing last month. “That’s wrong for the United States of America.”

But the union is fighting an uphill battle. Free-trade pacts are expanding to Asia and elsewhere, rather than contracting. And Mexico is an increasingly attractive destination for companies trying to maximize profit margins, particularly on small cars. 

Ford has not specified where it will move production of its Focus sedan and C-Max hybrids. But it is already cutting 700 jobs at the plant in Wayne, Mich., where they are built, and plans to ship the remaining production elsewhere in three years. 

The company said the future of the plant, which has employed as many as 4,700 workers, would be decided at the bargaining table.

Interestingly, the fast-growing Mexico auto industry was one of the reasons, along with Canadian dairy and U.S. pharmaceuticals, that this last round of TPP talks failed, as Jonathan Weisman reports in his excellent recap, "Trans-Pacific Partnership Session Ends With Heels Dug In":

Mexico’s secretary of the economy, Ildefonso Guajardo, is taking a particularly hard line against Japan’s automotive industry, a position that some negotiators said helped dash any hope of completing the trade deal in Maui.

At issue is the definition of a car or truck from one of the Trans-Pacific Partnership countries. Mexico wants only vehicles with around 65 percent of their components made in the T.P.P. region to qualify for lower tariff barriers under the deal. That would favor Mexican trucks made with American and Japanese parts. Japan wants that “rule of origin” threshold set closer to 50 percent, favoring its parts suppliers in China and Thailand.

“The auto industry in Mexico is the seventh-largest producer in the world and the fourth-largest exporter,” Mr. Guajardo said late on Friday. “What you can accuse me” of “is putting myself to the front to really push the interest of my country.”

New Zealand and Canada are at loggerheads over dairy. While tiny New Zealand produces just 3 percent of the world’s dairy products, it is the world’s largest dairy exporter. Canada’s government, embattled ahead of parliamentary elections in October, showed little inclination to let New Zealand’s cheese and eggs compete with its own.

Mr. Groser, the New Zealand negotiator, noted that his country was the first to propose a trade accord linking both sides of the Pacific Ocean. He wrote one of the first briefs championing it.

“I don’t really feel emotionally in the space of wanting to leave the party. No, we will not be pushed out of this agreement,” he said.

With so many countries angered by Canada’s closed-door stand on dairy, Ed Fast, Ottawa’s minister of international trade, was left to defend his stance. “Canada came to Maui ready to conclude a T.P.P. We were active, constructive partners at the table,” he said.

The biggest problem may be intractable differences over intellectual property protections, especially for pharmaceutical companies developing the next generation of medicines known as biologics. A copy of the still-incomplete intellectual property chapter, viewed by The New York Times, shows just how isolated the United States’ position is.

In one section, the United States and Japan want language saying a lack of enforcement resources is no excuse for failure to ensure compliance. That position is opposed by New Zealand, Vietnam, Mexico, Peru, Australia, Malaysia and Brunei.

In another section, 11 negotiating nations propose language to ensure judicial authorities have the power to force a company that “abuses enforcement procedures” to compensate a party “wrongfully enjoined or restrained” if a case is lost. Only the United States opposes that.

Much of the intellectual property dispute revolves around the protection of major pharmaceutical companies, which want the United States’ 12 years of data protection on new drugs expanded to the other 11 T.P.P. countries. Republicans in Congress, especially Senator Orrin G. Hatch of Utah, chairman of the Senate Finance Committee and a key ally of the president’s on trade, demand that the White House hold firm.

But most of the other countries — and most international health groups — oppose that position strenuously. They say it would keep drug prices high, drain government coffers and put new biologic medicines out of reach for the developing world.

“That is the toughest nut to crack,” Mr. Schott said.

Those of us who root for any defeat of the "radical center," the neoliberal consensus that governs the globe, experienced a somersault of emotions in June and July when at first it looked like Democrats in the U.S. House of Representatives killed the TPP by blocking TPA (Trade Promotion Authority), a.k.a., Fast Track, for Obama. But the administration with the help of GOP majority leader Mitch McConnell was able to salvage TPA in the Senate. Then in early July another somersault. Greek voters stood tall and strong with their overwhelming "Oxi" vote against austerity only to have prime minister Alexis Tsipras abjectly surrender to the diktats of the Eurogroup. But now just as the TPP is looking wobbly on the ropes so too is the future of any new bailout deal for Greece.

The neoliberal paradigm completely dominates the political landscape but this does not mean that it can erase the cracks in its foundation. Change we can believe in might indeed be fast approaching.