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March 28, 2013


On January 12, 2013, I wrote a blog entitled “Camels and the Mouse – Yesterday and today – a Final Note.” The title was not descriptive – the blog was about international trade, with specific reference to entering into what is called the “Trans-Pacific Partnership” and a short list of my objections to signing and implementing it. The TTP was initiated in the Bush era and is just now coming to fruition. We are on the verge of signing it if (as I write this) we haven’t already done so. It is a mistake.

How big a mistake? It is not a mistake on the order of our agreement to allow China into the WTO (along with “most favored nation” status – both of which have been disastrous to everyone but Wall Street and its multinational corporate handmaidens), but disastrous nonetheless. Rather than pick and choose, I here attach that January blog in its entirety, and will add commentary to TTP’s status today.

January 2, 2013

Long before the exotic stories of camel caravans and the silks and spices from Cathay, we had trade. Before we even had countries, there was always another area which had something we wanted and we had something they wanted. War provided one means of getting something we wanted, but wars had their downsides. The more passive and less destructive idea of exchange (with some exceptions) became the norm of trade.

One of the classic theories in economics is the law of comparative advantage – that if every country or area exports what it makes most efficiently, all traders are better off. This, of course, assumes that there are no impediments or other obstacles such as political upheavals or wars which would interfere with a free and fair exchange of goods (later expanded to include services) between and among such traders. A certain mystique came to bear in describing such exchanges as an organized effort. It came to be and still is known as “The Market.” As we will see, there remain many obstacles to the free and fair exchange of goods and services today, though, thankfully, not usually by reason of war.

Trade in olden days of goods for goods on a large scale was a bit impractical. A trader might not want as much of a product as the other trader had for delivery and exchange, among other such problems. A medium of exchange was necessary and several evolved, such as gold, silver, coin, paper money, wampum – all of which, along with a preexisting barter system and other such forms of exchange, greatly facilitated trade.

Those days are not these days. We can now order certain quantities of good from Cathay (now China) and other such venues anywhere on the face of the earth with the click of a mouse. Sophisticated systems of increasingly robotized manufacture and delivery are now routine. Camels are out of style; caravans have morphed into container ships and jumbo jets.

One would think that such modern methodologies would sharpen the old axiom of the law of comparative to such a fine edge that all traders around the globe are enjoying the relative efficiencies in the production and transportation of the goods to be traded and everyone is happy. They aren’t. Why?

It is not just greed (which we have had at least since our exodus north to Europe from Africa). Opinions may vary, but my opinion is that the central problem these days is (at bottom) nationalism. Nation states use the manipulation of trade with other countries to gain political as well as economic advantage. The old classical rule of exchange for like value (whether barter or via medium of exchange) is subservient to a new look at trade as a means of asserting hegemony in other non-economic spheres of influence.

In short, trade has become a political tool masquerading as trade, though, of course, the players need a formal pretense to the contrary; hence NAFTA and other such trade pacts (which have been bonanzas for Wall Street but catastrophes for American labor and aggregate demand in our domestic economy). In isolated context, it is safe to say that what political advantage we may have gained by our participation in these “trade pacts” is still waiting to be identified. An argument can be made that the vast majority of the American people have been certainly and adversely affected by such participation in terms of employment, wage growth and other such economic measures. We will see how we prospered politically when the next big political problem arrives on the international scene and we seek UN support, for instance.

A good example of this pretense (which I have outlined in an earlier essay in this trade series) is the Trans-Pacific Partnership between nine nation states (including the United States) which is soon to be signed. It is essentially an Asian trade pact with the United States and is designed to counter the growing Chinese influence in the area. That, of course, is not cited as a rationale for the trade agreement (as that would be politically incorrect), but anyone who looks at some of its provisions agreed upon to date would have to be asleep not to see the political ramifications of the soon-to-be pact. The agreement will give Wall Street with its banks and multinational a preferential pipeline into the economies of the member signatories at the expense of Chinese banks and the incredibly huge pool of capital in the Chinese Sovereign Wealth Fund.

That unspoken outcome is by design and has little to do with trade of old, where goods were exchanged in a relatively free and open market. We are thus faced with a trade pact-in-being where in truth trade is secondary to political goals, however smiling diplomats and trade representatives wish to otherwise describe it over post-signing cocktails. It is not primarily a trade deal; how much palm oil can we import?

The truth, of course, is that such “trade” pipelines will put the United States’ Wall Street banks and their multinational handmaidens into new sources of cheaper labor than formerly enjoyed in China (where wages are going up 17% per year and strikes are increasingly common). Bangladesh, for instance, has a wage scale far beneath the Chinese wage scale. With such a foothold, Wall Street banks will be enabled to invade local economies and dictate to central banks in such countries privy to the “trade” pact, perhaps much as we have seen the World Bank and IMF dictate to central bankers in poverty stricken countries in the recent past. Our TPP partners will have traded their sovereignty to make political as well as economic decisions under such arrangements, just as we will have traded ours to “trade decisions” made by foreigners and unelected citizens (which are antithetical to the concept of democracy and the exercise of sovereignty which supposedly rests – per Lincoln – in the people, not Wall Street.)

The deeper question is identification of the interests in this country who will and will not be served by TTP. With capital being exported to such countries and yet cheaper labor for the production of goods and services to be exported to the United States, it is clear that the race to the bottom for the American workforce will intensify, and just as clear that Wall Street and its minions will again greatly profit from their hijacking of our sovereignty to be used for their profit under the guise of a “trade agreement.”

The president is for TTP. I am not. I think the American people are entitled to transparency in trade negotiations so that they can assess the relative advantages and disadvantages of any such proposed pacts. I think the peoples’ sovereign rights should never be on any bargaining table. I think American labor should be relieved from this perpetual race to the bottom that such pacts guarantee with their support of slave labor venues. I think Bangladeshi wages do nothing for aggregate demand in our economy and that, when all is considered, their products may be more expensive than those made here. Like Lincoln, I believe in the selected use of tariffs, and for the same reasons he gave – to support American labor and commerce.

I think that trade pacts which we are told will facilitate commerce and domestic employment do no such thing. I believe that there are other motives politicians and their Wall Street backers have in engaging this country in such multilateral trade arrangements and that they are flawed by their very nature in any event – that bilateral rather than multilateral trade pacts present a better framework for trade, especially as to enforceability of their protocols and conventions, and perhaps more importantly, less likely to be used as political tools under the guise of “trade.” Most importantly, perhaps, is the lesser likelihood of a bargaining away of the peoples’ sovereignty (an unnecessary giveaway inasmuch as there are various other methods of handling trade disputes, methods that should be detailed in the trade pacts themselves). I think that trade should be about trade – not sovereignty, banking etc.

Finally, and as those who have read all the essays in this series on trade must have guessed by now, I think that these trade pacts often if not always state in their preambles the direct opposite of the real but hidden intent of what one or more of the parties hope to accomplish as parties signatory. Trans-Pacific Partnership has a nice ring to it, just as Leave No Child Behind sounds good, too. However, No Child, like (perhaps) TPP, has perpetuated the very evils it was ostensibly adopted to correct. Politicians can name their legislative boondoggles by any name they choose – and do. (See also “Right to Work.”)

TPP, the promised facilitator of trade under the classic law of comparative advantage, will, in my opinion, have been signed under false pretenses, for the wrong reasons, and will once again (as with China) enhance the export of jobs from and import a new round of poverty to this country. If I am essentially correct in the conclusions I have drawn from the evidence, then TTP will itself turn out to be the impediment and obstacle to trade that it is ostensibly designed to enhance.

We need not take that risk for the above and a variety of other reasons not treated here for lack of space. I see no advantage to over 99% of the American people in endorsing TTP and I am unalterably opposed to it unless it is radically amended to reflect the interest of that 99% in the real world economy we live in and endure, an unlikely scenario.  GERALD  E

The foregoing was written almost three months ago, and nothing has happened during the interim to persuade me to change my lack of endorsement of the proposed pact. It is now nearing reality and President Obama has signaled that he will sign it. It is a mistake, and one that will have been committed by a Democratic president.

As a lifelong liberal Democrat, I am beginning to wonder about the antics of Democratic presidents. Clinton signed a repealer of Glass-Steagall that had very successfully prevented the merger of commercial with investment banking since 1933, which in my opinion was the worst mistake in presidential economic history, and one which brought us to the cusp of a failed state recently. He also endorsed Chinese entrance into the WTO along with most favored treaty status (which adversely affected our ability to correct their inevitable practices of dumping, currency manipulation etc.). President Clinton did not serve his country well in agreeing to open the world to Wall Street excesses.

I had hoped that President Obama would do better. From all appearances to date, he seems to be also caught up in the Wall Street/multinational corporate propaganda that no tariffs or any other form of protectionism should be lodged against imports from slave labor states. While his record to date is good, especially with the historic passage of the Affordable Care Act, his indication that he will sign the TPP does not number among his otherwise decent achievements in leadership of this nation.

He should call the whole thing off, adopt some reasonable protectionist policies to protect American labor and commerce (as did Lincoln), and boldly propose Keynesian policies to move our economy and the people in it to prosperity – a prosperity in which Wall Street and its minions could share, but not rule, ruin or otherwise dictate.  GERALD  E

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