Candidates Across U.S. Attack Jobs and Tax Dollars Going Overseas but Ignore the Real Heart of the Problem
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This election season, hundreds of candidates across the country are campaigning on their opposition to jobs and tax dollars going overseas. This makes sense, given poll returns that show opposition to unfair trade practices is one of the few things that unite Americans of different incomes and political parties. But many of the politicians’ 30-second television ads do not explain why this offshoring is happening.
A key part of the explanation is so-called “trade” agreements like the World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA). Since these pacts went into effect, 43,000 manufacturing establishments have closed, 5 million manufacturing jobs have been lost, and inequality has skyrocketed. Brand name goods once made here are now being made offshore and imported back to the U.S. for sale, leading to rising trade deficits. And our exports to the 17 countries with which we have NAFTA-style deals have grown at half the pace of that to countries with which we do not have these agreements.
So, while NAFTA and the WTO have been called “trade agreements,” they would be more accurately understood as “offshoring agreements” that guarantee special treatment and lower risks for firms that relocate to low-wage countries.
These pacts did not come down from God or the invisible hand from college economics textbooks. They were part of an intentional strategy on the part of large U.S. corporations seeking to offshore production, their lobbyists, and politicians to fundamentally change the way the American economy works.
Cut to the current election cycle. Virtually every Democrat in a tough race has at least one paid television ad attacking offshoring, and many propose changes to the tax system to combat it.
But that’s just one piece of the problem. Multinational corporations have long complained that foreign judicial systems provide unreliable protection for their overseas investments, not to mention the risk that governments there might introduce new labor or environmental regulations they don’t like. Presumably, these concerns are one deterrent from shuttering factories in places like Peoria and Buffalo.
Now, NAFTA-style deals make it easier to offshore by removing this deterrent. They allow corporations to bypass national judicial systems and launch attacks on governments in international tribunals for interfering with the companies’ future expected profits. The “judges” are selected in part by the corporation, and the trade pact “rules” they enforce have been tailored to corporations’ demands. Often the mere threat of one of these cases can cast a chill on public interest regulation. Under NAFTA alone, governments have been ordered to pay over $200 million to corporations for the privilege of enacting new rules to protect the environment, consumers and more.
Or look at the other side of the aisle. Earlier this year, former governor Sarah Palin caused a stir when she posted on Facebook that stimulus cash was being spent on foreign- made goods. This theme has caught on like wildfire, with dozens of Republican congressional candidates lambasting the offshore leaking of our tax dollars. Yet the WTO and other trade pacts impose constraints on how we can use our tax dollars. That’s right: these deals say we cannot give preference to local producers.
A generation ago, we wouldn’t have had this problem. “Buy America” or “Buy Local” rules meant that, whenever possible, tax dollars collected in our communities should be spent here on locally made goods. But the trade pacts require that the federal and many state governments must exempt foreign-made goods from these purchasing requirements if they were made in one of 52 countries with which we have certain trade pacts.