Globalization

This week marks a critical moment in the struggle of so many to move the nation from the disappointing era of Bush to a new and more hopeful era for the nation.  The Senate and House are working to craft a new and better approach to the Middle East; the House Democratic Caucus discussed the new trade deal Tuesday at its weekly meeting; and the Senate has begun a vital and important debate on how to best fix our broken immigration system. 

To help our community better participate in these consequential debates, we offer up the following:

On a new strategy for the Middle East – We are excited to release a recently conducted video interview with noted Middle East expert, Vali Nasr, author of The Shia Revival.  Professor Nasr, now of the Fletcher School at Tufts, has had a profound influence on our thinking about the Middle East.  You can learn more about his book, read his writing, watch his appearance on The Colbert Report or watch our in-depth and probing interview with him here. 

On Immigration Reform – NDN is proud to be part of the national coalition working to pass comprehensive immigration reform this year.   On our site you can read our recent statements about the new bi-partisan approach to immigration, watch video of several informative immigration events, including our recent March event with Senators Reid, Kennedy, Salazar and Menendez, and watch and listen to the television and radio ads run by NDN and our affiliate the NDN political fund during the national immigration debate last year. 

On Globalization – On our site you can find the work of our Globalization Initiative, headed by former Clinton chief economic advisor Dr. Robert J. Shapiro.   There you can find our statement about the new trade deal negotiated by Chairman Charlie Rangel,  watch video of our public forums, including a compelling interview with SEIU’s Andy Stern, read a new paper which advocates putting “A Laptop in Every Backpack,” and review our many essays, reports and commentary that seek to craft a new economic strategy for America.

When the American people tossed the Republicans from power last year they were making a clear statement that they wanted their representatives in Washington to stop playing politics and work towards solving the great challenges facing the nation today.   We should be heartened at the progress made so far by the new Congress, and the eagerness of Majority Leader Reid and Speaker Pelosi to take on the hard things and not just the easy ones.  

But we should not be under any illusions – ushering in a new era of progress isn’t going to be easy.  Our community, which has contributed so much in the past, simply must stay engaged and active, and work to support in every way those leaders and initiatives working to repudiate the disappointing politics of the Bush era and help make this new century as exciting and successful for America as the one just past. 

Next week's US-China trade summit may be more acromonyous than Treasury Secretary Henry Paulson had hoped for, according to the WAPO:

On the eve of high-level economic talks in Washington next week, Chinese leaders are increasingly bitter about what they see as bullying behavior by the United States on trade issues, potentially complicating efforts to tackle disputes on such matters as technology exports and intellectual property.

In the span of three months this year, under the pressure of domestic politics, the United States moved aggressively against China for trade violations, filing two lawsuits and imposing steep tariffs on imports. The actions have so incensed China that Vice Premier Wu Yi, the leader of its delegation to next week's talks, apparently considered boycotting them.

On the surface, the Chinese are likely to play the role of grateful guests. Friday, in a slight concession to American arguments, they loosened controls on the value of their currency, the yuan. The Chinese are expected to bring with them $4.3 billion in high-technology contracts for American products.

But Treasury Secretary Henry M. Paulson Jr., Federal Reserve Chairman Ben S. Bernanke and the heads of nine Cabinet-level agencies are sure to encounter a more combative China when they sit down at the table this time. The Chinese are so mad there had been talk Wu might stay home to show "dissatisfaction and anger," said Xu Mingqi, an international economics professor at the Shanghai Academy of Social Sciences, a government-affiliated think tank.

Make sure to see Broder's look at Democrats and the trade deal announced last week.  His reporting skills are put to use in taking the tempreture of some key Democrats:

Levin said that the government in Colombia, which is allied with the United States in opposing the influence of Venezuela's leftist Hugo Chávez, must do more to curb violence targeted at union organizers. And Levin, representing an auto district, wants South Korea, which ships thousands of cars to the United States, to open its doors to American-made vehicles.

Nonetheless, both Levin and Schwab describe last week's agreement as "an important first step" toward rebuilding a bipartisan coalition behind a trade policy that expands the volume of shipments into and out of this country -- but that raises labor and environmental standards instead of degrading them.

That is what Levin calls "expanding the circle of those who benefit from globalization," a healthy step beyond the old and futile debate between "free trade" and "protectionism."

But there are some forces in the Democratic Party and elsewhere reluctant to abandon the old rhetoric -- or the old fights. Bloggers such as David Sirota and interest groups such as the U.S. Business and Industry Council condemned the new agreement and vowed to fight the issue.

Because most Republicans are on the side of liberalizing trade, the key question is how many Democrats will support trade agreements negotiated by a Republican administration. When I asked Rep. Rahm Emanuel, the chairman of the House Democratic Caucus, his answer was "maybe 60 to 90," substantially less than half the Democratic membership but perhaps enough to make a majority with Republican votes.

The Washington Post weighs in with an editorial detailing the victories Democrats won in the new bi-partisan trade deal (read our statement here). 

While we should all be pleased with the spirit of this deal, it would be advisable for those wanting to garner votes to create a bigger context for the coming debate.  The data is very clear here - in this decade globalization has been very good for those with capital and for American corporations, but has not been so good for American workers and families. 

A vital strategic goal for those of us who believe in the benefits of liberalization must be to help our elected leaders come up with an agenda that successfully reverses the sluggish job growth and weak income and wage growth of our time.  To believe that the American people will accept the current way the economy is unfolding is niave.  Poll after poll, and the core economic data show that for about two-thirds of all Americans the economy is not what they want it to be.  They are losing faith that this century's global economy has the capacity to give them the opportunity and upward mobility all generations of Americans have to come to expect.  Making the American economy work for more Americans is one of the most important governing challenges of our time, and one NDN has been relentlessly focused on for the past several years in our Globalization Initiative.  

So in the days ahead I think it would be wise for those looking to build public support for this new trade policy to talk about what their strategy is bring greater prosperity to our workers and kids.  We've offered many ideas - raise the minimum wage, reform our immigration system, put a laptop in every backback, bring broadband to all Americans, fix our health care system so all Americans can have adequate insurance and good care, give our workers the option of card check, adopt the Speaker's innovation agenda, significantly increase funding for the teaching of science and math in all schools - the list goes on and on.  And it is time for once and for all to stop throwing out "TAA - trade adjustment assistance" as a sop that everyone knows isn't an adequate response to the realities we face today. 

The conversation about trade cannot happen in a vacuum.  Unlike the 1990s, globalization is neither seen to be, or is, working for a majority of Americans.  If the American people and their elected leaders are being asked to support greater liberalization, they must be told in clear terms what the strategy is to help them achieve the American Dream in a much more competitive age.  These conversations need to be linked.  And those looking to build public support for further liberalization need to get serious about offering not just a new trade policy, but a comprehensive economic strategy for America in the 21st century that helps ensure that globalization works for all Americans. 

Dr. Robert J. Shapiro, Director of our Globalization Initiative, and I just released the following statement. Feel free to comment below.

We congratulate Speaker Pelosi, Chairmen Baucus and Rangel, the White House and other Congressional leaders - including the New Democrats - for finding common ground and fashioning together a new approach to trade policy.

The agreement shows that this White House and the new Congress are capable of doing what the American people want them to do – come together and offer forward-looking, pragmatic solutions to the tough problems facing our nation today.

 

This new agreement creates a new and better framework for our trade arrangements, one that will put labor and environmental issues front and center in future trade deals, and no longer relegate these important issues to side agreements. This new path may allow America to once again be a leader in fashioning the new rules of the road for the global economy, a role that up until now has been neglected by the Bush Administration.

 

This new agreement will be remembered as an historic one if it leads the White House and Congress to forge a new national strategy that seeks prosperity for all Americas in this intensely competitive economic era. Even as the economy as a whole is well positioned to prosper in a time of globalization, too many Americans are struggling to get ahead. By undertaking the necessary governmental actions and making the needed investments in education, skills, technology, infrastructure and communities, America will be able to ensure that our workers and our kids the same broad opportunities that all proceeding generations have enjoyed.  

"Nearly 50 years ago, President John F. Kennedy advanced a new trade policy that cemented Democrats as the party of free and fair trade.  Today, we build on that tradition to announce a new bipartisan breakthrough for fair trade – where we expand opportunities for American businesses, workers and farmers.

Our economic future rests upon our ability to open new markets for U.S. goods and services so that we can continue to capitalize upon the innovative spirit of the American people.  We must also do much more to address the consequences of globalization and how many working families are faced with increased economic insecurity.

Free trade must be fair trade. For that reason, the inclusion of basic, internationally recognized labor and environmental standards in our trade agreements have been long-standing Democratic priority. 

Enforceable labor standards ensure that our trading partners abide by the most fundamental standards of common decency and fairness – prohibitions against child and slave labor, protection from employment discrimination, and the right for workers to form a union.

Similarly, protecting our planet is a core Democratic value and must be reflected in the core of our free trade agreements, not as a side agreement.

Last November, Americans voted for a New Direction, and that includes a right direction on trade – where labor and environmental standards are at least as valued as our financial interests. 

Today marks a new day in trade policy so that we can raise living standards in the U.S. and abroad, expand markets, spur economic growth and uphold strong labor and environmental standards.”

Steven Pearlstein has a thoughtful look at the new bipartisan deal on trade in today's Post.

The Times has an excellent editorial today on the challenges the economy is posing to policy makers.   It is deeply consistent with what NDN has been advocating for these past several years, and makes a strong case for why we need a New Economic Strategy for America:

How Slow Can It Go?

Last week, when the government reported that the economy had slowed to a crawl in the first quarter of the year, any lingering hope for robust employment growth was tempered accordingly. But no one was quite prepared for a job report as weak as the one released yesterday. Only 88,000 jobs were created in April, the smallest gain in nearly two and half years and a sharp deceleration from job growth in the recent past.

Predictably, the slowdown was reflected in Americans’ paychecks. Weekly earnings are up over the past year. But of late, the rate of increase has dropped significantly. A squeeze on jobs and paychecks is the last thing Americans need right now.

Though the economy has been expanding for more than five years, wages and salaries for most workers have picked up in earnest only in the past year. And now hiring and pay increases appear to be slowing before many families have had the chance to rebuild their finances. For many people, mortgage payments are also being adjusted upward as home prices fall, making it harder for them to refinance their debts. At the same time, the price of everyday essentials, like food and gasoline, is rising. And life’s big-ticket items, like health care and education, are increasingly expensive, even as employers and government shoulder less of those costs.

If this strain on family finances ends up curbing consumers’ spending, the economy at large will be in danger of a recession. The Federal Reserve would probably try to counter such a downturn by cutting interest rates. But rate cuts are not magic. Their effectiveness would depend on the depth of the recession and the ways the lower rates reverberated through global markets.

More likely, the real solutions will have to be political, not merely technical. When the next downturn hits in force, it will become painfully clear that American workers have not shared in the benefits of Bush-era economic growth in any way commensurate with their hard work and productivity.

The nation will need policies — and leaders — to reconnect economic growth with rising living standards, for all.

India launched it's first commercial rocket today, a major technological and entreprenuerial milestone for the world's second largest nation.  I was reminded of a great post by former NDNer James Crabtree on the phenomenon that is "Chinarunindia."  Read on...

Chinarunindia

by James Crabtree -- 7/21/06 

It is now almost a political trope that Chinarunindia threatens American jobs. And so it does. But not in the way people often think. Case in point are the statistics people use. You see this often, of the following type...

Such statistics are part of statistics-as-metaphor. Whether or not they are true is not the point. You should treat them in the same way people say "Eskimo's have 27 words for snow" or "half the world has never made a phone call." Are these true? They might be. They probably are not. [Read for instance this superb essay by technology thinker Clay Shirky on exactly this point, examining the truth behind the second quote.] But that isn't the point. The point is that they are meant to tell you something bigger: namely that language responds to circumstance, and the technological revolution is confined to rich countries. My favourite is: "1 in 7 people is a chinese farmer." This one is actually true, with 6 billion people and 900m employed in chinese agriculture. But what it really means is nothing to do with farming. It means: holy hell! there are a lot of people in China!

The same habit crops up with the statistics politicians use to describe Chinarunindia. They are trying to make the point - quite correctly - that the world is changing fast. They want you to understand that this brief period of history when the US is the (as Rob Shaprio, our Globalization Initiative directorl likes to say) only global power with no peer since Rome, will be just that. Brief. But in the course of making this point, some real whoppers emerge. As the FT explains:

Although both countries produce millions of graduates annually, the raw numbers are a misleading metric for employable skills. China produces 600,000 university-trained engineers every year, for example, a figure often cited to illustrate the country's inexorable rise as a technology power. But a McKinsey survey of nine occupations including engineers, accountants and doctors found that fewer than one in 10 were employable by multinationals.

The rest of the piece is similarily on the money, and you should read it. It highlights something almost no one seems to understand, namely that (unbelievably) Chinarunindia are running out of workers. They aren't running out of people exactly. But because they invest so little in education, they are running out of employable workers. These labour shortages will ripple out accross the world economy in the coming years. But because politicans use these misleading stats, they miss the bigger point. It is this. Imagine how much Chinarunindia will change our economy when 9 out of 10 of their professionals are employable by multinationals? Makes you think. Have a great weekend............

As the United States files a major case at the World Trade Organization charging China with wholesale piracy of U.S. intellectual property, especially copyrights covering books, music and videos, let’s pause and think about our trade deficit with China.  The administration is entirely right to file the case – though a little late, given that it’s only our third complaint with the WTO over intellectual property violations since George W. Bush took office, compared to fifteen cases filed at the WTO by the Clinton administration in its second term alone.  We’ll get to why those violations matter economically, but first let’s look at an even bigger picture.

It may not be politically satisfying, but the truth is, we cannot blame any other country’s trade practices for the size of our trade deficit.  We run trade deficits for one reason: We consume more than we produce and then purchase the difference from abroad.  When China sells paper or t-shirts for less than they cost to produce and ship them here, it increases our imports of Chinese paper and t-shirts, hurting American workers and companies that still produce them here. But if China charged three times as much, and we bought more paper and t-shirts from American or other foreign suppliers, it could affect the composition of our trade deficit, but not its overall size: That’s because the size is locked in by how much we consume of everything, relative to how much we produce of everything.  The only way to reduce the trade deficit is to either consume less – which is what economists mean when they say that the answer is to save more – or to produce more. It’s used to be the case that the two were closely linked: In order to produce more, you had to invest more, and to invest more, you had to save more (and so consume less).  Global capital markets have changed that for the United States, where everyone wants to invest: Now, we can invest more even without consuming less – we just have to borrow the investment funds from foreign savers. There’s a big cost down the road, since foreigners end up owning more of our companies and real estate, and then taking home their profits and rent – but at least we get to invest.

Force China to play fair with her trade policies (if we can, which is often doubtful), and we’ll end up importing a little less from China and exporting a little more to China. But unless we also begin to consume less overall or to produce more overall, it won’t affect the total trade deficit at all.  There is one, possible way it could do so -- if demand for our exports to China goes up, it may lead to greater production at home to fill the need (after it had led to greater investment to expand production) -- and the increase in our production can bring down the trade deficit.

The one exception to all this is what the administration is finally focusing on -- foreign violations of the intellectual property rights of American producers.  If we could get China, India, Russia and Brazil (the four biggest offenders) to stop appropriating or pirating our pharmaceuticals, software or music and films, it would directly reduce our trade deficit. Our own consumption wouldn’t change, but foreign payments back to U.S. companies would increase, just as if our production had increased and all been exported. Stealing our intellectual property, in short, has the effect of reducing our production (more precisely, taking part of our production and pricing it at nothing), which in turn drives up the trade deficit.

So, now there are two reasons to crack down on intellectual property violations by our trading partners.  It’s the only cost-free way to reduce our trade deficit, and it should increase the returns and incentives for producing more of it, at a time when globalization and technology make intellectual property a central factor in U.S. economic growth and progress.

One more word on our trade deficit with China: Half of it comes from U.S. companies bringing back products they’ve produced in China by their Chinese subsidiaries. China’s currency is undervalued by all the standard economic measures. But if China does revalues its’ currency, so its exports become more expensive, it will raise the price of products produced by American companies there for sale here – and by itself can’t affect the overall trade deficit.