Chairman, U.S. Economy/Smart Globalization Initiative at the New America Foundation
Posted: September 21, 2010 09:30 AM
I've spent a lot of time in my blog posts urging the Obama administration and Congress to take immediate action, from every available direction, to plug the 22 million employee "jobs gap" that is strangling our country today. And you can be sure that everywhere members of Congress went on the campaign trail this summer and will travel to this fall, they are hearing this exact same thing from voters. Luckily for Members in races this year, there are still five weeks remaining until the mid-term elections to talk with voters about job creation. For the nation, however, there are only a limited number of days left in this Session of Congress -- less than thirty days for sure, even assuming a lame-duck session - to see some quick actions taken.
Unfortunately, two big issues -- energy and immigration -- which are key to the future of the U.S. economy and our prospects for significant job creation will not be addressed at all in what remains of this Session, and, in all encompassing ways, maybe not even in the next Session. However, pieces of each could be legislated early next year which would quickly create some of those jobs we're missing. And let's be clear, the future of the U.S. economy and our prospects for significant job creation will be hugely impacted by how we eventually manage these two issues.
As soon as possible next year, Congress should at least seek to agree on a renewable energy standard for the country that would require utilities to provide escalating amounts of power from renewable sources like wind and solar energy. And then it should tackle the promotion of home-efficiency retrofits, high-efficiency home appliances, natural gas-powered commercial trucks, and medium-cost electric vehicles, which would have significant job-creating effects.
Regarding immigration, also early next year there are important hearings that should be held. In them, Congress needs to remind the American people and workers that most of the 11 million-plus unauthorized immigrants have been resident here for many years with the active encouragement of our federal and state governments and the business community, mostly doing jobs that businesses wanted to under-pay for. They have worked hard for years, and now they're entitled to both pathways to legalization and a temporary worker program.
Unauthorized immigration is not at all the culprit behind either the broad-based erosion of the American Dream or the current jobs crisis that many contend. Rather, it's factors like declining unionization, the erosion of the real value of the minimum wage and wages in general for 90% of workers, and our grossly unbalanced foreign trade.
The one area therefore where meaningful action still can and should be taken by Congress in the relatively few days remaining is trade reform, where at least three quick steps should be taken.
Right now, around 40% of U.S. exports are to countries with which we have bilateral trade agreements, which we often fail to fully enforce, and many of them are out of touch with today's global economy and where the U.S. stands in it. The other 60% of our exports are to markets with trade barriers, which need to be broken down in order to provide American manufacturers with level global playing fields. And while President Obama is rightly proud of recent increases in U.S. exports, the White House continues to largely ignore the U.S. trade deficit which is skyrocketing and crushing both our economy and millions of our workers.
The Obama administration is abdicating on trade generally and, in the extreme, it is tolerating China's trade abuses, proudly settling for China's recent opening of its market to "American pork and pork products" (and little else), and endlessly studying -- rather than acting upon -- the fundamental economic rebalancing that must take place among the world's major trading partners. Imports from China alone are now responsible for about 75% of our deficit in manufactured goods and 55% of our overall trade deficit.
Those three quick-hit trade initiatives that Congress should quickly undertake before the end of the year are:
1. Hold hearings on the strategic and economic differences between a manufacturing and industrial strategy and a policy, and between the administration's goal of "doubling (gross) exports over five years" and, instead, "increasing net exports," which would create millions more jobs. Every other major developed nation plus China and India has a "manufacturing and industrial policy." Unfortunately, the administration says that we need only a "manufacturing strategy", which conveys an unwillingness to engage with the private sector at exactly the time in history when we need to do so the most and which won't revitalize our diminished manufacturing sector or close our oppressive trade gap.
2. Take up and then vote down the President's three pending free trade agreements (FTAs) with South Korea, Colombia and Panama. These three agreements will destroy many more American jobs than they will ever create. First negotiated under Bush but now embraced by Obama simply, it seems, for the sake of showing momentum, these three FTAs would allow, in the same way that NAFTA did, for massive imports into the U.S. with few opportunities for reciprocal exports of U.S. products. These agreements are particularly flawed in the areas of U.S. beef and agricultural exports and automotive and industrial textile imports into the U.S. They are more broadly flawed in their failure to account for the relative advantages afforded the three proposed trading partners by their value-added tax systems. FTAs must apply the same rules to both parties and to accept agreements that impose nonreciprocal tariff and tariff-elimination schedules violates the most basic concepts of free trade, which are fairness and balance.
3. Hold hearings regarding trade enforcement, which I am convinced will show that right now we do not either enforce our trade agreements very well or protect our domestic manufacturers, especially their hard-gained intellectual property. U.S. Trade Representative Ron Kirk has said that, "There's a danger in which we believe the only way to get new market growth is just to go get new trade agreements." To his credit he has suggested a strategy that focuses less on bilateral deals and more on boosting exports through promotion and 'more rigorous enforcement of trade rules'. Yet he has received almost no encouragement from the White House on this approach, even after showing that just for our software and high-technology sectors, compliance with World Trade Organization rules on intellectual property rights by China and Southeast Asian nations would boost annual U.S. exports by $50 to $75 billion. In these hearings, Congress should also look at moving trade enforcement to a fully enabled and funded office in the Justice Department. Trade negotiation and the enforcement of agreements are distinct activities requiring very different skills, and enforcement best belongs with 'enforcers', not with those who negotiated the trade agreements.
We all know that Congress failed to pass a meaningful jobs bill because of Republican resistance. As Ezra Klein said, "Republicans managed to take a jobs bill, weaken it to an unemployment benefits and state and local relief bill, weaken that to an unemployment benefits bill, and then weaken that bill." As a consequence, the 30 million real unemployed workers have been left only with a series of palliative benefit extensions, which is hardly a valid mechanism for creating the millions of jobs destroyed by the Great Recession of 2007 and for attacking the record-level income inequality that has left 90% of American workers with stagnant wages for nearly two decades.
Members of Congress have their work cut out for them. With the White House seemingly devoted to other issues, Congress needs to act yet this year on any areas it can which can yet chip away at the continuing absence of that much needed jobs bill. Let's start with trade where Congress should take its oversight responsibilities seriously and begin to redirect the administration's approach toward fair free trade.
Let's also, through this piece and in others to follow, start telling U.S. Trade Representative Ron Kirk and Commerce Secretary Gary Locke that henceforth whenever they meet on global trade and investment issues, the trade principles outlined above should be paramount. The Global Services Trade Summit begins in DC tomorrow, and in addition to Ambassador Kirk and Secretary Locke, attendees will include Anand Sharma, Minister of Commerce, India; Bruno Ferrari, Secretary of the Economy, Mexico; Pascal Lamy, Director-General, World Trade Organization; and trade ministers from around the world. They should all hear that from within the U.S. Congress, there are soon to be some 'new sheriffs in town' when it comes to U.S. trade.
Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.
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