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Article Artículo

Globalization and Trade

WaPo Takes Another Shot at Senator Warren on Behalf of the TPP

The fast-track authority needed to get the Trans-Pacific Partnership (TPP) through Congress must be in real trouble. Why else would the Washington Post devote so much space to pushing the deal and attacking its critics?

The latest was a diatribe by editorial board member Jonathan Capehart which is directed largely at Senator Elizabeth Warren. The piece starts by basically calling Senator Warren a liar for describing the TPP as "secret." As Capehart tells us:

"Yes, it is secret from you and me. As Ruth Marcus correctly explained, 'This is not secrecy for secrecy’s sake; it’s secrecy for the sake of negotiating advantage. Exposing U.S. bargaining positions or the offers of foreign counterparts to public view before the agreement is completed would undermine the outcome.' But TPP is not secret to Warren. She has read it."

Okay, so the deal is secret from 99.9999 percent of the country, but Warren is wrong to call it "secret." It is true that members of Congress and a limited number of staff with clearance can read the deal. They cannot take notes and cannot discuss details of the deal with people without security clearance.

The trade agreement is written in technical language. Our senators and congresspeople may all be very bright, but it is a bit much to expect them to be experts on everything from patent and copyright law to consumer safety regulations. Without the assistance of staff or experts outside of Congress it would be quite difficult for members to make an informed judgment on many of the issues in the pact.

But, not to worry:

"Any member of Congress who wants to be briefed on the emerging agreement or ask questions about what they are reading can call the offices of the United States Trade Representative (USTR). According to the folks at USTR, there have been more than 1,700 in-person briefings on the deal. In fact, Ambassador Michael Froman, who is the USTR, has personally briefed Warren on various aspects of TPP."

See, the office of the USTR, possibly even the USTR himself, will be there to clear up any points of confusion. Yep, that's like the prosecutor's office making itself available to help the jury on any points that were not clear during the trial. What could be better than that?

Of course the deal could be made public tomorrow if President Obama chose to do so. After all, that great proponent of open government, George W. Bush, made the Free Trade Area of the Americas draft available to the public before asking Congress to vote on fast-track authority.

Interestingly, Capehart doesn't address Warren's often repeated concern that fast-track authority will be in place well into the term of the next president. This cedes a huge amount of Congressional power to the next president. He also didn't mention the issue that Warren has repeatedly raised of the extra-judicial Investor-State Dispute Settlement panels established by TPP. Australia has opted out of these panels, is there some reason the United States can't opt out also?

Dean Baker / May 26, 2015

Article Artículo

Thomas Friedman Warns of Dire Disruptions to the Economy, Again

Thomas Friedman, the man who told us the world is flat and told us about "hyperconnectivity," is again raising the alarm about economic disruptions ahead. He tells readers about a new study which finds that 47 percent of the jobs in the United States are at risk of being taken over by smart machines and software in the next two decades. Wow!

Economists have a technical term for smart machines and software displacing workers. It's called "productivity growth." Back in the old days, when people who wrote on economic topics for major news outlets were expected to have some knowledge of economics, we thought productivity growth was good. It created the possibility of rising wages, shorter work hours, general improvements in living standards.

We can assess the assess the implications of the study Friedman cited for productivity growth. Suppose that half of the "at risk" jobs disappear over the next two decades. This would translate into a 1.3 percent annual rate of productivity growth. That would be slower than the U.S. has experienced for any sustained period since World War II. We should indeed be worried about the slow pace of technological progress in this case.

Suppose that all the "at risk" jobs identified in the study are eliminated over the next two decades. This translates in a 3.1 percent rate of annual productivity growth, roughly the same pace as during the Golden Age from 1947-73. This should be good news. Workers should be able to enjoy higher pay, shorter hours, and longer vacations. 

Dean Baker / May 23, 2015

Article Artículo

Brazil

Latin America and the Caribbean

World

A Brief Look at Brazilian Social Movements

Brazil currently has its most conservative Congress in decades. As violence against social movements increases and the criminalization of Brazilian social movements in the media and judiciary intensifies, it is a good time to take a closer look at who these movements are and what they are doing. How did they start, and what is their position in the current political context? This article is meant to serve as a very brief introduction to two of the largest Brazilian social movements: the MST and the UNMP.

During the 1970s, as Brazil suffered under a U.S.-supported neofascist military dictatorship, liberation theology factions within the Catholic Church created political organizing groups, called ecclesiastic base communities, in poor villages and slums. Using methodological tools developed by philosophers such as Paulo Freire, and influenced by Marxism, the priests and nuns began to develop local leaders and organize exchanges among them at the local, regional and national level. There were other factors at work, but the role that liberation theologians played, from the final years of the dictatorship until their censure by the Church hierarchy in the late 1980s and early 1990s, was fundamental in the formation of the popular (or “poor people's”) social movements. These movements played an important part in creating one of world's most progressive constitutions, as well as in the formation of the PT (Workers Party), and the elections and re-elections of Lula Inacio da Silva and Dilma Rousseff.

FNRUPhoto courtesy of the UNMP-São Paulo.

The Movimento dos Trabalhadores Sem Terra, or MST (commonly called the Landless Peasants' Movement, or Landless Workers' Movement), was created in 1984 to address historic inequalities in rural areas (caused by 500 years of monoculture) by fighting for agrarian reform, collectively squatting on and farming on unproductive land under the slogan “Occupy, Resist, Produce.” Due mainly to its efforts, this practice is considered legal under the 1988 Constitution (although the Constitution is frequently ignored by local governments and the judiciary in Brazil) and is now regulated, supported and protected by a government agency called the Instituto Nacional de Colonização e Reforma Agrária.

CEPR and Brian Mier (Guest post) / May 21, 2015

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Niall Ferguson Goes to Bat for Cameron, Osborne, and Austerity

I see that Niall Ferguson is again pushing the case that the austerity pursued by the Cameron government in 2010 was both necessary and good. This can be a useful opportunity to show why the history since the Conservatives took power does not support this claim, even though they managed to get re-elected.

To quickly summarize Ferguson’s case, he argues that the turn to austerity was a matter of necessity, not choice. The U.K. had a high and rising debt burden. Furthermore, inflation was increasing and reaching dangerous levels. So it was necessary for the government to take quick action to reduce the deficit to keep the economy on a stable path. However, once on this course the economy quickly rebounded. The government’s actions restored business confidence leading to strong investment and growth.

Let’s start with the debt story. Ferguson cites a study from the Bank of International Settlements and argues that the government faced a much worse debt picture than other countries:

“The baseline scenario for the UK at that time was that, in the absence of fiscal reform, public debt would rise from 50% of GDP to above 500% by 2040. Only Japan was forecast to have a higher debt ratio by 2040 in the absence of reform."

Okay, that sounds pretty bad. Of course there is a long time between 2010 and 2040 to deal with rising debt if it becomes a burden on the economy, but there are two points that argue strongly there was no need for the Cameron government to be concerned about a financial panic sinking the country.

Dean Baker / May 21, 2015

Article Artículo

Globalization and Trade

Honduras

Latin America and the Caribbean

World

Maquiladora Industry Wages in Central America Are Not Living Wages

While the maquiladora export industry is sometimes touted as a symbol of progress and development in underdeveloped countries, the reality for many workers implies otherwise. In Central America, maquilas act as multinational levers to gain profit, but are not a guarantee of a sufficient income for workers.

According to a 2014 report [PDF] published by labor and social organizations, in El Salvador, Guatemala and Honduras – the Northern Triangle countries of Central America – approximately 350,000 [PDF] workers are employed in the maquiladora industry: 80,000 in El Salvador, 150,729 in Guatemala and 120,000 in Honduras.  As Table 1 illustrates, on average, 54 percent [PDF] of these countries’ total exports to the U.S. are produced in the maquiladora industry (42 percent for El Salvador, 55 percent for Guatemala and 65 percent for Honduras).

Table 1

Data from the U.S. Office of Textiles and Apparel shows that Central America and the Dominican Republic produce around 10 percent of all apparel goods purchased in the U.S., of which 70 percent is produced in Guatemala, El Salvador and Honduras. This means that Central America is behind only China (which produces 36 percent) and Vietnam (which produces 11 percent) in clothing exports to the U.S. Among the largest sectors that Central America exports to the U.S. are cotton knitted T-shirts (23.1 percent of these U.S. imports in dollars) and cotton underwear (24.7 percent of these U.S. imports in dollars).

The apparel export industry in Central America is concentrated in the hands of a few multinationals. Fruit of the Loom, Hanes, and Gildan Activewear are three of the biggest North American corporations operating in Honduras, employing around 25 percent of maquiladora workers in the country. Fruit of the Loom alone employs approximately 24,000 workers in Honduras and El Salvador. Nike and Adidas also subcontract production to maquiladoras; together they have about 30 outsourcing companies in Honduras alone.

CEPR and Mateo Crossa / May 20, 2015