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Trade Statement

August 5, 2010

For a generation, U.S. trade policy and the outsourcing that has accompanied it, have hollowed out our manufacturing economy.  The U.S. trade deficit and the associated imbalances in the world economy were key contributors to the economic crisis that began in 2007.  U.S. trade policies have contributed to the loss of millions of manufacturing jobs and undermined the bargaining power of workers in the U.S. economy, contributing to wage stagnation.  In the place of wage-driven demand, our trading partners lend us back their dollars at low rates, fueling the credit-driven housing bubble of the last decade.

The Obama Administration has taken some steps in the right direction.  Vice President Biden’s Middle Class Task Force has adopted a national manufacturing strategy, which has begun to produce results.  President Obama has set a goal of doubling exports in the next five years.  We urge President Obama to make clear in moving the export initiative forward that we should be aiming for a doubling of net exports.  In order for export growth to contribute to net job creation, exports must rise faster than imports. Otherwise, our trade deficit and our nation’s economic problems will worsen. 

We are deeply concerned by recent announcements from the Obama Administration that the Administration wants to pass trade agreements with South Korea, Panama and Colombia in the near future.  These trade deals were negotiated by President Bush and reflect Bush Administration priorities. We would urge the President, rather, to see these processes as opportunities to establish a new approach to trade.  Moreover, the Administration’s wait-and-see approach on China’s manipulation of exchange rates appears to us to be a very dangerous decision that could undermine near-term hope of a jobs recovery.

1.         Bush-Era Free Trade Agreements

In the past decade, many major U.S. trade agreements have accelerated the outward shift of jobs, exacerbated wage inequality and worsened our trade deficit despite promises to the contrary.  The North American Free Trade Agreement (NAFTA), for example, is estimated to have cost the U.S. more than one million manufacturing jobs, and violations of core labor rights in both Mexico and the United States continued unabated. 

KoreaAs negotiated, KORUS FTA will not result in a more balanced trade relationship with South Korea and create the good jobs that workers urgently need now.  Worse, we fear that the agreement could further batter the U.S. auto industry just as it works to recover from the economic crisis. We very much appreciate the Administration’s expressed commitment to try to address auto industry and auto worker concerns and we support fully the proposals of the United Auto Workers (UAW), which aim to safeguard and promote the long-term viability of the U.S. auto industry and the many jobs which depend on it.  In our view, this can be achieved only through renegotiating the auto related provisions of the agreement.  However; the serious problems with the KORUS FTA are not limited to its effect on the auto industry.  Our negotiators need to go back to the table to address other long-standing concerns about this agreement, including investment, services, procurement, trade remedies, dispute settlement and other provisions.

Colombia:  We simply cannot agree to deeper economic integration with a country where trade unionists are routinely murdered with impunity, and where death threats are a fact of life for worker activists.  Colombia continues to be the world’s most dangerous place to be a trade unionist.  This year alone, over 30 trade unionists have been murdered.   The International Labor Organization (ILO) has also identified numerous ways in which the labor laws of Colombia fall short of the ILO's core labor rights.  The agreement should not even be discussed until this human rights calamity is addressed.  The AFL-CIO stands in solidarity with Colombia’s trade unions and workers, and with the global labor movement’s stance in opposition to trade deals with Colombia until concrete progress is made to end the violence and the impunity, and to reform Colombia’s labor laws. Finally, it is clear that there is no good economic case for the United States to ignore our moral obligations to Colombia workers.  Even the U.S. International Trade Commission, which has a history of projecting job creation where none materializes, has concluded that this agreement will do very little to create good jobs here at home.

Panama:  The Panama FTA is the final Bush agreement pending before Congress.  It shares the structural flaws of both the Korea and Colombia agreements.  In addition, in recent months the Panamanian government has engaged in anti-worker violence on a scale unprecedented in recent years.  Both the structure of the Panama agreement and the repression of Panamanian workers must be addressed before any further action should be taken on the Panama FTA.

2.         Trans-Pacific Partnership

On March 15, 2010, the United States commenced trade negotiations with Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore and Vietnam for a proposed Trans-Pacific Partnership Trade Agreement (TPPTA). Throughout the negotiations, our negotiators must adopt a jobs lens, asking how decisions at the negotiating table contribute to a coordinated strategy for the promotion of high-quality jobs and sustainable economic development among TPPTA member countries.  This is the opportunity for the Obama Administration to adopt a new trade framework that will make a positive difference in the lives of working people by protecting workers’ rights in all participant countries, leading to long-term, balanced economic development.

3.         Labor Enforcement in Trade Agreements

The AFL-CIO applauds the recent announcement by USTR and the Department of Labor to request consultations with the government of Guatemala under the labor chapter of the Dominican Republic-Central America-U.S. Free Trade Agreement (DR-CAFTA).  This announcement demonstrates a commitment by the Obama Administration to enforce our trade laws, including the obligation to respect workers rights.  If consultations fail, however, we call upon our government to prosecute this case vigorously through the dispute settlement process.  However, Guatemala is not the only country failing to enforce its labor laws; indeed, serious labor violations are widespread in nearly every country with which we have an FTA.  We urge the Obama Administration to act with equal vigor on all current and future FTA labor complaints - including the recently filed complaint on Costa Rica.

4.         Currency

While our trade deficit fell sharply with the rest of the world in the wake of the economic crisis, our bilateral trade deficit with China, $227 billion as of 2009 - about three-quarters of our total non-oil goods trade deficit - fell nowhere near as much.  While many factors (including egregious violations of workers’ core human rights) contribute to this deficit, China’s manipulation of the value of its currency is central.  Unless this is addressed, it will be impossible to right global economic imbalances and to put the United States (and the world) on a path to long-term and sustainable economic recovery.  In response to growing global pressure, the Chinese government announced just prior to the G20 Summit in June that it would allow its currency to fluctuate slightly.  However, this has not been followed by concrete and significant progress; its currency has barely appreciated by 1 percent.  Despite this, the Treasury Department announced on July 8 that it would not designate China a currency manipulator.  This announcement ignores the overwhelming evidence, including that in Treasury's own report, that the Chinese government has systematically intervened in currency markets over many years to keep the renminbi undervalued by as much as 40 percent. 

American workers and businesses are paying a steep price every day for our government's failure to act decisively in this enormously important area,

The AFL-CIO urges the Obama Administration to intensify its efforts to end the Chinese government’s manipulation of its currency.  The Administration should undertake a multi-prong strategy, including resolving trade cases involving currency manipulation such as the Coated Paper CVD Case. We urge Congress to pass H.R. 2378, The Currency Reform for Fair Trade Act and S. 3134, The Currency Exchange Rate Oversight Reform Act of 2010, which would give our government the tools and resolve its needs to address currency manipulation.

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