NAFTA re-do spurns manufacturing, benefits finance, media, agriculture

Since the Establishment hijacked the Trump White House in April, I've always emphasized the exception of the trade issue. It was the one area where the Trump campaign was being put into action, whereas on all other major topics the key GOP power groups (Pentagon, RNC, etc.) had seized control. That was reflected in personnel, where Ross as Commerce Secretary and Lighthizer as Trade Representative were clearly from the economic nationalist camp, unlike the globalists in charge of Defense, National Security, Treasury, etc.

I reasoned that the Establishment was letting Trump get his way on trade in order to keep the Rust Belt voters happy, so that the GOP could win further presidential elections and maintain its grip over the executive branch. Without Rust Belt voters, the GOP never wins the White House again.

So I was using "trade" synonymously with "re-industrialization" and manufacturing -- Trump won those Rust Belt states that have been de-industrialized, giving them hope that their economies would re-industrialize and return prosperity to their communities.*

Unfortunately, when the office of the Trade Representative released its objectives for re-negotiating NAFTA, manufacturing is just a little afterthought, while the sectors of finance, telecommunications (media), and agriculture make up the bulk of the focus, and with the most highly detailed goals.

The headline from the Axios article says it all: "Trade advocates relieved at Trump's moderate turn on NAFTA".

Free-trader approval:

House Ways and Means Committee Chairman Kevin Brady and Trade Subcommittee Chairman Dave Reichert released a statement praising the Trump administration's document. Why you should pay attention to Brady: He's a Texan with vested interest in keeping NAFTA afloat, and he's one of the most principled free-traders in Congress.

The Chamber of Commerce's commended the objectives because they "hew to the 'do no harm' philosophy long advocated by the business community," per Inside Trade.

In short: plenty were worried Trump would blow up NAFTA and today's document is the clearest sign they're moving in a more conventional direction.

The article doesn't go into detail about why the free trade ideologues and Chamber of Commerce are happy about the proposed goals, but a look into the document itself shows why: there is no sincere effort to reverse the "giant sucking sound" of manufacturing jobs going from America into Mexico over the past 20-odd years. The only sectors that they are planning to go to bat for are agriculture, finance, and the media.

Here is the entire brief section on objectives for industrial goods:

- Maintain existing reciprocal duty-free market access for industrial goods and strengthen disciplines to address non-tariff barriers that constrain U.S. exports to NAFTA countries.

- Maintain existing duty-free access to NAFTA country markets for U.S. textile and apparel products and seek to improve competitive opportunities for exports of U.S. textile and apparel products while taking into account U.S. import sensitivities.

- Promote greater regulatory compatibility with respect to key goods sectors to reduce burdens associated with unnecessary differences in regulation, including through regulatory cooperation where appropriate.

The last item is meaningless, since it's not regulations that sucked the jobs out. The first two are mostly about "maintaining" the status quo and just making it easier for the handful of remaining American manufacturers to get their products into Mexico.

It takes as fait accompli the tens of thousands of vanished factories of the entire past quarter century, and does not seek to force them back into America through any means at all -- e.g., by slapping a big fat 35% tariff on every item made in Mexico by an American-owned company that outsourced its workforce, so that the American company's cheap labor strategy will be foiled, and they might as well do production here again.

Notice the lack of specific areas of focus and specific problems within them that need to be corrected. They don't really care about manufacturing, which is treated as a boring homogeneous blob that is only there for feel-good lip service.

Contrast that with their attention to agriculture:

- Maintain existing reciprocal duty-free market access for agricultural goods.

- Expand competitive market opportunities for U.S. agricultural goods in NAFTA countries, substantially equivalent to the competitive opportunities afforded foreign exports into the U.S. market, by reducing or eliminating remaining tariffs.

- Seek to eliminate non-tariff barriers to U.S. agricultural exports including discriminatory barriers, restrictive administration of tariff rate quotas, other unjustified measures that unfairly limit access to markets for U.S. goods, such as cross subsidization, price discrimination, and price undercutting.

- Provide reasonable adjustment periods for U. S. import sensitive agricultural products, engaging in close consultation with Congress on such products before initiating tariff reduction negotiations.

- Promote greater regulatory compatibility to reduce burdens associated with unnecessary differences in regulation, including through regulatory cooperation where appropriate.

All of a sudden, they're obsessed with expanding the American producers' market in Mexico and Canada, not just "maintaining" the status quo. And look at all the fine-grained mechanisms they are targeting -- rate quotas, cross subsidization, price discrimination, undercutting. They don't even name the practices by which American manufacturing has been sucked out into Mexico.

They're so fixated on agriculture that they have a separate section with five goals just about safety regulations that might limit American agricultural products.

Reality check: agriculture was invented 10,000 years ago, and did not make us into the prosperous nation we were in the 1950s. It is mostly done in the deep red states of the Plains and Mountains, so that catering to that sector draws no new Republican voters. Most of the labor is done by immigrants rather than Americans, whether they are here legally or illegally. Agriculture is heavily subsidized by the American taxpayers, unlike manufacturing.

And BTW, General Kelly at DHS just approved another 15,000 visas for unskilled seasonal labor, since the cap had already been met at 66,000 for the year. What is reduced from the "illegal immigrant" column will simply be moved into the "legal immigrant" column by increasing visas. 

The only ones who benefit from this are the big agribusiness corporations, akin to the landowning class who ruled over the serfs in feudalism.

During the campaign, Trump dismissed the focus on agriculture in trade deals by pointing out how "all we send to Japan is beef," while they're sending us cars that zip off the over-stuffed container ships at 40 mph. Making cars leads to national prosperity, raising cattle does not.

So much for trade in goods, what about trade in services? Here is where the American elites are really going to make a killing, since only advanced professionals will be in demand at the international level. It's not going to be blue-collar workers who are put on retainer for intellectual property litigation.

The media sector:

- Promote competitive supply of telecommunications services by facilitating market entry through transparent regulation and an independent regulator.

- Secure commitments to provide reasonable network access for telecommunications suppliers through interconnection and access to physical facilities and scarce resources.

- Establish provisions protecting telecommunications services suppliers' choice of technology.

It's not enough for AT&T to merge with Time-Warner (parent company of CNN), they have to expand their telephone / cable / internet / entertainment empire into Mexico's large market as well. That creates jobs for the high-powered lawyers in mergers and acquisitions who will draft the contracts, and it will enrich the big stockholders. But the skilled technicians and unskilled workers who install the Mexicans' cable and internet will be local Mexicans, not Americans.

The finance sector:

- Expand competitive market opportunities for United States financial service suppliers to obtain fairer and more open conditions of financial services trade.

- Improve transparency and predictability in their respective financial services regulatory procedures.

- Ensure that the NAFTA countries refrain from imposing measures in the financial services sector that restrict cross-border data flows or that require the use or installation of local computing facilities.

Same thing applies here as with the media -- only the high-powered professionals will see new jobs and greater income by spreading the tentacles of the big banks into Mexico.

Finally, the digital sector:

- Secure commitments not to impose customs duties on digital products (e.g., software, music, video, e-books).

- Ensure non-discriminatory treatment of digital products transmitted electronically and guarantee that these products will not face government-sanctioned discrimination based on the nationality or territory in which the product is produced.

- Establish rules to ensure that NAFTA countries do not impose measures that restrict cross-border data flows and do not require the use or installation of local computing facilities.

- Establish rules to prevent governments from mandating the disclosure of computer source code.

Once again, no blue-collar or middle-class Americans will gain jobs or income. This is designed to benefit elite professionals whose digital products can be scaled up to an international level -- a smartphone app, a pop song, etc.

These three service sectors -- finance, media, digital -- are all deep blue liberal Democrat constituencies, unlike the deep red agribusiness. But the result is the same: no new Republican voters are brought on board, few new jobs for American workers, and greater wealth concentrated in the elite stratum. Also like agribusiness, these sectors are heavily subsidized by the taxpayers -- bailouts of big banks, handing over the airwaves and internet to private mega-corporations, and inflating one tech bubble after another.

Unlike these sectors that are the focus of NAFTA negotiations, the ignored manufacturing sector used to lie in purple states, offering the chance to swing yuge numbers of voters into the GOP column. It created millions of jobs for working and middle-class Americans -- not foreigners, and not elites. It paid high wages. And it was not kept alive by government subsidies.

Just look at what the different governments subsidize -- America subsidizes farming and banking, while letting manufacturing fend for itself, whereas Mexico or South Korea subsidize industry, while allowing their farms to get driven out of business and their finances to be taken over by multinational banks.

Until that is reversed, our country will continue to lose high-paying jobs for ordinary Americans, and be further driven into a polarized wealth pyramid with more poors and more elites. That is a recipe for a literal bloody revolution, and if the people in charge want to avoid that, they will bring back those manufacturing plants and jobs that allowed for a large prosperous middle class in America -- prosperous and satisfied with fairness concerns, that they did not feel like launching a Russian Revolution against their superiors, who treated them with noblesse oblige.

Sadly, it looks like the greedy short-sighted Establishment is taking over the issue of trade, preventing the re-industrialization of the Rust Belt -- or anywhere else in America that wants plentiful high-paying jobs for everyday people.

Silver lining: unlike the issue of warmongering, where there are no anti-war groups left to organize citizens against their wasteful and reckless government, there still are trade and industrial unions left to organize workers -- especially after they were promised a restoration of the Rust Belt.

Trump needs an organized mass of citizens to fight for his agenda, giving him cover in the swamp of Washington. If he is left to fight the populist and nationalist battle all by himself, the Establishment members will tell him to go to hell, ignore his priorities, and go right back to business as usual. He has no leverage within DC itself, so he will not be able to retaliate against them -- unless he wants to take the fight public and dare them to defy him out in the open! Even so, that will be much more likely to succeed if he is given cover fire by armies of citizens.

The corrupt leadership of the big unions has gone along with de-industrialization, but the rank-and-file are still organized, and are not exactly the "go along to get along" type. Especially if Trump himself wages war against the de-industrializers who are trying to hijack the effort to re-negotiate NAFTA, the rank-and-file union members will eagerly team up with him. They want to be led, and their current leaders are largely sell-outs. If Trump wants to lead, they will follow -- but only if it's toward re-industrialization.

Lastly, it turns out that the GOP really is still the party of stupid. I thought they'd at least concede the battle over re-industrialization in order to keep the Rust Belt states in the red column, but they are hell-bent on defying the Trump agenda all the way through.

They think white working-class people in Michigan will be too stupid to notice the lack of delivering the goods on restoring the Rust Belt industries, and will simply be won over by image and messaging, rather than substance and results.

News flash: Great Lakes people don't care for Trump's image or tone! They took a chance on him because of his promise to re-build their lost factories. They may even give him a chance again in 2020 regardless. But if the RNC, Chamber of Commerce, and the rest of the Establishment prevent Trump from delivering the goods, kiss the Rust Belt good-bye after he's left office.

* It was the Industrial Revolution that made us so prosperous, and narrowed the inequality gap between workers and elites. Finished goods are highly valued by buyers because most people cannot turn raw materials into a final usable product on their own. The more useful the good, and the more difficult it is to make, the more the consumer is willing to pay beyond the cost of making it -- like a car. That means higher profit margins compared to low-margin things that people can easily make themselves, like meals.

If the industry were competitive, the owners of a company would have to pass along a lot of that high profit margin to their workers, or they would work somewhere else. Low-margin industries like food service and retail service do not have much profit to pass along to begin with, even if the worker got 100% of it. Only manufacturing industries can support a large prosperous workforce.