Washington Insider - Tuesday

Another View of Trade and Jobs

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Next Steps for TPP Emerge in US and Abroad

The trajectory for congressional consideration of the Trans-Pacific Partnership (TPP) is coming into focus following the trade deal’s signing Feb. 4, as annual congressional trade agendas and increasing lobbying efforts signal that the deal’s path to ratification is entering a new phase.

Hearings before the Senate Finance Committee and House Ways and Means Committee are expected to feature testimony from U.S. Trade Representative Michael Froman, who recently expressed his optimism that the deal will prevail when it is considered by Congress.

Trade policy agenda hearings typically occur in Feb. or March, but the official schedule for hearings has yet to be announced publically. Even after the hearings, a date for the final up-or-down vote on TPP is not clear.

Issues expected to highlight congressional hearings on TPP include tobacco products and dispute resolution considerations, foreign content rules of origin for automotive parts and intellectual property protections for biologic drugs. Following the hearing, informal markups are expected where lawmakers will offer and vote on amendments for a draft implementation bill for the trade deal.

Lobbying for and against TPP is beginning, the most recent example are union overtures to congressional staffers reiterating their concerns with the labor and human rights provisions of the pact. Unions including the AFL-CIO say that enforcement mechanisms contained in the bill are inadequate, and that the bill will ultimately harm American workers.

“All of the countries are sort of incentivized to compete in a race to the bottom by saying “how can we get the highest return on capital.” The way that you get the highest return on capital is by reducing labor costs,” said AFL-CIO Trade and Globalization Specialist Celeste Drake. Specifically, unions have pointed to the close relationship between Vietnamese labor unions and the communist government as a cause for concern that labor standards will truly be enforced in that particular TPP nation.


Washington Insider: Another View of Trade and Jobs

The fight over the TransPacific Partnership (TPP) trade deal is about to intensify as Congress focuses on approval legislation. However, it is often focusing on the wrong issues according to an OpEd in The Hill. Economists have long argued that trade is a “two way street that expands markets and makes all participants better off,” and they can show those results with their models. Still, politicians have found that protectionism sells and that it is easy to blame almost all and any economic adjustments on “trade deals.” It is this view that the OpEd opposes.

This argument is interesting as all the presidential candidates flock to oppose trade, including Republicans who long have depended on improved market access for industry support. It includes politicians from both parties, including some who had to stomach major position shifts to do so. A recent example is a Republican senator in Ohio who had served as U.S. Trade Ambassador but changed sides after being scorched by an anti-trade rival in what seems to be a close election race.

This week, The Hill carried an OpEd from a Harvard Business Senior Lecturer and the CEO of Burning Glass Technologies, a leading labor-market analytics firm. They take aim directly at trade politics, and argue forcefully that “even without trade pacts, American firms cut hundreds of thousands of jobs over the past few decades.” They suggest that our workers are all too often not trained in the skills they need and that the current political nostrums will not improve that shortfall.

The long-term structural decline of American jobs began well before the Great Recession, they say. “Around 2001, both job growth and labor force participation began showing signs of distress. America’s jobs growth rate steadily slowed and labor force participation fell dramatically.”

The cause of the “tectonic economic changes” that have affected the composition of America’s jobs pool, the writers say, including advances in communications and information technology and dramatic improvement in global logistics. These fueled the outsourcing of many jobs at the same time jobs were disappearing as American companies opted for automation. University research shows that between 1990 and 2014, America’s ability to generate “traded” jobs--that is, jobs in industries exposed to international competition--stalled sharply and growth focused on “local jobs” that serve the domestic market such as retail, healthcare, and construction--and which pay less.

Both trends put pressure on wages and combined to set new benchmarks against which many American employers evaluated their workforces. “In 2014, traded jobs paid on average $69,000 a year, while local jobs paid just $37,000 a year.” With no net job growth in traded jobs over the last decade, fewer Americans could aspire to a more prosperous future.

The writers argue that there is “…plenty of evidence that the middle skills jobs crisis is really a skills shortage.” Even as 8.3 million Americans were unemployed in July 2015, 5.8 million job postings remained unfilled, the highest number of postings since the BLS began collecting those statistics in December 2000.

In addition, Burning Glass data show that demand remains strong for a range of well-paying middle skill jobs from IT support staff to production managers to technical sales managers and that many of those jobs remain open much longer than average, suggesting that employers are struggling to fill them. “If employers can’t find the talent, those openings often move overseas and take thousands of associated high-value engineering jobs with them.” The irony is that jobs like these [that are hard to fill] are exactly what we need to revive our middle class, but they “will continue to prove elusive where we fail to align skills training to employer needs or emphasize job skills in public secondary education.”

The writers believe that tariffs or flimsy labor standards agreements do nothing to ensure that America has the talent it needs. “Developing a playbook for equipping Americans with the right skills will be critical if America is to retain its competitiveness in an increasingly global economy.” And it is the essential ingredient to restoring income growth to the two-thirds of Americans who will not earn a four-year college degree.

This is not a new argument, but it has a new dimension these days; the need to focus job training on where the good jobs are. It is unlikely to turn around the bitter, often populist opposition to trade deals that many politicians are using, but it may perhaps help focus policies in the future, once the current election cycle is past. For producers, growing export markets are too important to allow to be clouded by efforts to return to the protectionism that limited ag market growth in the past, Washington Insider believes.

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