Wednesday, 20 May 2015

In defence of TPP - the loss of jobs

The opposition from labour unions in the US ( and labour activists everywhere in the world) to the TPP is that it will lead to the loss manufacturing jobs (read in the US) and therefore it is anti labour. I have some sympathy for the view of the labour unions in the US, but absolutely no sympathy for the "global labour activists".

In every change of  the status quo, including opening up of trade, there will be winners and losers. When international trade is made more easy, by whatever means, the risk of American manufacturing jobs being lost is real. Labour intensive activity will migrate from higher cost locations to lower cost locations - that's an indisputable fact of economics. Therefore there has to be some sympathy for the US unions' opposition to every trade deal with a foreign country.

The balance sheet of wins and losses for the US looks like this. Jobs will be lost, especially in manufacturing. US consumers win in terms of lower costs of products. If international trade were to be substantially reduced, inflation will soar in the US. Prices of all goods will rise to levels which will put them out of reach of many people making it hard for even the poor in the US to enjoy the quality of life they currently have. Increased economic activity leads to rise in taxes for the US government - don't believe all that spin about evil corporations hiding their money overseas ; this is a point I am happy to debate separately. The increased economic activity does create more jobs, but not enough to compensate for the loss of jobs and in any case it is mismatched in terms of skill levels. So the only constituency that has some case for objecting to the TPP ( and every trade deal) is the US labour unions.

The group that deserves utter contempt are the international "labour activists" who are protesting against the TPP.  As we have seen, jobs will be lost in the US, but they will migrate to lower cost, and poorer countries . These are the societies that desperately need economic betterment through jobs.  Secondly, by lowering the cost of labour, there is a defence against machines taking over these jobs. That is why iPhones are still assembled by hand in China and clothes stitched by hand in Bangladesh. In sum total, there are more jobs created and preserved in the world than it would have been if manufacturing were to be done in high costs countries. You would have thought this is in net good for the world.

It is also an indisputable fact that labour is exploited in poor countries.The US, to its credit, through various trade agreements and via the TPP, is trying to minimise this. In particular, US negotiators want TPP members to implement and enforce the 1998 Declaration on Fundamental Principles and Rights at Work of the ILO. This includes the freedom of association, right to collective bargaining, a ban on forced or compulsory labor, the abolition of child labor, and a ban on discrimination in employment. The US also wants countries not to exempt their special economic zones from the labour laws of the rest of their country. These are all sticking points in the negotiations, but this is what the US has been strongly negotiating for.  If there were no TPP, it would be laissez faire for labour exploitation in each country. The TPP at least attempts to get some common protection for labour in every country. And the "international activists" are opposing this.

So yes, international trade will hurt US jobs. It has been doing so for many decades. But if you see it from a global perspective, the world would be a better place with the TPP, than without it. Having said that, I have sympathy for, and would not argue against the opposition of the US trade unions.

9 comments:

Sriram Khé said...

I have nothing to disagree here.

I find it interesting that there is no mention of Elizabeth Warren in this post ;) I assume she will re-surface in the next posts ...

Or, is it because Warren and Krugman and others of the "loony left" who drive you crazy have not focused on this as their top reasons to oppose the ToiletPaper&Pee? ;) I think it was Bernie Sanders who was concerned about the labor issues ...

Am waiting for your arguments on why the secrecy is needed ... hehehe ...

gils said...

so capitalist USA, wants to offshore their jobs, making their own countrymen unemployed yet socially secure,so that some other even poorer folk from some other country, without any social security can survive on peanuts being paid to them in comparison to their American counterparts. is this is not communism in an interstellar level? :D:D

Ramesh said...

That a very interesting angle Gilsu. Never thought of it that way. Yes, at one level, Marx might even approve.

Would you like to write a post that visa restrictions are no different from tariff restrictions and that the US must abolish the H1B cap if they claim to believe in free trade ? Why not removal of non immigrant visa caps in the TPP. Once this series is over, I will write a post on the downright robbery that the H1B concept and process is.

Ramesh said...

I have no grouse against the good lady as a person. But every time she mouths something loony, I will rant and rave. She hasn't made one sensible argument against the TPP - she is purely making noise to position herself as some sort of leftist messiah. Why the good folk of Massachusetts vote for her I cannot understand.

As for Krugman, if I see his mug shot or his name, I quickly turn the page ! Thankfully, my newspaper The Hindu is not carrying his column very often these days.

Oh yes, the secrecy argument will be made day after tomorrow. I am reserving all my bile for that :):):)

gils said...

Avvv...ivlo urupidiaana topiclaam enakku post a varaathay :)

Sandhya Sriram said...

I do not know how much the TPP is going to make as an incremental impact to the already existing labour situation in the americas. the TPP doesnt fundamentally change the ability of any business in the US today to buy from a low cost country. it only facilitates and makes it more easier. if at all, it will help making existing products more cheaper. If I know China can make a cheap I Phone, i would already be buying from it. maybe i am being my usual dumb!!

Ramesh said...

Yes, the incremental impact would be small in the US. That is why this is not the big issue everybody is shouting about. Although I submit this is the one that requires most action - the US has to find a way to find alternate jobs for those who are losing it. If not there will be social unrest - we are already seeing it in the confrontation of the African Americans with the police.

John Price said...

Some interesting issues raised here about national vs global interests. There are similar fears in Europe over TTIP.

Ramesh said...

Thanks for reading and commenting. Yes, similar issues feature in the TTIP case. I suspect the relative weightages of the issues might be different - For eg, environmental issues might be much higher up in importance simply because Europe is light years ahead of the USwhen it comes to environmental regulations.

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