News Release

State of the Union and How Trade Deals Damage the Economy and Force Desperate Migration

USA Today reports: “Immigration and income inequality are expected to be major themes in the [State of the Union] nationally televised speech.” The paper also writes about the prospects of President Obama talking about his backing of corporate trade agreements: “Obama faces some Democratic opposition to his request for ‘fast track’ negotiating authority. That power would restrict Congress to up-or-down votes on [trade] deals that have already been negotiated, with no amendments allowed. The Obama administration is also trying to close in on two free trade agreements that are also being disputed: The Trans-Pacific Partnership with 11 Asian and Latin American nations, and another deal with European Union nations.”
But critics of trade deals such as NAFTA and TPP cite evidence that they increase inequality, decrease economic opportunity and cause desperate migration.

LORI WALLACH, via Valerie Holford, valerieholford at starpower.net, lwallach at citizen.org, @pcgtw
Wallach is director of Public Citizen’s Global Trade Watch. She said today: “Congressional opposition to more-of-the-same trade deals has intensified as Obama’s past SOTU trade promises have fallen flat. In contrast to Obama’s 2011 SOTU promise that his only major past trade deal, the U.S.-Korea Free Trade Agreement, would boost exports in the agreement’s first year, U.S. exports to Korea fell 10 percent, imports from Korea rose and the U.S. trade deficit with Korea exploded by 37 percent. This equates to a net loss of approximately 40,000 U.S. jobs.

“The drop in exports to Korea added to last year’s sluggish overall 2 percent U.S. export growth rate. Given current trends, the U.S. will not achieve the president’s export-doubling plan until 2032 — 18 years behind the 2014 deadline Obama set in his 2010 State of the Union speech.”

Public Citizen states: “Economists of all stripes agree that U.S. trade policy has been one of the major contributors to growing U.S. income inequality. There really is no disagreement about that — the only debate is the degree to which trade contributes. A study published by the Peterson Institute for International Economics — an early supporter of the NAFTA on which TPP is modeled — estimated that as much as 39 percent of the observed growth in U.S. wage inequality is attributable to trade trends. Other studies have posited greater and lesser contributions.

“The TPP would replicate and expand to additional countries the trade agreement model established in the North American Free Trade Agreement. Twenty years of evidence of NAFTA’s contribution to U.S. income inequality has become a major problem for Obama’s push to get Congress to provide ‘fast track’ authority for the massive TPP deal, described as NAFTA-on-steroids.”

The group also notes that while Republican leadership like House Speaker John Boehner has backed the TPP as has President Obama, many progressive Democrats and conservative Republicans have come out against it. See Public Citizen’s “Obama’s State of the Union Dilemma: Pushing to Fast Track Controversial Trade Deal Would Undermine His Pledge to Battle Income Inequality.” [PDF]

In their report “NAFTA at 20,” [PDF] Public Citizen writes: “The export of subsidized U.S. corn did increase under NAFTA, destroying the livelihoods of more than one million Mexican campesino farmers and about 1.4 million additional Mexican workers whose livelihoods depended on agriculture.

“The desperate migration of those displaced from Mexico’s rural economy pushed down wages in Mexico’s border maquiladora factory zone and contributed to a doubling of Mexican immigration to the U.S. following NAFTA’s implementation.

“Though the price paid to Mexican farmers for corn plummeted after NAFTA, the deregulated retail price of tortillas — Mexico’s staple food — shot up 279 percent in the pact’s first 10 years.

“Facing displacement, rising prices and stagnant wages, more than half the Mexican population, and more than 60 percent of the rural population, still falls below the poverty line, despite the promises that NAFTA would bring broad prosperity to Mexicans.”