The laws of free trade are not immutable after all

from Jim Stanford

For years, we’ve been told the dictates of globalization, and the intrusive and prescriptive terms of free trade agreements in particular, are immutable, natural, and unquestionable.  When workers were displaced by the migration of multinational capital toward more profitable jurisdictions, we were told there’s nothing we can do about it except join the race to the bottom in a desperate attempt to hang onto our jobs.  When investment and employment were undermined by lopsided trade and capital flows, and employers and financiers utilized the leverage afforded them by unrestrained international mobility to ratchet the distributional structure of the economy ever-more-blatantly in their own favour, we were informed this was just the logic of markets.  And anyone who questioned that logic, or pointed out that it didn’t work in the real world like it is described in the economic textbooks, was labelled either economically illiterate or protectors of vested interests.

Now, suddenly, on the strength of a few tweets from a President who hasn’t even taken office yet, it seems that those rules are not so immutable, permanent, or natural after all.  Now, global corporations will move billions of dollars of investment, and thousands of good jobs, just because a President-elect wants them to.  If there is one crucial lesson from the extraordinary developments this month in the North American auto industry (including Trump’s threats against Ford, GM, and Toyota, and Ford’s stunning decision to completely cancel its new assembly plant in Mexico), it’s that politics matter.  Nothing about the economy is ever natural or permanent — and the immense resources invested in convincing us they are, are actually trying to disempower and silence the potential power of those being hurt by the current system of globalization. We’ve now seen that when it suits powerful forces, global rules can be rewritten in an instant; decisions of global megacorps overturned swiftly and effectively; provisions of trade deals simply ignored.  

Trans-Pacific Partnership: Renegotiating NAFTA by the Back Door

For years, trade and justice activists from across North America have proposed renegotiating the North American Free Trade Agreement to address some of the deal’s most damaging features. Top priorities would include removing the anti-democratic investor-state dispute settlement (ISDS) provisions of Chapter 11, linking trade benefits to genuine protections for human and labour rights (crucial given the deteriorating democratic situation in Mexico, with mass disappearances and regular suppression of journalists and organizers), and establishing a continent-wide strategy to fairly allocate investment and production in key industries like auto manufacturing (thus curtailing the race-to-the-bottom the that currently shapes those patterns).

We were always told that renegotiating NAFTA was a pipe dream: it would not be possible to open the text and get all three countries on board with reforms, no matter how legitimate the concerns. So imagine our collective surprise to see that the entire NAFTA is suddenly now being renegotiated on a wholesale basis – but through a back-door method. The Trans-Pacific Partnership talks, as usual behind closed doors, have jumped right into the deep end, opening up the entire text of NAFTA to wholesale reform and renegotiation.

Canada’s Experience Warns of Dangers of Investor-State Dispute Settlement Systems

The more troubled the global economy becomes, the more insistent do neoclassical economists get with their arguments for still more free trade and globalization — and the more rose-coloured are the gains they predict from the next free trade deal.  Never mind that existing trade liberalization (under neoliberal terms) has produced imbalance, a tendency to stagnation, and a socially destructive race to the bottom in the interests of competitiveness.  The promised gains from trade are always just around the corner, to be unlocked by new twists in trade negotiations (and proselytized with the help of new twists in neoclassical economic modeling).

What’s a U.S. corporation?

from David Ruccio

It used to be that a U.S. corporation had its headquarters in the United States, paid U.S. taxes, and employed mostly U.S. workers.

Not anymore.

Now, while they still may have their headquarters officially located in the United States, they don’t pay much in the way of taxes, and many of the jobs they’re creating are overseas. In fact, they no longer even report the mix of U.S. and foreign jobs, even as they clamor for a tax holiday. 

New Video Deconstructs CGE Trade Models

from Jim Stanford

Every time the globalizers come along with a new NAFTA-style free trade agreement, they invoke the findings of yet another high-falutin’ computerized general equilibrium (CGE) model of the projected (and inevitably mutually positive) impacts of the deal.

We’ve seen this time and time again: a numerical simulation model (not based on econometric analysis, but constructed purely by attaching illustrative parameters to a Walrasian general equilibrium framework of simultaneous equations describing market-clearing in all markets) is solved, before and after some sypothesized trade policy liberalization, and the change in outcome is interpreted as the “predicted” impact of freer trade.  As we know, the positive outcome depends on sustained full employment, a lack of international capital mobility (and hence no change in aggregate trade balances), the sharing of gains (or compensation) within each participating country, a lack of cumulative causation in increasing returns industries, and a whole host of other assumptions that are necessary for the model to solve — but which have nothing to do with the real-world economy in which we live.

Mercantilism Works?

from Jim Stanford

I have gathered some interesting comparative information on the recent economic performance of the G7 economies.  My immediate goal was to try to puncture the national “triumphalism” which Canada’s ruling Conservative government has been (wrongly) wielding in an effort to deflect any criticism around Canada’s still-dismal labour market and macroeconomic circumstances. 

Kevin P. Gallagher and Ha-Joon Chang