A big deal: TPP negotiators meet in Peru

Representatives of 11 nations met in Lima, Peru, yesterday for the start of the 17th round of negotiations for the Trans Pacific Partnership Agreement, a trade treaty that would give corporations  the right to appeal to international tribunals to overturn federal laws, state laws and court decisions regarding not just patent and copyright laws, but also “buy American” rules and environmental and labor laws.

The text of the draft treaty has not been made public and only limited information is available to Congress and the public.  Business representatives, however, are being consulted on the draft.   The Obama administration has stated that this is the cornerstone of its trade policy.

Once agreement is reached, the Obama administration or its successor will ask for Fast Track authority to require the Senate to vote the treaty up or down as is, without amendments.  The previous Fast Track authority has expired, and should not be renewed.

Similar negotiations are underway for a new Transatlantic Trade and Investment Treaty with the European Union.   This is a very, very big deal, even though there has been little reporting in the national press and network television.

Click on the following links for more information.

Political Corruption and the ‘Free Trade Racket by Dean Baker.

Upcoming Trans-Pacific Partnership Looks Like Corporate Takeover by Dave Johnson of Campaign for America’s Future.

Large Corporations Seek U.S.-European ‘Free Trade Agreement’ to Further Global Dominance by Andrew Gavin Marshall for AlterNet.

The 11 nations in the negotiations are the United States, Canada, Australia, New Zealand, Brunei, Malaysia, Singapore, Vietnam, Mexico, Chile and Peru.   Japan has been invited to join the negotiations.

The profit motive is not an ethical principle

Here are links to articles I found interesting about what happens when the profit motive overrides professionalism, social responsibility or obedience to law.

Coming Corporate Control of Medicine Throws Patients Under the Bus

Yves Smith describes the corporate model for medical care, which is to set a limit on how much time a physician can see an individual patient, so as to maximize the number of patients seen in a day.  This means weeding out patients with complicated problems or without good insurance.

Who’s Getting Rich Off Student Loans?  College Endowments

Daniel Luzer of the Washington Monthly tells how college endowment funds invest in student loan servicing and collection companies such as Sallie Mae.   The perverse incentives are that the higher the college tuition, the greater the interest payments and the more profitable the investment.   Sallie Mae is the nickname for a government lender that was privatized in 2004 and became SLM Corp.

When Your Boss Steals Your Wages: The Invisible Epidemic That’s Sweeping America.

Lynn Stuart Parramore of AlterNet reports on the practice of wage theft, which includes not paying for all hours worked, not paying overtime, not paying minimum wage and confiscation of tips.   A survey of 4,000 low-wage workers in New York, Chicago and Los Angeles found that 26 percent were paid below minimum wage and 76 percent were denied overtime pay for working more than 40 hours a week.

The Vicious New Bank Shakedown That Could Seriously Ruin Your Life.

Lynn Stuart Parramore reports on how banks such as Chase JP Morgan are committing the same kinds of abuses in collecting credit card debt that they used in collecting mortgage debt.  What they do is “robo-sign” lawsuit claims without checking records to make sure the information is correct, and give “sewer service” (throw the legal papers in the sewer)  of the claim to the debtor.  The result is that debtors’ wages are garnished even though, in some cases, they may be paid up, and lots of fees and charges are added to their debt without their knowledge.

Anti-TPP movement growing in Japan

While few Americans know about the secret negotiations for the Trans-Pacific Partnership agreement, there is a strong and growing anti-TPP movement in Japan, which isn’t even an official party to the negotiations, which include the United States, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Leaked information about the TPP indicates that it would set up tribunals which would have authority to override national laws and court decisions deemed unfair to “investors.”   U.S. opponents of TPP cite precedents where trade agreements have been used to override laws and court decisions protecting public health and the environment.

But Nobuhiko Suto, a former member of the Japanese House of Representatives who is leading anti-TPP protests, told Real News that the TPP could destroy Japan’s successful health insurance system.  That is because, like all universal health insurance systems, it keeps average costs down by bringing rich, poor, healthy and unhealthy people into the same system.  He said the TPP would destroy this by forcing Japan to allow foreign health insurance companies to take the rich and healthy out of the system.  For Americans, this would mean that a single-payer health insurance system would be forever ruled out of consideration.

We don’t know for sure what is in the TPP—only that the negotiators fear an adverse public reaction if the draft agreement would be made public.  But Martin Khor, executive director of the South Centre, a think tank for developing countries, has the same concerns as Nobuhiko Suto.   He said these concerns are validated by agreements the United States has negotiated with individual countries such as Peru, and by statements of the Australian government.

Khor said the United States and Australian governments want a provision that requires any government service that duplicates private enterprise to operate on “strictly commercial considerations.”  He said they want to eliminate any inherent advantage that a government service might enjoy over private enterprise, including a requirement that the government service not merely break even, but earn a profit comparable to what a private company might demand.

Australia has … introduced the principle of “competitive neutrality” to discipline the SOEs [state-owned enterprises]. … …  This is based on the concept of a “government-owned business”.   The state-owned business enterprise which competes with private companies may obtain advantages, impeding the ability of the private sector to compete on equal terms.

… … These advantages include exemptions from taxes; cheaper debt financing (because of the low-risk classification or government guarantees); absence of need to make a commercial rate of return; and exemption from regulatory constraints or costs.

To offset these advantages, the Australian guidelines cover how government businesses should pay taxes in full; pay back to the central government the difference in their loan costs vis-à-vis private sector loan costs; pay license fees equivalent to the central government; and ensure that they obtain a commercial rate of return.

via TripleCrisis.

Of course these supposedly unfair advantages work to the benefit of the public.  The whole point of having government provide services is to do the things that private enterprise is unable or unwilling to do.   The Rural Electrification Administration extended electricity to farms that private utilities found unprofitable to service.  The U.S. Postal Service provides mail delivery to remote locations that the commercial carriers don’t serve directly (they use the USPS instead).   We have public trash pickup in Rochester because it means all the trash gets picked up, not just that trash of those who can afford a private service.

Now you may disagree that government does better than private business in these examples.  Reasonable people can differ about the role of government and business.  The problem with the TPP, unless all the information leaking out is completely wrong, is that decisions about this role would not be made by elected officials, but by an international body not accountable to the public.

Click on Serious Threat to Asian Economic Model for Martin Khor’s full analysis of the TPP.

Click on Trans Pacific Partnership: Background and Resources for background information from the Sierra Club New York City Group.

Hat tip to naked capitalism.

The extremely slow U.S. economic recovery

The Dow Jones average is back to where it was before.   The American job market still has a long way to go.

There is less to these charts than meets the eye.  Stock prices and jobs are rebounding, but investors are not doing all that well, and job-seekers are doing worse.

The Dow Jones average for the past six years has not kept up with inflation, even though the rate of inflation is extremely low.   And the bottom chart shows just how slow the rebound in jobs has been compared to previous economic recoveries.  Just as the stock market ought to keep up with inflation, the job market ought to keep up with population growth.  In other words, even when the number of jobs gets back to what it was in 2007, we’ll still be behind.

The official unemployment rate for April was 7.5 percent.  Economist David F. Ruccio pointed out that this means there are 11.6 million Americans still looking for work, four years after the supposed beginning of the economic recovery.

The Bureau of Labor Statistics reports its U-6 rate of unemployment, which includes jobless people who’ve given up looking for work, and part-time workers who want to work full-time, is 13.9 percent.   This is 21.9 million Americans, roughly one in seven eligible workers.

Click on Why Good People Can’t Find Jobs — What You’re Up Against for a good report on why it’s tough to find a job.

Click on occasional links and commentary for David F. Ruccio’s web log, which is crammed with good information.

Pushing back against pro-corporate treaties

Last month representative of 12 Latin American governments met in Guayaquil, Ecuador, to talk about what to do about trade treaties that give private business the right to appeal to international tribunals to overturn laws and court decisions for the protection of workers, consumers and the public interest.

Such provisions are part of the North American Free Trade Agreement and of numerous bilateral agreements between the United States and foreign governments.   These treaties not only give them the right to appeal to a tribunal of foreigners to overturn a nation’s laws, but to collect damages for loss of “expected profits.”   Only investors have the right of appeal under these treaties.  Labor unions and citizens groups do not.  As Public Citizen reported:

Many of the other countries present have also faced a taxing litany of investor-state cases in recent years:  Mexico (e.g. losing $170 million in a NAFTA-created tribunal to the same U.S. agribusinesses that, under the same NAFTA, displaced over two million farmers), Argentina (e.g. losing a slew of cases to foreign financial firms for using financial regulations to mitigate the country’s 2001 financial crisis), Guatemala (e.g. losing $13 million to a railroad company that failed to build a railroad because the tribunal thought that the government had failed to fulfill the company’s expectations), etc.

via Eyes on Trade.

These “investor-state” provisions are being used more and more.   Recently a company appealed Quebec’s moratorium on hydraulic fracturing for natural gas to a NAFTA court.   Lone Pine Resources, a company incorporated in Delaware and headquartered in Calgary, Alberta, has asked for $250 million to compensate for its time and expense in obtaining necessary permits and approvals for hydrofracking.  Under the treaty, the appeal must go to binding arbitration to a three-person panel of professional arbitrators in a hearing closed to the public.   If Lone Pine wins, this would have grave implications for the ability of New York state or any other North American government to regulate hydrofracking.

ICSID is the International Center for Settlement of Investment Disputes.

Barack Obama in his 2008 Presidential campaign promised to renegotiate NAFTA so as to give better protections for labor and the public interest, but as President, he did not make even a token effort to do so.   Instead his administration is embarked on negotiations for a new Trans-Pacific Partnership agreement and a new agreement with the European Union which would lock in investor rights to appeal national laws.

I don’t think global corporations need the benefit of special protection under international law.   If corporate executives feel their company is treated unfairly by a government, they have the power to simply cease doing business there.  Public Citizen’s Global Trade Watch organization quoted reports that there is no evidence that investor-state treaties increase the amount of foreign investment in a country.

As a result of the Guayaquil meeting:

At the end of the day, seven of the governments present signed a declaration to coordinate efforts in seeking to replace the investor-state regime with an alternative investment framework that respects sovereignty, democracy, and public well-being.  They announced the launch of an International Observatory, a intergovernmental commission based in Latin America to audit investor-state tribunals, draft alternative investment agreements, and collaborate in strategies for reform. … …  Representatives from the remaining five governments participated as observers and are now taking the declaration back to their capitals to discuss joining the emerging Latin American coalition.

via Eyes on Trade.

I hope something comes of this.   It is U.S.-based corporations and the corporate-influenced U.S. government that are pushing for unequal trade treaties.  They do not benefit the American people.

‘I regard the moral environment as pathological’

Jeffrey Sachs is a well-regarded American economist, who is director of the Earth Institute at Columbia University.  Last week he took part in a conference sponsored by the Drexel University at the Federal Reserve Bank of Philadelphia on how to fix the banking system.  This is part of what he had to say.

Jeffrey Sachs

I regard the moral environment as pathological.  And I’m talking about the human interactions that I have.  I’ve not seen anything like this, not felt it so palpably.  These people are out to make billions of dollars and nothing should stop them from that.  They have no responsibility to pay taxes.  They have no responsibility to their clients.  They have no responsibility to people, counterparties in transactions.  They are tough, greedy, aggressive, and feel absolutely out of control, you know, in a quite literal sense.  And they have gamed the system to a remarkable extent, and they have a docile president, a docile White House, and a docile regulatory system that absolutely can’t find its voice.  It’s terrified of these companies.

If you look at the campaign contributions … … the financial markets are the number one campaign contributors in the U.S. system now.  We have a corrupt politics to the core, I’m afraid to say, and no party is—I mean there’s—if not both parties are up to their necks in this.  This has nothing to do with Democrats or Republicans.  It really doesn’t have anything to do with right wing or left wing, by the way.  The corruption is, as far as I can see, everywhere.  But what it’s led to is this sense of impunity that is really stunning, and you feel it on the individual level right now, and it’s very, very unhealthy.

I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language, and I’ve not seen it once.  And that is shocking to me.  And if they won’t, I’ve waited for a judge,  for our president,  for somebody, and it hasn’t happened.  And by the way it’s not going to happen anytime soon it seems.

The significance is not so much the content of what he is saying, which has been obvious for some time, as that he as a member of the American economics establishment is saying it.

Foxconn: the face of world manufacturing

Foxconn, the giant Chinese manufacturing company, is expanding worldwide, not only into poorer regions of China but also into Brazil, India, Mexico, Malaysia, central Europe and, in the not-too-distant future, the United States.   With 1.4 million workers in China alone, it is the world’s second largest employer, behind Walmart.

Foxconn suicide nets (Bloomberg News)

The company, whose headquarters are in Taiwan and largest operations are in China, is famous for asking its stressed-out workers to sign pledges to not commit suicide and for putting up suicide nets to catch workers jump out of the windows of its tall dormitories.

Ross Perlin, writing in the current issue of Dissent magazine, says there are good reasons for this.   Work schedules of 12 hours a day and 50 hours a week are common, he said, with up to 100 hours a week during peak production.  He said that wages average $1 to $2 an hour.

Although the company continues to be plagued by wildcat strikes and suicide threats, working conditions have improved slightly, as a result of audits by Apple Computer, a major customer, and a tight labor market in China, Perlin wrote.

But there is a limit to possible improvement.  He quoted an analysis that said only 1.8 percent of the price of an iPhone goes to manufacturers in China, while Apple gets 58.5 percent and the rest goes to manufacturers of high-end components.  He didn’t quote the source of these figures, and I suspect they are exaggerated, but I agree with his overall point.  Profit margins of companies such as Foxconn and other Chinese suppliers are razor-thin, and they can succeed only by operating on a huge scale while keeping costs, including wages, to a minimum.

Perlin said that Foxconn and Apple symbolize the long-standing relationship between the United States and the economies of eastern Asia, including Japan and South Korea as well as China.

[It is based on] a series of dyads: American consumption and Asian labor, American innovation and Asian manufacturing, American debt and Asian savings, American power and Asian acquiescence. In its latest form—the co-evolution of Silicon Valley and China’s Special Economic Zones, particularly in information technology and alternative energy—it can be summed up in the words, engraved on nearly every Apple product: “Designed by Apple in California, Assembled in China.”

via Dissent Magazine.

This economic relationship has existed for a long time, but it can’t go on forever.  It depends on us Americans being relatively rich, and over time it makes us relatively poorer.

There are at least two ways it can come to an end.  One is that the United States government stands up for U.S. workers and does what the Japanese, South Korean, Chinese and many other governments do, which is to allow access to the nation’s market only on condition that the company make a positive contribution to the nation’s productivity.  Currently the U.S. government is on the opposite course.   From Reagan through Clinton to Obama, successive administrations have sought to lock the United States into international trade treaties precisely intended to prevent member governments from asserting national interests against global corporations.

The most likely ending is that we Americans eventually cease to be able to earn enough or borrow enough to be a worthwhile market for Chinese goods.  If and when that happens, the question becomes whether the USA will take down the economies of eastern Asia with us.  Maybe by that time they will have developed a middle class large enough to be a market for their own goods, after having moved their manufacturing operations to Africa or some other poorer part of the world.   Or maybe they or we will have found a better path, in a way I can’t presently imagine.

Click on Chinese Workers Foxconned for Ross Perlin’s full article in Dissent Magazine, which has other articles on China in the Spring 2013 issue.

The engineering of junk food addiction

We human beings are conditioned through natural selection to desire sugar, salt and fat.   They were scarce for our hunter-gatherer ancestors, who ate them every chance they got.  So it is no wonder that we like sweet, salty and greasy junk foods, and that food processors and fast-food restaurants make a lot of money selling them.  Since we Americans are no longer hunter-gatherers, our craving for junk food has many of us unhealthy and obese.

Recently a New York Times reporter named Michael Mann discovered there is more going on than that.  He found, through interviews and a search of court documents, that food processors are able to engineer their products to contain the exact amount of sugar, salt and fat that will maximize the human appetite for more—much as the tobacco companies were able to engineer nicotine to contain the exact amount that would maximize the craving for more cigarettes and cigars.

This is a drawback of competition and free enterprise.  So long as corporate profits depend on producing excellent goods and services at a reasonable price, the free market works for the benefit of the public in a way that no planned system could.  But when profits are increased by doing something that is harmful, any company that holds bag risks falling behind and being crowded out.

We as individuals have the power to refrain from addiction to an unhealthy diet.  I am glad the Food and Drug Administration requires packaged foods to be labeled as to their fat content, and their ingredients.  I have only become concerned about a healthy diet fairly late in life, but I now look carefully at what I buy.  I don’t know what I would do without this information.

Click on The Extraordinary Science of Addictive Junk Food for Michael Mann’s article in the New York Times Magazine.

Click on How the government subsidizes obesity for an earlier post of mine on how the federal government’s grain subsidies make junk food cheaper than healthy food.

Click on The Acceleration of Addictiveness for an article by venture capitalist Paul Graham on the synergy between addictiveness and free enterprise.

TTP trade deal would override American law

Right-wing opponents of President Obama say that his policies are a threat to American democracy.  I think that’s true—but not in the way they think.   He claims the right to sign death warrants based on secret criteria.  He has brought government secrecy to unprecedented levels.  His administration protects wrongdoers and prosecutes whistle-blowers.   But all these things will be possible for a future President to roll back.

Not so the TransPacific Partnership agreement, a treaty now being negotiated in secret.  The TPP treaty will be submitted to the Senate under the Fast Track system under which it can be voted up or down but not modified.   It is very possible that it will be enacted before the majority of the American public has a chance to learn what it is all about.

The full extent of the TPP is not known, but some provisions have been leaked.  They are all favorable to global corporations and unfavorable to the public.  The worst provision is the agreement to submit to special courts with authority to overrule U.S. law and U.S. court decisions when they are deemed unfair to “investors.”

Investors will be the only class of people protected by the TPP.   They will be allowed to ask for damages not only loss of business due to labor, health or environmental laws, but for hypothetical losses of future profits.

One purpose of the TPP is to create an 11-nation Pacific bloc in which there are no national boundaries for global corporations, but China is locked out.  But there is no minimum number of nations that have to sign for the TPP to go into effect.  Even if only a handful of nations besides the United States sign on, it will have achieved another purpose, which is to create a body with power to override U.S. laws that are objectionable to corporations.

Under Article VI of the U.S. Constitution, treaties are the supreme law of the land.  That is a necessary provision.  If it were otherwise, treaties would not be binding.  Unfortunately, this opens the door to treaties such as the North American Free Trade Agreement, which set up courts superior to national courts, to which corporations can appeal to overturn national and local laws.  For example, a NAFTA court recently ordered the Province of Ontario to pay damages to a national gas company for future profits lost because of Ontario’s restrictions on hydraulic fracturing.  TPP is NAFTA on steroids.

There are many other pernicious provisions in the TPP.  Click on TransPacific Partnership Will Undermine Democracy, Empower Transnational Corporations for details.

Click on US secretly negotiating NAFTA-like TPP treaty for an earlier post of mine on TPP.

Click on Trans-Pacific Partnership: NAFTA on Steroids for another earlier post.

Click on Barack Obama’s economic legacy: His four must-have items for comment on how TPP fits in with Obama’s overall economic agenda.

A crazy idea from Walmart management

Sam Walton, the founder of Walmart, was a business genius.  But his heirs, to put it as kindly as possible, are not.

Walmart has been foundering of late because it is so understaffed that its employees are not able to keep the shelves of its stores fully stocked.  This is wrongheaded.

Now Walmart management is seriously thinking about giving its customers discounts in return for delivering on-line orders within their ZIP codes.  This is deeply crazy.  No doubt their lawyers and insurance companies will talk them out of actually attempting this.

The Walton heirs are a good argument for keeping estate taxes high enough that important business enterprises do not fall into the hands of the idiot children of great entrepreneurs.  The operation of the free market will catch up with Walmart eventually, but not until a lot of good, hard-working people are hurt.

Click on Walmart faces the cost of cost-cutting: Empty shelves for a report from Bloomberg Business News about the company’s troubles.

Click on Wal-Mart may get customers to deliver packages to online buyers for a report from Reuters about management’s bogus solution.