What was so bad about NAFTA? If you ask the president, it was one of the worst deals ever made. A common 2016 campaign riff was his promise to bring jobs back, get companies to return production to the U.S., and scrap NAFTA. This anti-trade campaigning caught the attention of many voters struggling to find work. Interestingly, it also got the attention of progressive trade critics on the left who had also been calling to renegotiate NAFTA for decades.
Lori Wallach, director at Public Citizen’s Global Trade, explains how their critique of corporate-rigged trade policies managed to align in some surprising ways with the president’s trade nationalist agenda. And while NAFTA 2.0 shows some progress, there are still a lot of improvements they want to see made. But that was only the beginning, ‘phase 1’ as Wallach puts it. Now, it has to be chewed over by a newly Democratic House and phase 2 begins.
LORI WALLACH: Currently with NAFTA, you have a lot of people who are making products that they are not being paid enough to even contemplate buying. You can get a job in one of those maquiladora factories on the border, not able to buy, certainly not the car being made there, but probably not the television being made there. Not sure your kids can meet their school fees, that you have enough to eat.
That kind of race to the bottom is not an act of God. That is not, there is not alternative. That is not something that happened because that's globalization, welcome to the modern era. That is the outcome of a specific set of rules. For progressive people, that is not acceptable.
CHRIS HAYES: Hello, and welcome to "Why is This Happening," with me, your Host, Chris Hayes.
So I've got some interesting polling data in front of me here that's about trade — who likes trade, who doesn't like trade. And the percentage who say free trade agreements between the U.S. and other countries have generally been a good thing or a bad thing for the U.S. And one thing, there's some really interesting thing in the data. So one is that Democrats, lean Democrats are much, much more likely to say that trade deals have been a good thing for the U.S. 67 percent say that, as opposed to like 19 percent, who say it's a bad thing.
Republicans, on the other hand, are much more likely to say it's a bad thing. Another interesting piece of data: when Trump was elected, there was this enormous wedge among Republicans, it went up to 63 percent of Republicans said trade deals are a bad thing, and 29 percent said it was a good thing. And over the last two years, as he has implemented some of his trade policies, those numbers have converged.
So now it's basically tied, so the number of people, who when Trump was elected, they were like, "Yeah, totally. Trade deals are bad," with 63 percent, now it's down to 46 percent. So watching the actual first few years of the Trump administration have moved even Republican voters away from Trump himself on trade, and that's true of the general population. Back when Trump was elected in 2016, it was tied. People say it's a good thing, a bad thing. Now good thing is 56 percent, bad thing 30 percent. 26 percent margin.
So what we've seen in this country around trade, is that Donald Trump ran on what I think was a fairly popular anti-trade deal agenda against NAFTA, against the TPP, which he killed. He said, "Americans were getting ripped off by those bad foreigners," and that won him, I think, a lot of votes in the industrial midwest. The greater industrial midwest among white voters without college degrees. That was a key part, it shows up in the polling data. Anecdotally you hear it.
Now he's been in office and I have to say, unlike a lot of ridiculous promises he made, it's one that he's kind of delivered on, in the sense that he said, "I'm going to tear up these trade deals and be a real hawkish pugilist on trade," and he has been that. They did rip up TPP, they did renegotiate NAFTA, we are right now in a trade war with China. They have actually raised tariff. This is not like his “drain the swamp” promise, it's not like his, "We're going to cut the cost of pharmaceuticals" promise. It's not like his, "Universal Healthcare" promise.
There are a lot of Donald Trump promises that went absolutely nowhere, trade is not one of them. The trade agenda of Donald Trump has been quite distinct and quite different than the Washington consensus before it, and has also created a lot of backlash. It's a little bit of that, "Oh, I like that. I like that thing," and you get it. And you're like, "I don't like this that much."
What's a good example of that? What's a thing where you like something in the abstract and then you get it? It's a little like a gym membership. You're like, "Yeah, I want a gym, I want to work out, I want to go to the gym and work out every day." And then you get a gym membership, and you're like, "I don't want to really go to the gym. I think I'm not going to go the gym today."
American trade opinion's a little like that. Like, "Yeah, let's get tough. Let's get tough on that trade stuff. Let's do it. Let's make a trade war with China. Stop ripping us off." And then they started doing that, and then it's like, "No, we need someone to sell our soybeans to. What are you doing? No, stop. We like free trade deals. Hello, hello. We like free trade." That's kind of where American public opinion has been on trade, which is fascinating.
Now there's two other layers of complexity here. One is that the history of American trade and public opinion is really fascinating because the different parties and different political coalitions have been on different sides of the who's free trade and who's anti-free trade through the years. So there's periods in American life where it's like, the southerners are super into free trade. And the northerners are super into protection because of northerners are like mercantilist industrialist and the southerners are selling all their cotton to England.
And there's periods where the rich people in America are super anti-free trade because they have industries they want to protect, and the poor represented by say William Jennings Bryan, the great prairie populist, are super free trade because their farmers need to sell their products. And then there's periods in which the rich are super free trade, like the period we've experienced over the last 30 years. And the party of the rich is super pro-free trade.
There's all kinds of ways in which trade is a signature part of American public opinion and politics, from the very first moment the country's created. Remember, before you have an income tax, the country is largely funded based on tariffs. Like tariffs are what fund the government. The federal government works off of tariffs for a very long period of time. Trade is a central axis of political conflict between different coalitions in American political life from the first moment that the country exists, and has been all throughout. So you've got that as the backstop, right.
Trade public opinion and trade pro and anti-trade coalitions sort of ebb and flow in all sorts of fascinating ways, based on the different interests, and technologies, and moments of the time. You've got this amazing thing happening now, which is that Donald Trump has run on a kind of anti-current trade status quo agenda, has implemented to a certain extent, has had tangible real word effects, and those have created some real political backlash.
And the third element that's fascinating here is that before Donald Trump did all this, there was a very well developed trade critique on the left, by people who are not Donald Trump fans at all, that I have covered and watched develop for 20 years. In 1999, protestors took to the streets of Seattle and had this incredible demonstration, and these clashes with police over the World Trade Organization's meetings there.
And one of the unifying causes of the international left in the U.S., in the developed world, and the developing world throughout the '90s and the first decade of this century, was going after the international trade regime that had been put in place, neoliberalism it was called, the institutions that fermented it, like the World Trade Organization, and the World Bank, and the International Monetary Fund, there are books and books of critique over how these institutions and the trade regime they created, immiserated the world's poor and empowered the world's corporations.
That left trade critique fits really weirdly with the Donald Trump trade agenda, right. Donald Trump's coming at trade from a very different perspective, but ends up with some of the same critiques as the left trade critique, which is how you end up with liberal Senator Sherrod Brown in Ohio praising Donald Trump's trade agenda.
He doesn't like the other stuff Donald Trump's doing, tax cuts for corporations, the immigration rhetoric, his obvious and disgusting bigotry, all of that. But they kind of agree a bit on trade. We had the president of the Steel Workers Union on our show when the tariffs were announced on steel and aluminum. He's not a big Donald Trump fan. He likes that part of the agenda.
So here's where we are, right. We're in the midst of this trade war. You got all these really fascinating tangled and ideological political and historical lines, that are sort of all knotted together in this moment. And there are real world consequences.
And I thought to myself, "How can we understand this moment?" Particularly, how can we understand and reframe some of the ways we think about trade by accessing that tradition of critique that the progressive international Left had developed over many years, which I think has been a little sidelined by the fact that like, Donald Trump's trade agenda now embodies the critique of trade?
So I thought I would go to Lori Wallach.
Lori Wallach is probably the top left trade critic in America, at a certain level. She's the director of Public Citizens Global Trade Watch. She has written about trade, studied trade, lobbied on trade on Capitol Hill. She knows all about the nitty-gritty of how these trade agreements work, and has been a very vocal critic of the trade consensus. The same trade consensus that Donald Trump is a critic of, although as you will see in our conversation, from a very different worldview.
A few things to understand about this interview before we get started. First, we did it back in 2018, so I keep talking about next year, and that's just now that we're in, the thing that we're in. We're in 2019. Don't be confused by that. I'm not talking about 2020. The other thing is, we get into some weeds here. I don't want to scare you off too much, but trade policy is pretty complicated, and there's a number of things we talk about. One of the things we talked about is something called investor-state dispute settlement. Don't go anywhere, okay? Don't turn off the podcast.
I'm going to say it again: investor-state dispute settlement. You will hear us refer to that, we'll refer to it as ISDS, or investor-state, or investor-state dispute resolution. Here's what that means and we will explain it in the podcast, but just to have this in your head. That's one of the most controversial aspects of modern trade deals, is the ways in which it empowers corporations to sue countries directly for policies they don't like.
So in the old days, if you invested in a corporation in Mexico and they raise their minimum wage, and you think, "Well, that's not ... Well, now I got to pay my workers more." You could try to take it up with the Mexican government, but they're probably going to tell you to buzz off. NAFTA and other trade deals create a way for you to directly sue the Mexican government. A remedy to be like, "Hey, wait a second. We invested in your country, and we have this factory, and you told us people were going to make a $1 an hour, and now they're making $2 an hour. That screws us. We want some money back."
Now if that sounds crazy to you, it's pretty crazy. It's one of the things that critics of the modern trade regime find most odious and you will hear Lori Wallach talk about that, but because it's a little weeds-y, I want to just kind of flag that for you as you go into this conversation.
The broader picture though is, and this is part of what makes this conversation fascinating, she is not a person who if I had to guess, voted for Donald Trump. She is not a person who if I had to guess, thinks very highly of Donald Trump. I think she thinks quite lowly of him.
She is a person who is a product of the American left, immersed in Public Citizen, the group founded by Ralph Nader. She doesn't think the Trump trade agenda's that bad. It's pretty fascinating to hear someone who knows her stuff, talk about what Donald Trump is doing in the trade sphere, and it's much more ambivalent than I thought it would be. Take a listen.
Tell me about how you became a kind of professional trade watcher? How did that happen?
LORI WALLACH: I was not so long out of law school, after having worked on Capitol Hill, and I was working on food safety for Public Citizen. And I kept going to congressional hearings, and the guys from the big beef association, and the chemical guys for fertilizer and pesticides, they just were mentioning in creepy ways trade agreements. So they would say things like, "Well, Congressman Waxman, you can't improve that pesticide law, not within NAFTA." Or they would say, "Oh, Congresswoman, you can't have labeling of where that beef came from, not with the WTO."
And at some point, it struck me, "Geez, are these companies actually undoing the key consumer and environmental protections we've spent decades fighting for through some kind of sneaky, backdoor attack, through something called trade agreement, but that actually is more like a trojan horse?" Where this appealing brand on the outside is hiding, what is basically a corporate power grab of rewriting our laws to some kind of diplomatic legislating in the context of trade, which all smart people are supposed to be for trade agreements.
And that more or less is what we eventually realized, was going on with this generation of so-called trade agreements, NAFTA, WTO, that aren't really much about trade.
CHRIS HAYES: Let's talk about what is NAFTA? Like what does it actually do, back in the 1990s?
LORI WALLACH: Well, that's the key thing, because nobody really realized exactly what was at stake. They took at face value the brand, free trade agreement. But actually, at the heart of NAFTA is not so much anything you would have found in a real trade agreement. It's not mainly about cutting border taxes, tariffs, or about opening up quotas, limits on imports. And its heart are a set of astonishing new rights and privileges for corporations.
For instance, the antithesis of free trade, NAFTA had first time of any trade agreement, new monopoly protections for some interests, particularly big pharmaceutical companies. So in classic trade theory, you want to avoid protectionism, and the thing you want to avoid the most is rent-seeking when the government issues a license to a favored protected industry, to basically inefficiently dominate a market.
Well, that more or less, is the textbook definition of a medicine patent. For 20 years, a company is shielded from competition and can charge an obscene price for medicine we need to survive. And the NAFTA, literally expanded that period of monopoly from 17 years to 20 years, pushing Congress' hand through a trade negotiation. Or, investor-state dispute settlement. At the heart of NAFTA, are investor protections, that literally make it cheaper and easier to outsource jobs.
CHRIS HAYES: So investor-state dispute resolution, which is a really important term for people to understand in trade agreements… it was one of the things, I think, that killed the TPP, the Trans-Pacific Partnership because of the kind of craziness of those.
And one of the things we can get to very early here, is the distinction between free trade in the abstract, a bunch of principles about how economy should operate, and the win-win, non-zero sum benefits that come from trade, and then the actual texts of these agreements, right.
Because what I'm hearing from you is, you buy the basic story that liberalization, that it's good for everyone if, for instance, Mexico makes a lot of avocados, where they grow easily, and trades them to us. And we send them a lot of washing machines, or whatever it is, you buy the basic story of kind of comparative advantage and trade, and how that can benefit two different countries.
LORI WALLACH: Of course. The complication is, it's really no longer comparative advantage. Because that theory relies on neither capital, nor technology being so mobile. So what we have now is really what would be in the textbook called absolute advantage. And that is what NAFTA facilitated. So those investor rules that you mentioned, and I totally agree, that is what took down TPP.
There's a whole set of extraordinary rights that go beyond, say what are U.S. property right protections, including effectively a right not to be regulated, or not to face a change in regulations. That's called the minimum guaranteed standard of treatment. There's also a rule where you get compensated for what is called indirect or regulatory takings. That's a change in law that lessens the value of your property. It's not the government taking your property-
CHRIS HAYES: Right.
LORI WALLACH: To put in a road. It's a really slippery slope concept, that severe right-wingers have used forever to try and kill things like the Endangered Species Act. So those concepts meant that, if you're an investor, a company in the U.S., and you would like to outsource to Mexico, where the courts are a little shaky, and you don't know what the risks are, you have to buy risk insurance. Well, investor-state was like free risk insurance.
It effectively, in technical terms for the wonks out there, it lowers the risk premium of outsourcing. So you've got pro-NAFTA groups like the Cato Institute call investor-state dispute settlements a subsidy, promoting outsourcing. Because suddenly, it was literally less expensive and less risky.
CHRIS HAYES: Right, because you're looking at the balance sheet, and you think to yourself, "Well, it's cheaper. Labor is cheaper there, obviously. Transportation logistics might be a little more expensive because we have to get things, ship things around, and maybe the roads aren't good, and the transportation networks." But net-net, I'm looking at the balance sheet, but of course, there's this question, which is just the regulatory environment, Mexico has high levels of corruption. And I don't know about political stability.
And so investor-state resolution comes into say, "We will take care of that. Don't worry about it. You are guaranteed a bunch of protections," and that sort of tips the balance. So then you say, "Okay, well, then I'm going to go build my company down there."
LORI WALLACH: That's exactly right-
CHRIS HAYES: I mean, but isn't that, wait. Well, hold on a second now. Why is that not a good thing, right? In the sense of, if the idea is, you want to bring investment capital into Mexico, right. And Mexico should have car factories, right, because they can build cars there, too.
And the thing that is standing the way of that are shaky judicial structures, or the possibility of corruption, and that that kind of baseline guarantee allows the capital flow in there. Why is that bad?
LORI WALLACH: Because what you want to do is see the domestic court structure improve, so not just multinational corporations, but a community who has that multinational pollute their water.
CHRIS HAYES: Right.
LORI WALLACH: Or, workers who get beaten up by their multinational corporation's fake union, have justice too. ISTS is a parallel system of justice, where nobody but multinationals, international investors, foreign investors, can seek justice in front of three corporate private attorneys, they skirt the courts where they can demand compensation from taxpayers. It's taxpayers subsidizing foreign companies not having to meet their laws in a system that only applies to rights for companies, not for governments.
Here's what just happened, for instance. This is a case that happened this year. Goodyear opened up a new tire manufacturing plant in San Luis Potosi in Mexico. They're paying their workers there a $1.58 an hour. They are making the exact same tires that workers in Kansas City in the U.S. at a Goodyear plant are being paid $26 an hour for.
Goodyear decided instead of building a new plant in the U.S., they would go down to Mexico. Before the plant even opens, they had arranged a protection union, where a union that really is the branch of the political party comes in and registers a union, fulfilling the constitutional requirement for workplace to have a union. But the workers have never been hired. They sign a contract for terrible wages, bad conditions, and then these workers come in, they start working. They're not making a wage that can allow them to feed their families. But worse, the plant's dangerous. People are getting injured. They go on strike. They all get fired for breaking their contract signed by their union and a bunch of them get beaten up. Right now, they can't do anything to go to court about that. But under investor-state dispute settlement, if at this moment Mexico decided to raise the minimum wage significantly, Goodyear could say, "I'm sorry, that violates the expectations we had when we made this investment."
CHRIS HAYES: Really? A minimum wage raise would constitute a breach essentially?
LORI WALLACH: Yep. Brace yourself, but there is the exact case happening right now with a French company attacking Egypt. After the revolution in Egypt, there was this push to raise wages. And it wasn’t an enormously large raising wages but a company that had the contract to do the waste disposal, the garbage disposal for a city just outside of Cairo basically said, "Well, if you raise the wages, we can't really profit on the contract anymore. So you're in violation of our investor rights." And that case is going forward as we speak.
CHRIS HAYES: And that's before the WTO, you mean?
LORI WALLACH: No. This is investor-state. The investor-state system that's in NAFTA has been since embedded in other agreements. NAFTA is sort of the place where a lot of really bad ideas got hatched of hijacking the good name of a trade agreement and the concept of trade agreements, which are, have been, were perfectly useful to set the terms of actual commerce of things you could drop on your foot and what happens when they cross a border, what's the tax, how many of them is there no tax? That brand gets hijacked, stuffed full of all kinds of non-trade stuff, and one of those things that NAFTA hatch was investor-state being attached to actual trade agreements. So now there is an epidemic of investor-State agreements.
Right now, between France and Egypt, there's one of these agreements under which that case is going. The NAFTA has it between the U.S., Mexico, and Canada just under NAFTA’s 25 years, more than $400 million has been paid out in investor-state attacks against water policies, toxic spans, timber rules, transportation policies, energy policies, you name it. Some corporation has rated tax dollars getting paid off for having to meet the laws of the land in one of the NAFTA countries.
CHRIS HAYES: So we've got these sort of ways in which this sort of corporate-dominated alternate form of jurisdiction gets created, right? Protections for patent monopolies and intellectual property things that are outside what we normally think of as sort of actual trade. Then there's the actual trade stuff. And what I'm hearing from you is there has been, right. NAFTA and particularly, the WTO and China's entrance in the WTO, which is a huge deal has liberalized in the basic way global trade quite a bit. The levels of tariffs and quotas and stuff like that have come down on the average ...
LORI WALLACH: Remarkably.
CHRIS HAYES: Remarkably for last 20 years, and concomitantly, global trade has expanded massively during that period of time.
LORI WALLACH: Well, here's the dirty little secret of NAFTA. If NAFTA didn't exist, if the president really withdraws, it's not going to have a huge impact because in the 25 years since NAFTA went into effect, the WTO, the World Trade Organization, also phased out thousands of tariffs.
CHRIS HAYES: Right.
LORI WALLACH: For instance, Mexico, before the WTO had something like a 25 percent average tariff rate, they're like 4 percent. We're at 2.3 percent. Canada's at 2.1 percent. Now, if you export meat, there's some high tariffs peaks. But a lot of stuff is duty-free NAFTA or not, which sort of gets to why the NAFTA renegotiation is so important because it's not the tariff so much. But it's all the other incentives, basically, the incentives that promote outsourcing so that corporations can pay workers less. Those are the incentives that have to be reversed if the NAFTA renegotiation is actually going to stop NAFTA's ongoing damage.
CHRIS HAYES: One of the reasons I wanted to talk to you, I've followed this issue and written about it for a while. I wrote a piece in the New Republic, I think, 10 years ago. And what was interesting to me about it, there's a sort of left critique which I think is the place you come from, right, a kind of anti-corporate critique. This is bad for workers and consumers and ordinary folks, and it increasingly concentrates power with global corporations who can move jurisdictions and they can move capital in and out and it helps them and hurts us. And then there's always a kind of nationalist angle to it. The John Birch Society magazine back when I was writing about them also eight or nine years ago was obsessed with how bad NAFTA was, and that was going to lead to the introduction of a North American currency called the Amero, and it was violating American sovereignty.
And then there's always a place where there's a little bit of overlap this idea of like they, the bad they, the Chinese they, the Mexican they, are taking our jobs. And that part of it is always like ... I understand why people feel that way, and if you're in a factory town that saw it 800 jobs get shipped out to Mexico, you're pissed off and legitimately so. But it's also like, Mexicans and Chinese people should have jobs, and their people who are very poor particularly relative standards. I wonder how you think about those two aspects of it because right now, you're a left trade critic dealing with a president who's a trade critic, who is coming much more from the nationalist side.
LORI WALLACH: Yeah. There is no doubt that everyone wishes the first major rewrite of the U.S. trade agreement model were not occurring in the context of a Trump administration because what he did is he hijacked the critique from progressives. Which is to say he already, during the NAFTA fight, NAFTA was a bad idea, but not based on the overwhelming case that's been made since from unions, from progressive Democrats, from groups like ours, where we've documented the almost one million specific U.S. jobs certified by the government, by the Department of Labor as lost to NAFTA. Which by the way, folks want to look at that, if that seems maybe exaggerated you can go to our website, tradewatch.org, go to the trade data center. Thanks to the Freedom of Information Act and a law suit, we get that data and we have had a program built so you can search by your ZIP code, your town name, a company you've worked for, your member of Congress. You can cut it all kinds of ways or a company, if you know somebody who's lost a job and you can actually see the official government certifications.
Was the job outsourced? Where was it outsourced? What was the date? Who lost their job? And the record is horrific and Trump seized on that and it's a real experience and it's not just the Rust Belt. The number one concentration of NAFTA job losses is in Beto O’Rourke's El Paso congressional district. It's Latino women. The numbers that are largest are New York and California. So nationwide, there's been this damage. Trump seized on it. Unfortunately, he exploited the gruesome reality that democratic presidents like Republican presidents have basically pushed the same corporate rig trade policies and been very dismissive of the people who've gotten clobbered, and it has been the Congressional Democrats and particularly led by the progressive Congressional Democrats that have built this story of what the real outcomes were in stark contrast to the promised benefits.
And that is exactly where the parallel between what Trump says and what I'm fighting for or progressive Democrats are fighting for ends. Which is to say his narrative is exactly what you said, that Mexicans have taken our jobs, or the U.S. the victim of NAFTA. This is such crap. NAFTA was a brainchild of presidents Reagan, Bush one, and Bush two. Clinton then passed it. The agreement was negotiated in secret with over 500 official U.S. corporate advisors. Certainly, it was not the idea of Canada or Mexico to set up things like rules that limit their citizens having affordable medicine. That was a U.S.-made in America bad idea. So the result is you have an agreement that if you look at it from just ... it's not even left-right practically. You have an agreement that was written by, for, of big companies to be able to pay workers less, to accumulate power. It's not a theory, it's not rhetoric.
Literally when I take members of Congress on a guided tour of NAFTA, it's as a recovering trade attorney, someone who reads these agreements and they basically say, "Well Lori, you say that NAFTA concentrated power and corporations. Show me that." And then I'll whip open the part in the service sector that basically has service sector rules that says, "You cannot regulate companies according to how big they are. You cannot regulate financial companies according to how many services they provide," that translates to no firewalls, no too big to fail. What the hell is that doing in a trade agreement?
All of that stuff, that corporate power stuff empirically is why not surprisingly, while some of these big companies have done quite well under the agreement, not only has the U.S. lost almost a million jobs with more being outsourced to Mexico every week and our wages flat, but workers in Mexico, their real wages are down relative to before NAFTA and ...
CHRIS HAYES: Wait a second.
LORI WALLACH: Yes.
CHRIS HAYES: Median real wages in Mexico lower now than NAFTA?
LORI WALLACH: Yes. Down 3 percent.
CHRIS HAYES: How can that possibly be true? It is definitely a richer country.
LORI WALLACH: It is much more unequal. So Carlos Slim, a gazillionaire and many other people who have benefited handily from NAFTA have made a lot of money and real median wages are down 3 percent. The manufacturing gap...
CHRIS HAYES: Wait. I just want to make sure. Since...
LORI WALLACH: Comparing 1993, the year before NAFTA until 2017, the latest data.
CHRIS HAYES: The reason I'm sort of stopping here is Mexico's a developing economy that has had very significant GDP growth over the last 20 years. The US is a mature market economy. Europe places like that who have sort of flatter sort of curves of growth. Mexico is a place that has seen quite rapid growth over that period of time. And the idea that median wages are down during that same period is pretty crazy.
LORI WALLACH: Well, I mean Mexico has taken policies explicitly to create the low road of competition because the next part I was going to make is Mexico's way of attracting investment is low wages. And according to a study that Merrill Lynch put out earlier this year, Mexican manufacturing wages are now 40 percent lower than coastal China. So they have explicitly, with the union-busting policies, with the protection unions, the fake unions, that basically guarantee that workers can't organize to raise their wages. They have held down wages.
CHRIS HAYES: Right. They're now in ... The problem, right, for everyone in the kind of classic race to the bottom model is as the society gets richer wages go up and suddenly your comparative advantage disappears, particularly, things that are very, very far up the supply chain, right like socks. For instance, right which doesn't take a ton of capital investment is a fairly cheap and easy thing to make and so the sock factory goes to Mexico first in the Mexico gets too expensive. So then it goes to Bangladesh and then Bangladesh gets expensive than it goes to somewhere in sub-Saharan Africa. And what I'm hearing from you is Mexico recognizes that, so the answer is just keep suppressing the wages.
LORI WALLACH: Suppress wages.
CHRIS HAYES: So that the sock factory stays.
LORI WALLACH: And that is the wrong way to go. The way to go basically, is not a race to the bottom. But trade based on having some floor of decency. So with this renegotiated NAFTA, which is going to be a battle royale next year and it's going to be a place really where the progressives in Congress are going to define the heart and soul of the democratic party because it is not tenable that Trump holds onto the mantle of the trade reform guy, of the fair trade guy, because as you've pointed out, his narrative is us against them and if you look at how do I renegotiate agreement to stick it to Mexico? That's not going to fix the problem facing workers both there, lower wages, and here, outsourcing in a race to the bottom.
CHRIS HAYES: That's true. And the reason I'm stopping you there, though, is that in some ways it feels a little to me like the rhetorical chickens coming home to roost because I think for a long time, left Progressive trade critics were sort of happy to marshal the language of U.S. versus them because it is much more politically potent than solidarity with the workers in Mexican factories. And then that rhetoric which I watched progressives marshall and use and flirt with and employed in various ways, Trump just came in was like, "Well, screw all the progressive stuff, just like, fuck those Mexicans who are taking our jobs."
LORI WALLACH: I haven't seen it in the context of NAFTA. I mean, for sure I've seen angry workers say Mexicans are taking our jobs. But as far as the dialogue, the debate of progressives around NAFTA, I don't hear it. I heard around China. And that is a different context because there is no Chinese corporate sector that is not the government. The government and the corporate sector and the military are incredibly entwined. It's not just the companies that are benefiting. The companies across invested with the military and who are investors and controlled by and paying off the government and it is much more a government affair as compared to a NAFTA, where the fixes you need are to remove the corporate goodies and then to tune up the trade rules that you put a floor of labor standards, environmental standards on which the competition ensues.
CHRIS HAYES: There's no way that's what we're going to get out of a Trump Administration. In what universe is that going to ... You and I've been watching his first two years of this Administration, how will that happen? I mean first of all, before we get to that actually. I don't even understand what the heck that thing they signed is, what is that thing? What is the document that has currently been signed that is sitting there? USMCA, whatever the hell it is.
LORI WALLACH: So they're two different things to go to this. Number one, the thing that they have rebranded, The U.S., Mexico, Canada agreement — USMCA — should only ever be called NAFTA 2.0. It is not a shock that an agreement negotiated by Donald Trump, Enrique Pena Nieto, and Trudeau is not the progressive replacement of the corporate rigged trade agreement model we've been advocating for two decades. However, that having been said and brace yourself. Actually, they made some changes to that agreement that include the progressive demands of decades. The way that that agreement plays out is some of it is incredibly better like they whacked ISDS.
CHRIS HAYES: Investor-state dispute settlement.
LORI WALLACH: Dispute settlement.
CHRIS HAYES: Right.
LORI WALLACH: They changed the rules of origin. So instead of allowing a lot of content from China to sneak in and bust whatever labor standards would be in the agreement they moved up the value of products to say 75 percent of it has to be made in North America, not 60 percent. And with respect to cars, 40 to 45 percent of that has to be made by workers making $16 an hour or more. That is the first wage standard in any trade agreement. There are problems with how it's going to work. It's not inflation-adjusted.
They're all kinds of tweaky things that could be improved, that is a big deal. But it's not yet sufficiently enforceable, which is why you hear everyone from Elizabeth Warren, and Bernie Sanders, and Sherrod Brown, and Rosa DeLauro to the union saying, "Hey, some progress, but these agreements as is not going to stop the damage ongoing from NAFTA. You must improve the enforcement of the labor standards and make some other important gains," and here is the one place that has got to be fixed because it got worse. There are new goodies for Big Pharma that would lock in place, the policies that keep our medicine prices so high, that is worse than NAFTA. So we've got the better, the worse, and the unfinished business. And now all of that is rolling into the new democratic house.
CHRIS HAYES: So what I'm hearing from you is, largely structurally similar, improvements in some significant areas, worse in some areas, all of which a Democratic Congress is now gonna kind of chew through and be part of a negotiation about.
LORI WALLACH: That's exactly right. The way I would describe this is that signing that agreement is not the end of any damn road. It is one step in a long process.
CHRIS HAYES: Right.
LORI WALLACH: And phase two of the campaign to replace NAFTA starts now. Ding, ding.
CHRIS HAYES: So that's NAFTA. Turn our attention to China 'cause you mentioned it. And the reason I wanted to is because we're in the midst of a kind of trade skirmish with them that people fear will turn into a trade war. And also, when you're talking about trade, it's kind of the case there's China and everything else. I mean, NAFTA has had effects, but they're dwarfed by China, particularly China's entrance into the WTO. And China's also kind of its own thing in a lot of ways, for the reasons you say. It's a strange hybrid controlled economy that's both kind of free market but also sort of government invested and capital underwritten, and it's very active in using the weight of trade policy and protection to secure the kind of advantage for itself. Again, before Trump, what was your sort of feeling about the U.S.-China bilateral trade relationship?
LORI WALLACH: It is entirely on the wrong basis. To some degree, when the WTO China vote happened, I remember being incredibly sad but also turning to a friend of mine and saying, "You know, it's a 50-50 chance that China going into the WTO blows up the WTO." Because China's not gonna follow the rules, the WTO rules don't discipline the things that China does.
CHRIS HAYES: Right.
LORI WALLACH: That's going to lead to serious distortions in trade balances, not just with us, but with developing countries. Big developing countries. And it is going to make the rules of the WTO very transparently inadequate, and unfortunate for the outcomes a lot of the countries are gonna want. And to some degree, that's what's happened. So when you see the crisis the WTO is in, it's kind of like it's swallowed the hand grenade that was China.
CHRIS HAYES: Right.
LORI WALLACH: With China joining in 2000. So going forward, the kinds of issues that this administration's focused on certainly are part of the problem. So China has a plan called China 2025. It's a combination of billions of dollars, trillions of dollars in subsidies, restraints on competition, and the buying up of competing companies in other countries to ensure that Chinese firms dominate the industries of the future. So robotics, new construction materials, blockchain, various medical innovations, aerospace, et cetera. And the program is such that it's almost impossible, no matter how innovative or what great of an industrial policy a country like Germany might have, you're not gonna be able to compete against a government that is basically picking winners, subsidizing them, et cetera.
CHRIS HAYES: Right.
LORI WALLACH: And that is what those tariffs are about. Which is the only upside to having the ginormous trade deficit that we now have is we have considerable leverage if we are willing to basically stick it out. 'Cause it's gonna be painful, but in the end, China has run out of things to impose tariffs on. 'Cause they only import $120 billion of our stuff.
CHRIS HAYES: Right.
LORI WALLACH: Versus we import $500 billion.
CHRIS HAYES: Right. So you're saying, and that sounds like a very Trumpian argument to me, which is basically that the asymmetry of the trade imbalance actually gives us an advantage in tit for tat because we can play a bunch of rounds of tit for tat on tariffs. They run out of things to slap tariffs on because they import so little, and we can just keep going all day long because we import everything we buy from China.
LORI WALLACH: Well, and you know, because so many other countries have already, in different ways, put up barriers against China, we've become their market of last resort. So we have the capacity to try and change policies by basically saying the status quo is not gonna continue. And it's a game of chicken because in the end, basically, both countries have to absorb pain in this standoff.
CHRIS HAYES: Right. So wait, what I'm hearing from you is a sort of not even grudging approval of the road that Trump is starting to go down on this.
LORI WALLACH: Well, no. That's what I was about to say. Now, that theory is a smart one, but a lot of the asks of what the demands for change should be are not part of the Trump agenda.
CHRIS HAYES: Right.
LORI WALLACH: And so, just for instance, the same sorts of issues about race to the bottom labor standards, horrific environmental contamination, all of those people standards that should be the floor of international competition, are not in the demand set being deployed. And if you think about what the problem is with NAFTA, if you think about what the problem is with China trade, the bottom line of it is the current global economy is structured to turn middle class jobs into sweatshop jobs. There is no floor of competition.
It's like the United States before we had national laws, before we had the progressive era of the turn of the century. And New York was playing it off against North Carolina on who could have the most children working the most hours for the least money. And we don't have any global enforceable rules. So the China leverage that we have ...
CHRIS HAYES: Right.
LORI WALLACH: For sure, part of it should be aimed at this China 2025 cheating.
CHRIS HAYES: If you put aside national interest of Americans, and obviously I'm an American citizen, I love my country, and if I were elected to represent American citizens, those are the people I would be looking out for. But what China has done in that last 20 years, its impact in global trade, the way it's managed it, I think you and I would agree, right, is completely sui generis. They just do it differently, they have more people, but from their perspective, that Chinese government is monstrous in all kinds of ways, not the least to mention they have like a million people in internment camps right now who are Muslim.
All of that said, it is the most incredible creation of wealth diffuse over a population probably in human history, the last 20 years, in terms of the standard of living and the median income of the Chinese through this extremely managed, ruthless process. And that approach has, again, it's been ruthless in many ways. I mean, all of the environmental degradation and the suicides at Foxconn where they had to put up the nets, and I do not want to minimize the human misery that has come with all of this. But in a broad sense, it has also been the case that hundreds of millions of people have gone from grinding, dust eating poverty to something that looks much closer to, I don't know what the right word is. Sort of ...
LORI WALLACH: But it's not middle class. That is where I was gonna go next, which is to say, an enormous amount of wealth has been generated, but so has enormous inequality. So yes.
CHRIS HAYES: Unquestionably, yes.
LORI WALLACH: From going to dust eating poverty to going to five dollars a day poverty.
CHRIS HAYES: Yes, right.
LORI WALLACH: Is certainly improvement for the person making that transition. The difference is, I'm not willing to have a world where the good outcome is five dollars a day.
CHRIS HAYES: Totally, yeah. Yeah.
LORI WALLACH: Hungry poverty versus dirt eating poverty.
CHRIS HAYES: Yeah.
LORI WALLACH: So, this is why I keep reverting back to basically where Jared Bernstein and I, a couple years ago during the TPP debate, wrote a little book about the alternative model, the progressive alternative model for trade rules. 'Cause the rules, you said, are gonna shape the outcomes. And one of the points is you have to insert that floor of decency, of the international environmental, human rights, health, labor standards, that countries as sovereigns, nations, have signed up to. But that currently the trade agreements, WTO, NAFTA, Trump. You actually have to make those the floor on which the global trade agreements are conditioning their rights.
Because by creating, basically bringing up a floor of decency on which competition ensues, you're not gonna equalize the wages between Germany and China. But you're gonna narrow that gap. And the difference for the Chinese worker, or the worker in Mexico now making less than the Chinese worker, is you're gonna make enough to buy the things you make, which currently is not the case. Right? I mean currently, with NAFTA, you have a lot of people who are making products that they are not being paid enough to even contemplate buying. And in fact, NAFTA's low wage race to the bottom manufacturing has been a big supply side in increased migration from Mexico to the U.S. Undocumented migration from Mexico doubled.
CHRIS HAYES: Yeah, of course.
LORI WALLACH: In the first ten years of NAFTA.
CHRIS HAYES: Yes, unquestionably.
LORI WALLACH: Because you can get a job in one of those maquiladora factories on the border, and you're gonna be living in corrugated tin shack with hardly able to feed your family and not able to buy, certainly not the car being made there. And probably not the television being made there. And you're, every week, not sure your kids can meet their school fees, that you have enough to eat. That kind of race to the bottom is not an act of God. That is not, "there is no alternative." That is not something that happened because "that's globalization, welcome to the modern era." That is the outcome of a specific set of rules.
For progressive people, that is not acceptable. These rules that the corporations have set up explicitly to allow them to pay people less and maximize their margin. There is plenty of money to go around, if there are rules that allow the people making the stuff to make enough to have a decent standard of living.
CHRIS HAYES: To me, the question is, what is the next chapter in this fight, having watched Trump hijack a lot of the language and having a situation in which there's a kind of ideological battle, which I think the critics have won a lot of, to be totally honest. I think just even in the academy, even the ways that someone like Paul Krugman writes about trade now versus how he wrote about trade back in the 1990s when he was the Slate columnist, which was basically tut-tutting all you know-nothing idiots who criticize NAFTA. You guys have won a lot of those arguments. You've won a lot of the ideological fights, but the power problem's still the same thing. It's Big Pharma and the big corporations. They still have all the power when it comes time to write these things.
LORI WALLACH: I'll tell you how it gets fixed, which is we have to ensure, as we did the Trans-Pacific Partnership, that there simply isn't a majority in Congress to enact more of the same agreements.
CHRIS HAYES: Right.
LORI WALLACH: So, you know. Donald Trump's narrative of TPP as he came in like a hero and killed it. That agreement was already moldering in its coffin when the man arrived. It was a corpse, because in the entire year after it had been signed, a majority could never be found in the House of Representatives.
CHRIS HAYES: Right.
LORI WALLACH: By a margin of 60 votes.
CHRIS HAYES: Right.
LORI WALLACH: To implement it. As a result, a bunch of the lunatic ideas in the TPP never became an agreement. This is where we are on the NAFTA 2.0 situation. So here is this moment where because of the progressive media infrastructure that didn't exist at the time of NAFTA so you can be telling your viewers on MSNBC about what's really going on with this fight, while there is the internet, so people can be actually communicating to each other… "These are the real changes that have to be made to the agreement that they signed, get with your member of Congress to do it."
With this inspiring progressive set of new members joining, some kickass progressive members like Rosa DeLauro and Jan Schakowsky and Mark Pocan, who've been leading this fight in the House side, and Lloyd Doggett, and people over on the Senate side like Senators Warren and Sanders, all these people together are in a very empowered position. Because here's the bottom line: Trump's renegotiated NAFTA ain't going anywhere unless it gets through the House. And to get through the House, a lot of members of Congress have been very clear that while some progress is made, there are more improvements that are necessary, and the measuring stick that they're holding up against it isn't the ideal agreement.
'Cause you're right, even if we are able to get NAFTA to the standard of it stops some of the ongoing damage, the point you made is right. There's an ongoing fight, the power is very high and hard against us, we are gonna have to fight very hard to ever implement the full progressive alternative. However, it would be a big honking deal if we could actually get the additional improvements needed. So getting out the lunatic giveaways for Big Pharma that would lock in high medicine prices, adding the swift and certain enforcement of the labor and environmental standards, beefing up the environmental standards so now they're as good as the labor standards.
There are a couple other things that need to be adjusted, but it's not in the realm of the impossible. In fact, it is in the realm of the totally doable. And if those progressive changes to the deal that Trump signed, which on its own's not gonna stop the damage, if those progressive changes were added, well, that would be worth harvesting as a big step towards the eventual progressive alternative that, in the future, please god, after 2020-
CHRIS HAYES: Right.
LORI WALLACH: ... a progressive president would then have as the stepping off point to continue to win. The bottom line of all of it, though, is if people care about this, and if you care about the climate, on food safety, on financial regulation, on wages, on income inequality, you name it, these damn not really about trade agreements touch it. If you care about it, then the thing you gotta do is get members of the House of Representatives to say, "Either we get the right deal that really is ..."
CHRIS HAYES: Or we vote it down.
LORI WALLACH: Exactly. That's gonna make things better, or we're not gonna have it go forward. And that, Chris, is how we actually beat the power dynamics.
CHRIS HAYES: That's encouraging. It's gonna be a very interesting battle. I mean, you've set that up very well. I'm very curious to see how this plays out, and we will continue to follow it. Lori Wallach is the director of Global Trade Watch and has been an indefatigable chronicler of, critic of, advocate on behalf of, an alternative trade system for years. Thank you Lori, so much.
LORI WALLACH: Thank you very much! No way we're gonna cede the trade reform mantle to Donald Trump.
CHRIS HAYES: Once again, my thanks to Lori Wallach, who's the director of Public Citizens Global Trade Watch. That story that we're talking about there, again, we spoke about this a few weeks ago at the end of 2018. There's gonna be more news on that front. So I'm glad that we had this conversation, I think it's good framework as you listen to the trade developments going forward, and maybe we can get her back further on down the line as things with China in particular play out.
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