Leaders of the US and European Union are considering a new trade agreement that would in many cases eliminate tariffs, lower non-tariff barriers, and make the flow of capital between the two shores of the Atlantic even easier than it is now.
Corporations, banks, and political leaders on both sides are eager to strike a deal, and negotiations on a US-EU free trade agreement, could begin as early as this summer.
Some US labor leaders, who have opposed similar trade deals, are saying that such an agreement if done right could help both US and EU workers.
According to a statement on the AFL-CIO blog, “If negotiated with the goal of increasing employment and well-being for working families, a US-EU (free trade agreement) could positively affect that trade imbalance and create jobs in the US by increasing net exports. Unfortunately, experience has shown that despite rosy predictions. . . export and job growth, promised gains from NAFTA-style trade agreements generally fail to pan out.”
“An agreement done right could help sustain and expand the middle class and provide economic opportunity for hundreds of millions of people,” said Leo Gerard, international president of the United Steelworkers. But Gerard also cautioned that following the pattern set by NAFTA “would be a recipe for disaster.”
Supporters of past trade deals have promised that they would create jobs, but as Robert E. Scott of the Economic Policy Institute points out, these have turned out to be empty promises.
According to Scott, the problem with these deals is that they do little to reduce the US trade deficit–our excess of imports over exports.
Exports complement domestic production and produce more jobs; imports, on the other hand, supplant domestic production offsetting any new jobs created by more imports.
Past deals, in some cases, have exacerbated the trade deficit. According to Scott before NAFTA, the US had a small trade surplus with Mexico. By 2010, the US trade deficit with Mexico had grown to $97.2 billion, which displaced 682,000 jobs.
The Korea trade pact which went into effect in 2012 was supposed to help lift the US economy out its doldrums. President Obama said that exports resulting from the deal would result in a net increase of 70,000 jobs.
But according to Scott, “That agreement took effect on March 15, 2012, and yet U.S. exports to Korea fell last year, and the trade deficit increased, meaning that Korea trade reduced demand for domestically produced goods in 2012 and cost the US jobs.”
Union leaders think that the right trade deal with Europe could reduce the US trade deficit.
For one thing, both trading partners have similar labor markets, so there wouldn’t be as much incentive to move production overseas, which not only costs workers jobs but also increases the trade deficit.
Moreover, Europe unlike other US trading partners has higher labor standards than the US, and if the goal of the proposed trade pact is to reduce inequalities that hamper trade, one solution might be to equalize labor standards to reduce the difference in labor costs.
Business would want to lower EU labor standards to make them more like the ones in the US, but some labor leaders think that they might have enough leverage to use the new pact to improve US labor standards and thus improve wages, job security, and health and safety.
“At a minimum any (trade) agreement should expand on existing EU mechanisms that provide for information disclosure and consultation between workers and trans-national enterprises, strengthen regulations concerning workplace health and safety, adopt the strongest protections on the testing and control of toxic chemicals, and include best practice regulations concerning contingent workers among other crucial issues,” said Gerard.
But Scott cautions that there will be many obstacles to overcome before a trade deal can help European and US workers. These trade deals are ” essentially a long menu of giveaways and protections to various corporate sectors yet leave genuinely crucial issues . . . off the table,” he writes.
Despite the significant barriers that need to be overcome, Gerard and other labor leaders are guardedly hopeful that a trade pact with Europe could benefit workers.
“Negotiations with the EU do provide a real opportunity to ensure that workers on both sides of the Atlantic could finally benefit from a free trade agreement if their interests are properly addressed,” said Gerard. . . . “How an agreement addresses the rights of workers vis-a-vis their employers as well as regulations and standards for workers at their workplace must be of paramount importance as this negotiation goes forward.”