Category Archives: Trade

Trade Unions, Wage Bargaining Coordination, and Foreign Direct Investment

Source: Roxana Radulescu, Martin Robson, Labour, Vol. 22, Issue 4, December 2008
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From the abstract:
Conventional wisdom is that a high trade union bargaining strength and a system of coordinated wage bargaining reduce the attractiveness of an economy as a location for foreign direct investment, although there is limited evidence for this. The paper takes panel data for 19 OECD economies to examine the relationship between trade union bargaining strength, bargaining coordi nation, and a range of incentives for inward foreign direct investment. It finds a strong negative effect of trade union density on inward foreign direct investment, which is dependent on the degree of wage bargaining coordination. A high degree of coordination weakens the deterrent effect of high union density, which is consistent with the notion that under certain circumstances a coordinated increase in wages can increase profits of the multinationals by hurting domestic firms.
See also:
October 2006 version

Squandering the blue-collar advantage

Source: Josh Bivens, Economic Policy Institute, EPI Breifing Paper #229, February 13, 2009

Why almost everything except unions and the blue-collar workforce are hurting U.S. manufacturing.

It has become convenient in some circles to blame unions for the hemorrhaging of jobs in the manufacturing sector. The facts, however, simply do not support that argument.

Instead, the main culprit for manufacturing’s troubles over the past decade is an overvalued U.S. dollar. Smaller contributors to manufacturing’s decline include a dysfunctional health care system and the high labor costs of managers and executives.

What is equally clear is that the pay and productivity of blue-collar workers in manufacturing are clearly not a competitive drag. In fact, these workers actually earn lower wages than many of the most important U.S. trading partners while simultaneously posting higher productivity levels. In short, the relatively low pay and high productivity of the blue-collar workforce in the U.S. manufacturing sector provides an important competitive edge over its trading partners. This report documents that competitive edge and how it has been squandered.

Failed Expectations of U.S. Trade Policy: Lessons for Change

Source: Robert Cassidy, Economic Policy Institute, EPI Issues Forum, January 27, 2009

[Audio, written remarks, and recommended reading below]

Once touted as a magic elixir that would lift the world’s economies and create opportunity for American workers, free trade was embraced by U.S. leaders from both parties who entered into a succession of agreements that lowered tariffs while protecting corporate interests.

China’s entry into the World Trade Organization in 2000 accelerated the changes wrought by this new approach and exposed its fundamental flaws. The benefits were skewed toward the already-affluent, while working families shouldered the burden of free trade’s considerable downside: millions of lost jobs, stagnating or falling wages, and U.S. products increasingly disadvantaged in the world marketplace.

Now at a time of broad political change, the existing trade regime is being questioned by a growing number of economists and political thinkers. Notable among them is the former top Clinton administration official for China trade, Robert Cassidy, who is now speaking out against the signature trade agreement he helped to negotiate, which paved the way for China’s accession to the WTO.

This forum featured a conversation with Cassidy about where we are, how we got there, and what the new administration should do differently to correct the errors of the past two decades and redefine a new, better approach to global trade.

Big Business Lobbies for Importers

Source: Robert E. Scott, Economic Policy Institute, January 2009

Multinational companies such as General Electric and Caterpillar, and their allies in the Chamber of Commerce, are attacking “Buy American” provisions included in the economic recovery bill passed by the House on January 28th.  They claim that these provisions will provoke a “trade war” with foreign governments, but foreign governments have long histories of supporting their own domestic companies.  These companies are self-interested, simply wanting unlimited access to imports, many of which are illegally subsidized and unfairly traded.  U.S. and foreign multinational companies (MNCs) were responsible for nearly two-thirds of all U.S. imports in 2006, as shown in the chart below.  U.S. firms led the way with $678 billion in imports, 36.4% of all U.S. goods imports.  Foreign MNCs pulled in an additional $482.4 billion in goods, 25.6% of the U.S. import bill.  

Labor Rights Can Be Good Trade Policy: An Analysis of U.S. Trade with Less Industrialized Economies with Weak or Strong Labor Rights

Source: Christian E. Weller, Stephen Zucconi, Center for American Progress, September 18, 2008

The United States for decades now has racked up large and growing trade deficits with the rest of the world. These deficits could contribute to much lower U.S. living standards in the future. Repaying this accumulated debt–at the end of 2007, the United States owed $2.4 trillion more to foreigners than it held in foreign assets abroad–will become increasingly costly to our nation’s standard of living because it will come at the expense of making needed investments in other parts of our economy. But what should policymakers do about it?

Globalization, Worker Insecurity, and Policy Approaches

Source: Raymond J. Ahearn, Congressional Research Service, RL34091, July 31, 2008

Today’s global economy, or what many call globalization, has a growing impact on the economic futures of American companies, workers, and families. Increasing integration with the world economy makes the U.S. and other economies more productive. For most Americans, this has translated into absolute increases in living standards and real disposable incomes. However, while the U.S. economy as a whole benefits from globalization, it is not always a win-win situation for all Americans. Rising trade with low-wage developing countries not only increases concerns of job loss, but it also leads U.S. workers to fear that employers will lower their wages and benefits in order to compete. Globalization facilitated by the information technology revolution expands international trade in a wider range of services, but also subjects an increasing number of U.S. white collar jobs to international competition. Also, globalization may benefit some groups more than others, leading some to wonder whether the global economy is structured to help the few or the many.

The current wave of globalization is supported by three broad trends. The first is technology, which has sharply reduced the cost of communication and transportation that previously divided markets. The second is a dramatic increase in the world supply of labor engaged in international trade. The third is government policies that have reduced barriers to trade and investment. Some recent research examines whether these trends are creating new vulnerabilities for workers.

China Trade Costs Jobs In Every State

Source: Robert E. Scott with research assistance by Emily Garr, Economic Policy Institute, Economic Snapshot, July 30, 2008

Unbalanced U.S. trade with China since 2001 has had a devastating effect on U.S. workers. Between 2001 and 2007, 2.3 million jobs were lost or displaced, including 366,000 in 2007 alone. These jobs were displaced by the growth of the U.S. trade deficit with China, which increased from $84 billion in 2001 to $262 billion in 2007.

Report for the WTO General Council Review of the Trade Policies of the United States

Source: International Trade Union Confederation (ITUC), June 2008

From the summary:
Brussels, 9 June 2008: The ITUC presents today its biannual report on core labour standards in the US, coinciding with the Trade Policy Review of the US at the WTO, taking place on 9 and 11 June. It reveals a poor and worsening record on worker protection, particularly in the areas of trade union rights and child labour, areas in which serious violations continue to take place.

Trade, Jobs, And Wages: Are the public’s worries about globalization justified?

Source: L. Josh Bivens, EPI Issue Brief #244, May 6, 2008

A wide gulf exists today in American politics. On one shore are voters increasingly anxious about globalization and its effect on their jobs and communities. On the other are economists, policy makers, and pundits who maintain that trade is good for the economy, that the wider public is simply misguided about its benefits, and that politicians who sympathize with those concerned about globalization are pandering to special interests at the expense of the wider economy. This latter group relies heavily on the suggestion that “all economists believe” globalization is good for the vast majority of American workers.

This reliance is odd given that mainstream economics actually argues that there are plenty of reasons for concern about globalization’s effect on the majority of American workers. This primer highlights two issues in particular that should worry American workers about globalization: job losses stemming from growing trade deficits; and downward wage pressure for tens of millions of American workers. These problems are not unexpected consequences of expanded trade; quite the opposite, they are exactly what standard economic reasoning predicts.

Confessions of a Sweatshop Inspector

Source: T. A. Frank, Washington Monthly, Vol. 40 no. 4, April 2008

Presidential candidates are calling for tougher labor standards in trade agreements. But can such standards be enforced? Here’s what I learned from my old job.

I remember one particularly bad factory in China. It produced outdoor tables, parasols, and gazebos, and the place was a mess. Work floors were so crowded with production materials that I could barely make my way from one end to the other. In one area, where metals were being chemically treated, workers squatted at the edge of steaming pools as if contemplating a sudden, final swim. The dormitories were filthy: the hallways were strewn with garbage–orange peels, tea leaves–and the only way for anyone to bathe was to fill a bucket with cold water. In a country where workers normally suppress their complaints for fear of getting fired, employees at this factory couldn’t resist telling us the truth. “We work so hard for so little pay,” said one middle-aged woman with undisguised anger. We could only guess how hard–the place kept no time cards. Painted in large characters on the factory walls was a slogan: “If you don’t work hard today, look hard for work tomorrow.” Inspirational, in a way.

…Today, labor standards are once again in the news. Barack Obama and Hillary Clinton have criticized trade deals such as NAFTA as unfair to American workers, and the new thinking is that trade agreements should include strict labor standards. Obama has cited a recent free trade agreement with Peru as an example of how to go forward. I hope he’s right, but let’s remember that NAFTA was also hailed, in its day, for including labor protections. Our solutions on paper have proved hard to enforce. Peru attempts to remedy some of the problems of NAFTA, but we’re still advancing slowly in the dark….