The Green New Deal demands that America think differently about how, and for whom, the global economy works. In particular, we must rethink trade policies that have pumped up corporate profits at the expense of workers and the environment.
Jason Schneider
American trade policies were problematic before Donald Trump took office, and since then things have only gotten worse. Past policies helped decimate America’s industrial base, encouraging low-road development overseas that’s helped hasten global warming. Now Trump’s trade wars aren’t proving good or easy to win. Manufacturing is in a slump and employment in the sector is falling. Share prices of U.S. Steel and Alcoa, prime beneficiaries of
Trump’s steel and aluminum tariffs, have seen their stocks plunge more than 60 percent from their pre-tariff peaks. Trump’s domestic economic policies are faring no better. U.S. business investment has collapsed in spite of sweeping deregulation and nearly $2 trillion in tax cuts for so-called “job creators.”
It’s time for a new direction in our approach to trade, one that incentivizes innovation and industrial development in America and supports sustainable growth around the world. Over the past few decades, administrations from both parties have worked closely with corporate lobbyists to write the rules of international trade. In one trade deal after another, the profits and property rights of corporations have taken precedence over the rights of workers and the well-being of the planet.
Today, with production relocated to far-flung offshore supply chains, American business sees little benefit in the social investments needed for a high-performance domestic workforce or in the public investments in infrastructure and research and development that spur homegrown innovation and productivity growth. Blinded by profits, American business leaders nurtured a formidable geostrategic competitor in China by moving so much production there. And yet executives would still rather spend their money on share buyback schemes than on investing in the United States and technological solutions to our most pressing social problems.
A Green New Deal, aimed at reclaiming American jobs and technological leadership, requires drastic changes in both trade rules and trade goals. Domestic reconstruction needs to take priority over corporate-driven globalism. This will be good not just for the U.S. but for other nations eager to chart their own courses.
Back in the Obama administration, the president suggested that the Trans-Pacific Partnership could bring a healthy balance back to our trade relationships. President Obama argued, correctly, that deepening economic relations with a bloc of countries ring-fencing China could promote higher standards in trade. However, he then left the details of the treaty to his trade appointees, such as Michael Froman and other officials in the Office of the U.S. Trade Representative who rotate from Wall Street and corporate lobby shops into government and back out again.
TPP repeated the past mistakes of segregating worker, environmental, and social concerns. It made sure they were subordinate to corporate priorities in trade and investment. The agreement also failed to implement rigorous “rules of origin” that would track where goods and their component parts were made to prevent “leakages” to low-standard countries. What TPP did do, primarily, was extend protections for investors in real and intellectual property and give them teeth to enforce these rights. Those provisions made it marginally more attractive for multinationals to divert some investment from China to Vietnam and Malaysia, but were never going to remake world trade. Trump was right to reject the TPP, whatever his reasons. But the track he has led us down since is more of the same, done with Trumpian bellicosity, unpredictability, and profound ignorance.
In working to build a new model for trade, it’s important to understand that Americans are not soured on trade per se, just on how it’s conducted on their behalf. A recent Gallup poll shows a solid majority of Americans, 74 percent, believes foreign trade can be an opportunity for economic growth. Conversely, only 31 percent of Americans think our ongoing trade war with China benefits the United States economically. So how do we make a progressive vision of trade a reality?
First, we need to pursue policies that spur innovation instead of stifling it. Today’s trade agreements and the World Trade Organization give far too much power to the owners of intellectual property rights. The existing IPR regime discourages the dissemination of knowledge and limits access to vitally needed products. Price-gouging on essential medicines like insulin has made recent headlines, but the problem is much bigger. The monopolies granted by intellectual property rights constrain access to all sorts of technological advances, deterring others from building on those innovations and denying benefits to people across the globe.
Pervasive market failures in research and development lead the private sector to underinvest in science and produce too few innovations. To avert a climate catastrophe, we’ll need an all-out effort to re-engineer energy generation and distribution, revolutionize industrial and agricultural production, transform transportation systems, and drive transformational change in so many other critical areas of the U.S. and global economy. With American executives maniacally focused on short-term strategies to pump up share prices, we cannot leave the urgently needed effort to decarbonize our economy solely in the hands of the private sector. The public sector must play a leading role in fostering the development of targeted technologies and industries.
The current trade rules forbid the United States from giving preference to domestic industries and workers. But just as in the original New Deal, domestic reconstruction and domestic jobs need to be priorities, especially when they are financed by domestic taxes and domestic government borrowing.
As future administrations rewrite existing trade agreements, we must be prepared to reconfigure existing rules so they set high standards that distinguish traded goods and services by how they are made—so-called process and production methods. Traded goods and services not meeting those standards will face border adjustment costs or even be refused market access. And we would also push to establish rights to cross-border collective bargaining that empower workers in all countries to stand together for real labor and community rights. Setting high standards for competition in U.S. markets will create demand that enables domestic firms to grow and expand to serve broader markets.
Only the government has the capacity to drive a mission of the scale and scope necessary to combat global warming and to bring so many stakeholders to the table in common purpose. The government must set a level playing field for competition to prevent the corruption or exploitation of the mission. Government must socialize key risks of large-scale investment projects and ensure that the rewards are shared broadly. And government must make the requisite public investments to span the gaps in the innovation chain where private investment won’t go.
Creating the right incentives for investment in innovation is only part of the equation. America also needs a strategy to develop the demand side of markets in industries that produce green-technology goods and services. Supply will not create its own demand; predictable demand is what draws entrepreneurs to invest in projects that bring new technologies to scale and give fledgling industries opportunities to take root. We can foster that demand through a mix of tax incentives, infrastructure investment, and public procurement, and by enforcing high standards in international trade throughout the supply chain.
America has a leading role to play in fighting climate change and rebalancing the global economy, but these are not problems we can solve on our own. America’s Green New Deal also necessitates a Global New Deal to reinvigorate the international cooperation and multilateral institutions and agreements critical to tackling climate change and reforming how the global economy works.
Although these institutions are now failing us, we should remember it was not always like this. Delegates in attendance at the 1944 Bretton Woods Conference had seen how extreme inequality and the economic stagnation of the Depression led to a collapse of international cooperation, the rise of right-wing nationalism, and war. So they vowed to design a system for the postwar world order. Bretton Woods was not perfect—even in John Maynard Keynes’s idealized plan—but the system produced a generation of broadly shared growth across the world before political forces eventually pushed the institutions away from their ideals and toward the world we know today.
WHEN ACTIVIST Greta Thunberg called out world leaders for putting economic growth ahead of the future viability of life on Earth, she was right. The United States will need to work with our international peers. The threat of climate change bears upon us all. The pain of rising inequality is felt across in the world. It’s not just about us. Realizing this Green New Deal will mean bringing everyone along. We are all learning from Greta. That’s how you lead a global community.
