[ Issues ]

International Trade and Investment Policy

World trade is expected to contract in 2009 for the first time since 1982. With the deepening global economic recession set off by the meltdown of financial markets, the World Bank is predicting a 2.1 percent decline in international trade. The economic prescriptions offered by many conservatives include calls for greater deregulation, lower wages and benefits for workers, and above all, the expansion of free-trade regimes across the globe. But rather than pursuing the same failed economic policies that led to the global meltdown, the UAW believes the Obama administration and Congress should adopt an alternative approach to international trade and investment policy. Policymakers must begin with a comprehensive re-evaluation of the trade deals negotiated by the outgoing Bush administration.

U.S.-Korea Free Trade Agreement (KORUS FTA)

The UAW strongly denounced the free-trade deal negotiated by the Bush administration with Korea (KORUS FTA) in April 2007. It would open the U.S. market to increased automotive imports from Korea, while allowing the Korean government to continue to use a variety of nontariff barriers to keep their market effectively closed to U.S.-built products. As a result, this trade deal would threaten automotive production and jobs in the United States.

President Obama has strongly criticized the Korean trade deal because of its failure to address the imbalance in auto trade. This criticism has been echoed by Democratic congressional leaders. Accordingly, during the coming year the UAW will be calling on the Obama administration and Congress to oppose passage of the current KORUS FTA, and to insist that this trade deal must be renegotiated. Specifically, we believe the trade deal should require Korea to open its market to U.S.-built automotive products before the United States provides any further access to our market.

Korea is the fifth largest producer and fourth largest exporter of motor vehicles in the world. In 2007, Korea produced 4.1 million motor vehicles and exported 2.8 million of them. Imports of Korean automotive products into the U.S. were valued at $11.3 billion, while U.S. exports of similar products to Korea amounted to just $1 billion. The net result was a $10.3 billion U.S. automotive trade deficit with Korea. In 2007, Korea exported 668,000 vehicles to the United States, while U.S. producers were allowed to export only 6,500 vehicles to Korea. The deficit in automotive products now accounts for 83 percent of our overall trade deficit with Korea.

Historically, Korea has kept its market almost completely closed to U.S.-built automotive products, as well as products from other nations. This has been accomplished through a combination of tariff and nontariff barriers. Indeed, Korea's market has the lowest level of import penetration (4.3 percent) of any major automotive producing economy in the world. Despite previous agreements between the United States and Korea in 1995 and 1998 in which Korea promised to eliminate its barriers to imports, the Korean market still remains essentially closed to any significant import competition.

The auto provisions in the proposed KORUS FTA will increase access by Korean auto producers to the U.S. market, while allowing Korea to keep its market closed to U.S. built vehicles and auto parts. The net result would be a surge of automotive imports from Korea and the loss of tens of thousands of additional auto jobs in the United States. The proposed KORUS FTA contains no guarantees or mechanisms for the United States to gain substantially greater access to the Korean auto market. It does not require Korea to eliminate all current nontariff barriers, nor does it establish effective and enforceable mechanisms for addressing future nontariff trade barriers. The UAW is also concerned that the KORUS FTA will not end the Korean government’s ongoing efforts to use automotive safety, emission and other technical standards as tools to discriminate against imported automotive products.

Action:

U.S.-Colombia Free Trade Agreement

The UAW and the entire international labor movement continue to oppose the passage of the U.S.-Colombia Free Trade Agreement, negotiated by the Bush administration. Colombia continues to lead the world in murders of trade unionists. More than 2,000 trade unionists have been murdered in Colombia since 1991, including more than 450 since President Alvaro Uribe took office in 2002. Fewer than 2 percent of the perpetrators of these murders have been brought to justice, indicating the inability or unwillingness of the Uribe government to end the killing. The majority of these murders have been committed by paramilitary groups, some of which have been linked to high-ranking members of the Uribe government.

Up until the final days of his administration, President Bush argued that the Colombian government was making progress against anti-union violence. But in fact, more Colombian trade unionists were murdered in 2008 than in the preceding year. In late 2008, President-elect Obama and the majority of congressional Democrats opposed action on the Colombia trade deal until the Uribe government did more to curb violence against trade unionists and brought the perpetrators of that violence to justice. The UAW stands in solidarity with Colombian workers and will continue to oppose this FTA until concrete progress is made in Colombia, and Colombian workers can exercise their rights to organize and bargain collectively, free from threats and intimidation.

Action:

Other BilateralFree-Trade Agreements

In 2007, at the insistence of congressional Democratic leaders, the Bush administration modified the Peru and Panama free-trade agreements to include internationally recognized worker rights and environmental protections. While the UAW welcomed this action as a good first step toward the inclusion of fundamental labor rights in trade law, we believe the Obama administration and Congress should still take a cautious approach to the negotiation of additional bilateral trade agreements. We continue to have concerns about our trading relationships with many countries.

The Bush administration began trade negotiations with Malaysia in March 2006. But these discussions stalled over issues of Malaysian national sovereignty and affirmative action programs. From the UAW perspective, a free-trade deal with Malaysia could adversely affect the U.S. manufacturing sector and UAW members. The U.S. bilateral trade deficit with Malaysia stood at $20.9 billion in 2007, with a significant portion of this deficit being in automotive products. Many of the world's major auto producers, including Ford, Chrysler, Honda, Toyota, Nissan, Hyundai and Kia, operate export production facilities in Malaysia.

Unfortunately, the Malaysian labor movement is relatively weak and the International Metalworkers Federation affiliate (Metal Industry Employees’ Union) represents a small percentage of the workers in the auto sector. Thus, there is a real danger that a free-trade deal with Malaysia could lead to a surge in automotive exports from Malaysia to the United States. This could put the jobs of thousands of UAW members at risk.

Action:

Trade Promotion Authority (Fast-Track)

Fast-track procedures set the rules for Congress to consider trade agreements — preventing any amendments and limiting time for public debate — thereby easing the way for flawed agreements to win approval. When Congress granted President Bush fast-track negotiating authority in 2002, this opened the door to the negotiation of a series of NAFTA-style free-trade agreements that have advanced the interests of multinational corporations at the expense of the living standards of the majority of American workers.

This fast-track authority expired in July 2007. The UAW and the rest of the labor movement strongly opposed any extension of fast-track authority because we did not want to grease the skids for more NAFTA-style free-trade deals. Fortunately, the Democratic-controlled Congress agreed with our position and did not extend fast-track authority.

President Bush spent the final 18 months of his administration pushing Congress to implement the trade deals negotiated prior to the expiration of fast track. However, when Bush sent the U.S.-Colombia Free Trade Agreement to Congress in early 2008, House Speaker Nancy Pelosi successfully used procedural means to block a vote on the FTA until the Republicans acted on pro-worker economic measures, including the extension of trade adjustment assistance (TAA). This action demonstrated that Congress, which has the constitutional authority to grant or deny fast-track authority, still retains the ability to block trade agreements that are not in the economic interests of American workers.

Action:

World Trade Organization (WTO) and Global Trade Negotiations

In 2001, the World Trade Organization (WTO) launched a new round of trade liberalization negotiations — the so-called Doha Development Agenda. These negotiations were designed to revise the rules of international trade and investment to promote global economic development. Issues of worker rights and environmental protections were excluded from the negotiations at the outset.

Despite repeated statements by WTO Director-General Pascal Lamy that progress was being made, the global trade talks remain essentially deadlocked around sectoral tariff elimination for industrial products and the special safeguard mechanism for developing countries in agriculture. Many developing countries will agree to global tariff reductions only if they are allowed to exempt selected domestic industries such as auto from any tariff cuts.

The UAW is deeply concerned that the WTO negotiations could undermine U.S. anti-dumping rules and other trade remedies. There also is a danger that the negotiations could lead to the elimination of U.S. automotive tariffs, including our 25 percent tariff on imported light trucks, while other countries are allowed to continue to employ a variety of tariff and nontariff barriers that effectively exclude U.S.-built automotive products from their markets.

The UAW and our trade allies remain vigilant and will continue to monitor these trade talks. We will continue to voice our strong opposition to any WTO agreement that simply benefits multinational corporations, and sacrifices the interests of working families.

Action:

Worker Rights

In May 2007, Democratic congressional leaders succeeded in getting the Bush administration to agree that future trade agreements would have to include core labor rights, enforceable by the same dispute mechanism covering commercial rights. Up until this point, U.S. trade policy had been built on ground rules that protected property, contract, and investment rights, but not basic worker rights.

The UAW heralded this breakthrough in trade policy as a good first step toward the development of an alternative approach to U.S. trade policy. However, this did not represent a green light for the trade deals with Korea and Colombia, or for an extension of fast-track trade negotiating authority.

For worker rights provisions in international trade agreements to be truly effective, more concrete mechanisms must be created to enforce the rights of workers to organize and bargain collectively. We must be clear-sighted about the reforms that are necessary to achieve real, measurable increases in workers’ bargaining power in the face of increasingly mobile capital.

Action:

NAFTA, China and Trade Deficits – The Need for a Different Approach to Trade Policy

The U.S. merchandise trade deficit for all of 2007 stood at $815 billion, which included large bilateral trade deficits with China ($256.3 billion), Japan ($82.8 billion), Canada ($64.2 billion), Mexico ($74.3 billion), Germany ($44.7 billion), and South Korea ($12.9 billion). The trade deficit continued to increase in 2008, despite the weak dollar, which makes imports more expensive and U.S. exports cheaper to foreign consumers. Through the first 10 months of 2008, the U.S. trade deficit stood at $720.7 billion, as compared to a deficit of $682 billion over the same period a year ago.

The 2007 U.S. trade deficit in the automotive sector stood at $121.5 billion, which included large bilateral auto deficits with Japan, Mexico, Germany, and South Korea. Through the first 10 months of 2008, the U.S. ran an automotive trade deficit of $92.8 billion. We continue to run large bilateral auto trade deficits with our major trading partners: Japan ($46.3 billion), Mexico ($25 billion), Germany ($12.9 billion), and South Korea ($8.9 billion).

NAFTA, permanent normal trade relations (PNTR) with China, and the free-trade approach of the past administration have contributed greatly to these ballooning trade deficits. As a direct result of these trade policies, millions of American workers have lost their jobs, devastating entire communities. Wages have fallen, health care and retirement benefits have eroded, and poverty and inequality have increased.

During the 15 years that NAFTA has been in place, U.S. trade deficits with Canada and Mexico have soared, and the auto trade deficit has more than tripled. Many companies have shifted production to Mexico at the cost of hundreds of thousands of U.S. jobs. In addition, companies have used the threat of relocating to Mexico to wring concessions in wages and benefits. The NAFTA side agreements on labor and environment have proven to be completely ineffective. For these reasons, UAW continues to believe that NAFTA must be renegotiated to fix the many problems in this flawed trade agreement.

Permanent normal trade relations with China have been in place eight years. Instead of strengthening the ability of the United States to resolve trade problems with China, it has triggered a ballooning of the United States-China trade deficit. The Bush administration refused to file cases against China in the WTO, and failed to take action to enforce China’s commitments to follow WTO rules. The past administration even rejected cases under U.S. trade law that identified China’s denial of workers’ rights and its currency manipulation as unfair trade practices.

At the same time, China has been following a national automotive industrial policy that conflicts with many of its WTO commitments. As a result, China is emerging as a major automotive manufacturer, and a producer of its own brands of vehicles and parts for the world market. Congress and the Obama administration need to insist that China live up to its WTO commitments, including dismantling its national automotive industrial policy. China must also be compelled to cease its violations of internationally recognized worker rights and its currency manipulation.

Action :

Currency Manipulation

Several of our important trading partners, including Japan and China, manipulate the value of their currencies to gain unfair international trade advantages. International trade will not lead to higher living standards for workers in all countries if governments manipulate their currencies to artificially pump up their exports and hold down imports.

The most extreme example of this type of unfair practice is China. The Chinese government controls the value of its currency to provide a price advantage for exports and disadvantage for imports. Most estimates of the undervaluation of China’s currency (and the advantage for Chinese products over those made in the United States) fall into a range of 25-40 percent.

Similarly, manipulation of the value of yen by the Japanese government makes automotive and other products made in Japan far more competitive than they would be if the exchange rate were not manipulated.

Because currency manipulation prevents the establishment of a level playing field for American exports and domestic production, an equitable trading system must have rules to prevent currency manipulation from contributing to large and persistent trade imbalances. In the absence of such rules, Congress and the Obama administration need to take immediate steps to bring pressure to bear on China and Japan to stop their harmful currency manipulation.

In the last Congress the UAW supported several pieces of legislation that contained meaningful measures to combat currency manipulation. Unfortunately, under threat of a presidential veto, Congress failed to complete action on any these proposals. Thus, during 2009 the UAW and other unions will be urging Congress and the Obama administration to take tough actions to force China and Japan to stop manipulating their currencies to gain unfair competitive trade advantages.

Action:

Trade Adjustment Assistance

Hundreds of thousands of workers lose their jobs each year due to foreign trade and thereby become eligible for trade adjustment assistance (TAA) benefits. Unlike other programs for dislocated workers, the TAA program is an entitlement, so workers have a right to the promised benefits of training and extended income support. The Bush administration and Republicans in Congress have fought for caps on TAA funding (effectively eliminating the "entitlement" status of the program), and have proposed numerous changes in the regulations governing the program that would make it harder for workers to qualify for benefits.

In 2007, House and Senate Democratic leaders put forward legislation to reauthorize and expand the TAA program. These bills contained a number of key improvements that have long been sought by the UAW and other unions, including:

• Increasing funding for the TAA program so it can serve more workers who are adversely affected by trade.

• Streamlining the procedures for workers to receive TAA benefits.

• Expanding the TAA program to cover workers in the public sector and services industries.

• Improving the training benefits.

• Expanding and reforming the health care tax credit so it can help more laid-off workers obtain affordable health insurance coverage.

In late 2007, the House approved this important TAA legislation. However, similar legislation in the Senate was blocked by Republicans. Given the current economic recession and increase in unemployment, it is critically important that Congress pass TAA reform legislation in early 2009.

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