Remarks at the Idaho AFL-CIO Convention: Toward a Worker-Centered Trade Policy

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It’s an honor to be asked to speak with you today.

This is not my first trip to Idaho to meet with hard-working union members. When I was advising former U.S. Trade Representative Katherine Tai, we made a point of visiting all 50 states. She wanted to put the U.S. back in USTR. And that meant meeting with workers, hearing your perspectives, and understanding what you do and don’t want from the economy in general, and trade in particular. This was part of our effort to reshape trade policy to serve the interests of workers – our worker-centered trade policy.

For four decades, American policymakers have designed trade policy to benefit multinational corporations that feel they owe no allegiance to anything other than their own bottom line. We as a country developed these policies and exported them around the world. They were sold as good for the consumer. And since everyone is a consumer, it sounded like a good deal.

But it wasn’t.

“The argument that trade policy designed to benefit corporations lifts all boats is nothing more than the trade verson of trickle-down economics.”

Because the human being in the economy isn’t only a consumer. That person is a worker, a parent, a member of a community. And the trade policy we pursued for decades rewarded wage suppression, environmental harm, and the offshoring of entire supply chains that hollowed out our industrial base and hurt our communities. The argument that trade policy designed to benefit corporations lifts all boats is nothing more than the trade version of trickle-down economics. And we know trickle-down economics doesn’t work for working people.

When we took office in 2021, we wanted to hear from workers, and we wanted to visit their communities. In my role in the office of the US Trade Representative, I had the good fortune to travel to Arizona, New Mexico, Montana, Wyoming, and Boise, here in Idaho. I went to places in the East, too – West Virginia, Pennsylvania, Kentucky, Tennessee, and the Carolinas.

Putting the U.S. Back in USTR: What We Learned from Meeting with Workers

Let me highlight five takeaways from my conversations with workers on those trips. I hope that the conversations I have with you while I’m here will help me the same way those conversations did - to make sure I’m focused on the things that really matter to you, the workers.

●      First: Trust with workers is broken. In many cases, when my colleagues and I walked through the door, we were met with suspicion. What are these people from Washington doing here? What do they want from us? Because they wouldn’t be here if they didn’t want something.

“We gaslighted working people.”

●      Second: Elites sold workers out in trade deals. You all know unfairness when you see it. We heard about how hard it is to compete with lower labor standards in other countries. We heard about how hard it is to compete with lower environmental standards in other countries. One of the things that troubled me the most on these trips is the number of times a worker would voice a concern about the unfairness of the system but preface the comment with “I didn’t go to college, so maybe this isn’t right, but….” Not only did elites sell out workers, but we then made workers feel as though their actual experience was less relevant to the conversation than our economic theories. We gaslighted working people.

●      Third: Workers are the backbone of communities. Workers in communities, especially rural communities, are also volunteer firefighters, members of the school board, little league coaches, essential contributors to the local tax base – when a factory is offshored, the harm isn’t only to the worker as a worker, but to the worker as a member of the broader community. 

“One thing I say to people back in Washington: the complaints we hear when we go to resource-rich states in the US are the same as the complaints we hear when we go resource-rich countries in Africa and Latin America.”

●      Fourth: People feel the economic model is extractive. Workers are angry that their pay was being blamed for pandemic-era inflation when the real cause was supply-chain shocks from having so much manufacturing offshored, coupled with corporate price-gouging. Beyond the inflation issue, workers in resource-rich states told us that they felt that those resources were extracted from the state, but too much of the value-added downstream production was done out-of-state. One thing I say to people back in Washington: the complaints we hear when we go to resource-rich states in the US are the same as the complaints we hear when we go resource-rich countries in Africa and Latin America. It’s a point of cross-border solidarity: people feel the global economic model is built on extraction, without a fair share going to the people where the resources are.

●      Fifth: Oligarchy is one of the major drivers of our economic and political problems. There is a big debate in the Beltway Bubble back in DC about whether the term “oligarchy” resonates with everyday Americans. But on my very first trip to meet with workers, in 2022, one guy literally complained about the oligarchy. He used that word. We haven’t had this kind of concentration of wealth and power since the Gilded Age and the robber barons. We know what followed that era: the New Deal, labor laws, and aggressive anti-monopoly enforcement. But over the past four decades, we as a country forgot about how important labor unions are to our democracy, and we backed away from anti-monopoly enforcement. We’re paying for it now. Almost every tough issue we face comes back to the basic inequality in our economy. The choices we made in trade policy make this problem worse.

How Did We Get Here?

Ambassador Tai knew there were decades-old fundamental, structural problems with American trade policy. If you’ll indulge me, I’m going to get into a bit of history because years ago, policy makers did get it, they did understand that workers are the backbone of our economy, of our democracy — and that means workers must be the focus of our trade policy too.

I’m going to go all the way back to when the US was coming out of the Depression and looking ahead to the end of World War II. That’s when President Franklin Roosevelt wanted to create a rules-based trading system. He wanted that system to internationalize the New Deal, the national economic system his administration designed to put working people first. After World War II, we and 53 other countries succeeded in concluding an agreement that would have gone some way toward creating that system. It was the International Trade Organization Charter, signed in 1948. It had an obligation for countries to pursue full employment policies. It had fair labor standards. It had policies to fight monopolistic practices, including price-fixing. It recognized that foreign investors could go into countries and have too much influence over governments. That was a trade policy that put workers at the center.

But when it came to participation from the US, our Congress didn’t sign on. Why not? Because Big Business didn’t like it. One powerful organization called The National Association of Manufacturers, which had a history of resisting workers and union power, joined other trade associations like the Chamber of Commerce and the National Foreign Trade Council to lobby successfully against it.

“Even Republican President Dwight Eisenhower thought Taft-Hartley went too far. ”

Who else opposed it? One important player was Ohio Senator Robert Taft, co-sponsor of the Taft-Hartley Act, the first major bill that weakened New Deal labor protections. Even Republican President Dwight Eisenhower thought Taft-Hartley went too far.

Because Big Business blocked the effort to internationalize the New Deal, we were left with a global trading system that was focused only on cutting tariffs. It lacked those labor protections and antimonopoly rules that are so essential to driving greater economic equality.

This approach to trade policy moved into hyperdrive in the 1990s, when the US and others created the World Trade Organization and ramped up free trade agreement negotiations, including NAFTA. Did we include the labor rules from the International Trade Organization Charter? No. Did we include the anti-monopoly rules from the ITO Charter? No. Did we recognize that foreign investors can meddle with the laws of other countries? No. In fact, we made it easier for them to rig the rules to serve their bottom line by including in our trade deals a whole range of issues that let them go after legitimate laws and regulations, and in some cases by giving companies special privileges to sue governments. This isn’t anything like what was in the ITO Charter. This is the opposite of a worker-centered trade policy.

So having put constraints on our own ability to protect our people, we let a major communist country, the People’s Republic of China, into the system. Now, during the Cold War, we hadn’t traded with major communist countries, including the Soviet Union. And we won the Cold War. But somehow what we took away from that is that trading with a major communist country would be good for democracy.

It wasn’t. What we got was an unholy marriage between Wall Street and Chinese state capitalism. Wall Street saw a billion cheap workers. The PRC saw an opportunity to make itself the world’s factory floor, which is exactly what it did. The PRC used subsidies, currency manipulation, dodgy environmental enforcement, and labor rights suppression to create a fake cost advantage.

We should think about that for a minute. The PRC is run by the Chinese Communist Party – but the supposed party of the worker represses workers’ rights. The CCP has more in common with Wall Street than we realize.

“Companies have been able to weaponize trade to break worker power at home and abroad. ”

Who didn’t benefit? Manufacturing workers everywhere, up and down supply chains. Those supply chains reached all the way here to Burley and other communities in the Rocky Mountain West.

This pro-multinational corporation/anti worker trade model is how companies have been able to weaponize trade to break worker power at home and abroad. That threat hangs over workers’ heads today. If workers ask for fairness, then they are told they’re asking for too much, and they’re threatened with having their jobs sent to another country with weaker protections. These companies make record profits. Inequality gets worse. We’re in a Second Gilded Age.

How Did We Try to Right the Ship?

Our first order of business was: do no harm.

What do I mean by that?

I mean that we were under pressure to do trade deals, in part because the whole system is hard-wired to think you have to be constantly doing deals or you’re somehow “falling behind.”

“We held the line against old-fashioned trade deals.”

We held the line against old-fashioned trade deals. This was in 2021. We were still in the middle of a pandemic, and supply chains were kitchen-table conversation. We said to people: the last thing we want is more of the same. The supply chain rules in those old agreements contribute to the supply chain failures that literally killed people.

I will tell you, though – there are a lot of die-hards addicted to those agreements, who literally cannot see the relationship between those deals and the calamities we endured as a result. 

But we were resolute.

Back during the first Trump Administration, the US had launched traditional free trade agreement negotiations with the United Kingdom and Kenya.When we got into office, we said to ourselves — we know the rules in those old deals are a problem, and we’re not going to do them. We were willing to do trade agreements, but wanted to focus on important issues that serve the public interest, like good governance, labor, environment, anti-corruption.

There was a lot of pressure to do a free trade deal with Taiwan. We said no. Taiwan in particular has supply chains that are deeply integrated with the PRC. If the point is to learn lessons from the pandemic and reduce dependencies on the PRC, that’s not the way to do it. So, we worked with Taiwan to tackle important issues but not to cut tariffs.

“When I see how farmers and workers are both at the mercy of this kind of corporate power, I get why the Farmer-Labor Party in Minnesota came to be.”

Here’s another struggle we had with that old approach to trade agreements: the difference between the way agricultural and industrial products are treated. The supply chain rules were designed to create incentives to source agricultural products made in the United States. Industrial products are treated very differently. These rules are really hard to understand – most so-called trade experts pay no attention to them. But it means the American agricultural community is a big cheerleader for free trade deals, and American unions typically are not. Because of the way these rules are designed, these agreements end up being a tool that pits American farmers against American workers.

Now, we aren’t even sure that the farmer actually reaps the rewards of those trade deals. Here’s why. American farmers and ranchers are squeezed on the input side – they’ve got to buy equipment, feed and more from companies that have pricing power – and then they’re squeezed again on the output side, because they’re selling to agribusiness conglomerates who, again, have pricing power. It’s that old story of buying retail and selling wholesale. Once again, the big multinational wins, the regular American loses.

When I see how farmers and workers are both at the mercy of this kind of corporate power, I get why the Farmer-Labor Party in Minnesota came to be.

I want to spend a bit more time on the People’s Republic of China, because it looms so large in the trade conversation. We have to understand that the PRC recognized what would attract Wall Street and took advantage of a poorly-designed set of trade rules to become the world’s factory floor. The first Trump Administration recognized the problem, but the deal they negotiated was mostly designed to benefit Wall Street.

That’s not what we were after.

We started by focusing on strengthening manufacturing here at home – using tariffs to protect those investments -- and we ended by launching an investigation into Chinese shipbuilding practices, focusing on core issues like labor rights in the PRC.

“The most important thing that happened while we were in office was that, for the first time perhaps since FDR himself was in the White House, trade and domestic economic policy worked together.”

But I would say that the most important thing that happened while we were in office was that, for the first time perhaps since FDR himself was in the White House, trade and domestic economic policy worked together. We were pro-worker at home and pro-worker abroad. We were anti-monopoly at home. We were anti-monopoly abroad. American manufacturing policy -- like the CHIPS Act investments in Boise -- was integrated into our trade policy. That’s how you start to rebuild supply chains, a manufacturing base, and our middle class.

So far, the current Administration doesn’t seem to like the domestic investment model, and their tool of choice seems to be tariffs. A tariff is a tool, like a two-by-four: you can use it to hit someone in the head, or you can use it to build a factory.

Here, we have to ask ourselves: what are the current Administration’s tariffs for? Are they to rebuild those factories? Are they to pay for tax cuts for the rich? Are they leverage to end up with more free trade?  Will the tariff policy create those same supply shocks we experienced during the pandemic?

If we’re going to fix the hollowing out of our industrial base, if we’re going to address the supply chain problems aggravated by flawed trade deals, then we need an industrial policy, including a trade policy, that’s grounded in fair competition, that respects the rights of workers here in the Magic Valley and all around the world, so that workers are no longer pitted against each other in a painful downward spiral.

Here, I want to mention something really bothersome that even open-minded economists do.

They talk about the focus on rebuilding our manufacturing base as if it’s just nostalgia. It comes across as if they don’t respect the importance of increasing production here at home. Now, when you dig a little deeper, some of them are warning against exaggerating the number of jobs that we can actually create. And they recognize that the source of good-paying jobs is, in fact, unions. But the itch to trash manufacturing runs strong.

Of course we shouldn’t deceive ourselves. We need to rebuild our industrial base, but that doesn’t mean we’re going to restore manufacturing to the position it once held in the American economy. That isn’t the goal. The goal is to build back an industrial base so that we can feel safe and secure at home and also build back union power, not just for manufacturing workers, but for all workers. Because that’s what will help us fix the problem of inequality that is eroding our democracy.

What’s Happening Today?

The answer is, I’m not sure. Tariffs, as I said earlier, are an important tool, and I have a bone to pick with those who simply say that “tariffs are taxes” as if both are bad. We know that fair taxes are part of a functioning society, and if tariffs are taxes, then tariffs should also be on the table for the same reason.

“Are we going to “deregulate” ourselves into having unsafe factories and unsafe food? It looks like the winners under this approach will be the same as the winners under the old approach.”

But tariffs on all our trading partners all at the same time? Gutting the National Labor Relations Board? Destroying the ability of the Bureau of International Labor Affairs to investigate the very foreign labor practices that drive the race to the bottom? Are we only going to do tariffs and not do any domestic investments along the lines of CHIPs? Are we going to “deregulate” ourselves into having unsafe factories and unsafe food? 

I don’t see where workers, where you, are the priority in any of this. It looks like the winners under this approach will be the same as the winners under the old approach.

We know that it doesn’t have to be this way. We know that the middle class built this country, and unions built the middle class. We can have a trade policy to match – if we put workers at the center of it.

Thank you.