President Obama is in Oregon today, pushing for one of his top priorities for the year: the passage of a massive trade deal with Asia. Oregon is home to some of the president’s biggest political allies in this fight, like Sen. Ron Wyden, who has tried to balance his liberal leanings with advocacy for his state’s highly trade-dependent industries. It’s also home to Nike, which Obama will use as the backdrop for his major address.
Wait, what? Nike? Like child-labor-and-sweatshops Nike from the 1990s?
The symbolism has befuddled some on the left, who see the Swoosh as a symbol of everything that has gone wrong with free trade: a global race to the bottom, in which countries keep labor standards low in order to attract business from companies free to source their products wherever it’s cheapest. Obama will likely tout Nike’s progress on cleaning up its supply chain, talk about how selling more shoes abroad will allow Nike to add more high-wage design and marketing jobs in the United States and argue that bringing Nike’s supplier countries into the Trans-Pacific Partnership will make them subject to labor rules that can then actually be enforced.
It’s that last question that is really at the heart of debate over what impact this deal could have on workers in the 11 countries that will suddenly become much more friendly destinations for U.S. capital. Will they ever actually implement the deal’s more onerous requirements, once they have all the benefits that come with it? What happens if they don’t? And would it be a better idea to make them shape up before letting them into the agreement, using expanded trade as a reward for good behavior?
Take Vietnam, for example, where about a third of the people who make Nike products work. Its labor laws have come under criticism for being notoriously weak, child labor and human trafficking are rampant and unions free of government control do not exist.
If Vietnam joins the TPP, Nike will no longer have to pay tariffs to import shoes that range from eight to 15 percent (a cost that adds about $3 to each pair). U.S. companies will get additional protections for their intellectual property so Vietnamese contractors can't just replicate it. And U.S. companies will also have the ability to sue in an international court if they feel like they have been treated any worse than a Vietnamese company. On top of that, U.S. financial services have more access to operate in Vietnam, and they might have less competition from Vietnamese state-owned companies. (We don’t know exactly what’s in the TPP at the moment, but we know at least the broad strokes.)
All of those changes, which give U.S. companies greater protections and conveniences when doing business in countries party to the agreement, will likely lead to a flood of footwear and apparel contracting into Vietnam. The job losses won't come primarily from the United States, which relinquished most of those jobs long ago. (The United States makes only about 2 percent of its own shoes.) Rather, they will come from places like China, Central America and Pakistan, where labor costs are higher but commercial infrastructure — like reliable business partners and functioning judicial systems — are more developed.
As that happens, wages in the countries left behind by U.S. businesses will decline, and wages in Vietnam will probably rise. (In fact, one recent paper found that they already have risen since an earlier trade agreement facilitated some commerce, as more workers moved from the black market economy into the formal sector; another found that child labor decreased as a result as well.)
That’s why those who adhere to traditional economics believe that increased trade in and of itself tends to benefit workers in developing nations. The White House’s Council of Economic Advisers report on the benefits of trade out last week leaned on that argument in its section on working conditions, and many outside economists think the experience of other Asian countries has shown it works.
“Does anyone believe that the living standards of workers in China are worse today, linked to the free access to markets in North America?” asks Gary Burtless, a senior fellow at the Brookings Institution. “To make the argument that we shouldn’t have a trade agreement with Vietnam, because Vietnam doesn’t treat its workers very well, also means you are willing to limit the improvements of living standards of low skilled, low wage workers in Vietnam.”
But labor advocates reason that the point of a trade agreement should be to accomplish both: allow workers to reap the benefits of increased trade and also make sure that their basic rights are respected. If that means fewer companies jump from a relatively high-wage country to a place like Vietnam, well, so much the better.
From the public statements the Obama administration has made so far, it sounds like Vietnam would be required to come into compliance with a slate of international standards, potentially through a separate side agreement. But in interviews with the Huffington Post and the Washington Post, Labor Secretary Tom Perez has been vague on when exactly compliance will be expected and how violations will be punished. "We are not going to transform Vietnam into Germany overnight," he told the Post's Greg Sargent. "In Vietnam, we want a whole series of reforms and tariff elimination. We want to put in a regime that is meaningfully better."
If it works like other recent trade agreements, progress will be very mixed. In recent years, U.S. trade agreements have built in stronger enforcement mechanisms for their labor rights provisions, and that has shown some results. For example, the Inter-American Development Bank determined that the number of labor inspectors jumped by 20 percent on average for Latin American countries that had signed trade deals with the United States since the 1990s. And when the United States does revoke trade privileges, as it did after the deadly factory collapse two years ago in Bangladesh, it can spur fast action on improvements.
But the legal process under most trade agreements grinds very slowly. Although corporations have the right to sue governments for unfair treatment directly in many of these deals, workers don’t; they must petition their government to bring an action on their behalf. As the Government Accountability Office found late last year, the few cases that the United States brought against countries like Guatemala, Bahrain, and Honduras took years to conclude — if they ever were at all — because of the lack of resources devoted to prosecuting them.
Now, labor activists often point out that the best way to make sure countries actually take worker rights commitments seriously is to ask them to meet certain tests before the trade deal goes into effect, since the promise of market access is our most powerful source of leverage. That is the philosophy behind Sen. Robert Menendez’s (D-N.J.) amendment to the Trade Promotion Authority bill that passed the Finance Committee a couple of weeks ago, which bars expedited consideration for deals with any country that is on the State Department’s human trafficking watch list.
“Where there are known, chronic problems, and they’re so egregious that we’re talking about fundamental labor rights, and those problems are fixable, then it’s time for us to hold out,” says Eric Gottwald, legal and policy director at the International Labor Rights Forum. “The moment to get good changes is before you sign the deal.”
So far, attempts to do that have shown some results. For example, congressional Democrats held up ratification of trade agreements with Peru and Colombia until they had agreed to bring their laws into compliance with international labor standards. Since the U.S.-Peru deal was struck in 2007, Peru has extensively overhauled its labor laws, improving inspection processes and freeing up unions -- although it rolled back some of those laws in 2014. And while a number of murders of trade unionists in Colombia remained unsolved three years after the implementation of the labor action plan that Colombia agreed to as a condition of its free trade agreement, the U.S. Trade Representative argues that the situation is better now than it would have been had the agreement never been signed.
That is what irks some trade union representatives: So far, there's not really a perfect example of trade benefits being withheld entirely until a developing nation gets its act together, so the benefits of half-measures are touted as victories.
“We’re always put in this position of ‘Well, isn’t it better than nothing,’” says Thea Lee, deputy chief of staff at the AFL-CIO. Colombia might have made more progress, she argues, if the United States had demanded a greater degree of compliance before conferring the benefits of access to U.S. markets.
“We had no business signing a trade agreement with that country,” Lee says. “If you want to be in a trade agreement with the U.S., you have to start out with labor laws and practices that are consistent with international standards.”
Everyone is waiting to see how the White House’s plan for labor enforcement in Vietnam will actually work. But with all the disappointment of previous trade deals, it’s hard for worker advocates to have any faith that even the most glowing promises of strict enforcement will yield serious results, when they rely on the White House’s willingness to commit millions of dollars to making sure those promises are kept.
This article has been updated to specify shoe tariffs on Vietnam and elaborate on Peru's labor reforms.