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Corporate-Rigged Trade Deals: More Job Offshoring, More Income Inequality

Negotiated in secret with hundreds of industry advisors, corporate-driven trade deals such as the North American Free Trade Agreement (NAFTA) and the derailed Trans-Pacific Partnership (TPP), include special protections for businesses that offshore American jobs to low-wage countries and eliminate many of the usual risks that make firms think twice about moving to low-wage countries.

The offshoring incentives have contributed to the net loss of more than 57,000 American manufacturing facilities and nearly 5 million U.S. manufacturing jobs – one out of every four – in the era of corporate-rigged deals. The U.S. Department of Labor lists millions of workers as specifically losing their jobs to offshoring and import competition in this era – and that is under just one narrow program that excludes many whose job loss is trade-related. Studies estimate that the U.S. economy could have supported 7 million more manufacturing jobs if not for the massive trade deficits that have accrued under current U.S. trade policy.

This failed model has also exacerbated U.S. income inequality. A litany of studies has produced an academic consensus that trade flows since NAFTA and other deals have contributed to the historic increase in U.S. income inequality – the only debate is the degree to which trade is to blame. Failed trade deals have exacerbated inequality by displacing well-paid manufacturing workers who must then compete for lower-paid non-offshoreable service sector jobs, which in turn depresses wages in those sectors, spurring broad-based middle-class wage stagnation.

The TPP — which was defeated by thousands of diverse organizations representing working people united across borders — was a controversial potential trade deal that would have expanded job offshoring and worsened income inequality. The TPP would have replicated and even expanded on past deals' extraordinary privileges for firms that relocate abroad. The TPP's offshoring incentives included a guaranteed minimum standard of treatment in the offshore venue and compensation for regulatory costs. One study found that even with a conservative estimate of trade's contribution to inequality, the losses from a projected TPP-produced increase in inequality would have wiped out tiny projected gains from the deal for most U.S. workers. The net result would have been wage losses for all but the richest 10 percent of the United States. That is, for anyone making less than $88,000 per year, the TPP would have meant a pay cut.

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