When the U. S. Senate blocked giving the president fast-track negotiating authority for a new trade deal last week, it took a stand for a fairer approach to trade that’s especially important to workers in manufacturing-heavy states like Kentucky.
The country’s large and growing trade deficit is a big, but often unrecognized, reason we lack the jobs we need. A trade deficit occurs when a country buys more from other countries than it sells abroad. After decades of relatively balanced trade, the U. S. trade deficit began growing in the late 1990s and now has swelled to $500 billion a year.
A major cause of the trade deficit is the elevated value of the U. S. dollar compared to other currencies. But the high value of the dollar isn’t the result of market forces; it’s inflated in part because of what’s called currency manipulation. That’s when the central banks of more than 20 countries, including China and Japan, buy up dollar-denominated financial assets in order to artificially suppress the value of their countries’ currencies, making their exports relatively cheaper and U. S. goods more expensive.
Among the beneficiaries of this arrangement are large corporations like Walmart that produce their goods offshore and sell them in the U. S. But in this country, it’s responsible for the loss of up to 3 million jobs per year. And workers in those countries engaging in currency manipulation lose out when capital that could be invested domestically is instead being sent abroad to push down currency values.
Congressional leaders — led by Kentucky Sen. Mitch McConnell — and President Barack Obama have been unwilling to take on the powerful interests that benefit from this situation. They didn’t insist on provisions addressing currency manipulation in the proposed new Trans-Pacific Partnership trade deal. But the absence of those provisions is the reason many members of the Senate blocked the deal last week. And there are other legitimate concerns about what might end up in a trade deal, including the weakening of protections for workers and the environment and the potential undoing of rules intended to protect us from the bank shenanigans that led to the Great Recession.
As residents of a manufacturing state, Kentuckians should be especially concerned about bad trade policies. Among states, Kentucky has the eighth-largest share of factory jobs compared to total employment. Since 2001, the state has lost 41,000 jobs from the growing trade deficit with China alone, the 17th-largest share of any state, according to a study by the Economic Policy Institute (EPI). Job loss has been especially steep in computer and electronic parts manufacturing, where 10,700 jobs have been lost or displaced; apparel manufacturing, industrial supplies, including plastics and rubber products, and electrical equipment, appliances and components.
The loss of good jobs in the past is reason enough to be wary of a new trade deal. And signing a deal without addressing currency manipulation is a missed opportunity to create jobs just when we need them. Kentucky could grow up to 82,000 jobs if Congress ended currency manipulation, another EPI study shows. Especially benefiting would be the first and second congressional districts in western Kentucky, which are among the 20 percent of districts in the country with the most jobs to gain from taking action.
Jobs and the economy always top the list in any poll of Kentuckians about the issues that concern them most. But almost always missing from the debate about jobs are the harmful impacts of our overvalued dollar and unfair trade policies. You might argue that’s because it’s a complicated issue, but a more likely reason is that addressing it means taking on the billionaires who benefit from the way things are.
While it’s unclear what will happen next on the Trans-Pacific Partnership deal, let’s hope last week’s vote is a step toward a better discussion on the kind of trade policies that can create a more broadly-shared prosperity.
Originally published in the Herald-Leader on June 1, 2015. Published in the Courier-Journal June 4, 2015.
