Nel's New Day

May 8, 2015

Nike Proof of Trans-Pacific Partnership Dangers

President Obama visited Oregon’s Nike offices today to talk about how much he loves the Trans-Pacific Partnership (TPP) and how deluded the opponents on both the left and right are. I’m one of those strong opponents, disagreeing with my usually progressive senator Ron Wyden. People can argue that I haven’t read it and therefore know nothing about it. True, but I’m not allowed to read it. Neither is almost everyone else in the United States.

The supreme secrecy of the TPP is excessive, even in a government that prizes secrecy. Edward-Isaac Dovere wrote:

“If you want to hear the details of the Trans-Pacific Partnership trade deal the Obama administration is hoping to pass, you’ve got to be a member of Congress, and you’ve got to go to classified briefings and leave your staff and cellphone at the door.

“If you’re a member who wants to read the text, you’ve got to go to a room in the basement of the Capitol Visitor Center and be handed it one section at a time, watched over as you read, and forced to hand over any notes you make before leaving.

“And no matter what, you can’t discuss the details of what you’ve read.”

Rep.Rosa DeLauro (D-CN) said, “It’s like being in kindergarten. You give back the toys at the end.” Rep. Lloyd Doggett (D-TX) claimed, “My chief of staff who has a top secret security clearance can learn more about ISIS or Yemen than about this trade agreement.” Rep. Brad Sherman (D-CA) commented, “[The president is] incredibly condescending. It’s like, ‘You’d be all for this if only you hadn’t gotten an F in economics.’” He opposes what he’s seen because it lacks labor standards and measures to address currency manipulation. “We know when we’re being suckered,” said Rep. Alan Grayson (D-FL), who he believes that the agreement quotes percentages instead of absolute values on trade statistics that give an overly positive impression. “It’s not only condescending, it’s misleading.”

Members of Congress are also upset because Michael Froman, the man behind the agreement presented false information in a Senate Finance Committee hearing about the “fast-track” process:

  • Fast Track doesn’t put “Congress in the driver’s seat” because it gives the executive branch all the power before “an up-or-down vote with no amendments or changes.”
  • There is no trade surplus with the TPP partners: the U.S. has a $180 billion trade deficit with the 11 countries and a $51 billion manufacturing trade deficit with all FTA partners.
  • Negotiations are not working for “access to affordable life-saving medicines” but instead giving greater monopoly protections for drug companies.
  • Froman’s “diversity of voices” are actually 90 percent representatives for industry interests.
  • His claims about the growth of exports are also false.

More details from Jonathan Tasini are available here.

Labeled a “free trade” agreement, the TPP covers many other subjects. Only five chapters deal with traditional trade issues. The others give foreign corporations to equal status with sovereign nations by allowing them to enforce corporate rights and privileges while limiting government policies for health, safe food and water, and wages. Nations in the agreement, including the United States, cannot make laws that might endanger any corporate profits.

This look at Nike, where President Obama tried to show how beneficial his trade agreement is to people in the U.S., describes the company’s decimation of jobs in the United States.  Phil Knight, head and co-founder of Nike, is worth $23 billion because of outsourcing jobs to overseas sweatshops, avoiding U.S. taxes through P.O.-box subsidiaries in tax havens, and threatening to extort tax breaks from its “home” state. Enrolled at Stanford Business School, Knight came up with the idea of using cheap labor at overseas factories in 1964. His 1962 thesis was on the profitability of offshore low-wage production of goods to be sold in the U.S.  At that time, 4 percent of U.S. footwear was imported; now 98 percent of this product is made overseas. By offshoring its labor, Nike has participated in driving down U.S. wages and benefits.

When horrible working conditions at the Nike overseas factories became an issue, Knight and other company officials claimed that they weren’t responsible for safety problems or labor conditions because they didn’t own the factories. A 1996 Life magazine article called “Six Cents an Hour,” picturing a boy sewing Nike soccer balls, brought the issue to a head. The exploitation of Nike’s offshore cheap labor created “brand erosion,” which could cost the company several million dollars. Two years later, Knight promised to get rid of child labor.

Nike earned $27.8 billion in revenue in 2014 and “employs”—through contractors—over 1 million workers. Fewer than one percent of these employees are in the United States. That’s 10,000 out of 1,000,000 workers. At this time, Nike pays Vietnamese workers $.56 an hour to make shoes, at a cost of $10, that sell for $320. The company had moved to Vietnam after wages rose in China. In today’s speech, President Obama said that Nike had promised to bring back “thousands of jobs” if the TPP is confirmed. The 10,000 new employees that Nike promises adds one percent to the total number of Nike manufacturing jobs in the United States.

All Nike shoes are produced outside of the U.S. In 2013, none of the 68 factories with Nike made shoes. Nike cut one-third of its U.S. production contracts and dropped the employees by one-third, from 13,922 to 8,400 U.S. workers. By contrast Massachusetts-based New Balance makes shoes in five U.S. factories. The TPP would force these factories to close because of the agreement’s lower tariffs on shoes made in such places as Vietnam, benefitting Nike.

An Obama administration argument for TPP is special “progressive” labor rights provisions for Vietnam, in recognition of its bad labor conditions. When that happened in Colombia, more than 100 union organizers were assassinated, and another 1,000 were threatened with violence.

Tax havens have saved Nike $2.2 billion in federal taxes. Nike had twelve shell companies in just Bermuda alone, ten of them named after Nike’s shoes: Air Max Limited, Nike Cortez, Nike Flight, Nike Force, Nike Huarache, Nike Jump Ltd., Nike Lavadome, Nike Pegasus, Nike Tailwind and Nike Waffle. Although the company appeared to have scaled down its tax shelters outside the United States, the company must disclose only “significant” subsidiaries. On the most recent financial report, issued last Friday, half the Bermuda subsidiaries from the previous year have disappeared.

The UK discovered that Nike is dodging taxes there as well by funneling millions of pounds from its sales through its Dutch division. The company that sponsors the England football team and tennis stars such as Maria Sharapova siphoned £8.3m from Britain to a sister company in Hilversum, Holland, because the Nike “subsidiary” in the Netherlands “owns” the rights to “license” something to Nike in other countries.

While Nike pays 90 percent less than its fair share in taxes, Knight managed to get huge tax breaks by threatening to leave the state. The legislature passed a bill agreeing to tax Nike only a portion of its sales for the next 30 years. Nike gets $2 billion for investing $150 million in a project with 500 jobs–$4 million per job. Nike has few employees here, shelters most of its revenue offshore, and had no intention of leaving Oregon, but its threats paid off big.

At this time, only one representative and one senator from blue Oregon oppose the TPP. The newest one to go with the president’s arguments, Rep. Suzanne Bonamici, said she’s backing the bill because it would help boost exports. Sadly, she there’s no proof. Bonamici does have concerns that it “include strong labor standards that will, among other things, guard against child labor and human trafficking” and to contain “unprecedented environmental standards to protect our land, air, and water and conserve our precious natural resources.” Even if the agreement that she approves—although she may not have seen it—has these provisions, it is a “living agreement,” which means that it can be changed after she votes to approve it. At this time, the TPP includes 12 countries, but it is open for every nation to join and open to changes in the provisions.

The president needs at least 30 House Democrats to make up for the missing 60 or more missing GOP votes. Sen. Ron Wyden (D-OR) got six of the 11 other Democrats on the Finance Committee to back the legislation last month, but Sen. Harry Reid (D-NV) has promised to filibuster the TPP.

flush the tppAs Robert Reich wrote, “Nike isn’t the solution to the problem of stagnant wages in America. Nike is the problem.”

What Nike does isn’t illegal. The company can legally use sweatshop labor and shelter its revenue from taxes. Part of the legality comes from trade agreements. The president is now promising Nike and other huge corporations that he will push through another agreement that will be far more beneficial to them and far less beneficial to U.S. workers. I understand why Knight wants the TPP. I don’t understand why President Obama wants the agreement.

 

[Protesters greeted President Obama at the entrance to the Nike offices.]

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2 Comments »

  1. It was nice to see the President here in Oregon, but I’m so disappointed about the TPP, and so disappointed that quite a few of our local liberal Congresspeople support it. It definitely should not get fast tracked!

    Like

    Comment by eurobrat — May 8, 2015 @ 8:33 PM | Reply

  2. I just don’t get it either.

    Like

    Comment by Lee Lynch — May 8, 2015 @ 8:29 PM | Reply


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