20 September 2018

Reframing the Trade Debate

There is no question that the president has reframed the debate on trade in the United States. As I have said many times, after 30 years below the fold in the business section (for you, millennials, that’s a reference to old-fashioned newspapers), trade is now on the front page every day. As it turns out, that has had both good and bad consequences. On the good side, trade policy is now a common topic of conversation, which means, in turn, people are learning about it, whether they want to or not. What is a trade deficit? How long have we had one? Is it good or bad? What is currency manipulation? Why do exchange rates matter? What are subsidies? Dumping? Tariffs? Who, or what is the WTO? What are supply chains, and how do they make things different? People are now asking those questions and getting answers from experts. The answers are not always the same, but that’s fine—people are learning about trade and globalization, and that’s a good thing. Regardless of where they end up, they will be in a better, more informed position to make judgments on our trade policy. 

Also good is the fact that the administration has highlighted some longstanding problems in the trading system that work to our disadvantage, which need to be addressed. Yes, Virginia, there are subsidies. And they hurt U.S. companies and workers. The Chinese do, indeed, steal our intellectual property and force our companies to transfer technology, and that makes us less competitive. Other countries’ barriers to U.S. agriculture products persist. The WTO Appellate is guilty of ignoring its own rules and issuing decisions that go beyond the limitations in the Uruguay Round Agreement. 

These are not new issues. Past administrations—of both parties—knew about them but either did not assign them a very high priority or simply did not succeed in addressing them, choosing instead to attempt further trade liberalization—also an effort that has been largely unsuccessful. The president has consistently pursued a policy of victimization and blame, so it comes as no surprise that he has applied that to trade policy; but in doing so, he has identified real, serious problems that ought to be dealt with. The problem, as many observers have pointed out, is not with his diagnosis but with his prescriptions. 

But the diagnosis alone has been helpful in reframing the global debate around our problems (which are also other people’s problems) and putting the miscreants on the defensive. Countries have begun, finally, to look at the WTO critically and to organize to address the problems we have identified. There will be a ministerial-level meeting in Canada next month to do just that. It may or may not get very far, but at least countries are taking the first step. 

As everyone knows, the news is less good on the bilateral front, and this is where the bad consequences arrive. They pertain to the prescriptions rather than the diagnoses. Tariffs as a policy solve nothing, and as a tactic—which is the president’s defense—they have so far accomplished nothing. The president is telling our farmers and manufacturers to just wait, we’ll win, and everything will be fine. As time goes on and nothing happens, the victims are beginning to ask how long they will have to wait and are pointing out that if they go bankrupt in the meantime, “winning” won’t matter very much. 

As failures, or at least non-successes, add up, the president resorts to the only tactic he knows—upping the ante. More threats, more insults, more tariffs. These actions have also reframed the debate by drastically lowering the bar. People no longer hope for trade agreements that actually advance trade; they hope for agreements that do no harm and a day when some new country is not insulted. A good day is merely a day without tweets. When I served in the executive branch during the Clinton administration, my great frustration was that there were too many people—many of them lawyers—who went home thinking they had a good day if they stopped something from happening. For an administration intent on accomplishing something, that was tremendously depressing. Now we have reached the point where the best we can hope for is a day when nothing bad happens. When we decide that one of Gary Cohn’s main accomplishments is taking a paper off the president’s desk so he can’t sign it, you begin to understand how our collective expectations have declined. 

The president would no doubt respond by saying he is a disruptor, and he is right about that. Disruption, as noted above, can be good when it reframes the debate and forces people to think about things they might prefer to avoid and look at them in a new light. But pursued maladroitly, disruption only leaves us where we are now—hoping vainly for an uneventful day. 

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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