Supporting Trade In A Non-Trade Moment

 | 
January 4, 2023
UPDATED: 
January 4, 2023


Nations that want to move ahead engage in trade. Trade allows these countries to harvest the best ideas, products and technology from around the world, and they allow the rest of the world to receive the benefits of that nation’s ideas and products as well. And all nations benefit from competition, which broadens choice, decreases the cost of manufacturing, and works against inflation. Yet the United States is not moving ahead on trade.

This halt of U.S. trade leadership is not purely a Donald Trump phenomenon, though Trump built his political identity around hostility to trade, using it as a metaphor for worker dislocation, deindustrailization, and Washington fecklessness. Obama also expressed ambivalence about trade, and for all of the differences between Trump and Biden, Biden has not moved to repeal or reduce the China tariffs Trump imposed. In contrast with his alliance leadership in Ukraine or with the Quad, Biden has not shown any appetite for leadership on trade. As Biden has not taken up Trump’s call for a free trade agreement with Kenya or pursued any digital trade agreements, as Trump did with Japan, one could argue that Biden is even less sympathetic to trade than Trump, albeit with rhetoric that is less bombastic.

As I have mentioned in a previous column, I am sympathetic with Biden’s concerns in one sense: trade liberalization can bring more political costs than benefits, at least in the short-term. Rarely does a successful trade agreement win any applause, but it can frequently receive criticism. We know that the benefits of trade will be diffuse and long-term, whereas the costs will be more immediate and acute—even if those benefits significantly outweigh the costs. So on any given day, it might make political sense to do nothing on trade. Cumulatively, however, doing nothing is harmful to the nation.

Given the limited appetite for trade movement, what might be possible for the U.S.? Let me outline five elements for a trade policy in this non-trade moment.

Don't look for a fight. The U.S. should work with markets that have advanced economies and a high standard of living so that there can be no allegation of labor arbitrage. No jobs moving offshore.

Size matters. In addition to a high standard of living, the U.S. should work with the larger economies that will provide material benefits through liberalization. The EU, Japan, the U.K. and the east Asian grouping originally known as the Trans-Pacific Partnership all stand out as large economies that meet this criteria.

Early harvest. Let’s reverse the traditional sequence of negotiations. The traditional approach has been “all or nothing”—the agreement does not take effect until all of the details have been worked out. This all or nothing approach makes sense when time is on your side and you can take years to grind through the minutiae of minor elements. Instead, we need an “early harvest” strategy.

“Early harvest” means both sides move to liberalization on critical sectors even as negotiations are unfolding—for example, zero tariffs on manufactured goods, or mutual recognition on processed food testing and labeling. This would provide considerable benefits of cheaper goods and economic expansion in short order. This early harvest would push back service issues and regulatory issues—which could take years. The risk is these more complicated issues never get fully resolved. The advantage is all participating economies immediately get a shot in the arm.

Use a shock absorber. Even in negotiating with advanced economies, we want to minimize economic dislocation. Separate the manufacturing liberalization into three segments: at least 50% of current exports must go to zero tariffs immediately, 40% within three years, and 10% within five years. In other words, all participants can offer their more sensitive segments up to five years to make a transition.

Keep an eye on China. It is in all parties’ interest, including the U.S., for economies to reduce their trade dependency on China. Making it as easy as possible for these economies to collaborate would be a useful political step as well as an economic boost.

How realistic is renewed U.S. leadership on trade? We won’t know unless we try. The Biden Administration could start exploring this idea with a few speeches by USTR (the U.S. trade representative), and Commerce Department leadership. The world is not standing still. Trade is not standing still. The U.S. should not stand still.



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  • Chuck Parsons

    Chuck is Score LA’s Executive Director of Events and Marketing. He aims to help business owners and would-be entrepreneurs in Los Angeles improve their business practices.

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