Future of trade policy

At the same time on Tuesday when the Doha Round of multilateral trade negotiations was once again falling apart (see earlier posting), the Senate Finance Committee was holding a hearing on The Future of U.S. Trade Policy: Perspectives from Former U.S. Trade Representatives. The hearing heard from four former Trade Representatives: Mickey Kantor, Bill Brock, Carla Hills, and Charlene Barshefsky. Interestingly, all of them talked about overall competitiveness as well as trade. As Charlene Barshefsky put it:

Structural change in the global economy is creating new industries and overturning familiar old ones; outdating old domestic policies, social arrangements and elements of our trade regime; and, as China and India rise, raising questions about America’s status as the world’s economic leader.
This hearing, accordingly, is a remarkable opportunity to reflect and develop consensus on our response to a profound set of challenges. My first and most important point is that trade policy can be only one element in this response, and not the principal element. We should place national competitiveness at the center, examining our finances, our commitment to science and innovation, our high-tech and traditional infrastructure, our human resources policies in both education and immigration, and other matters. We should also restructure our domestic social contract, to remove powerful sources of anxiety, notably fear of the loss of health care, as well as to spread the benefits more equitably and mitigate the risks for individuals. Together with this, we need a battery of trade, financial and other global policies that allow us to draw maximum benefit from the global economy, tap new areas of growth, and support our goals in national security, development and poverty reduction, and environmental quality.

Mickey Kantor laid out an overview agenda:

I. Building a competitive America
  A. Renewal and rebirth of public education (K-12);
  B. Energy security and addressing global warming, climate change and environmental challenges;
  C. Rebuilding and updating our infrastructure;
  D. Emphasis on science, discovery, research and development;
  E. A sound fiscal policy.
II. Restoring a credible, open and expanding trade agenda
  A. Enforcing trade laws and trade agreements;
    (1) Vigorous enforcement of our trade laws and full use of the WTO and other dispute settlement systems;
    (2) Establishment of a trade prosecutor at USTR;
    (3) New comprehensive trade negotiations with China to ensure full compliance with international trade commitments;
    (4) Review and update all existing significant trade agreements;
    (5) Enforce legislative standards in all preference programs;
    (6) Initiate discussions with Mexico and Canada re: NAFTA, labor and environmental provisions and dispute settlement agreements;
  B. Advancing U.S. trade and economic interests
    (1) Seeking multilateral and pluralateral sectoral agreements in critical areas;
    (2) Renewed efforts to implement the FTAA and APEC;
    (3) Complete the Doha Round;
    (4) Negotiate convergence and mutual recognition agreements on a multilateral, regional and bilateral basis;
    (5) Seek to resolve problems with the pending FTA’s with the Congress;
    (6) Seek an FTA with Japan or an expanded agreement involving the Quad (Canada, the European Union, U.S. and Japan);
    (7) Opening markets for U.S. agriculture.
  (C) Fair Trade Initiatives
    (1) Passing and implementing an expanding TAA program;
    (2) Seek to abolish abuse of child labor worldwide;
    (3) Include enforceable labor and environmental provisions in all trade agreements;
    (4) Implement stronger dispute settlement understandings in all trade agreements;
  (D) Promoting developing countries access to international trade and spreading the benefits of an open, rules-based trading system
    (1) Removing barriers to entry of products no longer produced in the United States;
    (2) Provide technical assistance and training to developing nations in negotiations and in WTO processes;
  (E) Encourage presidential leadership and advocacy.

Kantor also said something that echoes what I have said about the current trade strategy:

we should begin to fashion initiatives to promote the most prominent growth industries in the United States. Industries such as biotechnology, nanotechnology, environmental controls, health care, education and financial services are prime examples. This, of course, is not to ignore the other important areas of agriculture, telecommunications and other copyright industries. The attempt to negotiate a new and comprehensive Doha development round agreement has stood in the way of sectoral agreements, which have the potential of large impacts on global growth.
. . .
Agreements covering convergence of standards, mutual recognition agreements, regulatory regimes and transparency should be pursued. As we become increasingly connected, the ability to reach understandings covering accounting standards, corporate governance and financial reporting, product standards and safety and internet protocols can have a large impact on global growth and efficiency. Our businesses, workers and investors would profit immeasurably from progress in these areas.

Barshefsky made a similar point:

Fundamentally, trade policy should turn from bilateral agreements with relatively small partners toward the fast-growing industries and major economies that we can tap for growth. Among these industries are services generally, energy and environmental technologies, infrastructure-linked industries where Asian countries in particular are large buyers, and medical and health industries. Our goal should be to ensure that American-based service providers and manufacturers can supply the goods and services where demand is greatest. Major targets should include the EU and Japan, China, India, Brazil, ASEAN, the Persian Gulf and similar large developing country
A quick conclusion of the Doha Round would be a good start here, though not at all sufficient. Whether Doha succeeds or fails, we should move quickly to a new approach, based on the negotiation of plurilateral sectoral agreements among the main economies. These would seek broad liberalization of large and rapidly growing industries: energy and environmental industries perhaps first, also selected medical and health industries, based on agreement among the major players rather than requiring participation of each one of the WTO’s 153 members. The model would be the Information Technology Agreement of 1996, and the WTO’s later agreements on financial services and basic telecommunications. Here is where we will tap rapidly growing markets, and ensure that America remains a leading player in the industries that will lead the 2010s and 2020s. These agreements have the further advantage of being sectoral in nature, not country-specific, and are therefore based upon MFN policies that work with rather than against supply chains and other business trends.

But she was even blunter about the failure of the current strategy of “comprehensive rounds”

It worked reasonably well for the Kennedy Round in the 1960s and the Tokyo Round in the 1970s, spottily for the Uruguay Round in the 1980s and 1990s, and is now a hindrance.

(Something I completely agree with – see After Doha: What The WTO Is Not Talking About. See also Barshefsky’s Foreign Affairs article With or Without Doha.)
On a different point, Bill Brock made another interesting comment about job loss and insecurity:

This Congress clearly needs to think about an urgent change in the way we address people whose jobs have been affected by all these varied economic forces, not just trade.
One of the problems in doing so is that our trade adjustment assistance is based largely on giving workers some help when their jobs are affected by trade. Well, what if it wasn’t trade that cost them their employment? What if it was just the fact that Americans preferred hybrid cars to buggy whips? They are still out of work, and we need them just as much as they need a job. Why do we lead them to believe that we only care if they lost their job due to some competitor overseas, for that is at least the implicit message of our present trade adjustment assistance program?
I suggest that one critical step in a new trade policy would be to address this issue. In a world where the pace of change seems locked into ‘warp’ speed, hard‐working men and women are going to be faced with changes in their job situation time and again throughout their working lives. The studies we did when I was at Labor indicated that our youngsters coming out of school could expect to hold eight to ten jobs, and have two to three careers during their working lives. If anything, we may have underestimated the magnitude of the problem. To date, this nation has done virtually nothing to address this fact, but the loss of skills, which occurs because we do not, costs us dearly.
If we could create a far more comprehensive worker adjustment and training system, it would not only be more humane to those individuals who are suffering, through no fault of their own, but it would expedite their return to the workforce, perhaps more effectively than ever.

Amen to that. I have long advocated for a comprehensive adjustment system, including a system of Community Workforce Partnerships.
The US clearly needs a new trade strategy, as this hearing pointed out. The insights from these former Trade Representatives are a good start at leading the way toward the development of that new strategy — by people who have been there and done that.

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