The October 11th to October 17th, 2021 trade report with L.C.
US Trade Representative Katherine Tai was in Europe this past week, where she delivered a speech about “the WTO’s important role in the global economy.” The original purpose of the WTO was to increase global prosperity by expanding world trade. That, however, is not Ms. Tai and the Biden’s administration’s view, as became evident in her speech. She spoke in Geneva of how the WTO could help promote the non-trade goals she prioritizes over trade liberalization. “We can make the WTO an organization that empowers workers, protects the environment, and promotes equitable development,” she said. (emphasis added)
There is a fundamental problem with prioritizing other issues over trade liberalization. For one thing, that’s not what the WTO was founded for. Trade liberalization is about countries opening their economies to increased foreign as well as domestic competition on a non-discriminatory basis. The goal of liberalization underlies WTO rules (most-favored-nation, non-discrimination, etc.). The rules are based on the notion that increased and more open trade is win-win. All partners gain prosperity by an expanded division of labor. Whether one country might gain a bit more than another shouldn’t be an issue because both countries will be better off than they were before.
Zero-sum trade
A trade policy that instead prioritizes non-trade issues such as worker rights, environmental standards, and especially equity assumes that increased economic growth leaves many behind and that trade should be understood as a zero-sum game. In this static, if not decline-oriented, view about the economic “pie,” benefits should be directed toward equalizing existing wealth among trading partners rather than expanding it for all. This mindset of USTR Tai and the Biden administration leads to the same protectionist outcomes as former President Trump’s push for “reciprocal trade.”
Hard-core Trump supporters complain that until Donald Trump became president, Washington had been dominated by the “Uniparty” – a like-thinking Republican and Democratic establishment. But in trade matters, the “Uniparty’s” recent exemplars have been the Trump and Biden administrations, with their Bobbsey twin protectionist trade representatives Robert Lighthizer and Katherine Tai.
Ms. Tai tries to get the ITC into the act
Meanwhile, Ms. Tai sent a request to the US International Trade Commission on October 14th asking it “to launch a two-part investigation of the distributional effects of goods and services trade and trade policy on workers and underserved communities.” The request is in line with the Biden administration’s view that trade is not in itself a tool for broadening prosperity but just a tool that may be wielded on behalf of the administration’s other interests, led by “worker-centric” and environmental priorities.
After her Geneva speech, Tai answered questions and held a press conference. She told reporters that “In 25 years the economy has changed and a lot of the members have changed….. There is a feeling of a malaise around here and… the time is now for us to confront that malaise. Everyone agrees that the WTO needs reform. The top priority for reform is getting that process under way.”
Does Ms. Tai need Maalox for her malaise?
That’s not helpful leadership. She cites “malaise,” but most attribute the “malaise” to the Trump-administration-initiated Appellate Body crisis, its complaints against the WTO, and its refusal to state what specific changes it wanted to see. All this empty complaining is being religiously continued by Ms. Tai and the Biden administration.
Asked for her suggestions for the Appellate Body and for improving the panel process, she wouldn’t provide specifics or guidance that would enable other countries to engage the US on reform. She refused to have the US take the lead even though the WTO’s immediate problem stems from US refusal to let the AB operate.
Two approaches, one outcome
Admittedly, despite the identical protectionist outcome of both the Trump and Biden trade regimes, the motivations were different. The Trump administration was motivated by an economically ignorant nationalism, whereas the quasi-Marxist Biden administration doesn’t believe in free markets at all, whether domestic or international.
This especially has come out in its approach at the WTO to the question of the TRIPS waiver – how to get Covid vaccines quickly to developing countries. Biden wants to give away the patented mRNA technologies developed by private US and European pharmaceutical companies after years of risky, expensive research. His administration is also doing its best to destroy the one Covid vaccine manufacturer – Moderna – entirely situated in the US.
It’s difficult to see how the US can credibly protest China’s theft of intellectual property when the US is governed by an administration that wants to simply give away some of its most precious intellectual property to the rest of the world and especially its Chinese and Russian enemies. The latter meanwhile have been working overtime to steal that property.
Several other important matters the WTO must address – which countries should be labeled “developing,” how much slack developing countries should get in respect to WTO rules, and what to do about statist non-market economies such as China’s — Tai didn’t bother mentioning at all in her nothing-burger of a Geneva speech and press conference.
Minimal action on the metal tariffs hurting allies and US manufacturers
Seemingly contradicting the appearance of total passivity on the trade front, the administration is working to lift a 25% tariff on EU steel imports – in response to the EU’s threat of double retaliatory tariffs to be assessed if the US steel tariff isn’t lifted by November 1st. But the US-EU bilateral talks aren’t including the 10% aluminum tariff also imposed on allies by the Trump administration. Also, it appears that any deal reached with the EU will apply only to the tariffs on the EU’s steel, not the same tariffs imposed on other US allies, including key defense partners Japan and the UK – perhaps because they haven’t threatened retaliation the way the EU did. What a way to treat allies! The Biden administration doesn’t seem to have the faintest clue that liberalized trade is not only for commercial benefit but also to form a strategic supply chain among trusted allies.
Supply chain crisis
Meanwhile, concerns are focused on the impact of the supply chain crisis on trade – choke-points at ports, constraints on shipping and shipping containers, and the pandemic’s impact on global manufacturing. While much of the overall supply chain problem stems from the COVID-19 pandemic as factories in China, Southeast Asia, and elsewhere closed, Biden administration policies have made matters worse rather than better:
- Biden green energy policy, intended to destroy the fossil-fuel industry, has played a major role in exacerbating fuel shortages and the resulting spill-over inflation. Crude oil prices have doubled and natural gas shortages are now global as winter approaches. Biden recently has been forced into a temporary reversal of his scorched-earth anti-fossil edicts, a reversal no less embarrassing to him than his reversal of the Trump administration’s “Stay in Mexico” border policy.
- The shipping crisis has been exacerbated by perpetuation of the Jones Act and the administration’s effort to make the unions much stronger than they already are, given the present labor shortage, by passing the PRO Act.
- The labor shortage itself has been exacerbated by administration welfare payments that for some former workers have made employment unnecessary.
- States controlled by Democrats shut down production and services beyond reasonable trade-offs between Covid on the one hand and gainful employment and production needs on the other.
- The Democrats’ teachers unions refused to return to classrooms for a year, forcing many working people to stay out of the labor force to take care of children who otherwise would have been cared for in schools or day care.
Pacific trade pacts moving along
Other countries, however, unlike USTR Tai and the Biden administration, understand “trade” as meaning trade, not equity, imputed low-CO2 content, etc.:
- RCEP. Brunei became the 6th country to ratify the RCEP, joining Cambodia, China, Japan, Singapore, and Thailand. Malaysia also moved its ratification process forward this week by amending relevant laws. RCEP can take effect after six ASEAN and three non-ASEAN members submit their ratification instruments to the ASEAN secretariat – which is expected to happen in time for it to to enter into force next January.
- CPTPP. South Korea is moving toward joining the CPTPP, spurred by the recent bids of China and Taiwan. South Korean Trade Minister Yeo Han-koo said in an interview last week that “I think Korea is more than ready and prepared to enter into CPTPP than any other country right now.” It has been reviewing the agreement and making preparations to do so for a few years, including making required changes to domestic regulations. Yeo also commented that China isn’t ready to meet the deal’s high standards. Separately, UK trade minister Anne-Marie Trevelyan said on October 13th that London hopes to enter the CPTPP in 2022. Thailand is also considering a CPTPP bid. And back in the US, corn, pork, beef and dairy farmers in the Farmers for Free Trade group, at an October 14th panel, called for the US to enter the CPTPP, with participants noting that Southeast Asia has huge market potential for US agriculture, and now with the prospect of China, Taiwan, the UK, and South Korea joining, the CPTPP will be even more important for the US, and worse for farmers here if the US is left out.
L.C. reports on trade matters for business as well as Founders Broadsheet.
Leave a Reply