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I
noticed last week that the U.S. trade representative (USTR) announced
the United States was not going to negotiate a free trade agreement with
Kenya as President Trump proposed two years ago.
Instead, we are going after a trade and investment framework agreement,
a step down that looks very much like the proposed Indo-Pacific
Economic Framework (IPEF) and the negotiation launched with
Taiwan.
That
reminded me that the United States made essentially the same decision
with respect to an agreement with the United Kingdom. We are not
pursuing real trade agreements with anybody else either. In addition, it
appears the USTR has declined to try to restart negotiations on an
Environmental Goods Agreement (EGA) or to broaden it to cover services,
despite the fact that an EGA would be entirely compatible with the
administration’s climate goals. Early on, there was some talk about
trying to extend some of the provisions on labor and environment that
are in the United States-Mexico-Canada
Agreement (USMCA) to Central America, but there does not appear to have
been any action on that either.
Do
you see a pattern developing here? The administration’s trade policy is
being defined more by what it isn’t than by what it is. And what it
isn’t is anything that involves tariffs or market access, or would
require action by Congress.
Instead,
we have gotten a lot of rhetoric about a trade policy for workers,
environment and sustainability, and economically meaningful outcomes.
Thus far, nobody seems to know what that means. Optimists will conclude
it is too early to say, and we will just have to wait to see what is
eventually produced. Cynics will say the words don’t mean anything, and
are, in effect, a pretend trade policy rather than a real one.
Readers
have to draw their own conclusions about what the administration
intends. It is easier to predict what they are likely to get, and the
reaction to the IPEF thus far provides some clues. The absence of market
access talks means a dearth of tangible benefits. A decision not to
submit an agreement to Congress signals the other countries that the
United States does not intend to make any significant concessions
(because if it did, Congress would have to approve). It also raises
doubts about whether any agreement will last beyond the next election.
If Congress passes an implementing
bill, it becomes law. Absent that, the next president could simply undo
what his predecessor had done, as Trump did with the Trans-Pacific
Partnership (TPP).
That
suggests the best we will get is a series of shallow agreements that
contain a lot of words about mutual cooperation in a wide variety of
areas but will not make much economic difference.
At
this point, you might be asking yourself, why would that be good
policy? The answer, sadly, is politics. Administration officials are
veterans of the intraparty TPP battle of 2016 and are determined not to
go through that again. The result is that rather than demonstrating
leadership on trade that might produce jobs and growth, the
administration has effectively outsourced trade policy to its left wing,
declining to do anything that might get it stirred up. And, apparently,
what it doesn’t want is anything that might bring more imports into the
United States that, by the way, may not
work politically. One of the ironies of the IPEF launch was that shortly
afterwards, a number of progressive groups in the participating
countries put out statements attacking it as, essentially, TPP in
disguise.
So,
our trade policy is turning out to be a series of missed
opportunities—United Kingdom, Kenya, IPEF, EGA—and an incredible,
shrinking USTR. There is another irony here as well—Democrats and
Independents are pro-trade. According to Ed Gresser from the Progressive Policy Institute, 72 percent of self-identified Democrats are “pro-trade.” Independents, at 65 percent, view trade as an “opportunity.”
Meanwhile, only 44 percent of Republicans view trade as an opportunity, while 52 percent believe it to be a threat.
In
other words, a policy based on conflict avoidance is not only bad
policy but also bad politics. That may not matter in the upcoming
elections since the American people clearly have a lot of other things
on their mind than trade (which regularly ranks last on the list of
problems people worry about). However, it matters to the economy in
terms of opportunities for jobs and growth foregone.
It
also matters to the U.S. position in the world. The point of IPEF is
the same as the point of TPP—to reaffirm the U.S. presence in the
Pacific. The point of a Kenya trade agreement is to provide a beachhead
in countering China in Africa, where the United States has been largely
MIA. The point of restarting EGA is to demonstrate U.S. leadership in
the climate/trade debate. The thin gruel we are currently offering
fulfills none of those goals.
The
usual response to comments like these is either that the politics are
very difficult, or, for those who actually believe what they’re saying,
old trade policy benefited big corporations and the new one will benefit
workers. The response to the former is, of course the politics are
difficult, but that’s what leadership is about—staking out the right
course and rallying the people to follow instead of folding at the first
sign of resistance. The response to the latter is that trade agreements
create benefits. More trade means more jobs and growth. Without
agreements, there are no
new benefits to distribute to either workers or corporations. Trade is
clearly one area where less is not more.
William
Reinsch holds the Scholl Chair in International Business at the Center
for Strategic and International Studies in Washington, D.C. |