Just Get On with It
There are two topics this week. The first is the bunch of trade meetings at various levels occupying the administration. The latest round of Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations concluded last week. The president went off to the G7 meeting in Hiroshima. There will be an Asia-Pacific Economic Cooperation (APEC) trade ministers meeting this weekend in Detroit coupled with a separate session with the IPEF trade ministers. The next EU-U.S. Trade and Technology Council (TTC) meeting will occur shortly after that.
My CSIS colleague, Matt Goodman, is a much better interpreter of the statements that come out of these meetings than I am, so if you are interested in them, you should pay attention to what he will say. I will just make a brief comment about expectations.
Last week I participated in some discussions about what did—or might—happen at some of these meetings. One comment that struck me concerned the TTC; that it was really about “relationship building.” This came as a surprise, since the administration had claimed the previous meetings were all about “deliverables.” Apparently, the main deliverable this time will be an improved relationship. Nothing wrong with that, although one would think over the past 75 years, we had already developed one. The distressing news is that concrete deliverables seem to be fading off into the sunset, and there is really no substitute for them. Relationship building is like forming a committee. It’s what you do when you don’t know what to do, or when you can’t agree on anything important. If that’s the best we can do, then we should worry that the TTC may go the way of its several predecessor structures with the European Union and descend into irrelevance.
It turns out that is not very different from what we are hearing from the administration about our overall trade policy. We are creating a new Washington Consensus, a new approach to trade that is about sustainability and inclusivity for the benefit of workers rather than large corporations. Leaving aside the wisdom of that policy, it would at least be nice if they could just get on with it and produce something concrete. In trade negotiations, officials are judged by what they finish, not what they start, and the time for finishing is rapidly drawing to a close as the country heads into election season. Voters may give them four more years, but it would be nice to see “deliverables” returning to U.S. Trade Representative’s (USTR) vocabulary and to see some actually occurring.
Second, a word about incompatible goals. In 2011, Harvard professor Dani Rodrik published The Globalization Paradox, which I have taught in my classes and which I recommend to those interested in a broader view of the implications of a globally integrated economy. In it, he explained the political “trilemma” of the global economy—that three fundamental goals of hyperglobalization, national sovereignty, and democracy cannot all be achieved at the same time. You can pick any two, but you can’t have all three, at least not in their fullest form. That was a useful insight for politicians and economists, along with the ever popular, “There is no free lunch,” something both the right and left should keep in mind as the government wrestles with the debt limit.
We are now seeing a similar trilemma on a smaller scale in the Inflation Reduction Act. The administration is trying to do three things: accelerate the green transition, promote reshoring and domestic manufacturing, and respect trade laws and institutions. Unfortunately, all of them cannot be accomplished at the same time. The United States does not presently have the capability to achieve all its green goals domestically or by relying on friends and allies. If we want to accelerate the transition to renewable energy in the short run, we should buy solar panels and battery minerals and components from China. If we want to have domestic capabilities in those areas, we can build them, but that will slow down the transition and make it more difficult to meet our climate goals. It is also apparent that building those domestic capabilities is easier if you don’t worry about trade rules, but that simply encourages others to do the same thing, further eroding our laws and institutions and fragmenting the trading system, which is already getting frayed around the edges.
So far it appears the administration has chosen to prioritize the second goal—domestic manufacturing—with the result being a slower transition to green energy, slower achievement of our climate goals, and a series of losing cases in trade tribunals that will only increase. That is a policy choice the president gets to make—which is why he gets the big bucks— and voters will ratify or reject it in the next election. My immediate gripe is that we should stop pretending we can achieve all these goals at the same time right away, sort of a political version of Everything
Everywhere All at Once. There are inevitable costs and trade-offs in making these policy choices, and the American people would be best served if the administration is fully transparent about them.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.