Missing the Boat?

I had intended to title this week’s column “Missing the Boat” without a question mark and then proceed to rant about all the opportunities the administration is missing on trade. However, as often happens, reality intruded, and it appears the administration is actually about to do a couple things we have been waiting for. I could say it’s a bit late, but that would be churlish. If they’re moving in the right direction, I want to recognize that and encourage them to keep going. So, let me begin with what they’re doing right before I rant about what they are not doing at all.

The biggest accomplishment was the G7 agreement over the weekend on new global tax rules. This still has a long way to go. The Organization for Economic Cooperation and Development (OECD) group working on the issue meets at the end of June, and G20 finance ministers will review the G7 agreement when they meet in mid-July. Ultimately, the full G20 will have to endorse it, and they meet at the end of October. Even so, the agreement this weekend is a significant step forward after years of bickering, and it is really due to Treasury Secretary Yellen, who jumpstarted the talks with a revised U.S. proposal. It is also noteworthy that the ministers reached agreement not only on the widely publicized 15 percent minimum corporate tax issue but also on new rules for large corporations making profits in multiple venues. Big U.S. companies, which had been targeted by other nations, particularly in Europe, will have to pay, but so will large companies from other nations, so the tax will be less discriminatory than the national proposals that emerged earlier. This was not actually a trade accomplishment, and it is not part of the portfolio of the Office of the U.S. Trade Representative (USTR), but if it makes it all the way to the finish line, it will be the most significant international economic accomplishment of the year.

Second, word has leaked out that the administration plans to agree to the EU proposal for a Trade and Technology Council at the upcoming U.S.-EU summit. While there are not a lot of details about what this will mean—and this is an area where details matter—it is still an important step forward. We have a boatload of issues with the European Union appropriate for discussion in this forum. They begin with the European Union’s General Data Protection Regulation (GDPR) rules and the problem of how to move beyond Privacy Shield, which the courts threw out in the Schrems II decision, but they also include other manifestations of the European Union’s enthusiasm for regulation—the Digital Services Act, the Digital Markets Act, and the forthcoming proposal on artificial intelligence regulation. Inevitably, there will also need to be discussions of a common approach to Chinese inbound investment in critical technology areas and on export controls of critical technology items. A high-level agreement to move forward on any or all of these issues would be an important step.

Of course, setting up a committee doesn’t by itself solve those problems—in fact, it is often what you do when you don’t know what to do—but it is a recognition that the problems exist, and it creates a forum for dealing with them. It sets the table and provides the menu. Whether the parties actually sit down and pass the plates around remains to be seen, but it represents a good first step after months of saying our policy is “under review.”

That, then, brings me to the many other things that remain under review long past the point where there should be some signs of the administration’s intentions. Most important, of course, is China, where there are many issues besides trade that complicate our relationship. I do not see signs of a trade policy emerging yet, and there might not be one for some time. The conversation between Ambassador Tai and Vice Premier Liu He were a necessary first step, but neither party seems very interested in negotiating anything—the Chinese because they don’t want to spend time fending off U.S. demands that are similar to Trump’s, and the Biden administration because it doesn’t want to have an early failure. “Under review” may not be permanent in this case, but it could be long term.

Elsewhere, the most obvious cases where we are missing the boat are our failures to move forward on trade negotiations with the United Kingdom and Kenya and on trying to restart the Environmental Goods Agreement (EGA) talks which ground to a halt at the end of 2016. None of these are easy or guaranteed successes, but they are all constructive initiatives, and our failure to pursue them is hard to understand. We may not ultimately be able to reach agreements with Kenya or the United Kingdom, but it is an insult to them not to make the effort, and it is noteworthy that neither is waiting around for us to lead. Kenya continues its involvement in regional trade arrangements and in the Africa Continental Free Trade Agreement (AfCFTA), and the United Kingdom is now about to negotiate entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), suggesting a clarity of vision about Asia that we seem to be lacking, at least on the economic front. Finishing the EGA is consistent with the administration’s goals and on most environmentalists’ lists as something that would be good to get done.

Finally, a case where the ship has already sailed is the administration’s failure to support renewing Trade Promotion Authority. That authority expires at the end of this month, and, while global trade will not come to screeching halt without it, the time will come sooner than the administration expects when they will need it and regret not pursuing it when they had the chance. As long as your policy is under review, you don’t need the authority because you’re not doing anything, but as the president continues to hear from foreign leaders with trade issues, he will eventually realize the authority is a key item in his trade toolbox.

So, on today’s list, the administration’s positive score is two out of six. Could be worse, but, sadly, could also be much better.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C. 

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). 

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