State of the Trading Union
February 6, 2019
Scott Miller: I'm Scott.
Bill Reinsch: I'm Bill.
Scott Miller: And we're the Trade Guys.
Bill Reinsch: And we're the Trade Guys.
Andrew Schwartz: You're listening to the Trade Guys, a podcast produced by CSIS where we talk about trade in terms that everyone can understand. I'm H. Andrew Schwartz and I'm here with Scott Miller and Bill Reinsch, the CSIS Trade Guys. In this episode of the Trade Guys we talk state of the union.
[Kellyanne Conway via news clip]: He's calling for cooperation, and he's calling for comity- C-O-M-I-T-Y and also compromise. And he's going to point out a couple examples where this has actually happened on his watch.
Andrew Schwartz: USMCA.
Donald Trump [via news clip]: Well I did them a big favor in negotiating the USMCA which is basically the replacement to NAFTA, which is one of the worst trade deals ever made.
Andrew Schwartz: China talks, and what about that reciprocal trade act? All on this episode of the Trade Guys.
Andrew Schwartz: Trade Guys, it's State of the Union day. Finally, we've been waiting, everybody's been waiting. The government shutdown postponed it, now it's in the people's house again. State of the union is-
Bill Reinsch: No we haven't, who's been waiting for it?
Andrew Schwartz: Well we've been ... I've been-
Bill Reinsch: Do you really want to hear what he has to say?
Andrew Schwartz: Yeah, I want to hear what he ... I think I do, I want to hear what he has to say. And I want to hear what he has to ... Well, what's he gonna say on trade? He's gonna give an update isn't he?
Bill Reinsch: Well, he's gonna defend himself. He's going to say that everything is working. And he's gonna say the Chinese talks are going well.
Andrew Schwartz: They're beautiful talks.
Bill Reinsch: They're beautiful talks and they're gonna produce a brilliant success. That USMCA is a good bill, and deserves to be passed. And he'll probably get some applause for that.
Andrew Schwartz: Will he get applause from both sides of the aisle?
Bill Reinsch: Some I think yeah, not universal. Some people. I don't think he'll get a standing O out of the Democrats for anything, but some applause.
Andrew Schwartz: No I don't think there's gonna be a lot of standing O's on the Democratic side of the aisle.
Scott Miller: Well look, trade is just a component of what I think is the strongest section of the speech, which is the economy. Look the economy is excellent, the job growth is way ahead of expectations, overall economic growth has been quite strong, Main Street is benefiting, workers are benefiting. So if I were the president I'd certainly craft a speech around the strength of the economy, and I would try to connect as many of my administration's actions as a cause of that strong economy as I could. Certainly trade for the president: he will talk about being tough on trade and making sure we stop the unfairness of the past. And I think he will try to connect that with the economy which is his ... To me it's the strongest talking point he has.
Andrew Schwartz: Well if you're president Trump or Mitch McConnell, you've had two extremely productive years.
Scott Miller: Yes.
Andrew Schwartz: That's their point of view here, is the Democrats may have issues with the president's behavior, other independents may have issues with it, republicans may even have issues with his behavior. But if you're looking at it from their point of view, they're focused on this being two extremely productive years.
Scott Miller: Oh that's right, manners aside, they've gotten results and they're going to trumpet those results in the speech tonight.
Bill Reinsch: You guys are being way too kind.
Andrew Schwartz: Well that's what we have you here for Bill.
Bill Reinsch: The economy is doing well.
Andrew Schwartz: Yeah.
Bill Reinsch: Most people are forecasting a live-in recession, but not this year, probably next year.
Andrew Schwartz: So as long as we can kick the can down the road.
Bill Reinsch: Well that's what Congress does well is kick the can. I think what is ... The multiple elephants in the room is you've got a debt ceiling limit looming.
Scott Miller: Yes.
Bill Reinsch: You've got another shutdown and wall debate looming, you've got appropriations, you've got a budget sequester kicking in if they don't address that. And you've got a whole new round of appropriations kicking in. There's a whole bunch of things that have to be done. I think it's fair to say that the economy's had a productive two years, it's hard to say I think that Congress has had a productive two years.
Scott Miller: Oh well they-
Bill Reinsch: They've done very little.
Scott Miller: Set that aside. Keep in mind what we've got here, the guy who learned his philosophy through the power of positive thinking. And I think he is going to talk about the economy, appeal to the Congress, say, "Look we can work together and continue to achieve great things. Or we can fight and achieve nothing." And I think he'll claim the American people want the Congress to work with the president, he'll make that claim.
Bill Reinsch: So you think he'll take the high road?
Scott Miller: Well I think he'll assert that, and then he will talk programs in between. He definitely will talk about national security, he will talk about foreign policy, he'll talk about trade in the context of the toughness, and what its delivered so far, and what he expects in the future. So I think those things are components, but I think he will propose at least the notion that we've done a lot of good things in the last two years, we can continue to doing good things for the American people, but only if we work together.
Andrew Schwartz: But a lot of people are saying though that's he not known for taking the high road, he's not going to take the high road. This is not going to be a particularly pleasant evening for either side of the aisle.
Scott Miller: Well no question he's a counter puncher, and can't seem to resist doing that. But at the same time, deep inside, I imagine Donald Trump as a seven or eight year-old boy sitting in the Presbyterian church in Manhattan, listening to pastor Norman Vincent Peale who is literally the pastor of the church. And that theory of the power of positive thinking, and this notion of positivity is deeply embedded in him.
Andrew Schwartz: Bill are you feeling positive?
Bill Reinsch: I'm a Presbyterian, do I have to claim him? Trump?
Scott Miller: No, no you, no.
Bill Reinsch: I don't have to claim him. I think he will take the high road in the sense that if you look at his previous state of the unions he's followed the script.
Andrew Schwartz: Yeah.
Bill Reinsch: He's followed the script-
Andrew Schwartz: Well his last state of the union was praised.
Bill Reinsch: Yeah.
Andrew Schwartz: It was a good speech it was-
Bill Reinsch: He's done the teleprompter, and I think his people will say, for that event, demands a level of dignity and a level of ... I don't know what the right word is, sophistication that you just need to really produce. That's what people expect, you need to appear presidential. And you don't need to appear petty or vengeful, which is his normal proclivity. So I think we'll get that. He'll articulate some things that won't get any applause. I think his trade reform act won't get any applause, this is the thing that wants to give him even more authority to raise tariffs.
Andrew Schwartz: Let's talk about this. Bets are he's gonna mention this tonight-
Bill Reinsch: Yes.
Andrew Schwartz: That he wants to expand presidential power over trade. This is something that is a longstanding no-no on both sides of the aisle. Tell us about this Bill.
Bill Reinsch: The issue of who gets to make trade policy has been a contentious one for a long time in Congress. Members of Congress point to article I section eight, which says the Congress has authority to regulate interstate and foreign commerce. Presidents always point to article II, which is the executive authority section which says, the president has the authority to conduct foreign relations. And you kind meet in the middle. And up until 1934, the Congress set trade policy, of course up until 1934 trade policy was mostly tariffs.
Bill Reinsch: There wasn't a lot more to it than that, and Congress set tariffs and they did it one by one, Smoot-Hawley was thousands of individual provisions on regulating tariffs. And the economic records adjust, they didn't do that good a job of it. What Roosevelt did using The Depression as an argument was to persuade Congress to give the president the authority to negotiate. But what he did, and Trump wants to break the cycle, what the president did with Congress was to break the policy process into three parts: the authorization, the negotiations, and the approval. Congress controls, and even under Roosevelt and since, Congress controls the first part and the last part.
Bill Reinsch: They authorize the president to do things, and he can't do those things unless they authorize him. And they usually authorize him with conditions; ‘Here's what we want you to do, and here's what we want you to try to take of.’ They understand that you don't get 100% but they do that. Then what the new thing is, the president then can go off and do that, he gets to do it, it's an executive action. But at the end of the day it comes back to Congress, Congress has to approve it. What Trump wants to do is take away the last part, actually and the front part-
Scott Miller: And part of the first part yeah.
Bill Reinsch: And part of the first part.
Scott Miller: Yeah.
Bill Reinsch: And say, "If I find a tariff that I think is unfair where there's is higher than ours is, then I can unilaterally raise duties in order to equalize the situation."
Andrew Schwartz: So it's a pretty big expansion.
Bill Reinsch: It's huge.
Scott Miller: Well it is, it's huge. It's crafted in a way that makes it sound reasonable. Look-
Bill Reinsch: Yes.
Scott Miller: They talk about reciprocity. Now keep in mind, in 1934 it was the reciprocal trade agreements act that gave Roosevelt this authority that Bill just described. So reciprocity has been an idea for a long time in trade policy, and reciprocity sounds fair to the average person. Well it's even-steven, they do this to us, we ought to do that to them. And so there's an element of messaging in there, but what it does is breaks open the notion that open markets are actually something that Congress is in favor of.
Scott Miller: And many in Congress want to manage that and frankly the congressional constituents, businesses around the country tend to benefit from open markets, they're in favor of it. They really don't want higher tariffs for a lot of reasons, but the notion of Congress no longer having a key role, the central role in deciding what our trade policy should be is the fundamental change. And it's masked in this idea of reciprocity.
Andrew Schwartz: Well can he get it through?
Scott Miller: No.
Bill Reinsch: No, not a chance.
Andrew Schwartz: 'Cause he can't just declare this unilaterally?
Scott Miller: No, no.
Andrew Schwartz: He needs legislative support right?
Bill Reinsch: This requires legislation. And he's not gonna get it. The Democrats have no reason in the world to give this president more authority-
Andrew Schwartz: Right.
Bill Reinsch: For anything. And I don't think it's gonna get-
Bill Reinsch: Well-
Bill Reinsch: Senator Grassley has already said that it's a non-starter in the Senate.
Scott Miller: Chairman Grassley basically laughed it off. He has no interest in this. And literally when asked about it said, "We have no interest in giving more authority to the president on trade." So it was quite direct.
Andrew Schwartz: So why is Trump gonna bring this up tonight? Is this something with his base? Is this-
Scott Miller: Well it fits his message. His message is the United States is being treated unfairly-
Andrew Schwartz: Right. My guy is gonna get you a better deal.
Scott Miller: The evidence of the unfairness are these differentials in tariff, I'm gonna make it fair. That's his trade message, like or not or right or wrong, I should say.
Bill Reinsch: And there's more poll data out now from our favorites Pew Research Center.
Andrew Schwartz: We love Pew.
Bill Reinsch: We love Pew, we love Bruce Stokes who does a lot of this. And the data shows that the public in general is more supportive of trade, and more supportive of trade agreements than ever. And it also shows on the republican side, the very sharp dip in the negative territory on trade that occurred in 2015, 2016, and 2017 is now coming back.
Andrew Schwartz: Okay. So the president's not-
Scott Miller: And republicans are coming back into the pro-trade column.
Andrew Schwartz: The president is not a man who's unaware of polls.
Bill Reinsch: One would think not.
Andrew Schwartz: What does this tell him?
Bill Reinsch: It may not tell him as much as what I just said because there's another element to the polls. While it shows a lot of support, it also shows that for most people, while they have views on trade, it's not very important.
Andrew Schwartz: Aha.
Bill Reinsch: If you ask, "Here's a list of things. Are you worried about these things?" Trade, which used to be number 9, is now number 13.
Scott Miller: In the economy.
Bill Reinsch: Healthcare.
Scott Miller: Healthcare, yeah.
Andrew Schwartz: Healthcare, economy.
Bill Reinsch: Healthcare, the economy, terrorism are usually the big three. But it's even slipped below climate change now.
Scott Miller: Intriguing.
Bill Reinsch: It used to be always be one above climate change, and now it's below. The point is if you ask people what they think about trade, they'll tell you something happy about it for the most part, but then if you ask them do they care about trade, it turns out they care about other things. They don't really vote about trade.
Andrew Schwartz: Does this suggest that trade is big and complex the way climate change is big, and complex, and hard to actually vote on?
Bill Reinsch: I think it means people are conflicted about it.
Scott Miller: Yeah, most likely people have varying views on the elements of it and overall think it benefits their life, but it's not something they think about every day. In fact, only President Trump has made them think about it every day.
Andrew Schwartz: The Trade Guys have made them think about it every day.
Scott Miller: I always tell my friends the president's been good for business.
Bill Reinsch: It's sort of like cognitive dissidence. I think there's a lot of people that have conflicting thoughts at the same time, and they don't worry about reconciling them because when you ask other questions about, are you for trade? The answer is yes. Does trade cost jobs? The answer there is often yes, too. Does trade raise prices? You'd be surprised, a number of people think it actually raises prices when the truth is the opposite. People have contradictory views about it internally that they don't bother to reconcile. They just have those views.
Andrew Schwartz: That's why we're here. We're here to tell people what the truth is, to wade through it all.
Bill Reinsch: And to tell them when they're wrong.
Andrew Schwartz: Just to give them more information and talk about trade in ways that everybody can understand. If we're talking about trade in ways that everybody can understand, tonight the President is certainly going to talk about his talks with China, which as we said at the beginning were beautiful and ongoing.
Scott Miller: But importantly, he'll probably lead with China because that's the area of trade policy in which he has the greatest public support, and he actually has bipartisan support ...
Bill Reinsch: In Congress.
Scott Miller: ... for dealing with China in Congress. The Congress is behind the president in terms of getting tough with China and protecting U.S. Interest. That's a great thing to lead off with.
Andrew Schwartz: As of this morning, China and the United States have 25 days to reach a deal or President Trump is going to raise duties on $200 billion worth of Chinese goods to 25%, up from 10% currently. That's another hike.
Scott Miller: Yes.
Andrew Schwartz: He's already hiked it 25% on $50 billion.
Scott Miller: Yes, that's what the words are. Go to the music and the dance. The music and dance is with the meeting in the Oval Office with the negotiating team, the U.S. And Chinese bilateral delegation that was here.
Andrew Schwartz: Led by Bob Lighthizer at this time.
Scott Miller: Lighthizer on our side, yes.
Bill Reinsch: And Liu He from China.
Andrew Schwartz: Correct.
Scott Miller: Yes.
Bill Reinsch: Vice premier.
Andrew Schwartz: Good pronunciation there, trade guy Bill.
Bill Reinsch: I actually studied Chinese many, many years ago ...
Andrew Schwartz: Excellent.
Bill Reinsch: ... and know nothing, but occasionally get a pronunciation correct.
Andrew Schwartz: All I know is ni hao.
Bill Reinsch: Ni hao is good enough in a lot of places.
Andrew Schwartz: That's pretty much it for me.
Scott Miller: If you saw the video, it was a very pleasant meeting. It was very upbeat. The president himself was beaming and talking about making progress, and we're going to be in great shape, and we've got some flexibility. He was disinclined to push hard on it. I would note that the March 1 deadline for this tariff suspension is very close to the timing for the meeting with the president of North Korea. The Kim Jong-un meeting is very closely coupled to this March 1 deadline. I imagine that those are not independent entities at this point, that China's role in facilitating or creating problems in the bilateral Trump-Un talks, or Trump-Kim talks, I guess ... Victor will correct me.
Bill Reinsch: Yes, Kim.
Andrew Schwartz: No, Kim.
Scott Miller: Trump-Kim.
Andrew Schwartz: Kim Jong-un.
Scott Miller: Okay.
Andrew Schwartz: Victor being Victor Cha.
Scott Miller: Cha.
Andrew Schwartz: The great Victor Cha of CSIS, leading Korean analyst. You heard it here, if you like stuff about North Korea, listen to The Impossible State podcast also on this CSIS network.
Scott Miller: He's the best there is on North Korea.
Andrew Schwartz: But you're saying the Kim-Trump talks and China-U.S. Trade talks are somewhat tied?
Scott Miller: The dates are very close, and I don't think that's a coincidence. I think that they're likely to have an effect on one another.
Bill Reinsch: I will just say I don't think it was planned that way.
Scott Miller: No, I think the way it is now.
Bill Reinsch: The 90 days came up because that sounded like a good round number when they were in Buenos Aires back in the end of November to have the meeting. 90 days just adds up to March 2. I don't think anybody was thinking about a Kim summit then. It may have been now that they're thinking about it, although I'm a little surprised because it seems to me it is more Trump-like to try to get two big events, two separate big events, two separate press hits, two spotlights out of this rather than try to cram everything into three or four days, which is going to be one event.
Andrew Schwartz: Both of these events get good ratings.
Bill Reinsch: They're going to get fantastic ratings. The world's going to be watching both of them. Why would he put them together? You're the media expert. It seems to me he'd want to spread them out and get a double hit, wouldn't you?
Andrew Schwartz: I would think. The only thing is logistically this is a president who doesn't like to travel.
Bill Reinsch: Yes.
Andrew Schwartz: You have the ability here to negotiate two-for-one in a same trip. It could end up being a historic and beautiful trip, which would be an interesting media story for him.
Bill Reinsch: Flying on Air Force One is not exactly like going to Dulles and getting on a commercial flight.
Andrew Schwartz: It's not, it's not.
Bill Reinsch: It's a little more comfortable than that.
Andrew Schwartz: Did I ever tell you about the first time I ever went on Air Force One, the first thing I did?
Bill Reinsch: I never even knew you'd been on it in the first place.
Andrew Schwartz: Sure, I've been on Air Force One when I covered the White House. When I covered the White House as a producer/reporter, the first thing I did when I got on the Air Force One-
Bill Reinsch: Steal the M&M's probably.
Andrew Schwartz: No, no, I didn't steal the M&M's, although that was an exciting part of the trip, but not stealing them, being handed them with the presidential seal. This was during the George W. Bush administration. The first thing I did when I got on Air Force One was I banged my head on the overhead compartment. That was quite painful because the overhead compartment on Air Force One is really tough reinforced steel. It's not like the plastic on the commercial thing at Dulles. It is a different experience flying Air Force One. My first Air Force One experience, I think I was somewhat concussed.
Bill Reinsch: I'm impressed nevertheless. I've been on it in my life.
Andrew Schwartz: I didn't do a very good job reporting that day.
Scott Miller: At least you had a good excuse.
Bill Reinsch: Yes. Did you suffer any long-term brain damage?
Andrew Schwartz: No, I think I'm okay.
Scott Miller: The close coupling of the media events may or may not be a problem. I'm with Ted Koppel on this, which is while President Trump is in office, every day is a holiday, every meal is a banquet for the press. This guy creates so much news on a routine basis that they'll figure it out.
Andrew Schwartz: If you're a White House reporter or correspondent, this really is the golden age because you're now not even multi-platform, you're all world. You have to be everywhere at once. You're getting TV contracts. You're getting more ink. You're getting more of everyone because-
Scott Miller: And the stories write themselves.
Andrew Schwartz: Yeah, the stories write themselves, and the stories are constant and ongoing. Yesterday there was a story about the president spending a lot of time on executive time during his normal workday. Do you think he's thinking about trade during that executive time, or is he thinking about media strategy around trade during that executive time?
Bill Reinsch: I thought he was watching TV.
Andrew Schwartz: Yeah, that's part of media strategy.
Scott Miller: I think he's still a good real estate developer, and he thinks about leverage. Leverage applies in all those situations and on all the topics.
Andrew Schwartz: All right. Do we have leverage over the Chinese? The Chinese after all during this negotiation last week, they surprised White House officials by pledging to buy five million more metric tons of soybeans while negotiations continue. Talk about a drop in the bucket. That's not going to help our soybean farmers very much.
Scott Miller: No.
Andrew Schwartz: But it was a surprise gesture.
Scott Miller: But if I had to take blame or responsibility for one of the other economies, I'd take it for the U.S. And not the Chinese economy. Chinese economy is soft. This has been reported pretty broadly. Most of the reporting is it may be worse than the official numbers indicate. China is slowing, and that slowing economy is creating lots of problems for the president and the government per se.
Andrew Schwartz: Our economy is resilient.
Bill Reinsch: To a point. What the Chinese have to calculate, you've asked a really good question, where the leverage goes. It's been a subject of a lot of debate. I think if you assume that the Chinese government makes rational economic decisions solely on the basis of economic policy, then you can argue that we might have some leverage. That's not the way they make decisions. All their decisions are informed by the number one goal, which is party preservation and the preservation of the Communist Party of China as the controlling authority in the state. What we are asking them to do particularly in terms of abandoning state-owned enterprises and some of their other goals are things that are going to reduce the party's control. That's stuff that they can't agree to. Everything that Xi Jinping has been doing has been to magnify the role of the government in the economy rather than reduce it, which is exactly the wrong thing to do from the standpoint of economic policy. He's making everything worse, but he's going ahead and making everything worse, I think, because they want to maintain control.
Scott Miller: Right. The only way to escape the middle income trap is to liberalize massively and to get the services economy growing. Services economy are very dependent on market signals. I know of nowhere where services are well managed from the top down. This is a moment of real crisis for Chinese economic planners because it's one thing to plan an export-led production economy. It's quite another thing to try to plan an insurance market with consumers.
Bill Reinsch: There are some things changing actually. Another commercial message here. Read my column this week, which is on this, which is on-
Andrew Schwartz: We always read your column.
Bill Reinsch: Well, good. I'm glad. Good to know that somebody does. The changing nature of globalization and McKinsey did a report on this that was quite interesting because it suggests that ... It didn't suggest, it found that while global trade in goods continues to grow, the percentage of internationally-traded goods as a percent of output, is declining across the board. More sales are domestic and to the extent they're international, more of them are regional.
Bill Reinsch: What's happening in big economies, and China was specifically mentioned, is the creation of exactly what economists have been telling the Chinese to do for decades, which is a bigger consumer market. The one number I remember, in 2007, 17% of Chinese goods were exported. In 2017, so ten years later, 9% of Chinese goods were exported. What is happening in China is the development of domestic consumption and we're getting consumption-led growth. And what we're getting, therefore, is domestic supply chains inside of China to meet that growth.
Bill Reinsch: What that means for trade is fewer exports, relatively speaking and also fewer imports because you'll be seeing more domestic value chains. That is probably good for the Chinese economy long term. But the short term signs are exactly what Scott said. They're not recognizing that.
Scott Miller: Yes, 2007 happens to be the year where trade peaked.
Bill Reinsch: The essence-
Scott Miller: If you measure trade as a share of world output, total trade as a share of gross world output, 2007 was the peak. It declined precipitously in the recession, but has never recovered as a sort of a share of output. And this is one the reasons why the ... It's actually ... It's not necessarily bad news. It just is.
Bill Reinsch: No.
Scott Miller: Yeah.
Bill Reinsch: The other thing that's happening is the huge growth in trade and services.
Scott Miller: Yes.
Bill Reinsch: And trade in data, in data transfers.
Scott Miller: Digital trade.
Bill Reinsch: Yeah.
Scott Miller: Which is weightless.
Bill Reinsch: Which is actually good for us.
Scott Miller: Yeah.
Bill Reinsch: Because we are global leaders on both.
Scott Miller: We have advantages that don't necessarily lead to zero-sum games. So, our edge in services is a positive-sum game, whatever China does.
Andrew Schwartz: To be continued on China, finally, President tonight is expected to call on Congress to approve the new USMCA, Mexico-Canada Agreement. What do we think is gonna happen there?
Bill Reinsch: Well, we've disagreed on this before. I mean, I think that it's one of the few things that Scott and I don't entirely agree on. I think it's gonna get done. I think the shutdown has thrown the schedule off a little bit. I was predicting by the August recess, I think that's still possible, but the International Trade Commission, which has to do a report on the economic impact of this agreement has indicated they're gonna delay their report probably by the full 35 days that the government was shut down. That kicks it from March 15th to April 18th or 19th, something like that. And so a lot of the maneuvering is gonna slow down a little bit. I still think it gets done.
Bill Reinsch: Scott and I were talking before we began talking to the microphones. I think the one thing that could go badly wrong here is if the President decided to play the withdrawal card. You know? Announce that he's gonna withdrawal from current NAFTA in an effort to jam the Congress. My original thinking was that they'd all complain about that, but in the end, they would go along with it because they don't want to have no new NAFTA, no old NAFTA. I'm getting more worried that that might prompt the Speaker to pull the plug on and change the rules of the House as she did in '08 with the Columbia Agreement. And that's kind of a lose-lose outcome for everybody, but I can see her being pushed to do that.
Scott Miller: I'm still highly skeptical, obviously. I spent a long time getting paid to see the dark at the end of the tunnel. Okay? So I tend to be somewhat jaundiced in this respect. But look, I have never heard Speaker Pelosi say that trade is anything on her priority list. She has lots of priorities. None of them list the USMCA.
Andrew Schwartz: Right.
Scott Miller: Second, Chairman Neil of the Ways and Means Committee has essentially said that it needs more work. It's not ready for primetime, and so all the messaging from the leadership of the House, and look, implementing bills, it's a revenue bill, it's supposed to originate in the House, that's the key point of decision. And I just see a lot of reasons to stall this. I also now, I'm convinced that the ITC report will be another important reason to stall it because it's going to be disappointing. The amount of economic gains associated with this agreement versus its predecessor is too small to make a meaningful argument that it's gonna be great for the country if we go ahead with USMCA.
Bill Reinsch: The ITC didn't find a huge economic benefit from the last—
Scott Miller: From the original NAFTA. And now we're going against NAFTA as the base, and USMCA is the new world. So it's gonna be a tough sell. I think that Congress will find ways not to do it, and so my prediction is it's not gonna happen in 2019. So we'll continue this debate.
Bill Reinsch: Yes. I'm standing by that he's wrong about that. So far, it's playing out the way that I think we both predicted, which is of course the Democrats are gonna say it's not good enough. And from their perspective, it's not good enough. They're gonna demand changes, and I think what's going on right now is processes of figuring out what they should demand, because there's a bunch of things you can focus on. They're not gonna get them all, so they have to trim the list a little bit. I still think what they would like to see is a scenario in which they say, "Go fix these things," and Ambassador Lighthizer goes and does that. And bring something else back, something new back, and they say, "Ah, we made you fix it. Now we can vote for it." Not all of them, but enough of them to go along with the Republicans to get it through.
Bill Reinsch: And as we've said on this before, I'm more convinced of it now watching the Congress, the Democrats are, the evolutionary direction amongst Democrats is in a more pro-trade direction. The new ones are more pro-trade. Now, a majority, I don't think we're there yet. But the new Dems, which has been in the past, the group of hardcore of pro-trade votes, they're now up, what? Over 100 I think, in terms of new Dems.
Andrew Schwartz: We're not talking new Dems like Alexandria Ocasio-Cortez Dems? We're talking about—
Scott Miller: No, no, no.
Bill Reinsch: No, no. We're talking about the new centrist Democrats.[crosstalk 00:28:45].
Andrew Schwartz: We're talking about the coalition [crosstalk 00:28:45].
Scott Miller: And this goes back to Al From and really Bill Clinton.
Bill Reinsch: Yeah, centrist [crosstalk 00:28:48].
Scott Miller: Right.
Bill Reinsch: And they're not all pro-trade, but you know, they were down to like 28 in 2015.
Scott Miller: Yes.
Bill Reinsch: When the TPA was voted on.
Scott Miller: Yeah, we downed to two Blue Dogs then.
Bill Reinsch: Yeah, so now that group in the House has become much larger than it used to be. A lot of the people that were elected, people that are elected from swing districts from both parties tend to be centrists, and there's a lot of those, and I think what is gonna happen— Scott's exactly right about what the Speaker has said and done on trade in the past, and I don't think it's a personal priority and I think she's proven herself to be something of a skeptic. She's also someone who listens to her caucus, and I think the caucus view is yet to be formed on this but it's gonna be a more complicated debate than it was four years ago when they were doing TPA.
Scott Miller: Well can I say, I'm gonna stick with my pessimism but I hope Bill's right.
Andrew Schwartz: We will see.
Bill Reinsch: Maybe we'll have a bet.
Andrew Schwartz: We could have a bet, we could wait and see. Either way, it's happy State of the Union Day.
Bill Reinsch: Indeed. The next podcast, we can talk about how we got everything right.
Andrew Schwartz: Or wrong! Stay tuned.
Andrew Schwartz: To our listeners, if you have a question for the Trade Guys, write us at firstname.lastname@example.org. That's email@example.com. We'll read some of your emails, and have the Trade Guys react to it. We're also now on Spotify, so you can find us there when you're listening to the Rolling Stones or you're listening to Tom Petty, or whatever you're listening to. Thank you Trade Guys.
Scott Miller: Absolutely.
Bill Reinsch: Thank you.
Andrew Schwartz: You've been listening to the Trade Guys, a CSIS podcast.