Stop the World I Want to Get Off
August 5, 2019
It is tempting to spend some time discussing Elizabeth Warren’s trade plan. It deserves discussion, just as she deserves credit for producing it. Most Democrats have tried to avoid talking about trade so far in the campaign, either because they don’t know what they think (uncharitable view) or don’t know how to differentiate themselves from President Trump (more charitable view). She definitely knows what she thinks and has been brave to put it all down for everyone to see. The Scholl Chair decided to look at her plan in some detail, and we produced one of our Critical Questions papers that explains and analyzes her proposal. It can be found here.
So, this week, instead of trying to shrink our Warren brief to 800 words, I want to focus on an issue that came up while discussing her proposal. (I have Wendy Cutler of the Asia Society Policy Institute to thank for the idea.) Much of the Warren plan is devoted to criteria for undertaking trade negotiations, in particular, what the United States should demand as preconditions to starting talks. The assumption is that access to our market is so attractive that we have the leverage to pressure other countries to alter their practices, which we find unacceptable.
Wendy’s thought is that this is, at least from a process point of view, fighting the last war. Multilateral, plurilateral, and bilateral trade negotiations have been going on throughout the post-war period. They follow a pattern. Discussions lead to a decision to participate in negotiations; countries take time to identify their priorities and develop their negotiating positions; the talks occur over an increasingly long period, measured in years not months. Once an agreement is reached, if it is, the agreement must be approved by each participant’s legislative process, which takes more time. Most concessions are phased in, particularly tariff reductions, so implementation also takes place over a long period. (It was 15 years before all North American Free Trade Agreement’s tariffs went to zero.) The Doha Round, which is either dead or on life support depending on your point of view, began in 2001. The last serious negotiations were in 2008. In other words, these things take a long time under the best of circumstances.
Meanwhile, the world is spinning faster and faster. The era of simply exports and imports is long gone (unless you’re Donald Trump). Now we have global value chains, where the production process is sliced and diced and parceled out to the most efficient producers all over the world. And even those are receding into the background, as trade in services and digital transmissions increasingly become the leading growth drivers of economies. Looking ahead, autonomous vehicles, including trucks, could revolutionize transportation. 3-D printing could transform the assembly line. Blockchain could irrevocably change commercial transactions. And we have yet to figure out all the changes artificial intelligence is going to bring both to our lives and to our economies.
So, the question is, is a labor-intensive negotiating process measured in years the right way to tackle today’s trade problems, or are any agreements negotiated almost certain to be out of date by the time they are concluded? Today’s trade issues are about privacy, access to data, intellectual property protection, cybersecurity, and, yes, supply chains—all things very few people were thinking about even 10 years ago. The old issues are still there but are much less important as negotiators are pressed to focus on the new ones that have arisen. We may be trying to solve twenty-first-century problems with twentieth-century (or even nineteenth-century) tools.
Is there a solution to this problem? Probably not within the existing World Trade Organization framework. Efforts are underway to tackle some new issues but are either stalled—environmental goods trade and services trade—or are moving very slowly—fisheries and e-commerce negotiations. Similarly, efforts to modernize the rules, such as on special and differential treatment for developing countries, are sputtering. U.S. efforts to strong-arm reforms using Appellate Body appointments as leverage so far has not produced results. We appear to be pursuing a crash, burn, and rebuild strategy, but the lesson so far is that crash and burn may be achievable, but rebuild will not, or at least will not lead to anything that would be an improvement over the status quo. At some point that may persuade the United States to pick up its marbles and go home, but that wouldn’t solve the problem either and would just leave us in an even more vulnerable position.
That leaves coalitions of the willing: countries that want to move faster and farther get together and do so. Purists will say, correctly, that that is not necessarily a pro-trade outcome. It can be trade diverting and will leave many at the side of the road gathering dust, but it will allow the teetering bicycle to move forward and will likely speed it up, thus addressing Wendy’s question, and perhaps create a new negotiating model. Of course, it will make a mess of the multilateral system, but we may simply end up saying we will clean that up later.
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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