Straw People

A classic debate technique is the “straw man,” although I suppose these days we should say “straw person.” The Oxford English Dictionary definition is “an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent’s real argument.” Personally, I don’t like using “intentionally” because a person can never really know another’s intentions. A more neutral way of explaining it is simply an argument where someone disputes an assertion that the other party has not actually made. While this is popular in debate circles (though not usually a winning strategy) and in Congress (where it is more successful), it now appears to have some popularity with the administration as it explains and defends its trade policy.

The most obvious example is the administration’s argument that our trade policy has been too focused on tariffs, which no longer matter because the U.S. average tariff is 2.4 percent. That is a straw person because no one is making the argument that they are important. Indeed, no one has made that argument since the Uruguay Round concluded in 1994. There is no question they used to be important. They were the major instrument of trade policy, as well as government revenue, for the United States’ first 150 years, although the arrival of the income tax in 1916 demoted tariffs as a revenue source. They began to decline after enactment of the Reciprocal Trade Agreements Act of 1934, which was intended to help pull the United States out of the Great Depression. Tariffs continued to decline after World War II, thanks in large part to frequent multilateral negotiating rounds under the General Agreement on Tariffs and Trade (GATT). However, as tariffs declined in importance, the negotiations began to focus on other issues such as remedies for unfair trade practices like dumping and subsidies, rules for government procurement, technical barriers to trade like protectionist standards and regulations, intellectual property protection, and, most recently, trade facilitation. Tariffs have not been our primary trade policy instrument for decades.

At the same time, however, using an average as an argument for ignoring them is misleading. Like most countries, the United States retains tariff peaks, some exceeding 50 percent, often on apparel and footwear where developing countries have a comparative advantage. That means when we negotiate with other countries, such as in the Indo-Pacific Economic Framework for Prosperity (IPEF), we should not be surprised at their interest in greater market access through lower tariffs in specific product categories important to them. We may think tariffs are old news, but others do not. I recently had a conversation with an executive in a foreign firm that sells a key component to a company considering locating in the United States. That item has a tariff, which makes it more expensive here and as a result might end up affecting the investment decision. Averages tell only part of the story.

Speaking of investment, another straw person emerged in June 29 remarks by Deputy National Security Adviser Mike Pyle at the Carnegie Endowment for International Peace. In addition to the tariff argument discussed above, he argued that our trade policy is focused on investment rather than trade. “Just as the agenda with other industrial economies begins with investment, so, too, does the agenda for the Global South, for the developing world, begin with investment and building a tool kit to facilitate that investment.” Leaving aside the point that it is a bit odd to say your trade policy is not going to focus on trade, this is another example of reinventing old news. Corporate executives have been saying for at least 20 years that trade policy is investment policy, and the United States has long been a primary investor abroad and a destination for inbound foreign investment: it has consistently been in the top 3 countries receiving inbound foreign investment over the last decade, taking the top spot in 2021. Its outbound investment position has also grown consistently recently, nearly doubling in the past 12 years. 

The new element is the gap between saying investment is important and having a policy that supports it. For 200 years, the United States has pursued a relatively open investment policy, both inbound and outbound. That began to change in the late 1980s when Congress put into law the Committee on Foreign Investment in the United States (CFIUS) to review and potentially block investments that posed national security threats. In recent years, that authority has been used more aggressively. The number of formally blocked transactions remains low, but those that are limited by mitigation agreements or withdrawn in the face of expected opposition have grown. The most recent focus is on Chinese investment, but the message has been clear to everyone—despite what we say, investing in the United States is more complicated than it used to be.

Now the concern has expanded to outbound investment, as everyone awaits the arrival of the long-anticipated executive order creating a review process for outbound investment, as well as congressional legislation that could follow it. Although rumored to be limited in scope—I’m skeptical of that—it will still be a significant change in our long-standing policy. These are policies that discourage investment rather than promote it. It appears that administration statements promoting investment refer to government-inspired initiatives through the International Development Finance Corporation, which is small change compared to potential private investment.

Creating straw people can be a clever rhetorical device, but it can obscure the more important real debate, which in this case ought to be whether our trade policy will lead to more jobs and economic growth.

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