What’s Senator Warren’s Plan for U.S. Trade Policy?
August 1, 2019
This is the first in a series on 2020 presidential candidates and their trade policies. As more candidates release their detailed trade plans, the Scholl Chair will write similar in-depth analyses. Senator Warren is the first major candidate to do so at length.
Senator Elizabeth Warren has quickly made a name for herself in the Democratic presidential field for always having a plan. Her recently published trade policy plan contains aspects that are an extension of some Trump administration’s trade policies while also incorporating many longstanding Democratic Party priorities on trade. Overall, Sen. Warren’s plan would fundamentally reshape U.S. trade policy. Her plan would orient U.S. trade policy towards objectives tied to strong labor policies, environmental policies, and domestic growth policies.
Q1: What standards would partners have to meet before negotiating a trade agreement?
A1: In “Trade—On Our Terms,” Sen. Warren lays out a set of preconditions potential trade partners must meet before they would be eligible to enter into negotiations with the United States. In her view, the United States should not negotiate trade agreements with countries that do not comply with basic labor, human rights, and environmental and economic standards.
Sen. Warren would require free trade agreement (FTA) partners to recognize and enforce the core labor rights outlined by the International Labour Organization, including collective bargaining and the elimination of child labor. She also would require partners to uphold internationally recognized human rights including protecting the rights of indigenous people, migrant workers, and other vulnerable populations, enforcing religious freedom, and complying with the standards of the Trafficking Victims Protection Act. Sen. Warren would require that FTA partners end fossil fuel subsidies, ratify the Paris Agreement, and create a plan to reduce emissions toward long-term emissions goals. Lastly, Sen. Warren has several standards to ensure that trading partners have fair financial regulation. She calls for trade partners to ratify the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; comply with any tax treaty they have with the United States; participate in the Organization for Economic Cooperation and Development (OECD)’s base erosion and profit shifting (BEPS) project to combat tax evasion and avoidance; and cease currency manipulation practices that might put them on Treasury’s monitoring list.
The United States itself is not compliant with several of these preconditions. Sen. Warren asserts, however, that once she is president, the United States will rejoin the Paris Agreement and bring itself up to these same standards.
Q2: What changes would Sen. Warren want to make to the substance of trade agreements?
A2: Sen. Warren would change the recent U.S. FTA template in a number of areas including: labor, investor-state dispute settlement (ISDS), intellectual property (IP) for drugs, rules of origin, food standards, and enforcement. Some of these changes, such as tighter rules of origin, more Buy American protections, and elimination of ISDS, are extensions of or in line with objectives the Trump administration has pursued. Other changes align with top Democratic priorities, such as labor, the environment, and enforcement.
Sen. Warren is critical of labor obligations being included in side-agreements and aims to ensure labor standards are addressed in the core trade agreement. She says she will protect the domestic manufacturing workforce by calling for stronger rules of origin standards and promoting Buy American and other programs that aim to support domestic employment. Sen. Warren also embraces progressive Democrats’ call for shorter drug IP periods in a bid to lower drug costs, although the data is not determinative on whether drug IP provisions in trade agreements are related to drug prices.
On agriculture, Sen. Warren has pledged to reinstate Country-of-Origin Labeling (COOL), a practice that requires the origin of certain foods be clearly displayed by retailers. The World Trade Organization (WTO) has found past U.S. COOL measures in breach of WTO rules. Sen. Warren has also promised to include rules in FTAs that ensure food imports meet U.S. domestic safety standards.
When it comes to enforcement—another priority for Democrats—Sen. Warren would establish independent commissions to monitor FTAs for violations. If a commission recommends the United States to bring a case against an FTA partner for a violation, the United States would have to do so. Sen. Warren would also create a new labor and enforcement division at the Office of the U.S. Trade Representative and dispatch labor attaches at U.S. embassies to monitor FTA compliance.
Sen. Warren will also seek a multilateral agreement to “protect domestic green policies” such as subsidies for “green products” as well as a WTO agreement to enable preferential treatment for environmentally sustainable energy production.
Q3: How does Sen. Warren’s proposal change the trade remedy toolbox?
A3: Sen. Warren’s trade policy vision would add a number of tools to the U.S. trade remedy toolbox to penalize countries or firms for exports to the United States that involve subpar labor or environment standards. Sen. Warren would implement a border carbon adjustment on imports made with a “carbon-intensive process” to “equalize the costs borne by companies playing the rules.” Countries with poor labor and environmental standards could be designated “non-sustainable economies” and, akin to non-market economies, be subject to harsher trade penalties. Sen. Warren also calls for automatic starts into investigations of unfair trade practices, including labor and environmental standards, although it’s not clear if that system would only apply to FTAs or trade remedies overall. Finally, her trade policy includes a review of duties every six months and would lift duties if they do not benefit the workers of the industry the duties are meant to support.
Q4: How would Sen. Warren’s plan impact U.S. FTA negotiations?
A4: Sen. Warren’s prerequisites for foreign countries to enter FTA negotiations with the United States severely limits the pool of potential partners. Even countries on the higher end of the development spectrum would have trouble qualifying for FTA negotiations—nearly every member of the OECD provides fossil fuel subsidies, for example. The requirement that countries to not appear on the Treasury Department’s currency manipulation “Monitoring List” would make negotiations with key developing and developed countries alike off-limits. Negotiations with Japan and the European Union—if not concluded under the Trump administration—would have to end, rejoining the Trans-Pacific Partnership (TPP) would be (even further) out of the question, and the status of existing U.S. FTAs with Korea and Singapore would be called into question. The requirement that FTA partners sign the OECD Anti-Bribery Convention would limit potential partners on the less-developed end of the spectrum. Only 44 countries have signed convention—mostly developed countries—and a number of current U.S. FTA partners have not, including Bahrain, a number of Central American countries, Singapore, Morocco, and others, which would immediately call into question the status of those agreements.
The substance Sen. Warren calls for in FTAs could also complicate negotiations with important potential FTA partners. For example, the European Union would likely be extremely hesitant to enter into negotiations with the United States if government procurement were off-limits. Japan may be skittish about negotiations that would involve tight auto rules of origin. Canada and Mexico would almost certainly reject a renegotiation of NAFTA or the United States-Mexico-Canada Agreement (USMCA) (whichever is in force by the potential Warren administration) if it involved the inclusion of Country-of-Origin labeling. On the other hand, some of Sen. Warren’s proposals on substance may be attractive to potential partners. The elimination of ISDS may spark interest from the European Union, which is pursuing an alternate investment court system, although it is unclear if Sen. Warren would agree to enter that system. Shorter drug IP periods would eliminate an ask from the United States that has traditionally created friction in trade negotiations.
Q5: Could Sen. Warren’s plan put the United States in breach of its WTO obligations?
A5: Some yes, some no, and some maybe—ultimately the devil will be in the details and how these policies are implemented will matter greatly. The WTO has already ruled against practices similar to those contained in Sen. Warren’s proposals. This includes finding previous U.S. COOL rules and a policy to transfer revenue from trade remedies to afflicted companies, similar to the trade remedy test in the Senator’s proposal, as a breach of WTO rules. A border carbon adjustment would be closely scrutinized for WTO consistency. A policy to impose trade penalties on “non-sustainable economies” for subpar labor and environmental standards would almost certainly face challenges at the WTO. The rest of Sen. Warren’s trade platform appears WTO consistent, although the policy details are key.
Jack Caporal is an associate fellow with the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
Critical Questions 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).
© 2019 by the Center for Strategic and International Studies. All rights reserved.