We Need A Conversation And A Connection

The US faces a trade paradox. One one hand, we need a public conversation about trade. We need to understand how to shape a consensus that allows for forward movement. But on the other hand, the mere mention of trade policy can stop a conversation in Washington. Almost like raising the topic of a wayward relative who has dropped out of school or that other fellow who seems to have gotten in some trouble with the IRS, when the subject of trade policy is mentioned the polite people in the room clear their throat, or stare at their shoes, or sort of mumble, “A shame, yes, but what can one do?”

This gives me some sympathy for the Biden administration’s lack of appetite for trade initiatives. Whenever policy has short-term costs and long-term gains, it is a hard sell even when those gains vastly outweigh the costs. If the benefits are diffuse and the costs are particular to one industry or one company, the voice of the smaller party can dominate the debate. And Donald Trump was a master at portraying in sinister terms: Trade is not win-win trade, he claimed, but a through mechanism which volent countries exploit the US, based on a combination of their chicanery and US foolishness. Who in the Biden administration would want to expend their precious political capital rebutting this nonsense?

So with other policy goals deemed more pressing, general government inertia, and the dead hand of the former president setting the parameters for trade discussion, we all might as well stare at our shoes and mumble. A shame, yes, but what can one do?

On the other side of the argument, you will find a strong public consensus for trade, with 61% of Americans seeing it as an opportunity for growth. The rest of the world continues to move ahead with various trade arrangements, at least one of which (the Trans-Pacific Partnership) the US helped create and then walked away from. So there is indeed trade exploitation taking place, only it is the exploitation of other countries using trade initiatives started by the US We went swimming, and they stole our clothes.

Unless we want to keep our trade policy frozen in perpetuity, someone needs to get a conversation going about trade benefits. It does not have to be a major area of ​​focus, but to be completely silent on trade would be to cede the entire subject to the protectionists. Even in an era of limited appetite for trade, could there not be, for example, a monthly talk by USTR (US Trade Representative) or the Commerce Secretary about the importance of opening international markets through trade agreements?

Beyond a conversation, we need a connection. One of the core lessons of messaging trade policy is that support must be built by linking trade to other issues. The economic arguments alone will not carry the day. No need to review the law of comparative advantage. No sense in handing out the collected works of David Ricardo. We need to connect trade with benefits beyond trade.

The desire for regional stability helped spur support for NAFTA (North American Free Trade Agreement). Political friendships with Israel, Jordan and Bahrain helped to push trade for agreements with those countries. The need for security relationships with Korea and Australia set treaties with those nations in motion. Concern about Soviet adventurism in Nicaragua and elsewhere guided the Central American FTA. So what non-economic arguments might there be today for trade improvements? Let me suggest a few:

Health. The US could support the unilateral removal of tariffs on health, medical, and med-tech products. [Disclosure: I serve on the board of a med-tech firm.] The current baby formula shortage should remind us of the price we pay for health-related and the value of competition in this space.

Green. In the same spirit, why not trade freely in clean-energy products? Some raise the specter of Chinese dominance of this space, given their strength in manufacturing silicon panels, but I am not suggesting the removal of tariffs and legalization of dumping or other non-market activities.

Britain, Ukraine, Taiwan. The US should be able to undertake an FTA with Britain because it is an advanced economy so we will not see the migration of jobs. The US-Ukraine FTA would be more of a political signal than an economic initiative, given that Ukraine’s economy is less than 1% the size of the US, but why not help Ukraine by helping its economy compete, and help the US economy gain access to a new market? In the same vein, Taiwan is a smallish market that is under pressure and would welcome greater US connectivity.

Digital. Digital trade agreements should be easier to reach because the US firms tend to dominate and there are few legacy or uncompetitive firms in this space.

Let’s stop mumbling and staring at our shoes and have a serious conversation. Let’s connect trade with other issues to broaden the appeal. And let’s take the US economy into the future.


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