Two recent and really significant government reports have been released (around the time of the U.S. midterm elections) concerning U.S. trade policy focusing on U.S. workers and China.
The first by the U.S. International Trade Commission (October 2022) and the other the 2022 Annual Report by the U.S. – China Economic and Security Review Commission.
The report by the ITC entitled “Distributional Effects of Trade and Trade Policy on U.S. Workers” concluded, in part, “[P]olicies resulting in increased import competition had negative effects on workers in their communities and that imports were competing unfairly, for example, due to dumping or lack of worker protections in exporting countries.” p. 14.
The report by the U.S. – China Economic and Security Review Commission concluded, in part, “China has subverted the global trade system and moved further from the spirit and letter of its obligations under its WTO accession protocol. China’s subsidies, overcapacity, intellectual property (IP) theft, and protectionist nonmarket policies exacerbate distortions to the global economy. These practices have harmed workers, producers, and innovators in the United States and other market-based countries.” p. 175
These reports echo the long-standing Biden administration’s focus on workers and its criticism of the trading system. To me, this is also a continuation of the Trump trade positions with a bit more emphasis on workers. I suspect that as a result of the midterm elections the Biden administration will find more common ground with the Republicans in Congress, and we will see a renewed push for more industry subsidies and restrictive trade legislation (perhaps also restricting the WTO.)
USITC Report of Foreign Trade Competition (Oct. 2022).
2022 Annual Report of the U.S. – China Economic and Security Review Commission (Nov. 2022).
A good article appeared recently in Foreign Affairs arguing that global trade is now being changed by the end of globalization and the end of neoliberalism. I seem to agree with most of the arguments. But I’m concerned about how clearcut these propositions are and how inevitable they are. I recall the arguments of the early 1990’s concerning “the End of History.” Does the end of globalization mean a new regionalism or more protectionism? We’ll see. Here are some excerpts from this article.
- Both parties have until quite recently pursued policies … deregulating global finance, striking trade deals such as the North American Free Trade Agreement, welcoming China into the World Trade Organization (WTO).
- Encouraging American manufacturers to move much of their production overseas.
- Free-market globalism was of course pushed in large part by the powerful multinational companies best positioned to exploit it.
- But neoliberal policies also created immense inequalities within countries.
- Neoliberalism’s agnosticism about place is striking, given the origins of the political philosophy. It emerged in Europe in the 1930s, when nations were turning inward and international trade was breaking down.
- The notion that trade should be a handmaid to domestic policy interests fell out of favor during the Clinton administration, when the United States struck a series of trade deals and pushed for China’s entry into the WTO.
- What is clear is that globalization is in retreat, at least in terms of trade and capital flows.
- Muscular industrial policy will be increasingly common in the post-neoliberal world.
- Even in the United States, most Democrats and a growing number of Republicans believe that government has a role to play in supporting national competitiveness and resilience.
- As U.S. policymakers and business leaders seek to address these challenges, they must push back against conventional economic thinking.
- Instead of assuming that deregulation, financialization, and hyperglobalization are inevitable, they should embrace the coming era of regionalization and localization and work to create productive economic opportunities.
“After Neoliberalism – All Economics is Local.” Foreign Affairs (Oct. 2022).
Another recent article lambasting the impact of neoliberalism on globalization and the critical need to rethink trade policy. I agree with most of the points made in the recent article in the New York Times. We have many more issues to think about today than just economic efficiency and cheap imports. Such as national security, data protection, effective global taxation, sustainable supply chains, domestic employment. All without spurring a 1930’s protectionism.
This is the challenge in formulating trade policy today. Involving both new national laws and the role of the WTO and other international institutions. Especially those that formulate new rules and juridical dispute settlement.
The Trump administration started to attack the global trading system with tariffs and insults toward the WTO and others. The Biden administration has continued this attack in a somewhat less hysterical manner and supporting legislation codifying various measures impacting industrial policy.
Here are a few excerpts from this morning’s article:
- Global institutions like the International Monetary Fund and the World Bank and later organizations like the World Trade Organization — groups that were essentially about connecting global finance, trade and business across borders — were influenced by neoliberal philosophies.
- They vigorously advocated the Washington Consensus, a series of economic principles derived from the tent poles of market liberalization and unfettered globalization.
- The Reagan-Thatcher revolution unleashed global capital by deregulating the financial industry, and global trade was fully unleashed during the Clinton era, with deals like NAFTA and the eventual accession of China into the W.T.O., which tipped the balance of policy interests between domestic job creation and global market integration toward the latter.
- The neoliberal philosophy is tapped out not only in the United States but also abroad — witness the backlash in Britain to Prime Minister Liz Truss’s ill-fated experimentation with trickle-down tax cuts.
- And complex supply chains resulted in any number of production disasters well before the global crises of the past few years.
- Meanwhile, free trade itself, which was supposed to foster peace between nations, became a system to be gamed by mercantilist nations and state-run autocracies, resulting in deep political divides at home and abroad.
- Trade policy is shifting to better consider labor and environmental standards, with an understanding that cheap isn’t always cheap if products are degrading the environment or being made with a child’s tiny hands.
- There’s also a rethink of trade in digital services to account for privacy and liberal values.
- So what now? How can we make sure that economic globalization doesn’t again run too far ahead of national politics? And how can we fix things in a way that doesn’t result in 1930s-style protectionism or a false fit of nostalgia for a bygone era?
- It’s up to those who care about liberal democracy to craft a new system that better balances local and global interests.
“Globalism Failed to Deliver the Economy We Need.” (October 23, 2022).
Excellent piece in this morning’s Financia Times discussing trade policy and geopolitics, neoliberal globalism and global inequality, and global trade and peace. Here are some excerpts also discussing the WTO, China, and worker-based trade policies. I’m particularly interested in the rise of geopolitics and the role of law (and values) in global trade relations today.
- The fact that both Republicans and Democrats are rethinking trade policy says something important about our geopolitics.
- The idea that trade was primarily a pathway to global peace and unity, rather than a necessary way of balancing both domestic and global concerns, is over. We are entering a new era, in which concepts such as Francis Fukuyama’s “end of history” or Thomas Friedman’s “Golden Arches” theory are no longer relevant.
- Workers in our democracies have long understood that global trade without values-based rules to govern it made our people poorer and our countries more vulnerable. They have long known that it enriched the plutocrats, but not the people.
- Our system of neoliberal globalisation has created more wealth at a global scale over the past half-century than ever before. But there has also been huge growth in inequality within many countries.
- And there is research to show that the entities that have benefited most from the past several decades of globalisation have been multinational companies and the Chinese state — or more particularly, the people running them. Autocrats have done well too, often by using trade and commerce as weapons in geopolitical conflicts.
- And the west is certainly guilty of its own historical mercantilism and transnationalism. I’ve always thought that America’s embrace of China’s entry into the WTO had more to do with US corporate lobbying than any real belief in the possibility of political change.
- The point here is that the current system of economic globalisation isn’t going to magically dissolve political differences. We are heading towards a new, post-neoliberal paradigm in which values, rather than just “everyday low prices” as the Walmart retail slogan goes, become a more important consideration in economic policy decisions.
Good opinion piece by Thomas Friedman argues we are now taking on China and Russia and export controls is the critical instrument the U.S. is utilizing. And this new American foreign policy and national security strategy is focusing on semiconductor chips. In particular, he discusses the new set of export regulations that clearly targets China. Biden’s new annual national security strategy report released last weel clearly targets both China and Russia.
So, the question I have is the following: Are export controls the new foreign policy? Yes, in part. They are clearly coming into their own as central to implementing U.S. national interests and national security goals in a new era of global politics – where both China and Russia are the major concerns. Robust implementation of our trade laws generally is necessary to implement our foreign policy. Indeed, changes to CFIUS focusing on China, the recent adoption of computer chip subsidies, and tax credits for e-cars clearly indicate that a broader security – related trade strategy has become a central focus of U.S. foreign policy. (My concern now is how consistent are some of these policies with our obligations under the WTO as well as do they risk political and trade retaliation?)
“Thomas Friedman — China and Russia. (Oct. 12, 2002).
National Security Strategy Report. (Oct. 2022).
“How U.S. is Choking off China from Technology.” (Oct. 14, 2022).
“Trade has Become a Weapon.” (Oct. 14, 2022).
“Biden’s Trade Assault on China.” (Oct. 20, 2022).
The inaugural special report on foreign investment in the U.S. by the Financial Times has just been released. Ranks the top cities. None are in Virginia. Six are in North Carolina. Seems to be a wakeup call for Virginia. The methodology focuses on workforce and talent, business environment, quality of life and openness. I am surprised about the absence of Virginia from this important ranking.
“The Best Cities for Foreign Invesment.” Financial Times (October 5, 2022).