Source: Politico
"In the future, everyone will be a senior White House official for 15 minutes.” Andy Warhol didn’t say it like that, but you have to wonder what he would have thought of an administration that increasingly looks like a reality TV show constantly transitioning to its next season. In a recent “episode,” Commerce Secretary Wilbur Ross even executed a bizarre homage to Warhol—attempting to turn a Campbell’s soup can into a political rejoinder—on cable TV.
The newest character poised to become part of the drama is longtime CNBC host Larry Kudlow, the new director of the National Economic Council. Given his background, Kudlow will likely make for more entertaining television than his predecessor, Gary Cohn. But what this White House really needs is better policies backed up by more serious arguments. President Donald Trump’s erratic and evidence-free approach to decision-making is costly not only because it results in suboptimal policies, but also because the stream of spectacles created by the Trump White House distracts from what should be genuine debates about issues.
Take the tariffs imposed by the president on steel and aluminum imports. The announcement caught many in Trump’s own administration by surprise, setting off a domestic firestorm (one that Ross’s soup-can performance failed to quell), a stock market drop and international condemnation from some of our closest allies.
Yet the move did not come out of nowhere. Trump has repeatedly railed against existing agreements like the North American Free Trade Agreement (“the worst deal maybe ever signed,” he said) as well as prospective agreements with trading partners in Asia and Europe. Kevin Hassett, chairman of the President’s Council of Economic Advisers, said last month that past trade deals were “filled with concessions that relatively feckless negotiators of the past made to our trading partners.”
The chaotic announcement and the president’s bluster obscured serious questions: Is America bad at making trade deals? Have our negotiators been “feckless”? Did we get our existing trade deals as wrong as Trump says we did?
These questions deserve reflection, and meaningful answers. Expanding economic participation and prosperity for more Americans in today’s globalized economy is a central policy and moral challenge of our time. Trade deals are a major channel connecting us to the global economy, and their terms have consequences for American workers and consumers.
Trump is right about a few things: that past trade deals have not been perfect, that they have had unintended consequences, and that we can do better going forward. Unfortunately, his approach to solving these problems is founded in falsehoods (for example, he is obsessed with trade deficits to the point of conjuring them where they don’t exist) and likely to do more harm than good (witness the reactions of our trading partners and the consensus of progressive and conservative economists alike).
Those of us who believe that we have to do better by our middle class, but also believe in the merits of an integrated global economy need to develop and advocate a better way forward on trade. Here are four principles that should guide our approach:
First, we are better off writing the rules. Trump’s campaign and presidency have been defined in part by a promise to a certain segment of the American public that he can rewind the clock and reverse some of the economic and social changes of the past half century. Alluring as this promise sounds to some, globalization is not going away. The economic playing field does not stop at our borders. Our challenge is to figure out how we compete effectively in the decades ahead.
That means facing the fact that there simply aren't effective rules right now that cover the most pressing market abuses hurting our workers: currency manipulation, cyber-enabled economic espionage, state-owned enterprises and nontariff barriers designed to exclude foreign exports. And just bullying companies and chasing the bilateral deals Trump loves so much isn’t going to get the job done. An approach that leans too heavily on bilateral agreements sets up a race to the bottom and a patchwork outcome, not a common, level playing field for all trading nations.
If we want competition that reinforces labor rights, that creates new markets for clean energy, and that gives a fair shot to American companies and American workers, it will take new, generally applicable rules. This point goes beyond trade agreements, to every aspect of the international economy—including rules to end the gaming of international tax systems so that the wealthy and corporations avoid paying their fair share; rules to manage global financial flows to prevent the next crisis; and rules to curb corporate concentration that is suppressing innovation and distorting markets.
And by the way, we are good at writing rules. One of our comparative advantages in trade and other international negotiations is that we have a large group of experienced professionals—Democrats and Republicans, and career civil servants who have worked for both—who are skilled negotiators. The United States has an impressive human arsenal of international negotiators. We need to make sure they have instructions that focus on outcomes for American workers and consumers, not just corporations.
This brings us to a second principle: We have to get better at defining, advancing and defending American interests. In the past, policymakers have overly relied on the interests of specific corporations or small groups of companies as they have worked to shape the objectives of our trade negotiators. Whether it’s a pharmaceutical company emphasizing the importance of intellectual property enforcement or an internet company’s view on data protection provisions, these corporate interests have often played an outsized role in informing our policy objectives. Corporate influence and access in Washington provides one explanation for this, but there’s also a less nefarious explanation: Corporate interests provide an accessible and measurable proxy for the interests of sectors of the American economy, but policymakers have been too reliant on this proxy.
Going forward, policymakers need to assess the likely effects of a prospective trade agreement—positive and negative—on American workers and consumers, not merely on measures like gross domestic product (which can mask impacts on certain groups of Americans or on overall inequality, for example.) This will take creating an obligatory assessment process that examines the disparate impacts of trade agreements. Such a process might include a state-level assessment of the likely impact for each of the 50 states. It could include an economic assessment of the impact on rural areas. It could include consultations with labor groups, environmental groups and others.
The goal of such a process should be to tackle the question: How will this trade agreement affect a family in Youngstown, Pasadena, Denver, Boston or Dallas? Neither the considerations that go into answering such a question nor the answers themselves are likely to be simple. Policymakers will have to weigh the benefits and the costs, just as they do now. Our point is that the effects they consider should be rebalanced to give more weight to consumers and workers who are not major stockholders in corporations. The executive branch representatives who are setting trade negotiation policy should be able to explain why the objectives they seek are good for the American people, not just our companies or aggregate measurements of economic growth.
Third, better rules need better enforcement mechanisms. Trade deals need to have real teeth if we expect others to abide by them. And trade deals with real teeth are worthwhile only if we’re ready to use those teeth to encourage compliance.
There are several ways to toughen our enforcement of trade deals. One is to anchor assessments of compliance to independent third parties—so that, for example, assessments by the International Labor Organization on labor rights violations in a trading partner could be used to apply appropriate sanctions. Another would be to create rapid enforcement provisions. For example, for existing trade deals, the Department of Labor must make a determination that a party has violated labor provisions—an onerous process that takes months or years. Instead, we could require that an initial finding of probable violation triggers, within 30 days, some or all of the relevant sanction while deliberation continues—creating an incentive to conclude determinations promptly. New trade deals should include not only enforceable provisions, but they should also be accompanied by a strategy to ensure enforcement.
Fourth, trade agreements should proceed only as part of a larger package deal for workers. Our approach to international economic policy has treated stagnating middle-class incomes and rising inequality as problems to be dealt with through absolute gains and redistribution, neither of which has trickled down or panned out as promised. The traditional answer to worker displacement—trade adjustment assistance—falls woefully short. New deals should not come before Congress unless they are accompanied by meaningful measures to strengthen wages and benefits and improve skills. This includes going beyond short-term job training or wage insurance and building out infrastructure (such as securing broadband access in rural areas), apprenticeship programs that engage the private sector, and economic development incentives designed to help whole communities adapt and attract new investments. This will force the constituencies pushing for market access abroad to reckon with the constituencies properly demanding investments in the middle class here at home.
As part of this comprehensive approach, we need to fill the yawning empty space that Trump has left on the issue of technology and automation. Having workers’ backs means not just defending them against trade abuses, but also helping make technology work for them rather than against them. People in the Rust Belt know that automation poses a challenge distinct from, but compounded by, globalization, and they are looking for answers.
Trade has often been a source of American strength, and it can support American prosperity in the 21st century, too. But in order for trade to work for us, the goal can no longer be trade for trade’s sake. Our political leaders—Democrats and Republicans alike—must start prioritizing workers, consumers and the middle class, rather than making the world safe for corporate investment.