U.S. Trade Representative Michael Froman recently gave a speech at the Center for American Progress, a liberal think tank. One of his goals seemed to be to convince people on the left of the political spectrum that trade is not something to be feared. In doing so, he focused on the "values" that are wrapped up in trade, with a speech entitled "A Values-Driven Trade Policy."
At the risk of not getting invited to any USTR holiday parties in the near future, I'm going to comment on a few aspects of his speech.
America vs. the World on Trade Barriers
“America already has one of the most open economies in the world.
“Our average applied tariffs are 1.3 percent and we don’t use regulation to discriminate against foreign goods.
“Whether we pursue trade agreements or not, the U.S. will continue to see foreign imports because our consumers demand them and we have virtually no barriers to imports.
“The same is not true for the rest of the world.
“And that’s what the trade agreements we are negotiating are all about: lowering tariffs on Made in America products, breaking down barriers to our goods and services, and setting standards higher to level the playing field for American workers and firms, American farmers and ranchers, American entrepreneurs and investors.
I think I agree that it's probably fair to say that America is one of the more open economies in the world. I'm not sure that there is an authoritative ranking on these issues, although some have tried to measure it, but America is probably in the top group of open economies.
However, I'm skeptical of the suggestion that we don't use regulation to discriminate against foreign goods. That's not just because we recently had several WTO dispute settlement rulings which found that we do use regulation to discriminate against foreign goods (COOL, Cloves, Tuna, etc.). It goes beyond that. I suppose there is some question as to the meaning and scope of the term "regulation," but taking a broad view, it seems to me that long-standing policies such as Buy America provisions in government procurement clearly fall within the idea of discriminating against foreign goods. Thus, I would say that we discriminate against foreign goods pretty regularly.
Similarly, saying we have "virtually no barriers to imports" seems like an exaggeration. There are antidumping duties; countervailing duties; tariff peaks with regular duties; farm subsidies; rules of origin; customs procedures; and probably many others.
And finally, there's an issue here as to what trade agreements "are all about." To me, trade agreements are mostly about a mutual agreement to rein in economic nationalism. That includes "our" economic nationalism, and also "their" economic nationalism. By contrast, they are not about increasing exports for the benefit of American interest groups. I can see why, for political purposes, you might try to sell them that way. But even in terms of politics, I'm not sure this is a good approach, because it paints a picture of "bad" foreigners and "good" Americans, which gives people the wrong impression of what is really going on in the world and makes negotiating trade agreements more difficult.
The Importance of Values
“The question we face is not whether we can roll back the tide of globalization.
“It is whether we are going to shape it or be shaped by it, whether we are going to do everything we can to ensure that it reflects our values or let the values of others define it.
“Today, I’d like to focus on trade policy’s role in furthering three of our core values: Standing up for workers, protecting the environment and promoting widely shared innovation.
“Rest assured, other countries are not standing by and waiting for us to act.
“They are busy negotiating their own deals, trying to gain preferential market access to countries, setting rules of the road that do not reflect our values.
“With each negotiation, we have an opportunity to make progress toward a global trading system that increasingly reflects our values, ensures that the benefits of trade are broadly shared, and is more fair.
“We are a nation of values.
“Values born of history, tradition, and a shared understanding of what is right.
“Values that underpin our laws, direct our relations with other countries and define who we are as a people.
“The Obama Administration is setting a new standard, insisting that our values undergird our trade policy today and in the future.
Values are certainly important. We all have values that we like, and perhaps we would like others to share our values. But which values do we push on others? There are lots to choose from, and sometimes they change over time. Here's something I wrote a little while back in a more general context:
if we are going to try to change the world to be “more like us,” we need to think about how we want to change it: More death penalty, free markets, and gun rights? Or more Keynesianism, abortion rights, and protection for minorities? If it is just more of the views of whichever party is currently in power, we may wear out our welcome with ever changing demands for how the world should behave.
Today, one of the "values" that we want to export is stronger intellectual property protection. However, as the relative balance of intellectual property changes over time, I can imagine that others might be pushing for stronger protections in the future, whereas we might push for weaker protections.
To sum up, there are plenty of values out there to choose from, and exporting them is something we should do with some humility. Other countries appear less likely to use trade agreements to export their values. That doesn't mean what they are doing does "not reflect our values". It may just mean they have a different approach to communicating their values with others.
Trade Agreements as Global Governance
“Commitments to protect endangered species, for example, must be taken just as seriously as commitments to lower tariffs and protect intellectual property, including being subject to enforceable dispute settlement.
“We are asking our trading partners to commit to effectively enforce environmental laws, including those laws implementing multilateral environmental agreements – and we are committed to making sure our partners follow through.
I understand that many people have strong feelings about protecting the environment, and would like to use international agreements to help support this cause. But it's not clear to me why this needs to be done through trade agreements. If there is enough support for it, you can have environmental agreements that are binding and enforceable on their own. Why do we need to bring these issues into trade agreements? If we go down this road, trade agreements can get bogged down with all of the various "global governance" issues they now handle, and thus become much more difficult to complete.
Ever Stronger Intellectual Property Protection
“Just as our interests and our values intersect on labor and environmental issues, our position as the world’s oldest democracy and most innovative economy, calls for us to cultivate global norms rooted in promoting commerce, scientific progress and the freedom of expression – norms reflected in our Constitution that encourage innovation and creation.
“Intellectual property-intensive industries account for nearly 30 million American jobs and drive growth in manufacturing, services and agriculture.
“The American view, as enshrined in the Constitution and reflected in over two hundred years of practice, is that inventors should be able to patent their inventions and creators should be able to copyright their works. That view is also informed by a sense of balance, of the importance of matching incentives for innovation with mechanisms to assure access and dissemination as well.
I'm not aware of too many people who think we should abolish all intellectual property protection. But there is disagreement over how much protection we should be giving. At a certain point, isn't excessive protection just a subsidy for industry?
Ambassador Froman talks about these issues as being "enshrined in the Constitution." But when you go back to the origins of intellectual property protection in the U.S., it becomes clear that the protections offered back then were far less than what we offer now. For example, with regard to the length of copyright terms:
It is worth noting that in the United States, the copyright term has evolved over time. Terms for individual authors went from fourteen years (with the possibility of a fourteen-year renewal) as set by the first Congress, to twenty-eight years (with a twenty-eight-year renewal) in 1909, to life of the author plus fifty years in 1976, to life of the author plus seventy years today. …
My sense is that this issue would benefit greatly from more public debate and discussion than we currently see.
Digital Information Flows
“And we will continue to press our partners to allow digital information to cross borders unimpeded. We are working to preserve a single, global Internet, not a Balkanized Internet defined by barriers that would have the effect of limiting the free flow of information and create new opportunities for censorship.
“Indeed, fundamental to TPP is the priority of ensuring freedom of the Internet and an open digital environment that will benefit consumers around the world.
“Cross-border information flows are important to spurring innovation, incorporating small and medium-sized businesses into the global economy and laying the foundation for the next generation of economic drivers.
“These issues get at values more profound than economics. They have ethical foundations built on the most basic concepts of freedom and individual expression.
“These are values that are under challenge in some countries and they are values that we must protect, including the privacy of our citizens.
Going back to the issue of whether America has trade barriers, one of the most famous WTO disputes is over online gambling, and discriminatory U.S. laws that keep foreign online gambling service providers out of the U.S. market. Froman's argument here might be more convincing if the U.S. were willing to act consistently with existing WTO rules on this issue.
One way to show good faith on this issue would be to make sure the emerging U.S. market for online education is open to foreign competition.
The point about protecting "privacy," of course, is in the news a lot these days, and I don't think any further comment is needed.
So what does everyone make of a "values-driven" trade policy? It's the first time I can remember hearing this term. Is this going to catch on, and will other countries adopt a similar approach? Or is this just something peculiar to U.S. politics?