WITA Panelists Disagree On Tariff Liberalization, Non Tariff Barriers to Trade

Former trade negotiators, think tank trade advocates, and a current political appointee at the Office of the U.S. Trade Representative grappled with whether turning away from tariff-lowering free trade agreements is wise or misguided, whether years of globalization from 1995-2015 led to prosperity or economic carnage, and what type of issues should be tackled in the Indo-Pacific Economic Framework or other trade deals.

Asia Society Policy Institute Vice President Wendy Cutler, the chief negotiator at USTR for the Trans-Pacific Partnership, said at a Washington International Trade Association event: "What concerns me in trade policy right now is the word 'pause,'" she said. She said she understands we need to come to a domestic consensus on how to regulate social media or AI, but, she said, "We’re pausing while the rest of the world is moving on without us."

Former U.S. trade representative Susan Schwab said, "The easy stuff’s been done in terms of trade negotiations and tariffs, certainly with the U.S."

Cutler said that because tariffs had already been lowered substantially, negotiations started expanding to other issues such as import licensing, intellectual property protection, regulatory issues and labor and environmental standards. She said that created more constituencies for trade -- but also more opponents.

Bill Reinsch, a trade scholar at the Center for Strategic and International Studies, said it was inevitable that trade negotiations began to tackle sanitary and phytosanitary standards and other regulations, because, he said, countries imposed protectionist standards to avoid the consequences of more foreign competition for their producers once tariffs were lowered.

Longtime trade critic Lori Wallach, now at Rethink Trade, said adding food safety standards and extended patent protection for prescription drugs and capping standards, as well as investor protections that curtailed countries' ability to regulate, is what caused a "grassroots revolution" against trade deals and the World Trade Organization. She questioned the need to liberalize tariffs, as well, noting that China's applied trade weighted tariff average is 3.3%, the U.S.'s is 2.6%, the EU's is 2.8%, and India's is 7%.

Beth Baltzan, a policy advisor to the U.S. trade representative, also questioned the goal of lowering tariffs. "We hear this all the time, that tariffs are regressive and their effect on consumers," she said, but that ignores their impact on workers.

"Prices matter, yes, of course they do, but we also have values," she said. She said globalization allowed manufacturers to move production to lower-wage countries, and she said "that’s part of the reason we had deindustrialization."

She said as important as lower prices in stores is the "dignity of work, jobs that have benefits, jobs that eventually allow you to retire."

Baltzan also defended the need to pause, as she said trade deals need to address overconcentration of supply chains in countries that could withhold those goods for political reasons. She said the agency needs to reevaluate rules of origin. "If only 30% comes from the region, we incentivize 70% coming from the regions we want to get away from," she said. She didn't elaborate whether she meant that to apply to the African Growth and Opportunity Act and Generalized System of Preferences benefits program, both of which have a 35% rule of origin.

Schwab acknowledged that the geopolitical landscape has changed how she looks at liberalizing trade.

"Interdependence in a world where it’s … safe to be interdependent with everybody is one thing, but when there are national security risks for being interdependent… that’s another thing," she said. "But you’ve got to figure out how to do that without shooting yourself in the foot."

Reinsch said it's dishonest to point to a 2.6% average, because some items have particularly high tariffs, especially in textiles and apparel -- categories that negotiating partners like Indonesia and Vietnam are competitive in, and they want those tariffs lowered. "The people we negotiate with, they look at trade much more traditionally than we do," he said.

Scott Lincicome, director of trade studies at the libertarian Cato Institute, said that trade policy is neither the "the economic panacea it’s claimed to be," nor does it cause "economic armageddon," as some claim.

"Median wages, adjusted for inflation, since hyperglobalization began are up about 40%," he said. "This portrait of American carnage is pretty misguided," he said.

He said tariffs imposed by the Trump administration are imposing high costs and are not achieving their objectives. He agreed with Reinsch that tariff peaks are obscured by the tariff average, and that those peaks often are in areas developing countries specialize in. He said the debate about free trade agreement negotiations makes him a little crazy. "It’s all about manufacturing, although we’re a service economy," he said. He said negotiators should be focusing on market barriers to U.S. financial firms abroad and discrimination against digital firms more than worrying about preserving manufacturing jobs, which are declining in every industrialized country, including China.

"About 10% of the workforce works in manufacturing. It’s a decline that’s been happening since the 1940s," he said.

"On this perceived race to the bottom in labor and environmental standards," he said, he thinks it's misguided to discourage imports from countries with lower standards. "As countries get richer they tend to have better labor standards, better environmental standards. U.S. trade agreements can help them get richer," he said.

Former USTR general counsel Stephen Vaughn interjected, "I absolutely agree that our trade agreements have helped other countries get richer." Vaughn served during the Trump administration.