This is from Jennifer Harris and Todd Tucker in Politico:
President Donald Trump’s threat to levy tariffs on Mexico has triggered a political war in Washington, and not the usual partisan kind. Some Republicans are girding to fight their own president, rightly finding it absurd that he would take out his frustrations over immigration by increasing the cost of trade. As Sen. James Lankford (R-Okla.) told Politico, the White House "is trying to use tariffs to solve every problem but HIV and climate change." Trump supporters like Sen. Marco Rubio (R-Fla.), meanwhile, don’t see many options. “[W]hat alternative do my GOP colleagues have,” he tweeted, “to get Mexico to secure its southern border… & act on intel we provide on human traffickers?”
Much as it pains their colleagues—and as hard as it is for Washington to process this—Trump and his backers have a real point. Not about his immigration policies, which are part of a harmful cultural war and stand a real chance of inflicting long-term damage on the American economy. But the Administration’s use of tariffs to push its foreign-policy goals is not as irrational as Trump’s enemies make it seem. It shouldn’t be this way, but in 2019, if the United States wants to fix some of the big policy arguments it has with its trading partners, it has left little leverage besides the blunt tool of tariffs.
For that, the blame lies with Democratic and Republican administrations alike, including Trump’s predecessor Barack Obama, who collectively have let US economic policy shrink in ambition—a battle fought on a narrower and narrower field, leaving us with so few weapons that tariffs have become the most useful last resort.
A nation as powerful as the United States would traditionally be expected to have a fully developed economic and industrial policy, one that integrates incentives and priorities on the domestic front with carrots and sticks for foreign partners. In that universe, Mexico’s own immigration enforcement might be part of a much wider package of goals negotiated between the two nations, one that creates strong incentives for Mexico to comply, without hurting American consumers and companies the way tariffs would.
This fuller agenda, which some experts call economic statecraft, has been the norm for much of the country’s history. But unlike America's competitors, the United States has largely shelved this kind of economic thinking. President Obama, for instance, pitched the Trans-Pacific Partnership (TPP) trade agreement as a way to ensure that America, rather than China, would write the rules of the global economy. But under the hood, it was never a very compelling economic argument for the United States: The rules that China negotiates in its own trade deals overlapped considerably with the American proposal, meaning that the TPP was more a matter of diplomatic gamesmanship than a real plan to advance workers here at home.
There are two aspects to their argument: domestic and international. As they put it: "A nation as powerful as the United States would traditionally be expected to have a fully developed economic and industrial policy, one that integrates incentives and priorities on the domestic front with carrots and sticks for foreign partners."
With regard to the domestic aspects, they argue for industrial policy rather than neoliberalism:
For the last few decades, policymakers have embraced neoliberalism, a broadly open-market political philosophy whose effects have been to redirect more power toward the economically powerful and marginalize the economic majority. Things may be changing. Leading academics, public intellectuals on both the right and the left, and even the IMF are calling for a return to a robust domestic industrial policy.
I have two reactions to this. First, I would say that, in fact, industrial policy may be more likely to "redirect more power toward the economically powerful and marginalizes the economic majority." Industrial policy means lots of subsidies for big business. Some of that will trickle down, of course, but just as agricultural producers like farm subsidies, manufacturers and other businesses like industrial policy. And second, from what I can tell, rather than some major shift taking place, arguments for free markets vs. industrial policy are about the same as they have always been. The perception on the left that free markets dominated the 1990s is way off base. Harris and Tucker talk about the "the heyday of the global free-market consensus," but I can assure you that, as someone in the free market camp, there was never a time when I thought, "Wow, we are really winning the policy debate!" It was an uphill struggle, and any victory was outweighed by two defeats. At one point, farm subsidies were supposedly being phased out, but they quickly and quietly came right back. And anyway, there have always been U.S. policies that can be classified as industrial policy (e.g., military spending). It might not be the precise industrial policy that some people want, but that's how things tend to go. The ingenious policy innovation you just came up with is not going to be implemented as you hoped. Interest groups of various sorts will get involved and turn it into something else.
But nobody is ever going to convince anyone to change his/her mind on the value of industrial policy as a domestic matter, and I want to focus here instead on the idea of "economic statecraft," or using "carrots and sticks for foreign partners," or to put it more bluntly "using American economic power to boss other countries around." To me, this seems like a strange thing for progressives to want, but I confess that I'm a little unclear on who the progressives are (and for that matter, who the neoliberals are).
First off, I think we could really use some empirical assessment of whether "economic statecraft" is effective in achieving its goals, in both the short- and long-terms. Maybe it does accomplish some things, like restricting asylum seekers from getting to the United States, in the short-term. On the other hand, in the long-term maybe it pushes the countries we are trying to influence into alliances with other countries. I'd like to see some studies of all this before we assume it is effective, as Harris and Tucker seem to.
Second, advocates of this approach to foreign policy need to take into account that they are not always going to be in power. For those on the left who want to use U.S. economic power to do "good things," keep in mind that the specific government action that triggered the Harris/Tucker article was Trump's use of tariffs to get Mexico to take actions to restrict migration. Harris and Tucker are careful to point out that Trump's immigration policies are part of a "harmful cultural war" and they certainly don't support that sort of thing. On the other hand, they do seem to support the general concept of using U.S. economic power to coerce our trading partners:
the Administration’s use of tariffs to push its foreign-policy goals is not as irrational as Trump’s enemies make it seem. It shouldn’t be this way, but in 2019, if the United States wants to fix some of the big policy arguments it has with its trading partners, it has left little leverage besides the blunt tool of tariffs.
The problem is, if you endorse the principle behind this sort of "economic statecraft," you kind of have to take some responsibility for whatever comes out of it. You can't just say, we want economic statecraft but only the good kind. Once the principle has been established, it can be used for anything, and you know that in advance. I recognize that Harris and Tucker want President Warren/Sanders/or somebody to have this power for some progressive thing, but that also means President Trump has the power for some non-progressive thing. Given the way such power will actually be used, it's worth considering whether it would be better if the U.S. government simply didn't exercise this power, or exercised it a lot less.
Finally, it is also worth pointing out that it may be possible to accomplish these things without bullying other countries at all. For example, if we wanted Mexico to be able to handle migrants from Central America better, which Mexico probably wants as well, we could spend some of our own money to help them. That's closer to being a carrot than a stick, although maybe it's not even a carrot, but rather just the right thing to do. By contrast, Harris and Tucker seem like they are just looking for big sticks. They refer to "fixing some of the big policy arguments [the United States] has with its trading partners," but that sounds like a euphemism for what I think they really mean, which is using U.S. power to coerce other countries into doing what we want.
That's not to say that nobody should ever try to influence anything that goes on in other countries. But when you are considering the possibility of doing so, it's worth thinking carefully about what would be effective and appropriate. Sometimes just setting a good example may be the best approach.
