Here's one more post based on the Trade Talks podcast with Stephen Vaughn:
Chad P. Bown 16:43
Can I ask a bit more of the details on the enforcement piece? Is what we're thinking about if there is a deal that has some kind of enforcement with China, are we ever going to get back to a system of impartial third party adjudication of this? Or is it always going to be something that's tied to American leverage and tied to a unilateral decision by the United States of whether or not China is living up to these commitments?
Stephen Vaughn 17:11
To me that's a different question. In other words, I think if you're really just talking about getting other countries to do what you want the other country to do, I think most of the time, the best way to do that is going to be to use the direct leverage of the United States in terms of its market. I do recognize that there may be situations where for diplomatic reasons, maybe it's easier for another country to do what you want them to do, if they can point to arbitrators, who made a ruling against them. And I think that is something that really needs to be decided more on a case-by-case basis, in terms of whether you think an arbitration process is going to help. I think in terms of China, some people think they are more likely to respond to arbitration. I'm more skeptical in that regard. I think that what they've tended to do is to make very, very small changes, and pretty much go on with the way they were doing things before. So I think they're going to ultimately decide what's in their own best interest. And we have to decide how we want to deal with that.
My sense is that Vaughn is wrong about the effectiveness of economic leverage, but I admit it's a difficult issue to measure empirically. Krzysztof Pelc did it here in relation to a comparison between Section 301 and GATT/WTO dispute settlement, but the broader issue goes beyond what he tried to measure. I think the difficulty relates in part to the famous "seen" and "unseen" problem. People are enamored with unilateralism because they can see a few "wins" clearly, and so they reach the conclusion that using economic leverage works. But along with those wins, there are many things going on that are harder to detect. Yes, the United States can use its economic power to extract something from Mexico in the USMCA talks, and particular U.S. interest groups are happy with the outcome. But that "victory" has repercussions. Mexico becomes less happy with the relationship, and is less likely to work with the United States on various other issues.
We have seen a lot of unilateral trade actions by the Trump administration over the past couple years. At the end of this term, we'll have a sense of how effective they were. So far, the verdict does not look good for unilateralism in terms of the relative U.S. position in trade relations (and international relations more generally), but we'll see where we are next year.
