Bernie Sanders and Elizabeth Warren both talked to the NY Times editorial board recently, and trade was one of the issues raised (a tiny bit with Sanders, a lot with Warren). This is from the interview with Sanders:
AK: I’m wondering if you could explain how your approach to dealing with China would be different from the president and how it would elicit better outcomes.
China is one of the most powerful and important countries in the world, and it’s a country that we have got to work with and live with. It is a country I voted against permanent normal trade relations with China, which was the right vote because between Nafta and P.N.T.R. [permanent normal trade relations] with China, this country has lost some four million decent paying jobs.
So I’ll get to your question, but in terms of trade, I believe in trade. But it’s got to be based on principles that are fair, not unfettered free trade. So if companies want to shut down in America to find cheap labor in China or Vietnam, I’m against that and that’s how I have voted.
Bernie's answers to policy questions are often blunt and definitive, but then leave me confused as to what he means. He starts by saying he believes in trade, which is reassuring. He then says trade should be "fair" rather than "unfettered free trade," which I could take as concerning, but since currently trade is far from unfettered and free, maybe it's not as worrying as it wounds. Then he gives a very specific example that sounds clear but really isn't: He doesn't want companies "to shut down in America to find cheap labor in China or Vietnam," and he votes against trade deals that lead to that. But obviously it's possible that moving a factory to another country is the only way to stay in business. If the company keeps the factory open in America and a few years later has to declare bankruptcy and shut down completely, that doesn't help American workers. And what if a company is thinking of opening a factory, and has a choice between the U.S and China/Vietnam. Is it OK to choose China/Vietnam in those circumstances, where there is no shutdown? And more generally, is he saying that he is OK with tariff liberalization through a trade agreement where it doesn't lead to factories moving broad?
The conversation with Warren went into much greater detail:
SS: Well, speaking of using leverage, you’ve argued that nations that want to trade with the United States should be held to higher standards.
Yeah.
SS: The Obama administration tried that, Trump administration tried that in different ways, but no results. What kind of leverage would you use? What would you do?
Well, I’m not sure I accept the premise of the question, that they actually tried what I was talking about. Look, our No. 1 leverage is everybody wants the American consumer. They want access to the American consumer. They want to be able to sell us all of their stuff because the American consumer is not only the engine of about 70 percent of our economy; it’s a worldwide engine. So I think it’s perfectly reasonable to say, if you want to be able to trade with United States on the best possible terms, then everybody needs to raise their standards just a little. Who wants to do that?
And you may start out with modest increments and increase them over time, but there’s no reason that we should be treating a country that is producing goods through prison labor or child labor or unsafe working standards or by polluting the earth, that we should treat a country that produces goods in that way the same way we’re treating a country that produces goods with standards that are much closer to ours. We simply put our own businesses and our own workers at a competitive disadvantage, so we end up doing things like exporting pollution. Can’t pollute here in the United States, but move this polluting industry. This way that you’re going to paint dolls or produce chips, move it somewhere else where they have no environmental standards and then resell, and then sell those goods back in the United States.
Binyamin Appelbaum: Would you reduce existing —
We just undercut ourselves when we do that.
BA: Would you reduce existing access in order to achieve that goal?
Yeah.
BA: So you’d put tariffs on existing foreign imports?
It’s that you don’t get the tariff benefit. This is what it’s really about. Where’s the baseline? Right? And is the baseline one that says, across the board, you’ve got to give plenty of notice. You’ve got to work through, make sure you’ve got something that’s achievable for countries we trade with. But this is not like trying to institute a trade war. This is not like saying we’re mad at you and therefore we’re going to impose all these tariffs on you, and doing it as Donald Trump has done by tweet.
But it’s to work with nations and say, you want access to the American consumer, you’ve got to start raising your standards in a meaningful way. And here’s where the long-term goals are, here’s where you are, here’s what constitutes moving toward those. And I think that’s where a lot of folks would like to go, and frankly we should be working with other nations on helping, not just those who lag way behind, but those who have good standards to be using the same kind of approach to trade. The idea that trade is just about tariffs is just old 20th century. Trade today in the 21st century is about regulation. It’s about who’s going to have to meet what regulatory standards.
Whether we’re talking about workers or we’re talking about the environment, who has to meet what standards? And there are big corporations who figured out how to game the system. Where standards are high, then move that part of the operation somewhere else where standards are low and save a nickel. Because these corporations, they don’t have any loyalty to a country, they just have loyalty to their own bottom line. And they play this all around the world.
BA: Are tariffs the leverage that you use to secure those types —
Tariffs are one of the tools. Economic agreements across countries, that many countries join together, and say, we’re not going to let anyone import if they’re using prison labor, for example, or if they’re dumping dangerous chemicals into the water. There are lots of ways to do this, but we can’t simply think of this as a tariff, no tariff protectionism barrier. It’s not. It’s about regulations. Look at the dang NAFTA 2.0, look at what we were negotiating for T.T.I.P. T.T.I.P. was about financial regulations, not about goods that were moving, in a sense, the old way that people think about, that you put a bunch of stuff on a barge and you ship it across the Atlantic Ocean. And we just need to tune into the fact we know what our advantage is and we need to use it, not to try to lock others out, but to try to encourage others to come in.
Nick Fox: What did you think of the standards in the Trans-Pacific deal?
I disagreed with them. So for example, the Trans-Pacific Partnership had a robust investor state dispute resolution mechanism, which multiple of our trade treaties have had for decades now. And I just think that’s fundamentally wrong. It’s a two-tier system that says, in effect, we’ll make a bunch of promises in a trade deal on the environment, on use of prison labor, child labor and on anything else, and then we’ll give two entirely different enforcement mechanisms.
If you are a giant multinational corporation and any regulation comes along that you don’t like, the local country raises the minimum — we’ve actually seen this — raises its environmental standards, you get to sue them to get them to drop those standards. And who will your case be heard by? It’ll be heard by a handful of corporate lawyers, who when they’re not sitting on this arbitration panel are working for big law firms that are doing work for you or other multinational corporations like you. That’s one set of how the path will run.
But the other half, let’s say you have a complaint because the trade agreement had said that some other country would permit unionization or would not use low-wage workers beyond a certain point. Do you get a path like that? A quick resolution? And by the way, I should point out: That quick resolution? There’s no appeal from it. It is immediately enforceable against a government. So you can go straight against Canada for raising its environmental standards. You can go straight against a South American country for raising its standards to protect its children’s health from smoking.
But if your complaint is a labor complaint, that is, gee, here I am in America and I’m trying to compete against workers in a foreign country who are getting paid a dollar a day. What’s your path? Well, first you’ve got to go to the U.S. government and persuade the U.S. government that they should go after this country, for which we know what has happened. U.S. government has repeatedly — and this is not just by — well, yeah, we get your point.
But on the other hand, we have other diplomatic initiatives and it’s really important that we’re trying to work with this country, and they’re important to us strategically for this reason and we have this ongoing negotiation in that political thing. Drag your heels, drag your heels, drag your heels, until the jobs have disappeared here. And then once you go forward, you’ve got to go forward through a different kind of court that’s much slower.
So the effect is that the promises that are put into trade agreements like T.P.P., they may all look the same on paper, but man, they are nowhere close to each other in terms of what happens with enforcement. Multinational corporations are given the opportunity basically to opt out of laws they don’t like, where protections that are supposed to be written for our workers, for the worldwide environment, for human rights standards, just get left by the curb.
Warren says she wants to use tariffs and other leverage to induce other countries to raise their regulatory standards. We already do this to some extent. But as she describes things above, it seems like a major expansion of that policy, although it's hard to get a sense of what exactly this policy would look like in practice. Is she talking about withdrawing from existing trade agreements? Using domestic statutory power to impose new tariffs?
