This is something Beth Baltzan, a Senior Advisor at USTR, said at last week's Economist Impact's 2nd annual Global Trade Week as part of a panel discussion on digital trade agreements:
We need to think about the philosophy that led to the creation of the trade agreements that we have seen over the past 30 years, of which some of these digital agreements are a piece, and digital chapters in these trade agreements. And there was a real philosophy behind them, which was that there was some kind of achievable free market out there. And what you really needed to do was to get the government out of the way. And so when we look at the trade agreements that emerge, whether it's the WTO agreement, the NAFTA, the progeny of those types of agreements, it was really about that relationship, where you were getting government to defer to business. And there weren't particular guardrails around how businesses operated, whether it's labor rules or environmental rules. And that's the framework that we've mostly been operating in for the past few decades.
What I think has happened, whether it's the pandemic, the war in Ukraine, there have been real challenges to that approach to globalization, where I think there's a conversation around whether we ought to be doing so much deference to business or whether there really is a role for governments to play in regulating the marketplace in the public interest.
As I see it, one of the main purposes of trade agreements has always been to impose constraints on the ability of businesses to demand favors from governments. For example, businesses might push for tariffs that protect them from competition or subsidies that give them an advantage over competitors. By putting limits on these types of government favors, trade agreements try to make governments defer to businesses less.
Of course, businesses are smart, and they have been able to influence the drafting of trade agreements in a way that limits the constraints. As a result, we have rules that carve out wide discretion for governments to impose "anti-dumping" tariffs on foreign competitors; and farm subsidies given by wealthy nations to agri-businesses are carved out to a great extent as well.
Despite the anti-corporate rhetoric you often hear these days, from both the left and the right, we seem to be in a period right now where large corporations are in a very good position in terms of their lobbying influence with governments. To take an example, semiconductor companies who are planning investments have been successful at playing national and local governments against each other in order to extract subsidies to help them with building factories they were likely going to build anyway. Trade agreements can help with this problem, but right now the political agenda seems to be to give businesses in certain sectors what they want. Thus, it seems to me that rhetorical criticism of big business combined with policy that defers to certain big businesses is the current state of affairs (that's just my instinct, and I'd love to see someone test out my theory with actual evidence!).
With regard to how trade agreements affect governments' ability to regulate, that's a different issue. I agree that we need to think about how to establish the boundaries of the rules so as to put constraints on governments' protectionist favors for business, while still allowing governments to regulate for non-protectionist purposes. This is an area where I've heard hints from Katherine Tai that maybe something was coming, but so far we haven't had any concrete proposals.
