Here's something U.S. Trade Rep. Katherine Tai said in a recent interview with PBS:
In trade policy, it's something very interesting, and I've seen this happen in competition policy, where the anti-monopoly folks, antitrust people are working. We see in both of these areas, two centers that are forming. So you know, in our politics usually there's a center and then there are the fringes. And in trade, for instance, ... the traditional center has been ... free trade Republicans and the pro-business ... New Democrats. What we see is that the progressives on the left and the populists on the right are meeting in a new center, one that is pro-worker and pro-competition, that is trying to take on the oversized corporate power, looking to rebalance ... the equities within our system.
In reaction to this, I want to talk a bit about competition and corporate power. Tai suggests here that left wing progressives and right wing populists are "pro-competition" (also "pro-worker," but I'll leave that issue for a future blog post) and trying to take on "oversized corporate power." I have doubts about this, and I see the impact of the policy preferences of these groups as more about restricting competition and supporting corporate power.
Just briefly on antitrust first, I'm not an antitrust expert, but I will note that sometimes when one company's practices are being scrutinized by the government, another company is pushing for the government scrutiny of its competitor. Antitrust policy certainly may be pro-competitive, but it can be a difficult question as to what kinds of behavior to target in order to promote competition, and sometimes these processes are abused and end up helping one competitor at the expense of another. But again, I'm not an antitrust expert, and I'm really not sure how to draw the lines here, so let me put antitrust aside and focus on competition and corporate power as it relates to trade policy.
Are progressives and populists trying to promote more competition and take on corporate power through their preferred trade policies? Even if more competition and limits on corporate power are the actual goals of progressives and populists, the protectionist policies they tend to support will limit competition rather than promote it, and will help some very powerful corporations.
On competition, while most policies have a complex and varied set of effects, and you have to look at all of these effects to make a judgment, there is clearly an inherent anti-competitive impact from restricting imports: Tariffs and regulatory protectionism help domestic companies by limiting the competition they face from foreign companies.
Now, as I said, nothing is ever that straightforward, and there are a number of competitiveness aspects to trade policy. For example, it may be that there is anti-competitive behavior among the foreign companies in question, and therefore allowing imports could actually undermine competition to some extent. That would be a hard issue to evaluate, but it's certainly worth trying. Some people might argue that this is what anti-dumping is supposed to do, but I think there is general agreement that it does not do this in practice. Thus, while in theory restricting imports could, in some very narrow circumstances, promote competition, in practice it generally does not.
Turning now to corporate power, I think it's also worth talking about who supports protectionist trade barriers. While there are a few think tankers, academics, etc. whose thinking on the issue has led them to conclude that protectionism is good for the domestic economy, in terms of political influence, the most important players in the fight for protectionism are big corporations and other interest groups. The history of trade policy is largely about competing interest groups fighting over the direction of that policy, with domestic corporations who focus on the home market and compete with imports for that market being a key player. There are a lot of corporations out there, and they have differing interests, but there are a fair number of them who push for protectionism in order to limit competition from foreign companies, and these corporations are a primary reason that so much protectionism still exists. They are joined in their effort by unions and other groups, but I would say these corporations are the driving force, and restricting competition is their main motivation.
So, I'm skeptical that these progressives and populists are pro-competition and trying to limit corporate power. Some of them might think they are, and some of them may genuinely want to see more competition and to limit corporate power. It's difficult to evaluate someone's subjective intent (as we know from WTO case law!). But generally speaking, the protectionist trade policies they support take us in the opposition direction, as these policies tend to limit competition and make certain corporations more profitable and powerful as a result.
Finally, while I was focusing above on import restrictions, subsidies can have the same effect. When we talk about industrial policy these days, it is often about subsidies. Again, while policies have multiple effects, many of the subsidies that are being offered through recent legislation related to clean energy and national security have significant benefits for large corporations. For example, the requirements and processes for getting these subsidies are so complex that it may be difficult for smaller startups to qualify, and in that way the subsidies impose barriers on new entrants and benefit established incumbents.
