You don't see much talk about "colonialism" in mainstream U.S. trade policy discussions, so I was excited to see this from U.S. Trade Rep. Katherine Tai in her speech last week:
Whether it is through working with us on the Critical Minerals Agreement, the IPEF, or the APEP, more and more countries are realizing that we need a new model for doing trade to adapt to the challenges presented by the world we are living in. And we are doing this in cooperation with our allies and partners, not at their expense.
We are turning the colonial mindset on its head. Instead of supply chains designed to extract from developing economies, our approach is to partner together, where we are all co-owners of different parts of supply chains.
This makes perfect sense in terms of de-risking and building resilience. The key is to offer economies a spot in vertical integration so that developing countries are not perpetually trapped in an exploitative cycle.
In my discussions with foreign counterparts, I have found that, as it turns out, we all aspire to build our economies from the bottom up and the middle out—to provide those at the bottom with a path to the middle, and to build a broad middle class. We do this by collaborating in ways that allow us to create opportunities and build our middle classes together, rather than pitting them against each other.
In the conversation that followed, there was a bit more discussion of this issue:
Rana Foroohar:
At the same time, you also use the language of turning colonialism on its head by partnering to own parts of a vertically integrated value chain. ... Connect those dots about how what is good for a worker in the US, in the steel industry let's say, might also be good for someone not just in other OECD countries, but in the global south.
Katherine Tai:
... I think the connection then is -- it's been very interesting, my conversations, especially with partners who act as trade and economic ministers in developing countries -- is we are all actually looking for economic development and economic growth, and frankly, industrialization opportunities, and sometimes reindustrialization opportunities. We're not the only ones who have experienced an erosion of industrial capacities. We have a lot of developing country partners who have experienced that or whose aspirations are to industrialize in the first place. That is something that should connect us to each other.
And so to your question then, how does doing something that helps and empowers a steel worker in the United States also empower someone else in say, the global south? I think that that's the vision of, how do we build our middle classes together? I just had this conversation with a counterpart at the Asia Pacific Economic Cooperation trade ministers meeting in Detroit, a colleague from Southeast Asia, from a middle income country, who said, "Our goal should be how we can build our middle classes together." And that really stuck with me because I think that is exactly the thing that we're trying to do. ...
I strongly agree with the anti-"extraction" sentiment behind this initial statement of Tai's: "We are turning the colonial mindset on its head. Instead of supply chains designed to extract from developing economies, our approach is to partner together, where we are all co-owners of different parts of supply chains." If we want developing countries to reach the income and wealth levels of those in the industrialized world (and everyone should want this!), people in the developed world are going to have to accept that developing countries can industrialize too, and can even produce the high value added/high tech products that have traditionally only been made in developed countries. Tai's statements above that are critical of an "extractive" model may suggest that she agrees with this view (although "co-owners of different parts of supply chains" perhaps leaves some wiggle room; if she meant that everyone stays in the same part of the supply chain, but now they are "co-owners," that doesn't get us very far).
However, as things stand now, U.S. trade policy limits the possibilities for imports of manufactured goods from developing countries in a variety of ways, and the Biden administration hasn't changed those policies, or even talked about changing those policies. When developing countries start to move up the value chain and produce more sophisticated manufactured goods, they are immediately accused of some kind of unfair trade practice and there are attempts to keep their products out of the U.S. market. That is a big impediment to their industrialization, especially for countries with smaller home markets.
Why do these policies exist? The lobbying power of corporations and labor unions is a big part of the reason, and the positions of these interest groups are easy to understand in this context: They just don't want competition.
The reasons for the views of politicians and policymakers, by contrast, can be a little harder to discern. Are they just reflecting what interest groups tell them? Or do they have some ideological opposition to industrialization in developing countries? It's hard to figure out the answer, but regardless, there is a widespread view in the United States that manufacturing should be concentrated here, and we should sell our manufactured products to the rest of the world (e.g., here is Elizabeth Warren: "[the United States needs] to supply the world with clean energy products"). Along these same lines, when people talk about bringing back manufacturing from abroad, a significant aspect of that is bringing it back from developing countries (some of that involves China, but the argument isn't China-specific).
Tying all this back to the colonialism discussion, my sense is that this nationalist vision of the structure of international production holds that the U.S. government should be promoting a form of vertical integration in which natural resources are extracted in the global south, and then shipped to the U.S. to be used as inputs in goods manufactured here. This industrial structure is then enforced by tariffs and other trade barriers: If developing countries try to manufacture things themselves, the U.S. will impose tariffs to keep those goods out.
I appreciate Tai's criticism of the extractive model, but I'm not sure what she has in mind instead or how an alternative would be possible under existing laws and policies. To take a concrete example, Chile and Bolivia have a lot of lithium, which is important for making electric vehicle batteries. U.S. policymakers would be very happy to have U.S. companies use that lithium in battery-making in the U.S., but if Chile or Bolivia started making electric vehicle batteries with their lithium, would they be able to sell those batteries in the U.S.? The answer is almost certainly no, as they would face significant protectionist trade restrictions, such as prohibitive anti-dumping duties.
In this way, protectionism helps keep the economic nationalist/colonialist production structure in place. And if we want to move away from that structure, trade liberalization is the best approach. Without trade liberalization, I'm not sure much can be achieved in terms of getting developing countries into a non-extractive/exploitative part of the supply chain.
Is it possible to get to a point where U.S. policy can accept industrial production in developing countries? I think the answer is yes, but it's a long and slow process. For certain products and certain countries, we now accept it to some extent. But there is always a risk of backsliding if there is a U.S. company that is affected. And each new product and new country that enters into the mix is a struggle.
For centuries, we've had an economic system with a core and a periphery, with most advanced production taking place in the core (which has expanded a bit over the years) and natural resource extraction and more basic production as the focus of the periphery. Trade liberalization has undermined that structure to some extent. but interest groups have been able to use protectionist measures to keep the structure in place. I don't have a sense that this is the moment when things will change, as politics and policy seem to be moving in the direction of reinforcing the existing structure. But Tai did bring it up, so perhaps that can generate some attention and lead to a broader discussion.
