U.S. Trade Representative Katherine Tai spoke today at a conference on "Antitrust, Regulation and the Next World Order." She had the following to say about the connection between trade policy and antitrust policy:
A lot of the change vectors that we are grappling with in trade are actually also things that you are grappling with ... in antitrust, so I'll just highlight a couple of them. One of them is ... the fact that the trade paradigm for the last many, many decades, this globalization free trade paradigm, was built on a kind of an idolization, certainly a fixation, on maximizing efficiency. That efficiency, liberalisation of trade, became the end in itself, not a means to accomplishing another end. And so I think that that's something that we have very much in common with antitrust.
That also meant that as we thought about people in our economy, as we thought about justifying our trade policies and our trade liberalisation, the one benefit that we hung our hat on was the benefit of efficiency, which is lower prices, low prices. And one of the results of that, is we've seen a version of globalization that perpetuates a race to the bottom, the cutting of costs, the exploiting of people and planet.
So, as I've learned more about antitrust, it is an issue around detaching yourself from the consumer welfare standard, to bringing in other factors and goals, and from our perspective, that is about thinking of the human being in the economy that you're trying to benefit as not just a consumer. It turns out that in order to consume, you also need a job. You need to earn a wage. Every consumer is also a worker. If we're only pursuing policies to benefit people as consumers, and those policies are actually impoverishing those people as workers, the entire system doesn't work and in many ways explains why we are where we are right now.
The injection of the public interest standard in antitrust ... is also an enormous theme and what we're trying to do in trade, which is to break ourselves out of the assumption and the proxy that what is good for the biggest corporate stakeholders in our system equals what is good for America and Americans. I think for a long time we've pursued this assumption that well, these are iconic American companies. They are brand names that we're very proud of. Therefore, anything that is good for them will be good for us. That benefiting the companies will create that trickle down benefit to the company's workers and the communities where those workers live. And we've seen over time, that just isn't happening. It just isn't happening. So in this pursuit of evolution and progress in terms of our trade policies, I've discovered that we are in fact connected to our antitrust cousins. And in many ways we are trying to accomplish the same goals using different sets of tools.
It won't surprise people to hear that I see the trade/antitrust relationship very differently. I would start things off with this point. One of the best arguments against protectionism, in my view, is that protectionism limits competition and, as a consequence, raises prices and harms consumers. Thus, putting constraints on protectionism, either at the domestic or international level, helps promote competition, which antitrust is also intended do. I think that people who argue for protectionism, but say they support competitive markets, need to grapple with this.
Tai also makes a point about policies that are based on corporate benefits that may or may not trickle down to workers. As I see it, however, the argument for trickle down comes from a different direction. In this regard, a key argument for protectionism is that it helps specific corporations -- again, by limiting competition -- and the benefits will trickle down to their workers. That may happen to some extent, at least in the short term, but these corporate benefits come at the expense of all the people outside the corporation, and the expense to others outweighs the benefits to the well-connected companies who lobby for protection from competitors.
Finally, just to note a point that has come up before in Tai's remarks, I don't think trade liberalization has ever been an end in itself. Rather, it is a means to accomplishing an end, which is increased and more broadly shared wealth. If they want to, people can argue that it doesn't do that, but I think it's pretty clear that's the goal. And related to that, the argument for trade liberalization is that it provides more and better jobs than under a protectionist and anti-competitive economic policy.
Tai also said this:
If you take it all the way back to the very elegant and simple, maybe too simple, theory on which this free trade dream was built, David Ricardo's paradigm of, two jurisdictions, they both have diversified production, and then for efficiency sake, ... each one should focus on what they are best at and then trade, right. It's elegant, and it's very, very attractive. But we see that it doesn't really translate into the real world for lots of reasons that we could get into. But it occurred to me ... that part of that paradigm is that each country should become a monopoly. It should concentrate on the thing that it does well, and I think that therein lies a fundamental challenge with that vision and where it is running up against problems in the real world.
I'm not sure it makes sense to think of a country as a monopoly in this context. Ricardo was not envisioning each country having a single company making the more efficiently produced product. In addition, in terms of how things work in the real world, if you are going to take a counter-Ricardian view, you will have some serious issues to confront. For example, should each of the approximately 200 countries around the world use protectionism so that they all produce all of the products that their consumers need? I don't see that working very well, so if that is not, in fact, the vision, critics of Ricardo's theory probably need to spell out how they see this playing out in the real world.
