International Economic Law and Policy Blog

The Optimal Tariff Argument at the Scott Bessent Hearing

At his confirmation hearing last week, Treasury Secretary-nominee Scott Bessent mentioned "optimal tariff theory," which is something that always triggers me (although as I'll say later, I'm not sure he meant what he seemed to):

Senator Ron Wyden: On the tariffs, Donald Trump, with no plan and no strategy, says he's going to put across the board tariffs, blanket tariffs, on all imported goods, which means that our workers and our small businesses are going to get clobbered with additional taxes on practically everything they buy from other countries. My question here is, who would pay these tariffs? Americans or foreign countries?

Bessent: Senator Wyden, just to understand so I can frame the answer correctly, do you believe that these tariffs are a consumption tax increase?

Wyden: I believe these tariffs, you can call it whatever you want in terms of trying to gussy it up, they're going to be paid for by our workers and small businesses. All through the campaign, we heard they weren't, that foreign countries were going to pay it. I think that's baloney. It's going to be paid for by workers and small businesses. So, your response.

Bessent: Yes, Senator, I would respectfully disagree. And the history of tariffs and tariff theory, optimal tariff theory, does not support what you're saying. Traditionally, we see that the currency -- if we were to say, use a number that has been thrown around in the press of 10% -- then traditionally the currency appreciates by 4%. So the 10% is not passed through. Then we have various elasticities. Consumer preferences may change. And finally, foreign manufacturers, especially China, especially China, which is trying to export their way out of their current economic malaise, they will continue cutting prices to maintain market share.

Wyden: That's an academic view of it, but what I know is the history of this is, it clobbers people of modest means. They're the people who are going to get hit. And all through the campaign, there was a big show that it was going to be paid for by foreigners -- not so.

(emphasis added)

When "optimal tariffs" come up in the public discourse, I sometimes get the sense that people are using the term just to mean "really good and effective" tariffs. "Optimal tariff" has a more specific meaning, though, which you can check out here and here, but also I'm going to dust off my bookshelf for some Samuelson/Nordhaus (Economics, 1989) and Krugman/Obstfeld (International Economics, 1991) explanations.

Samuelson/Nordhaus give the idea of optimal tariffs some credibility as long as you focus only on the impact of the optimal tariffs themselves, but then they point out that other countries will retaliate and therefore everyone is worse off overall:

The "Terms-of-Trade" or "Optimal-Tariff" Argument

One valid argument for a country's imposing tariffs on its trade is that it will "shift the terms of trade in its favor and against foreign countries.'' Recall that terms of trade represent the ratio of export prices to import prices. To shift the terms of trade against foreigners means that levying tariffs on imports will reduce the world price of imports while increasing the prices of our exports. By shifting the terms of trade in our favor we can export less of our wheat and aircraft in order to pay for imports of oil and cars. The set of tariffs that maximizes our domestic real incomes is called the optimal tariff.

... We can understand it in a simple case by considering an optimal tariff on oil. Mill would note that the optimal tariff on oil will raise the price above the foreign price. But with out demand now curtailed, and because we are a significant part of the world demand for oil, the world market price of oil will be bid down. ...

...

Have we not therefore found a theoretically secure argument for tariffs? The answer would be yes if we could forget that this is a ''beggar-thy-neighbor" policy and ignore the reactions of other countries. But other countries are likely to react. After all, if the United States were to impose an optimal tariff of 30 percent on its imports, why should the European Community and Japan and Brazil not put 30 or 40 percent tariffs on their imports? In the end, as every country calculated and imposed its own domestic optimal tariff, the overall level of tariffs might climb to 30 or 50 percent.

But such a situation would surely not in the end represent an improvement of either world or individual economic welfare. When all countries impose optimal tariffs, it is likely that everyone's economic welfare will decline as the impediments to free trade become great. ...

Krugman/Obstfeld are even more skeptical. They start out by noting the possibility of an optimal tariff leading to overall benefits in the case of large countries:

One argument for deviating from free trade comes directly out of cost-benefit analysis: for a large country that is able to affect the prices of foreign exporters, a tariff lowers the price of imports and thus generates a terms of trade benefit. This benefit must be set against the costs of the tariff, which arise because the tariff distorts production and consumption incentives. It is possible, however, that in some cases the terms of trade benefits of a tariff outweigh its costs so there is a terms of trade argument for a tariff.

Then they provide the following useful clarification:

... (By convention the phrase ''optimum tariff" is usually used to refer to the tariff justified by a terms of trade argument rather than to the best tariff given all possible considerations.) ...

This makes my point about about "optimal tariff" not meaning just a really good and effective tariff.

Finally, they pile on the criticism:

The terms of trade argument against free trade has some important limitations, however. Small countries have very little ability to affect the world prices of either their imports or other exports, so that the terms of trade argument is of little practical importance. For big countries like the United States, the problem is that the terms of trade argument amounts to an argument for using national monopoly power to extract gain at other countries' expense. The United States could surely do this to some extent, but such a predatory policy would probably bring retaliation from other large countries. A cycle of retaliatory trade moves would, in turn, undermine the attempts at international trade policy coordination described later in this chapter.

The terms of trade argument against free trade, then, is intellectually impeccable but of doubtful usefulness. In practice, it is emphasized more by economists as a theoretical proposition than it is used by governments as a justification for trade policy.

(Krugman has noted elsewhere that the optimal tariff argument "plays almost no role in real-world disputes over trade policy.")

Over the years, when this subject has come up, I've asked people to point me to a tariff out there in the real world that they think constitutes an "optimal tariff," in the sense of affecting the terms of trade so as to make the country better off. No one has taken me up on it yet, which leaves me skeptical that the term has any practical relevance. But given that, as noted, the term kind of sounds like it just means "really good and effective tariff," we may not have heard the last of it from tariff proponents.

USTR's Model Negotiating Texts: Non-Market Practices and More

Last week, USTR released what it referred to as "Model Negotiating Texts" on a number of issues:

• Competition Model Text
• Inclusive Economy Chapter Model Text
• Non-Market Policies and Practices (NMPPs) Model Text
• Public Enterprise Model Text
• Standards Model Text

There's a lot to take in here, and I'm going to focus on just two things for the moment.

First, in its press release, USTR says: 

As this cover note explains, over the past eight years the United States has reevaluated the laissez-faire approach to globalization, and the Biden-Harris Administration has stressed the importance of building the economy from the middle out. 

And then in the Cover Note USTR adds the following on this point:

The version of globalization that has prevailed for the past three decades has been laissez-faire in orientation, tracking the broader shift in economic governance toward trusting markets to make optimal sourcing decisions. This approach empowered corporate actors to, for example, put downward pressure on wages, as jurisdictions competed for investment based on providing the lowest possible cost structure. That bred race-to-the-bottom globalization -- and that is the version of globalization that is experiencing backlash around the world.

In the past 8 years, the United States has reevaluated that neo-laissez-faire approach. ...

Everyone has already heard my "actually we were never anywhere close to laissez-faire" complaining, so just refer to my earlier posts for that. What I want to mention here is the reference to "eight years." To me, that suggests the authors of these documents see themselves as more aligned with Trump's views on trade than with what came before. If I'm reading that correctly, it's something I'd like to discuss further with Katherine Tai if I ever get a chance to talk with her.

Second, there are some aspects of the NMPPs text that puzzle me, in particular in terms of how they see the scope of this category and what international constraints they think should apply to it.

The cover note says the following about NMPPs:

Non-Market Policies and Practices (NMPPs): The pandemic exposed the extreme nature of our supply chain dependency on the People’s Republic of China (PRC). The PRC’s supply chain dominance is in part due in significant part to non-market policies and practices that are fundamentally anticompetitive in nature. Government intervention on behalf of Chinese companies is designed to facilitate global dominance across a range of sectors, including steel, aluminum, solar, and electric vehicles. Market-oriented economies, and in particular market-oriented democracies, must work together to tackle these NMPPs as part of a broader effort to
promote more resilient supply chains, reduce dependencies on geopolitical rivals, and mitigate the risks of economic coercion. The model text articulates shared values of market-oriented economies and provides tools, including through cooperative measures, to tackle NMPPs.

The text itself then sets out a number of illustrative examples of NMPPs:

3. The Parties affirm that non-market policies and practices of concern include:

(a) adopting and pursuing a non-market industrial plan that targets a specific industry for domestic or global market dominance by domestic enterprises;

(b) directing or pressuring public enterprises engaged in commercial activities or private enterprises to achieve capacity, production, or export levels or market share targets in accordance with a non-market industrial plan;

(c) creating or maintaining non-market excess capacity in industrial sectors through public enterprises or private enterprises;

(d) directing, pressuring, or otherwise interfering with commercial decision making by public enterprises or private enterprises;

(e) placing public officials or officials of the governing political party in private enterprises to monitor, direct, pressure, or otherwise influence commercial decision making;

(f) deploying subsidies in pursuit of non-market industrial policy objectives, including via policy banks, state-owned commercial banks, and government investment or guidance funds;

(g) promoting and sustaining domestic companies as national champions through financial support and regulatory and other preferences;

(h) providing special preferences and competitive advantages to public enterprises engaged in commercial activities;

(i) directing or allowing public authorities to exercise their authority in a discriminatory manner, including by treating domestic enterprises more favorably than foreign or foreign-invested enterprises;

(j) using selective or arbitrary application or enforcement of competition law to achieve industrial policy objectives;

(k) failing to maintain laws and regulations governing insolvency and bankruptcy, or preventing or otherwise interfering with the restructuring according to those laws and regulations, of insolvent or bankrupt enterprises, including through liquidation, in pursuit of the objectives of an industrial plan;

(l) measures that require or pressure the transfer or disclosure of technology, intellectual property (including trade secrets), or confidential business information such that the transfer or disclosure is not consistent with principles of fair competition, including measures that direct or support the theft of technology, intellectual property (including trade secrets), or confidential business information in furtherance of non-market industrial targeting;

(m) engaging in economic coercion, whether through public authorities, public enterprises engaged in commercial activities, or private enterprises;

(n) directing the judiciary to render decisions that serve industrial policy objectives;

(o) pursuing unique national standards when international standards already exist in order to leverage the economic power of the domestic market to promote or compel the adoption of those standards in global markets;

(p) failing to respect labor rights, including by failing to adopt, maintain, and effectively enforce labor laws that protect those rights, which can artificially lower costs for domestic enterprises;

(q) lack of effective enforcement of environmental laws and regulations, which can artificially lower costs for domestic enterprises;

(r) failing to publish final central level and regional level laws, regulations, and other measures that provide subsidies or other financial support to enterprises;

(s) failing to publish all central level and regional level laws, regulations, and other measures that impact the rights and obligations of persons; and

(t) preventing free access to and sharing of relevant information on which to base commercial decisions.

Clearly, these examples are targeted at China. But some of them are broad enough that I wonder if Biden's economic policies could get caught up here. For instance: "deploying subsidies in pursuit of non-market industrial policy objectives, including via policy banks, state-owned commercial banks, and government investment or guidance funds." Aren't the CHIPS Act subsidies, for example, being deployed in pursuit of non-market industrial policy objectives?

I get the sense that they want to allow NMPPs to some degree, but then set a limit which they cannot go beyond. Perhaps it is something along the lines of, "subsidies are OK if they promote domestic industries, but not if they promote them too much." The practical impact seems to be that they are not opposing non-market policies and practices per se. Rather, they are opposing what they see as excessive non-market policies and practices, and trying to draw a line beyond which something is excessive. But it can be very hard to say where that line should be.

The Latest on Appeal/Review in WTO DS Reform

I've been posting about official WTO documents related to appeal/review in dispute settlement reform. The latest one, from the heads of delegation meeting on November 21, is now available. There were no exciting new revelations, but just for the sake of completeness, I'm providing excerpts below of the appeal/review sections:

2.1. Mr. Joel Richards (Saint Vincent and the Grenadines), speaking on behalf of the Co-Convenors, made the following report:

"Our work has entered an even more intense phase, and this is discernible from the sheer number of meetings that we have had since October – six full-day plenary meetings, a workshop and many drafting group meetings. As always, we try to be very deliberate in trying to balance the need to deepen and intensify our work with the circumstances of capacity constrained delegations. In this regard, we must also commend experts for their collaborative and constructive engagement in the process. We are very pleased to confirm that we have made substantive progress on some sub-topics. Since our last meeting, the following elements have moved to drafting:

a. Under the sub-topic Scope of Review:

i. Limiting reviewable claims to those with material impact on implementation (MII) obligations – zero draft expected early next week and will first be discussed by plenary on 27 November.

ii. Clarifying adjudicators' roles in assessing panel facts under Article 11 of the Dispute Settlement Understanding (DSU) – zero draft completed and will be first discussed at plenary on 25 and 27 November.

b. Under the sub-topic Reducing/Changing Incentives to Appeal:

i. Making changes to the existing interim review stage of the panel process such that it provides a more meaningful opportunity for the panel to correct factual or legal errors – zero draft completed and will be first discussed at plenary on 25 and 27 November.

c. Under the sub-topic Clarifying Members' Expectations of Adjudicators:

i. Clarifying Members' expectations with respect to adherence to timeframes – drafting group established and having its first meeting on 22 November.

ii. Clarify that adjudicators should focus on assessing the panel's interpretations, findings and conclusions based on the claims of error put forward by the Parties This element was moved to drafting during our plenary session on Tuesday, 19 November and we are in the process of establishing the drafting group.

...

In terms of Access to the Mechanism, almost all Members consider automatic access to such a mechanism is essential to meet their interests. With respect to Form of the Mechanism, the majority of Members continue to support a standing body. This notwithstanding, we have been continuing a constructive exchange of views on interests and concerns, as well as exploring some interesting ideas based on the practices of some other international adjudicative bodies.

...

Concerning Standard of Review, as stated already, we have moved to drafting an idea to clarify the standard of review applicable to adjudicators' review of a panel's objective assessment of the facts of the case. However, the majority of Members do not consider that having a higher or more limited standard of review for other legal issues would meet their interests. Nonetheless, in the spirit of the constructive and collaborative manner of our work, experts continue to discuss ideas so as to address the interests and concerns of all Members.

Unfinished Business: Bringing China Into the Club of Market-Oriented Countries

Given where U.S. trade policy is at the moment, this doesn't seem like the best time for my latest piece, which is called "Unfinished Business: Bringing China Into the Club of Market-Oriented Countries." But sometimes all you can do is lay the groundwork for the future, which is what I was trying to do here. This is from the conclusion:

The goal of integrating China into the club of market-oriented countries is still worth pursuing. Both China and the rest of the world would be better off if China moved in this direction. While the way things played out after China's accession to the WTO was a missed opportunity, if we make China's economic structure a priority now, as it was in the 1990s, we might see some progress. 

The current political environment may not support this approach, as keeping China out of the U.S. market has become the primary trade objective. And the best opportunity for pushing market-orientation may have been in the years immediately following China’s WTO accession in 2001. Nonetheless, completing the unfinished business of integrating China into the world trading system would still be of value today. It looks as though U.S. trade policymakers are in the midst of trying all other options at the moment, but if and when those do not succeed, the foundation exists for a more productive approach.

In terms of the reaction from China, some of the actions and rhetoric coming out of Washington these days could be characterized as “anti-China.” But establishing and applying a set of rules about market orientation should not be seen as punitive. Rather, it simply reflects what China and other WTO Members agreed to as part of China’s WTO accession. Everyone has an interest in, and benefits from, this system of rules. If approached diplomatically, a renewed effort to push for China to be more market-oriented could actually be part of an improvement in relations between China and the West.

It doesn't come out clearly just from the conclusion, but the core of my argument is that WTO complaints provide the best overall chance of encouraging China to become more market-oriented.

One thing I'm unsure of is how the various China trade hawks think about the structure of China's economy. Many of them focus very heavily on keeping Chinese products out of the U.S. market. For this group, what I've wondered is, would they event want to see China become more market-oriented? Or do they worry that this shift would make Chinese companies harder to compete with? I tried asking this of someone once on social media but didn't get a response.

Katherine Tai on "The Real Purpose of Trade Policy"

As we close in on the end of the Biden administration, I may have fewer opportunities to react to Katherine Tai's thoughts on trade policy. My Katherine Tai tag now has over 60 entries. I've enjoyed writing them, and I hope she has enjoyed -- or at least not been too annoyed by! -- reading them. After she leaves office, I hope for two things: (1) I get a chance to ask her what she thought of all my posts; and (2) she takes a job in which she continues to weigh in publicly on these matters, in which case I can keep the tag going and maybe reach 100 some day. (Maybe she would even consider posting something here?)

Her latest trade policy thoughts are in a new piece in Foreign Affairs entitled "The Real Purpose of Trade Policy." There's a lot in there, and of course as always you should read the whole thing, but I'm going to focus on these passages:

The year 2024 witnessed a number of meaningful anniversaries for the United States and its allies: the 80th anniversary of D-Day, when Allied forces landed on the beaches of Normandy, heralding the beginning of the end of World War II; the 80th anniversary of the Bretton Woods conference, which began less than two months after D-Day and resulted in the creation of the World Bank and the International Monetary Fund; and the 75th anniversary of the founding of NATO, the alliance that eventually enabled Washington and its partners to triumph in the Cold War.

Marking these anniversaries offered an opportunity to reflect on a familiar list of triumphs—not just the defeat of fascism but also the creation of a U.S.-led postwar order built on the NATO alliance and the United Nations, as well as a global financial system that paved the way for an era of economic growth, including through trade liberalization. But the last item is often misunderstood. The victors believed that the path to a durable peace was grounded not in trade liberalization itself but in a broader vision of global governance designed to provide economic security for working people.

... 

World War II globalized the risk of totalitarian dominance, and Roosevelt recognized that similar threats existed at home, from fascism on the right and communism on the left. In his January 1941 State of the Union address, Roosevelt famously identified four essential freedoms: freedom of speech, freedom of worship, freedom from want, and freedom from fear. That summer, he and British Prime Minister Winston Churchill signed the Atlantic Charter. Recognizing freedom from want, they stated that international economic cooperation was for the purpose of securing “labor standards, economic advancement, and social security.”

By the 1980s, the liberal dream of freedom from want had devolved into a neoliberal quest for freedom from regulation. The United States had almost completely lost sight of Roosevelt’s original postwar vision of shared prosperity. The Biden administration set itself the task of recapturing it. The three pillars of the president’s economic agenda—targeted investments, the empowerment of workers, and the promotion of competition—have also been core aspects of his trade agenda. By working to build the U.S. economy “from the middle out and the bottom up,” President Joe Biden moved the country closer to Roosevelt’s vision of durable peace and prosperity.

...

By the mid-1980s, when the Reagan administration launched the negotiations leading to the World Trade Organization, the original postwar vision, which had linked democracy with economic security for working people, had been lost. The safeguards of the ITO charter had fallen by the wayside, and the so-called Washington consensus imposed a doctrine of rigid trade liberalization on developed and developing countries alike. Economics came to be dominated by thinkers such as Milton Friedman and other adherents of the so-called Chicago school. The more pro-democratic approach to capitalism, much of which had been embraced by President Dwight Eisenhower, fell out of favor. The laissez-faire ethos of the 1920s—the model that led to the 1929 crash and the Depression—came roaring back.

The effects of those trickle-down policies have become all too clear. They have left working people behind all over the world, pitting those in one economy against those in another as the private sector prioritizes short-term profit over inclusive, sustainable, durable growth. Along the way, the private sector has been able to exploit labor and environmental rules internationally, as inequality widens and the world experiences a global democratic recession.

...

In the 1970s, industrial policy enjoyed bipartisan support in the United States. The postwar project of rebuilding economies in Europe and Japan had succeeded so well that the United States needed to plan in order to compete. But the demise of the New Deal economic paradigm at home and President Ronald Reagan’s assertion that “government is the problem” made industrial policy a taboo topic.

While the United States abstained from pursuing an affirmative industrial policy, China did not. ... A second China shock is in the offing, and the Biden administration has pursued an investment agenda to prevent that outcome.

Part of that agenda has been creating well-paying jobs at home and supporting a just transition to clean energy. Those opportunities help correct for decades of deindustrialization resulting from trickle-down globalization and seek to begin the process of repairing American democracy by demonstrating that economic governance can deliver for working people. Many U.S. trading partners already have industrial strategies or are developing them. A shared recognition of the need for diversified supply chains, including in clean energy sectors, has created opportunities for Washington to work more closely with them.

I have three reactions here.

First, while the title of the piece refers to the purpose of "trade policy," I'm going to quibble with this characterization and say that I think Tai is talking about something bigger than just trade policy. In the piece, she mentions "a broader vision of global governance designed to provide economic security for working people"; she notes that when Roosevelt and Churchill signed the Atlantic Charter, they recognized freedom from want as an essential freedom and stated that international economic cooperation was for the purpose of securing "labor standards, economic advancement, and social security"; and she references a "broader code of economic ethics."

In my view, these issues go beyond trade policy, which I think of as narrower and focusing on the rules governing tariffs, protectionism, and subsidies. Obviously, a lot of other issues have seeped into the trade policy discussion over the years, but that doesn't make those issues into core trade policy issues so much as expand the international economic cooperation discussion to cover global governance more broadly. If all these other issues are trade policy, then trade policy would cover ... well, just about everything. Along these lines, recall my long ago April fools' day joke about a trade agreement on gun rights. And even without the jokes, thanks to the expansion of the scope of trade agreements, we actually do have trade rules requiring that copyright terms be for the life of the author plus 70 years. Tai seems to be for expansion, but it's worth noting that expansion can go in very different directions, and once you start down that road, it might go in a different direction than you had planned. Of course, it's clear that trade policy does not exist in a vacuum, and has overlaps with a wide range of other economic policies. But I think it's a mistake to classify all these trade-adjacent issues as "trade policy," and "global economic governance" is probably a better description of what she is talking about here.

Second, I don't think the mid-1980s was as "rigid" about trade liberalization as Tai suggests, in the U.S. or elsewhere. The creation of the WTO did tighten up the rules to some extent, but there were plenty of carveouts included as well. It's also worth noting in this context that 1980 was the moment that we saw a big shift in U.S. trade remedies practice, a crucial area of trade policy. A while back, I mentioned a Horlick & Shea paper noting that "the use of antidumping law in the United States increased significantly in the 1980s, with U.S. cases totalling three hundred and forty-six from 1980 to 1986, compared with one hundred and thirty-five from 1970 to 1976." (See also this Doug Irwin paper on the history of anti-dumping activity). As I've said before here on this blog, I'm not sure we will make much progress on crafting good trade policy until we put some more thought into what we are doing on trade remedies. The last time I recall such a discussion was in the early- to mid-1990s, at which point Mankiw & Swagel noted that anti-dumping was the "third rail" of trade policy. By the 2000s, it was mostly just the Cato trade folks who were talking about it, and it didn't seem as though anyone was listening. All the old questions are still out there waiting for a resolution.

Finally, I have a few questions for Tai about her vision for trade policy. First up is this: What do you want to see in terms of the use of tariffs, subsidies, and assorted protectionism around the world? Based on her descriptions of an ideal trade policy, I get the sense she thinks every country should focus on developing its own domestic industries, using subsidies, tariffs, etc. as key tools. But will state-supported industries that do not face much external competition really make the "working people" and "middle class" in all of these countries better off? How exactly do the benefits of corporate subsidies, for example, trickle down to most middle class people? Since none of this is really new, we can look around at all the countries where it has been tried. Have subsidies and tariffs helped the middle class in the many countries who have adopted this approach? I am skeptical that the results have been generally positive for the middle class. Just about every country has tried these policies, and there are many more failures than successes, with workers and the middle class suffering the most in the failures. And for the countries that have industrialized successfully in recent decades, and who used subsidies and tariffs just like everyone else did, there are often explanations for their success other than the subsidies and tariffs.

In terms of the international trade rules that should apply to all this, what I wonder is, does she have in mind any limits on domestic subsidies, tariffs, and other protectionism? If so, what are they? Keep in mind, that's basically what current WTO rules are -- modest constraints on subsidies, tariffs, and other protectionism. Does she want to keep that system, but just make it more flexible? How much more flexible? Because the existing system is pretty flexible as it is.

Also on this point about international rules, I understand that she wants to add new rules on labor and antitrust and the environment. As I commented here, though, one flaw with this idea is that the U.S. may never be willing to accept such rules if they were to have an actual impact on U.S. policy; and another flaw is that the U.S. position on these issues tends to change with each shift in political power within the U.S. (just about everything the Biden administration did is now up in the air in the incoming Trump administration).

That last section had a lot of questions I'd like to hear more from Tai about. As I suggested at the outset of this post, I'd be happy to have her talk about it here on this blog, but if not then maybe she'll write about it wherever she ends up.

Call for Papers: Journal of World Investment & Trade

This is a call for papers from early career scholars in international trade and investment law from the Journal of World Investment & Trade:

Submit your abstract, and if selected, you will be invited to participate in an exclusive workshop where you will receive invaluable advice and guidance from leading experts, including Andrea Bjorklund, Julien Chaisse, Dominic Npoanlari Dagbanja, FHEA PhD, Ming Du, Filippo Fontanelli, Moshe Hirsch, Joanna Lam, Maria Laura Marceddu, Irma Mosquera Valderrama, Krista Nadakavukaren Schefer, Shin-yi Peng, and more! They will guide you through the submission and peer-review process of the Journal of World Investment & Trade.

•⁠ ⁠Deadline for submission of your abstract: 1 February 2025
•⁠ ⁠Announcement of the results: early April 2025

Details of the "Call for Papers" are here. For further queries, contact Dr Maria Laura Marceddu at [email protected].

Call for Papers: Shaping Appropriate ADR in International Law

The International Law Association is hosting a conference on Shaping Appropriate ADR in International Law, on 7 April 2025 in Florence, Italy. The call for papers is here. Here is the conference theme:

As 2025 begins, there is no shortage of international law disputes, in areas ranging from geopolitics to boundaries, trade, investment or environment. As disputes increase, so does interest in efficient, effective, outcomes-focused dispute resolution – whether through adjudication or through alternative means. Growing reluctance to accept binding dispute settlement in some areas of international law makes it all the more important to identify dispute settlement mechanisms that can be both acceptable to the parties and efficient.

The ILA ADR Committee’s April 2025 conference will focus on appropriate ADR in public international law disputes in which at least one party is a State. Are there situations where ADR is generally more appropriate and effective for resolving international disputes, compared to other alternatives? Are particular types of such disputes best suited to ADR, or to some particular type of ADR? Our primary focus will be on non-adjudicatory and non-court processes and procedures in public international law, including but not limited to fact-finding, negotiation, mediation, conciliation, ombuds or transitional justice.

More details from the ILA:

This is an open call which welcomes all viewpoints and experiences. We encourage submissions that draw on empirical evidence and set it into theoretical context.

The conference will be held in person in Florence in hybrid format, with speakers able to hear and speak remotely. Preference will be given to authors participating in person.

Abstracts (up to 500 words) are due by February 5, 2025
Selected authors will be notified by February 25, 2025

We warmly invite scholars and practitioners to participate in this vital discussion.
Submit your proposals to [email protected]

Jake Sullivan's International Economics Legacy

Never having worked in government at a high level (I was a summer intern once a long time ago), I am only vaguely familiar with the idea of bolstering your "legacy" at the end of your time in office. But people who seem to know what they are talking about say this is a real thing that happens, and these people also seem to think this David Ignatius Washington Post piece is trying to do this for Biden administration National Security Advisor Jake Sullivan. The piece focuses mainly on foreign policy, but there was also this bit on economics:

Sullivan came to the White House with a “big idea,” which was that “the American middle class is a national security asset,” as he put it to me. Since 2016, he had been ruminating that there was a disconnect between the United States’ grandiose notion of “exceptionalism” and the experience of ordinary people who felt left behind in the rush to globalization. When Biden was elected in 2020, Sullivan initially wanted a White House job in which he could oversee economic revitalization rather than something at the NSC.

Sullivan’s populist economics were initially out of step with the Democratic establishment. I remember chiding him in the fall of 2016 for encouraging Clinton to reject the Trans-Pacific Partnership, a cornerstone of free trade. The conversation took place at a fancy conference in Aspen, Colorado, where, as Sullivan remembers, the hotel had a menu for dogs. He was adamant that the Democratic elite was missing something fundamental. What he was seeing on the campaign trail that year was an angry, resentful America.

Looking back, Sullivan was right to break with neoliberal orthodoxy. Paradoxically, his lasting achievement in the Biden White House might be in economic rather than foreign policy. With NSC aide Tarun Chhabra, he provided the intellectual firepower for the Chips and Science Act, supply-chain management, infrastructure legislation and other aspects of Biden’s “industrial policy.”

I have a few reactions to all this.

First, in his position as National Security Advisor, Sullivan had more to say than I expected on domestic and international economic policy. My sense when he started had been that he was more of an international relations and national security person than an economics person, but nevertheless he appears to have strong opinions about international economic issues and it's interesting to hear that he "initially wanted a White House job in which he could oversee economic revitalization." He gave a big speech about these issues in 2023, and in my comments at the time, I pointed out what I thought were some flaws in his understanding of U.S. and international trade policy. I see similar problems in the excerpt quoted above. Has there really been a "rush to globalization"? It seems to me that it has all been pretty slow and plodding, with protectionism strongly embedded in both the domestic and international parts of the system.

There is a view out there that the U.S. has been practicing an extreme version of free trade for many years now, but people who work in trade policy know that's not the case. Every "free trade agreement" has a wide range of carveouts. For example, domestic industries have been using anti-dumping laws to protect themselves from import competition all along (this avenue was ratcheted up in 1980 with the shift of dumping/countervail calculations from Treasury to Commerce). Here are just a few examples from the supposedly free trading "neoliberal" 1990s:

• 2.36%-55.77% duties on canned pineapple from Thailand in 1995
• up to 61.67% duties on bicycles from China in 1996
• 4.16%-188.45% duties on tomatoes from Mexico in 1996
• 6.28%-243.87% duties on preserved mushrooms from India in 1998
• up to 54.55% duties on non-frozen apple juice from China in 1999

As another example, U.S. farm subsidies have been used extensively for decades, with careful carveouts from WTO rules providing a legal basis. (For those of us who have been complaining about farm subsidies all these years, the Biden administration's semiconductor subsidies aren't that new and surprising.)

Second, I have no idea what "the American middle class is a national security asset" means, but putting that aside, I wonder what exactly he has in mind when he uses the term "middle class." Does Sullivan think he is middle class? He seems to have objections to the "Democratic elite," but isn't he part of this elite? More generally on the middle class, what percentage of Americans think they are middle class? My sense is that the number is fairly high, which makes me think the category might be so broad that the term is not that useful. The middle class is not a monolith, and if you say you want to help the middle class, you should probably explain which middle class people you think you are helping and how exactly you are doing so.

Several Biden administration policies are mentioned above in this regard. What impact are they having on the middle class broadly speaking? For some of these policies, if there are benefits, from what I can tell they go to a small sub-set of the middle class. To evaluate the overall impact, these benefits need to be balanced against the harms to others in the middle class. To illustrate this, whatever you think of semiconductor subsidies as a matter of economic or security policy, there aren't many people benefitting economically in the short term (a few big companies and their employees mainly), while the middle class as a whole is helping to pay the bill for these subsidies. It's worth talking to people in the middle class to see what they think of things like this, but my sense is this does not happen much in practice. Instead, there is a think tank/White House convergence around what the middle class needs, and then the administration and its allies try to sell the idea to the rest of Washington. What do all of the many millions of people in the middle class think of the idea? Were there alternative ways to achieve the policy goals -- without spending taxpayer money this way -- that some middle class people might have preferred? What do people in the middle class want the administration's priorities to be? These are questions that don't get as much attention as they should.

Relatedly, free trade and globalization have come under attack in recent years (even though we have never been close to having free trade, as noted above), but now that industrial policy has undergone a revival, it's time to put that under the microscope. To what extent are the "ordinary people" referred to in the Washington Post article helped by industrial policy? A significant aspect of the Biden administration's industrial policy seems to mean subsidies to big corporations. People sometimes characterize certain free market policies as "trickle down economics," but aren't corporate subsidies also trickle down economics, in the sense that some portion of the corporate subsidies will trickle down to the ordinary people who work for the company?

As to the politics of all this, in the 2024 election, American voters didn't seem very impressed by the Biden administration's economic policies. Sullivan and other advocates of these policies may want to think about why that was. I can imagine the answer they will give is the one Sullivan offered in the article: “[A focus on rebuilding U.S. economic strength and the middle class is] a strategy measured in decades, where elections are measured in two to four years.” Clearly, he believes in his preferred policies, and isn't going to let the election outcome affect his view that, in the long run, they will pay off. However, it may be worth reflecting on the possibility that, as suggested above, the Biden administration's economic policies were crafted without talking to enough people in the middle class and simply don't reflect what this group most wanted from Biden when they voted for him in 2020.