International Economic Law and Policy Blog

Free Speech and Trade Policy

In my last post, I briefly mentioned this point about free speech from Trump's recent memo on "Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties":

The Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative shall investigate whether any act, policy, or practice of any country in the European Union or the United Kingdom has the effect of requiring or incentivizing the use or development of United States companies’ products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content, and recommend appropriate actions to counter such practices under applicable authorities. 

Along the same lines, a White House fact sheet says:

The Administration will review whether any act, policy, or practice in the European Union or United Kingdom incentivizes U.S. companies to develop or use products and technology in ways that undermine free speech or foster censorship.

I'm thinking out loud a bit here, but I have a few reactions.

First, while there are a small number of free speech proponents for whom anything goes with speech, most people have at least some speech they want to see restricted, with the particular speech they find objectionable varying based on where they are on the political spectrum (e.g., flag burning for some, hate speech for others). For the purposes of the Trump administration's efforts noted above, an important point is that different countries have different values related to speech. The U.S. is probably the most protective of speech, with other countries more willing to impose restrictions. I am skeptical that these cultural differences can be reconciled, and I don't think efforts to push back through trade measures such as tariffs will have much success. Prodding the Europeans to be "more like us" on speech policies isn't going to work any more than prodding them to allow hormone-treated beef has worked. I do think it makes sense for the companies affected by these speech regulations to express their views directly to the governments doing the regulating, but U.S. government efforts here will probably fall flat for the most part.

Second, with regard to the general issue of tech companies using content moderation, I think content moderation is generally a good thing and companies should do it and be transparent about what they are doing. Different people want different online experiences, so there is room for experimentation here. There are a few people who want a speech free for all, and there are web sites and apps that provide it. However, most people want to have some restrictions in place, and ideally what we would see in the marketplace is different sites/apps offering different experiences tailored to particular consumer demands. A decentralized system where social networks can connect to each other while offering different content moderation policies may be a good way to achieve this.

Finally, with regard to government regulation of companies' content moderation practices, I worry that while well-intentioned, this might not go well in practice. For one thing, political leadership shifts back and forth over time, so you may get the regulation you want one day, but then after an election takes place you will be horrified by the new regulation. In addition, the regulation might be too restrictive and close off possibilities for content moderation that some people would like to see. On the other hand, perhaps rules simply requiring transparency in relation to content moderation are limited enough that they would remain useful regardless of who was in charge and what they were trying to accomplish. But I would need to look more closely at some specific regulations in this area to come to a firmer conclusion on this point.

How the US Reciprocal Tariff Plan Could Save the WTO

The US plan to impose reciprocal tariffs is a game changer. If you ask The Economist, Trump’s tariffs “really mean chaos for global trade”. We submit that, if managed well, the opposite could be true: a new balance in global trade and the revival of the World Trade Organization (WTO). We understand that the trade dimension is just one part of a broader global discussion. Yet, we consider that trade policy is one of the key bricks needed to rebuild the wall of global cooperation.

So far, Trump tariffs targeted specific countries (China) or products (steel and aluminium). These tariffs were enacted to protect an industry at home, or as leverage to change something abroad. They were temporary, ad hoc.

Tariffs under the proposed US reciprocal tariff plan, on the other hand, will presumably hit all major trading partners and all products.  Because they are expected to be used as a much-needed source of revenue, they are also likely here to stay. The US tariff on, for example, cars would no longer be 2.5% for everyone (except countries with whom the US has a free trade agreement). Instead, the US car tariff would mirror whatever tariff a trading partner imposes on US cars. Today that means 10% for European cars, 15% for Chinese cars and 75% for Indian cars. These variable rates for one and the same product depending on origin would fly in the face of a key principle of the global trading system that has been in place for close to 80 years: the so-called non-discrimination or Most-Favoured Nation (MFN) rule.

Chaos for global trade, and the end of the WTO?  Perhaps, but it does not have to end this way.

Within days of the announcement of the US reciprocal tariff plan, nations scurried to pledge tariff reductions to avoid being hit by President Trump’s reciprocal tariff. Both India and the EU are looking into lowering their tariffs on cars. But there is a wrinkle: unlike the US, the EU remains deeply committed to the WTO. So technically, if the EU reduces its car tariff from 10% to 2.5%, it should grant this benefit not just to US cars but to cars from all WTO members including, for example, Chinese cars. For the EU and most other countries willing to lower their tariffs, this creates a serious free-rider problem. China, in the case at hand, would benefit, without giving anything in return.

What can be done?

Instead of hurried, bilateral discussions between the US and its major trading partners such as the EU, aimed at avoiding the immediate imposition of a US reciprocal tariff, all major trading nations ought to sit around the table and reassess the balance of trade concessions agreed upon most recently--which was more than 30 years ago in the lead up to the creation of the WTO. Though trade concessions were considered to be on balance “reciprocal” in 1994, the world has dramatically changed. Yet, no update or re-adjustment to this balance has happened since.

It is not just President Trump who seeks reciprocity.  The WTO itself was fundamentally built on a reciprocal balance of trade concessions. It was only once all WTO members considered the exchange of trade concessions (including non-tariff concessions such as protecting intellectual property rights and special considerations for developing countries) to be sufficiently reciprocal that MFN obligations kicked in. MFN does not operate in a vacuum. It is preconditioned on reaching a state of rough equivalence in trade concessions, understanding the different economic status of various countries. But once this reciprocity is seriously out of kilter, applying MFN no longer makes sense.

The problem is that many consider the WTO to be hopelessly blocked from reaching a new consensus on even small items, much less a fundamental rebalancing of the terms of trade.

The good news for the WTO and for President Trump is that a procedure already exists that permits a single country to trigger a re-negotiation of current tariff levels. It is Article XXVIII of the General Agreement on Tariffs and Trade (GATT), pursuant to which any WTO member can unilaterally change its tariff commitments, subject to negotiating compensation with those countries that are most affected by the tariff change (in effect, countries representing 10% or more of imports). Although the US has not triggered Article XXVIII, that is exactly what it is doing in practice: telling other nations that it wants to pull back US tariff commitments and replace them with a new balance of concessions.

Instead of purely bilateral discussions with (and retaliation threats against) the US, the EU and other major trading nations should coordinate a broad-based Article XXVIII re-negotiation process. If managed properly, this could, in effect, turn into the biggest tariff negotiation round since the creation of the WTO in 1994, with the potential to create a fairer and more enduring result.

These tariff negotiations will likely differ from those in the past in one key aspect: tariffs could not only go down, but they could also go up (as against all WTO members or only some). Indeed, the US reciprocal tariff plan calls for putting a tariff on imports not just to match the tariffs imposed on US products abroad, but in addition, to add to that tariff the cost of certain non-tariff barriers.  To do this, non-tariff barriers, other forms of discrimination, subsidies and regulations or state interventions that put foreign producers or products at a disadvantage will be “priced” and those prices will translate into tariffs on goods exported to the US. Imposing such “priced-in” tariffs would in most instances lead to the US raising their tariffs, rather than lowering them.

The difficulty for the WTO is that it was created on the assumption that economic models (even that of China) would converge around the Washington Consensus, including its principle of reducing trade restrictions, privatizing state-owned enterprises, and abolishing barriers that restrict competition or foreign direct investment.  Under this model, tariffs should only go one way: down.

We are no longer living in such a world. The reality today is that the political and economic organization of states varies dramatically and that many or most of these differences are here to stay. To enable trade between such differently regulated states, interface mechanisms are needed. One such interface is to put a price on the major differences. Think of the competitiveness impact of certain forms of state intervention or regulation, or the lack thereof, including major differences in social or environmental regulation, competition policy, or even free speech. These are all sensitive topics that a world trade organization should not attempt to iron out. What it should do instead is bring countries around a table to discuss what it would take to have a roughly balanced trade regime (starting with reciprocal tariff levels) that takes these major differences into account. This “tariffication” of the cross-border spill-overs of major divergencies cannot and should not be calculated to precision. Political agreement on an overall, reciprocal balance would suffice. Defusing major divergencies between the US and China, the EU and the US, the EU, the US and India, and others, by putting a “tariff price” on them would also take the sting out of national security exceptions and even trade remedies, which are now being used (often unsuccessfully) to address problems that go beyond what these safety-valve instruments were designed for.

Such a re-set or de facto new “round” of tariff negotiations would take some time. But under the WTO rules, it cannot be blocked by any one country. When Article XXVIII negotiations over a tariff line fail, the country proposing the change can implement it unilaterally. In response, the major exporters of the product concerned can withdraw equivalent concessions. Agreement or no agreement, reciprocity is the rule. The US may, at first, prefer to re-set reciprocity through bilateral negotiations. With time, it may realize, however, that the WTO is ultimately built on the same reciprocity principle and that working within the WTO structure would enhance the value of bilateral deals by multilateralizing and stabilizing them under one roof.

The WTO leadership has a key role to play. The Director-General of the WTO should immediately start consultations with WTO members to mobilize the energies of members with a view to address in an orderly fashion a number of imbalances which have triggered the radical reactions of the new US administration. The EU faces major challenges similar to those that motivated the US to push for a new reciprocity approach. Those imbalances need to be urgently tackled after 30 years of immobilism. It should be agreed that discussions and negotiations amongst members should be finalized within a limited horizon of 6 months. If no agreement is reached, individual WTO members can unilaterally modify their tariffs in line with GATT Article XXVIII.

There are several other very important issues that WTO members need to address, including trade and inclusiveness, the rise of industrial policies and subsidies and improving the deliberative function of the WTO. It would be impossible to practically deal with them during such a short period of time. Yet, a revitalized WTO following a positive outcome on reciprocal tariffs would create the conditions for better international cooperation on these matters too.

If this could materialize, instead of chaos for global trade and the death knell of the WTO, Trump’s reciprocal tariff plan could be a boost for WTO reform and the creation of a new, fairer balance in global trade.

Hervé Jouanjean, former Director-General at the European Commission and Senior Trade Expert at Cassidy Levy Kent (Europe)

Jennifer Hillman, Professor from Practice, Georgetown University Law Center and former US Ambassador, General Counsel at the USTR and Member of the WTO Appellate Body

Joost Pauwelyn, Professor, Geneva Graduate Institute and Partner, Cassidy Levy Kent (Europe)

(This essay was written in the authors’ personal capacities)

The Trump Administration's New Push on Foreign Digital Taxes and Regulations

I have done a number of posts over the years on what U.S. trade officials mean when they talk about foreign digital taxes and regulations "discriminating" against U.S. companies. Are they talking about the intent of the measure or just its effect? On the latter, is a disparate impact on U.S. companies enough to qualify?

The latest Trump administration move on these issues makes my question irrelevant, however, as they go beyond the term "discrimination" in ways that make clear that both intent and effect are covered. A memorandum issued by Trump on Friday states:

Sec. 2.  Policy.  It is the policy of my Administration that where a foreign government, through its tax or regulatory structure, imposes a fine, penalty, tax, or other burden that is discriminatory, disproportionate, or designed to transfer significant funds or intellectual property from American companies to the foreign government or the foreign government’s favored domestic entities, my Administration will act, imposing tariffs and taking such other responsive actions necessary to mitigate the harm to the United States and to repair any resulting imbalance.

In taking such responsive action, my Administration shall consider:
 
     (a)  taxes imposed on United States companies by foreign governments, including those that may discriminate against United States companies;
 
     (b)  regulations imposed on United States companies by foreign governments that could inhibit the growth or intended operation of United States companies;
 
     (c)  any act, policy, or practice of a foreign government that could require a United States company to jeopardize its intellectual property; and
 
     (d)  Any other act, policy, or practice of a foreign government that serves to undermine the global competitiveness of United States companies.  

...

Sec. 3.  Agency Responsibilities.

...

(c) The Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative shall jointly identify trade and other regulatory practices by other countries, including, without limitation, those described in section 2 of this memorandum, that discriminate against, disproportionately affect, or otherwise undermine the global competitiveness or intended operation of United States companies, in the digital economy and more generally, and recommend to me appropriate actions to counter such practices under applicable authorities. ...

Under this policy, "discriminatory" is one element to be targeted, but it is not required, as a finding that the measure has a "disproportionate" impact on American companies is enough for the U.S. government to take action. (The memo also includes a category of measures "designed to transfer significant funds or intellectual property from American companies to the foreign government or the foreign government’s favored domestic entities." I'm not totally sure what is covered by this, but it seems like it would be broader than "discriminatory" as well.)

This is a much broader and more aggressive approach than the Biden administration took, as the Biden folks seemed to want to leave plenty of room for regulation (both foreign and domestic) and were seeking to negotiate international rules to address the tax issues. 

With regard to how any Trump administration fight on these issues will be undertaken, unilateral action under Section 301 certainly looks like it is going to play a prominent role. Here is the plan for digital services taxes:

(a)  The United States Trade Representative shall determine, in accordance with applicable law, whether to renew investigations under section 301 of the Trade Act of 1974 (19 U.S.C. 2411) of the DSTs of France, Austria, Italy, Spain, Turkey, and the United Kingdom, which were initiated under my Administration on July 16, 2019, and June 5, 2020.  If the United States Trade Representative determines to renew such investigations, he shall take all appropriate and feasible action in response to those DSTs.

(b)  The United States Trade Representative shall determine, consistent with section 302(b) of the Trade Act of 1974 (19 U.S.C. 2412(b)) (section 302(b)), whether to investigate the DST of any other country that may discriminate against United States companies or burden or restrict United States commerce.  He shall further determine whether to pursue a panel under the United States-Mexico-Canada Agreement on the DST imposed by Canada and whether to investigate Canada’s DST under section 302(b).

While Section 301 will be important, note the mention of the USMCA, pursuant to which the Biden administration had requested consultations with Canada. On that issue, now we will wait and see if the Trump administration decides to ask for a panel.

A White House fact sheet -- which talks about "America's sovereignty over its economy" and "overseas extortion" -- elaborates a bit on all this, and, not surprisingly, points to the Europeans as potential targets of "scrutiny":

Regulations that dictate how American companies interact with consumers in the European Union, like the Digital Markets Act and the Digital Services Act, will face scrutiny from the Administration.

And the memo states that:

The Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative shall investigate whether any act, policy, or practice of any country in the European Union or the United Kingdom has the effect of requiring or incentivizing the use or development of United States companies’ products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content, and recommend appropriate actions to counter such practices under applicable authorities. 

I find it interesting to watch the Big Tech-Trump administration dynamic in action. The administration pushes Big Tech hard on a variety of domestic issues, and then fights for them on international issues. In terms of the outcome of this particular international fight, I'm not sure how much they are going to get from the Europeans on these regulatory issues, and they are probably aware of the limitations. It's possible that the fight is mainly designed to prevent the "Brussels Effect" from extending these kinds of regulations to other countries.

The fact sheet also says this: "Rather than position their own companies and workers for success, foreign governments have been taxing the success of America’s companies and workers." One thing I've wondered, given all the recent talk and action about industrial policy, is whether foreign governments will up their efforts to "position their own companies and workers for success" in the tech sector. If they did and were successful, that seems likely to escalate the existing trade tensions.

Finally, stepping back a bit and looking at the bigger trade policy picture, what we are seeing from the Trump administration are (1) broad and varied proposals for U.S. tariffs, along with (2) strong demands for foreign governments to lower their tariffs and remove their taxes and regulations, even where the latter are not intentionally discriminatory. How are the two sides of this equation going to come together? Is there a massive trade war coming, or will there be some kind of grand bargain that mostly keeps the peace? I have no answers at this point.

Lighthizer's Proposal for the Trading System

Former U.S. Trade Representative Robert Lighthizer had a recent NY Times op-ed in which he argues for some big changes to the trading system. He starts off by complaining about other governments' industrial policies:

What brought down the postwar trading order was the rise in many countries of pernicious industrial policies. In this drama, those with continuous, large trade surpluses are the real villains.

China, which recently announced a nearly $1 trillion trade surplus for 2024, has demolished the system. But it is not China alone: Other chronic surplus-trade countries, such as Germany and Vietnam, have also adopted policies across their economies intended to shift resources from their consumers to their manufacturing sector to increase exports.

The innocent parties are countries like the United States and Britain that have consistently run sizable trade deficits. Policies that produce large deficits, even if they include tariffs, are not protectionist. They are the opposite.

With regard to specific industrial policies of concern, he notes the following:

Though tariffs command a lot of attention, they are not the main element of these destabilizing industrial policies. The more effective features are things like government subsidies; market-access limits; rigged health and safety standards; directed banking systems that lend below market rates to manufacturers; labor laws that keep wages down; currency manipulation; predatory tax systems; lack of essential regulation in areas like the environment ...

And then here is the crux of his proposal for a new system that he says would eliminate imbalances:

Countries with democratic governments and mostly free economies should come together and create a new trade regime. This system could enforce balance by having two tiers of tariffs.

One higher level would apply to countries outside the group. These would be nondemocratic countries as well as those that insist on using beggar-thy-neighbor, aggressive industrial policies to run large surpluses. Those tariffs over time would reduce those surpluses.

The countries within the new regime would pay lower tariffs, and they could be adjusted over time to ensure balance. When a country in the group begins to run substantial surpluses, the other countries could increase their tariffs on it. Those new higher tariffs would be reduced when the surpluses were eliminated.

I have a few disagreements with his arguments, including the following.

First, his statement that "[p]olicies that produce large deficits, even if they include tariffs, are not protectionist" is confusing, unless he is using some definition of "protectionism" that I'm not familiar with. There are various ways to define protectionism, but this is a well accepted one: "restriction of imports by means of tariffs and/or NTBs, and thereby intended to insulate domestic producers from competition with imported goods." Under this definition, tariffs imposed to protect domestic industries from foreign competition are protectionist, regardless of the country's trade balance. The fact that a country runs a trade deficit is irrelevant to determining whether it is engaging in some degree of protectionism. (All countries are protectionist to some extent.)

Second, while I, too, worry about industrial policies, it's worth pointing out that the trading system actually provides some pretty good disciplines on these policies. Unfortunately, those disciplines have not been utilized enough. Of course, there are some gray areas in which I'm not totally sure how WTO rules would deal with the issue. For example, while the GATT does have a provision -- Article XV:4 -- that could be applied to currency manipulation, it could use a lot more detail and clarity. But there's only one way to find out: File WTO complaints. Throwing up your hands and declaring defeat before trying doesn't seem like a productive approach. And if the existing rules turn out not to work, the solution is to make proposals to fill any gaps, as has happened with currency manipulation in the USMCA.

Third, in terms of his specific tariff proposal, a big problem with it is that it does not account for the fundamental reasons for imbalances. His proposal tries to use tariffs to create balance, but that approach won't achieve his goal. His own argument illustrates why. In the piece, he points out how high U.S. consumption rates are relative to other countries, naming China, Germany, and Ireland in particular. But then his proposal does not fully address this key issue. He doesn't spell all this out explicitly, but my sense is he thinks that high U.S. consumption rates/low U.S. savings rates are fine and do not need any adjustment, whereas everyone else's low consumption/high savings rates have to change. I don't think that's realistic or workable though. In this regard, I think most people would agree that, for example, Germany is going to continue to save more and consume less than the U.S. When you combine that with U.S. policymakers continuing to insist on the dollar being the world's reserve currency and on adopting policies that promote a strong dollar, you will not end up with trade that is balanced bilaterally between the two countries. Lighthizer's tariffs will protect domestic industries from foreign competition, but they won't eliminate trade deficits, because those deficits are mainly the result of macroeconomic factors (also, new U.S. tariffs could increase the value of the dollar).

Further on this point, Lighthizer says that "[l]ow domestic consumption is largely a result of policy, not the peculiarity of national character." I agree that policy plays a role here (although I think he underestimates the role of culture), and I would point out that if you are an influential American political figure, as I think it's fair to say Lighthizer is, you have an opportunity to influence U.S. policy. In this regard, Lighthizer could advocate for the United States to change its approach to government/private savings, for example by adopting policies to rein in its fiscal debt. I would be very interested to see what that change in policy did to the trade balance. (The fiscal debt is not the only thing that matters for the trade balance, but I think just about everyone agrees that it matters to some extent.)

Some Quick Thoughts on "Reciprocal Trade and Tariffs"

I'm going to flesh this out a bit more later, but I wanted to post something now on today's Trump administration memo on reciprocal trade and tariffs, which involves agency investigations of "the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners," as well as proposals for remedies. (The Trump administration did a report on similar issues during Trump's first term).

Trump's memo mentions four specific areas to look at in making U.S. trade relations "reciprocal" with its trading partners:

• Tariffs imposed on U.S. products
• Unfair discriminatory, or extraterritorial taxes, including VAT
• Non-tariff barriers or measures and unfair or harmful acts, policies, or practices, including subsidies, and burdensome regulatory requirements
• Exchange rates, wage suppression, and "other mercantilist policies"

There is also a final category of "any other practice" that imposes any unfair limitation on market access or any structural impediment to fair competition with the United States.

Setting U.S. tariffs reciprocally with each trading partner and trying to take into account each of these items sounds like an administrative and methodological nightmare. But putting that aside, let's talk briefly about each one.

Tariffs

• The tariffs imposed by many U.S. trading partners are actually not much higher than those of the U.S., so the scale of any unequal tariffs is probably less than Trump is imagining. Canada and Mexico are part of the USMCA, under which the three countries have eliminated virtually all tariffs on trade between each other. And according to the WTO, the average tariff rates imposed by the EU and Japan are 5.0% and 3.7% respectively, which is not much higher than the U.S. rate of 3.3%.
• At the same time, some developing countries do have significantly higher tariffs. It is worth noting that, in recent decades, U.S. demands in trade negotiations have gotten away from pushing for lower tariffs, and instead have focused on issues such as stronger intellectual property rules and protection of labor rights. If the tariff system is out of balance, with U.S. tariffs higher than those of trading partners, it is at least in part due to the U.S. emphasis on other issues. A shift back towards lowering foreign tariffs as the focus is possible, but it would likely mean giving up some of what the U.S. was able to achieve in these other areas.
• The data used for national tariff comparisons tend to focus on the standard tariffs that are set out in a government's tariff schedule, but there are other kinds of tariffs not included here. One example is anti-dumping tariffs, which are used to counter low priced imports, and can be imposed on specific products after an investigation by government authorities. For example, in 2024, the Biden administration imposed anti-dumping duties of 744.81% on Slovenian mattress imports. When you take into account tariffs of this type, U.S. tariffs don't look as low anymore.

Unfair Taxes

• Part of the focus here is on things like digital services taxes affecting U.S. tech companies, which a White House fact sheet mentions. I'm not a tax expert, but I am aware of the general problems of companies taking advantage of favorable tax treatment in certain countries to lower their tax bills and governments trying to fight back by capturing some tax revenue from companies that generate income in their country. From the outside, this all looks like a mess, and I've never had much hope that international coordination was going to get anywhere. With regard to Trump's proposal to respond to certain taxes with tariffs, I would think that would just lead to retaliation by the targeted countries.
• Concern about foreign VATs is a long-standing issue that Gary Hufbauer has written and talked a lot about over the years. Looked at on its own, the VAT is a non-discriminatory tax. But I think the issue arises because you have a U.S. system that relies heavily on incomes taxes that are not destination adjusted, whereas many other systems rely less on income taxes and more or destination-adjusted VATs. Does that situation lead to trade distortions or unfairness of some sort?

Non-tariff barriers

• Governments have been complaining for decades about how other governments' domestic regulations act as trade barriers, and there is an extensive set of rules in trade agreements that govern the issue. There has been some interesting GATT/WTO litigation about this over the years, sometimes productive and sometimes not in terms of resolving disagreements. Will unilateral tariffs imposed to counteract foreign government regulations be successful in inducing a change in policy? Or will they just lead to retaliation by the foreign government? As with the taxes noted above, my money is on the latter, but we'll see how this plays out.

Exchange Rates

• My view of currency manipulation is that it can be a real problem and it would be nice to have effective international rules to govern it. There are very brief rules on it in GATT Article XV:4, but something more detailed would be useful (some FTAs go a bit further). As with the previous two items though, I'm skeptical that unilateral tariffs imposed as a response will be helpful in addressing this issue.

Tooze vs. Tai on the Political Impact of the Biden Administration's Policies

At a recent conference in Brussels, on a panel entitled "The Battleground for Global Economic Domination: What's Ahead for Europe, as the US and China Fight for Supremacy?", Adam Tooze of Columbia University and former U.S. Trade Rep. Katherine Tai had an exchange on the political impact of the Biden administration's economic policies that I thought people might find interesting. I am providing a partial transcript, but you may want to check out the video as well.

Here is Tooze making the case that in political terms, the Biden administration's economic policies failed (starts at around 1:12:40)

The single thing to say about the Biden administration, in the end, unfortunately, is that in its central political objective, which was to prevent Trump II ... the fundamental reality about everything you've just heard is that, though this is a strategy which sounds great, it failed in its absolutely central mission, which was to prevent a second Trump administration.

...

If the case for the Biden administration was that it was able to rally working class Americans, blue collar Americans, around the Biden administration, the evidence goes against that. In other words, whatever the strategy's intentions were, it didn't work. Right? In terms of class polarization, the electional outcome in last year was every bit as polarized, and the moving apart of the American electorate into a group which is dominated, on the one hand, by college educated folks like ourselves, and on the other hand, blue collar Americans with less education, is more extreme than it was in previous elections. This is not something you can blame the Biden administration for. It's a long running trend. But this well intentioned strategy did not, in its most fundamental outline, succeed.

Tai responded as follows (starts at around 1:29:25)

There's a very moving story, and I believe the story's origin is Irish, and you really have to hear Martin Sheen, our great American actor, tell the story. So he does it, it's on YouTube. Take a look. But I'll do my best rendition, which is, a man dies and he goes to heaven, and he's at the pearly gates, and he's greeted by St Peter. And St Peter looks at him and says, Did you live a good life? And he says, Yes, I believe I was a good person. I tried to do the right thing. And St Peter said, great, great. Now roll up your sleeves. And the man's confused, and he says, Well, okay, why? So he rolls up his sleeves, and St Peter leans over and looks at him and says, well, but where are your scars? And the man says, Well, why I don't have any. And St Peter says, Well, was there nothing worth fighting for? So Adam, I think my response to you on your point of political failure is this. I don't want anybody to leave this room thinking that they have no role in what happened or what's going to happen. Where are your scars, Adam? I can show you mine, ... It was not fun being Biden's US Trade Representative, and I can tell you about the beatings that I have taken here in Brussels and across Europe. Where was Europe these past four years? Our futures are bound together, fortunately or unfortunately, the future is not yet written, and yes, these next years are going to be extremely painful. The last nine days, last eight days, we're on the ninth day, are just the beginning. But I think that the most important part of this conference and this conversation is for everyone here to understand that they have agency and that they are a part of the problem we are facing now. And therefore, each and every one of us is also a part of any solution that there may be in the future.

Their debate here is over whether the Biden administration's economic policies -- and given that Tai was in charge of trade policy, I'm going to focus on that sub-set of economic policies -- worked in a specific political way, that is, to appeal to a particular group of U.S. voters. Given the election result, it seems clear that the policies did not accomplish their ultimate objective. (I'm not totally sure what Tai meant by "where was Europe," and I'd love to hear her elaborate on this point.)

Having said that, let me offer a mildly hot take on this issue, with the caveat that it is purely based on instinct and I claim no particular expertise in political analysis or strategy. With that in mind, here's what I think.

At this moment in U.S. politics, it seems to me that personality plays a big role in presidential elections. I'm not sure policy matters as much as some people think, and to the extent it does, the framing may be more important than the actual policy. For example, if the goal is to put forward a trade policy that is for the middle class, you can frame either free trade or protectionism that way. The key is, can you do the framing in a way that appeals to the people you are trying to convince. 

Applying that view here, my sense of what happened in the last presidential election is that Biden's unpopularity, and Kamala Harris's subsequent loss, were in large part based on Biden's age and unlikability (and belated withdrawal from the race). As to the role of Biden's economic policies, while inflation was clearly a factor in the election, my point is that how the candidate talks about an issue such as inflation is more important than whether inflation exists. And then on trade policy, keep in mind that polling consistently shows that people don't care much about trade policy. As a result, adopting a specific set of trade/industrial policies isn't likely to be a significant factor in winning elections, no matter how you talk about them.

Regardless of whether I'm right about any of that, there is a political reality here that cuts in the other direction. There are many people who believe that policy plays a more important role than I've suggested, and the perception going forward may be that Biden's trade policies failed in political terms. When the Democrats are debating which way to go on trade policy in the future, opponents of Biden's policies are going to be able to point to Biden's approach and say "that failed, let's not do it again." I have no idea how those debates will go, although sticking with my earlier point, I think the outcome mainly depends on who the political players are and how they present their arguments.

Notes from the Jamieson Greer Hearing

Jamieson Greer had his Senate nomination hearing yesterday. Here are a few exchanges that I found to be of interest.

Historical Examples of Successful Universal Tariffs

Senator Ron Wyden (D-OR) asked a great question about the historical record of universal tariffs, which is something that Trump has talked about:

Wyden: I thought I'd start by asking you, can you give us an example ... in the country's history, where there were universal tariff hikes and where somehow the country benefited? Where are the examples that you cite for this Trump approach in American history?

Greer: Senator Wyden, thank you for that question, and I think it's indeed instructive to think about our history with respect to trade policy. As many on this committee likely realize, until about 1913 the United States government was entirely funded, almost entirely funded, from tariff revenues, including during the latter part of the 19th century, when America truly was exploding as an international industrial powerhouse and we had a relatively high tariff rate. At the same time, we saw countries like the United Kingdom lowering their tariff rates and actually falling out of industrial competitiveness. I would say also, you have instances in the past where we have seen what happens when the reverse happens. For example, when we gave China permanent market access to the United States ...

Wyden: What I'm asking about is an example for the idea that the President has made number one on the trade policy list: a universal tariff. I like a tool box. I'm prepared to put a tariff in there, and there are instances where it's valuable. But I'd like to see some kind of lode star here that shows us why we ought to go in the direction the president's going, because I haven't seen one.

Greer: Certainly. Well, when you look at the trade policy memo that the Administration released, they have a part about fair and balanced trade, and a part of that, they discuss what you've mentioned, Senator, which is the possibility of a universal tariff, and it's talked about in the context of our trade deficit, which is over a trillion dollars. And part of the question is, how large of a trade deficit do we want? Because the trade deficit represents in large part manufacturing jobs that have gone overseas and other things like that. And a universal tariff is something that should be studied and considered to see if it can't reverse the direction of that deficit and the offshoring that I don't ...

Wyden: I'll hold the record open. I've asked three times for an example of where there was history that the President's approach, the across the board tariff approach, rather than the targeted one, made sense. We'll keep the record open. Let the record note that I asked it three times and there were no examples.

It will be interesting to see if Greer comes back with anything on this as part of the questions for the record.

I will also note here that additional U.S. tariffs aren't likely to deal with the trade deficit (which Greer brought up), if you consider that to be a problem. If the deficit is a real concern, the Trump administration should look at the macroeconomic causes.

WTO Dispute Settlement vs. Section 301

Senator Bill Cassidy (R-LA) brought up the issue of using WTO dispute settlement for market access:

Cassidy: You have ... expressed skepticism about the need for binding dispute mechanisms at the WTO. But my rice producers and others have won decisions at the WTO on commitments by other countries on agricultural subsidies, and yet they're not enforced. And so are my agricultural people out in the cold? There are disputes that they win, but they now don't even have a dispute, and if they get the dispute it's not enforced. Help my rice producer, how are they going to handle it.

Greer: Senator, I think you're exactly right, and that's part of the reason why I show skepticism sometimes about the WTO, because we win a case, we get a result, and then it's not fixed, or it's fixed on the surface ...

Cassidy: There's two different issues, though. One, you got to win the case, and then you got to enforce it. But the first step is winning the case, and that I said, there's been some progress in. It's a lack of enforcement, which is critical. But that doesn't necessarily throw out winning the case, if you follow what I'm saying.

Greer: Certainly. I mean, listen, if you're trying to get rid of a trade barrier, there are a few ways to do it, right.  You can try to negotiate it, which is, on its face, not always successful if you don't have the leverage behind it. If you have a case, you have some legitimate authority to go to them and say to change it. We also have domestic laws like Section 301 and others that can identify and detect unfair trading practices.

Cassidy: Now those are, 301 and all those are kind of like economic necessity. Are you saying that we would use other mechanisms, abandon, if you will, WTO IDR, to use a bunch of abbreviations, and rely upon existing laws domestically to provide a tariff relief?

Greer: So I think we need to use any tools we have available to get relief so we can have the market access ..

Cassidy: The question is, why would we be tossing a tool out? If we want any tool, but we're tossing out the tool, the IDR, even if there's been faulty commitment, it seems to me like we're taking a tool, and we're getting rid of it, when we just said we want every, any tool that we can. 

Greer: Senator, I think, part of the problem we've had with with the WTO, and this has been, you know, bipartisan, I've seen letters from the chairman and the ranking member talking about how we need to make sure that the WTO doesn't undermine our trade rights and our trade laws. Listen, if we can use the WTO effectively to negotiate rules or to get a good panel result, that's fine, but we need to, to your point, we have to have enforcement. And at the end of the day, what that means is USTR has to go to the country and enforce the law, and sometimes that means imposing tariffs on them. We say trade enforcement, that means tariffs.

I'm glad Cassidy raised this, although I'm not sure the conversation got at the points I was hoping would be discussed. (And I wasn't sure what he meant by "IDR" -- if I even heard that right. Maybe International Dispute Resolution?)

On the substance, a key issue here is this: How effective is WTO dispute settlement for the U.S. in opening foreign markets, as compared to the use of Section 301 as an independent tool? This is a difficult thing to quantify, but my impression is that WTO dispute settlement is somewhat effective in many if not most cases, whereas Section 301 on its own is not very effective at all (using Section 301 to enforce adverse WTO dispute settlement rulings is something different). However, my impression is also that Greer and the Trump administration disagree with that view, and plan to use Section 301 on its own a lot more. As a result, in four years we should have some new data to analyze for this comparison.

Digital Trade and Discrimination against U.S. Companies

Several Republican Senators brought up concerns with foreign digital taxes and regulations, and Greer shared their concerns, so I think the rest of the world better get ready for a U.S. offensive here. Here were the exchanges:

Senator Mike Crapo (R-ID):

Crapo: Let's move to digital trade. We lost ground during the last administration because we turned our back on digital trade rules, including promoting data flows, combating forced technology transfer and promoting non-discrimination. A number of jurisdictions, including the European Union and South Korea, utilized that opportunity to advance measures that target US technology companies with special requirements or taxes while exempting their domestic companies or even Chinese companies. Do you agree that ensuring US technological leadership means that we need to confront these types of measures?

Greer: Yes, Chairman, I strongly believe that we need to do that again. This is an area where the United States is very competitive, and I understand that ... we are having a domestic conversation about how to regulate digital trade and technology companies, etc. And my view is, that is where the conversation should be happening. We should not be outsourcing our regulation to the European Union or Brazil or anyone else, and they can't discriminate against us, and it won't be tolerated.

Senator Todd Young (R-IN):

Young: Mr. Greer, if confirmed, how will you work to prevent the discriminatory treatment of US companies in key global markets and ensure they're competing at a level playing field when it comes to digital trade?

Greer: Senator, in the first Trump administration, we took action under Section 301 to combat discriminatory digital services taxes. I know there are many jurisdictions in the world right now that are doing this and other measures to try to control the business models of our digital champions, and I want to make sure that if anybody's regulating our digital companies, it's going to be us, and they can't discriminate against it. And I think that we need to explore using Section 301, and other measures to make sure that we're able to stay competitive global.

Senator Thom Tillis (R-NC):

Tillis: I would like, with unanimous consent, to submit this commentary from Mr. Greer just recently on the posture that we should have towards South Korea.

...

South Korea, you've very articulately, in your commentary, have identified the threat there, and the way that they're trying to counter unfairly, I believe, our big tech, and high tech in general, businesses, and some in their own country, and silent on China.

I assume the Greer commentary referenced by Tillis is this one.

With regard to all of these digital trade concerns, I'll just mention the issue that I've brought up many times: What does everyone mean by "discrimination"? Is this about the intent of the regulation, or is disparate impact on U.S. companies enough to qualify? These are very different approaches, with a much different effect on regulatory autonomy/sovereignty.

Security Exceptions

Senator Tina Smith (D-MN) was worried about how Trump's recent tariff threats/tariffs might affect negotiations of trade agreements, and Greer cited the essential security exception in response:

Smith: How do you go in and try to negotiate in good faith with potential trading partners when we have a president who appears willing to tear up agreements on a whim, on an issue that might be completely unrelated to trade?

Greer: It's important to remember that when we have trade agreements, they all contain an exception for measures related to essential security. And if dealing with illegal migration of criminals or dealing with fentanyl or issues like that come up, this is very clearly an issue of essential security.

Not that there was much doubt, but this confirms that the Trump administration will take a broad view of invoking the security exceptions in trade agreements.

Values-Based Trade

Senator James Lankford (R-OK) brought up some non-trade issues such as religious liberty:

Lankford: Countries want to trade with the United States, because we produce great products, and our manufacturers are tremendous at what they do, and they put out a good product there, but the whole world wants it. But that also means when you sit down with them and people say, we want to open up a trade agreement, people are going to want to talk about, me and my colleagues are going to talk about, labor agreements and how we're making sure there's not unfair labor practices, what we're doing to be able to make sure that we're not having unfair competition. But we also have standards in there for things like religious liberty and a free press and all those things. So I would just encourage you, you are an ambassador in many ways, on many issues. And when you sit down on trade agreements, you have the ability to be able to sit down to be able to press countries around the world that are oppressing their people on issues like religious liberty, and to say, if you want to trade with us, we want to trade with you. We want to be fair trade, but we also want to see some action in your country as well that begins to balance out our people trading with your people, that we also know that you're respecting things like labor rights or free press or the freedom of religion. So I'd encourage you just to be able to take that action as well, while you're also watching out for American workers.

Greer: Thank you, Senator, we'll be sure to align with the State Department, who is very good on these issues, to make sure that all of our messaging is aligned to encourage the kind of standards and values we would expect.

On this issue, one of the problems I see is that the "standards and values" promoted by the U.S. vary a lot by administration. As a result, what happens is, the U.S. pushes one set of standards and values for four years, and then pushes a very different set for the next four years. My sense is that many U.S. trading partners may be treating this as a short-term exercise that they should pay lip service to until the U.S. administration changes, but I confess I haven't really looked into this deeply.

Trade Promotion Authority

Senator Tillis asked about a variation of using TPA:

Tillis: Given the limitations of executive agreements, they only last for the duration of a president's term, in this case, it would, of course, be four years, and then the necessity of congressional approval for binding market access deals, do you believe USTR would be in a stronger position if Congress provided a clear legislative framework similar to TPA, but tailored for sector specific agreements like those for critical minerals?

Greer: Senator, I want to think about that, because I think that's creative. I think that any trade agreement that the USTR might bring to Congress, ... I want to have full support, right?  I mean, with USMCA, we had 89 Senators vote for it. We had almost 400 folks in the House vote for it. That's the level of support I want. And if Congress thinks that a legislative framework will help with that, I'm happy to talk about what makes sense.

I didn't get the sense that Greer was particularly enthusiastic, but he didn't reject it either, so who knows, maybe this might go somewhere.

Sociological Inquiries into International Law in a Polarized World: Markets, National Security, and Democracy (Utrecht University, November 13-14, 2025)

Call for Papers 

Sociological Inquiries into International Law in a Polarized World: Markets, National Security, and Democracy

The Sixth Workshop on Sociological Inquiries into International Law will be held at Utrecht University on 13–14 November 2025. Participants will explore how sociological perspectives can deepen our understanding of the range of current challenges for the international legal system, their effects within and beyond legal institutions, and the potential responses offered to these challenges.

Background 

We live in an era marked by heightened polarization. International lawyers and actors are increasingly confronted with a wide array of challenges, stemming from populist politics, migration, climate change, supply chain disruptions, economic inequality, disputes over resources, and armed conflicts. In turn, attempts to address these issues are frequently criticized for being inadequate, for serving the interests of a privileged few, or as illustrating the unequal application of legal norms. These demands place significant strain on actors and institutions in the international legal system.

While skepticism about the effectiveness of international law is not new, we suggest that there is something different about the current developments. The quickening turn to a multipolar world, combined with heightened polarization between and within national societies, present two sources of pressure on international legal institutions, and on everyday practices within them.

The point of departure of this workshop is the recognition that international law operates within - and is shaped by - diverse social processes and factors, such as social identity, formal and informal hierarchies, socialization, collective memory, and socio-cognitive frameworks.

Against this backdrop, the Sixth Workshop on Sociological Inquiries into International Law will be held at Utrecht University.

Submissions and topics

We invite submissions employing diverse sociological tools, frameworks, and theories to examine topics including, but not limited to:

• The rise of populism, government responses to popular movements, and threats to democratic practices and the rule of law

• The impact of double standards on the legitimacy of international law and the authority of those enforcing or seeking to reform it

• The role of international courts and tribunals, the politicization of international institutions, and their potential to transform the legal system

• The expansion of sanctions and the increasing use of economic and financial restrictions

• Economic unilateralism aimed at de-risking and protecting national security

• The proliferation of economic nationalism and new industrial policies

• Domestic and international efforts to address climate change and their effects on global trade and development

• Technological advancements, including hybrid warfare, digitalization of products, artificial intelligence, digital surveillance, and emerging international legal regimes 

• Immigration and debates over border control

We encourage submissions on these and related themes focusing on sociological approaches to international law. The workshop will be held in person on 13-14 November 2025, in the Johanna Hudig Gebouw building at the Utrecht University School of Law.

Details for submissions

To apply, please electronically submit an abstract of maximum 300 words and your CV using the following Google form by 31 March 2025. If you have any questions, please contact Alexandra Hofer ([email protected]).

Applicants will be informed of the results of the selection process by 30 April 2025. If selected, we will ask you to submit a discussion paper of no more than 3,000 words by 13 October 2025.

Scholarships

Unfortunately, we cannot cover participants’ expenses related to travel and accommodation.  However, Utrecht University may offer a limited number of scholarships to contribute to the travel and accommodation expenses of selected early career researchers who do not have access to sufficient funding. To apply for a scholarship, please include in your application, in addition to your abstract and CV, a short motivational letter stating why you are not able to cover your travel expenses, how much funding you would need, and how participation in the workshop fits your research plans. 

Timeline

Please take note of the following timeline:

• 31 March 2025: deadline for submission of abstracts and scholarship applications
• By 30 April, applicants will be informed of the results of the selection process
• 13 October: submission of discussion papers (about 3,000 words)
• 13-14 November: in-person workshop

Steering Commitee and organisers

Steering Committee: Alexandra Hofer, Birte Böök and Luca Pasquet (all from Utrecht University School of Law), Sungjoon Cho (Chicago-Kent College of Law), Moshe Hirsch (Hebrew University of Jerusalem), Ron Levi (University of Toronto), and Mikael Rask Madsen (iCourts, University of Copenhagen).

The workshop is organised by Centre for Shared Regulation and Enforcement in Europe (RENFORCE) in cooperation with the newly established Utrecht University Research Platform on Peace Security and Human Rights, the Utrecht Centre for Accountability and Liability Law (UCALL), and the Netherlands Institute of Human Rights (SIM).

Some Questions for Jamieson Greer

Jamieson Greer is Trump's nominee for U.S. Trade Representative, and he will have a Senate confirmation hearing on Thursday, February 6. This is a great opportunity and honor for Jamieson, and along with it comes his own tag on the IELP blog. I hope he appreciates/tolerates this! If his predecessor Katherine Tai's experience is a good indication, this is the first post of many with that tag.

In anticipation of the confirmation hearing, I have come up with some questions for Jamieson. Any Senators participating in the hearing are welcome to adopt these questions as their own. (Given recent events, I can imagine much of the hearing will focus on the IEEPA tariff threats/tariffs related to Canada, Mexico, and China, even though it's not something USTR is responsible for.)

1. In recent years, Section 301 has become a more frequently used tool to address foreign trade barriers. Do you have any data on its track record of achieving market opening? Are there any success stories you can point to?

2. During Biden's four years in office, the U.S. government did not file any WTO complaints. Do you anticipate using the WTO dispute settlement process to address unfair trade practices by U.S. trading partners?

3. What is your view of the WTO dispute settlement reform process that is currently underway? Do you plan to make concrete proposals to help re-establish a functioning system that eliminates the problem of appeals "into the void"?

4. What is the Trump administration's position on ISDS? Will you include ISDS in any future agreements? Will you try to revise it in, or remove it from, current trade and investment agreements?

5. The Biden administration used the USMCA's Rapid Response Mechanism (RRM) for labor rights enforcement extensively. How frequently do you anticipate using the RRM? Will you push for including a similar mechanism in other trade agreements?

6. What tools would you use to encourage China to become more market-oriented (in the sense of, for example, reducing its tariffs and subsidies, as well as ensuring that its SOEs behave in a commercial rather than political manner)?

7. The enforcement mechanism of the U.S.-China Phase One deal states that "The Appeal and any information and matters related to it are confidential and shall not be shared beyond the Bilateral Evaluation and Dispute Resolution Office, absent the agreement of the Parties." Will you push for public disclosure of as much information as possible regarding these appeals?

8. Is Chinese investment in the United States -- for example, a Chinese company building an EV factory -- something the Trump administration would support?

9. Many people have raised concerns about foreign digital regulations and taxes that discriminate against U.S. companies. How would you determine whether such measures are discriminatory? Would you look at the intent/purpose of the measure as part of this assessment, or solely at the impact?

10. Do you see any possibility of the Trump administration negotiating a trade agreement that involves liberalization of tariffs by both the U.S. and a trading partner?

11. If the Trump administration imposes a "global supplemental tariff," as mentioned in the America First Trade Policy memo, what would your approach be to dealing with retaliatory tariffs from U.S. trading partners?

12. In your view, would increasing the private and public savings rates in the U.S. help lower the trade deficit? If so, is increasing savings a policy you think the Trump administration should consider?

13. At the confirmation hearing for Scott Bessent, he mentioned optimal tariff theory. Do you have any views on the practical relevance of this theory? Can you point to any real world "optimal tariffs" that have affected the terms of trade to the benefit of the U.S. economy?

Some Initial Thoughts on Discordia Americana

Why Discordia Americana Is a Poor Replacement for Pax Americana

Steve Charnovitz

3 February 2025

Over the past 75 years, the US role in Inter-American and world affairs has been largely beneficent and has contributed to a great deal of global peace and prosperity. With a handful of very painful exceptions, the US has used its military strength in a fruitful way.  Through its various treaty alliances and support for multilateral organizations, the US has exercised its leadership in a manner to make US prosperity and global economic development go hand in hand.

Unfortunately, in recent years, US foreign policy has become less generous, less cooperative, less effective, less imaginative, and less predictable.  The resources and goodwill toward the US have sometimes been squandered and many opportunities to prevent and solve conflicts have been missed.  Important global goals, such as communicable disease control and environmental protection, have been stymied by lack of US leadership and resources. 

Modern Pax Americana promoted a relatively open US economy to allow the US and other countries to benefit from trade and trade rules.  Trade has always been good for the US, but the failures in US adjustment policies have left many US workers and communities as victims of imports, their voices seemingly not listened to.

President Trump has just imposed trade sanctions in the form of tariffs against Canada, Mexico, and China. Such economic warfare is Discordia Americana because it undermines the US reputation as a dependable, fair-minded, and law-abiding partner.  (Some commentators might not view China as a partner, but that is narrowminded since successful cooperation with China is important for achieving just about every US global goal.) Because of the disproportionately large size of the US economy, the threat and imposition of tariffs on other countries may succeed in bullying those countries to adopt, in the short run, particular policy changes demanded by the US.  But such transactional victories will be ineffectual in the long run because victim countries may adapt through both government policies and market changes to counteract the US leverage. 

Discordia Americana has two prominent features of exporting disruption to other countries and doing so through internal US processes that lack the rule of law. Although ambitious Executive Action by a newly elected US President is hardly anti-democratic, when President Trump takes actions that violate the US Constitution and US laws, that becomes anti-democratic and will make the US government seem more like the maligned dictatorships around the world.    

Chrystia Freeland on Global Imbalances and Fiscal Deficits

In a recent interview, Chrystia Freeland -- former Canadian trade minister and finance minister, and currently a candidate for leader of the Liberal Party -- made the following argument involving a connection between global macro imbalances and the U.S. fiscal deficit (starts at around 11:20 of the video): 

Scott Bessent is an incredibly sophisticated global economic thinker. He is a man who has a very well worked out view of the global macro, not just environment, but the global macro system. And he is someone who spent his career thinking about moments when that system changes. In fact, you could say that his investing strategy has been, figure out where the imbalances are and invest there. Figure out where the changes are going to be and invest there. And I do believe that it's right to point to there being global macro imbalances, which are a problem for the whole world, but particularly the US. The fact is, the global economy today is run based on the US consumer. It is run based on incredibly strong US domestic demand, and what that is requiring is that you guys run just like eye popping fiscal deficits, which at a certain point surely are going to become unsustainable. In the meantime, China has been running, notwithstanding frequent protestations this is going to change, an economic system that is based on selling stuff to the world and not having strong domestic demand and China, over and over again promises and fails to have strong domestic demand in China. I think it is entirely possible that the historic role that Scott Bessent has signed up for is to be the guy who rights those global financial and trade imbalances, a kind of Plaza Accords for our time. And Canada can be a valuable and intelligent partner for the US in the effort to rebalance the global economy. We're chairing the G7 this year. We get it and that is where I see too kind of quite new and important wins for Team Trump that Canada can offer, so continental security, national and economic, help you guys with this great and essential project of rebalancing the global economy.

(emphasis added)

This reminds me of the Michael Pettis view of global imbalances, which I think is mostly wrong. One key aspect of the issue is U.S. fiscal deficits, where Pettis has said: "The rising US fiscal deficit, in other words, is not a freely-chosen policy. Until the US reverses income inequality and stops allowing massive capital foreign inflows into the US, debt must continue to rise to prevent the alternative of rising unemployment." Freeland seems to hold a similar view, suggesting above that U.S. fiscal deficits are driven by global imbalances. But that's just not correct. In fact, U.S. fiscal policy is based almost solely on internal decision-making. Our fiscal deficit is high because U.S. politicians choose to spend more than they take in through revenue. These fiscal decisions are not influenced much at all by external factors and "maintaining global demand" is not a consideration.

One effect of these large fiscal deficits is that overall U.S. consumption is increased, which, of course, is likely to contribute to a higher trade deficit. Thus, to the extent there is a cause and effect relationship between the two deficits, the causation arrow actually runs the other way: A larger fiscal deficit can lead to a larger trade deficit. Following that logic, if we wanted to reduce U.S. trade deficits, reining in fiscal deficits could be helpful. Bessent has said some things that suggest he would try to tackle these fiscal deficits: "The United States also needs to tackle its own contribution to global imbalances by reducing its unprecedented budget deficits. Given that federal spending is both anomalously high and inefficient, whereas tax revenues are consistent with historical levels, spending cuts are the appropriate mechanism." However, people often say these things and it ends up being more difficult than they expect, and we'll have to see where the Trump administration's tax and spending levels end up in practice.

On the other side of the equation, I also don't expect big changes in Chinese consumer demand. From what (little) I know of the issue, this seems like a very difficult thing to move. (You could probably make some progress on Chinese subsidies/SOEs, though, with the right approach).

Freeland also mentions the Plaza Accords, which involved a coordinated effort to reduce the value of the dollar. But I also have a hard time imagining the Trump administration supporting a weakening of the dollar, given, among other things, the impact it would have on prices for U.S. consumers.

All in all, I don't see any of this going anywhere in the near future. But who knows! There is, I think it's fair to say, a lot of uncertainty about where things are heading in U.S. policy at the moment.