Beware the "Securitization" of Trade Policy

[Ed. note: I was asked to provide comments on a paper on industrial policy and national security, and the following is an edited and updated version of what I said. All of it probably needs to be fleshed out more, but I'm posting this version now anyway!]

In recent years, U.S. trade policy has seen a creeping takeover by "security" concerns. The precise scope of these concerns is unclear, but they appear to cover both the traditional aspects of military-related security as well as the vague and amorphous concept of "economic security." Some of the professed concerns are, in my view, a stretch, but that hasn't slowed their encroachment. As an example, we now have, if I am counting correctly, fourteen ongoing Section 232 cases in various stages, and with the extension to derivative products in some instances, the coverage is going to be extremely broad. Are imports of "upholstered wooden products" a national security threat? I have doubts!

These developments have led to a new policy/scholarly field to consider these issues, with law journal articles by legal scholars such as Kathleen Claussen and Ben Heath and Mona Paulsen, and a podcast by Peter Harrell, who all provide good analysis of what has been happening.

But should it be happening? Are policymakers on the right track? In my view, policymakers should rethink some aspects of what they are doing in relation to security and trade. In the past, it has sometimes taken years for people to question the conventional wisdom on security/foreign policy. Once we start going down a road, it's hard to get off it even when it becomes clear we are going in the wrong direction. I'm hoping – although I wouldn't say I'm hopeful – that today the questioning can come sooner.

While there are, of course, real security issues in the world, some of which interact with trade, in my view the policies being implemented in this context often exaggerate the scale and scope of the problems. Instead of responding appropriately to actual threats, what we often see are disproportionate responses to situations that are not nearly as threatening as suggested, and these responses may actually trigger more security risks than they resolve.

Let me offer five big picture thoughts that I hope policymakers will take into account in this context.

1. "China is not 10 feet tall." The "not 10 feet tall" characterization is a foreign policy expression that came from who knows where (I gave it a quick look but couldn't figure out the origin), but the basic idea is clear: People are overestimating the threat from China. I'll note a couple points that I think are key here.

First, China's economy is not as strong as some people believe, as there are significant internal problems (e.g. demographics and government money propping up employment in unprofitable investments). China in 20 years may not look like the competitor it does today.

There's an obvious comparison here to concerns about Japan in the 1980s and early 1990s, which turned out to be wildly overstated. While there are important differences between the Japan and China situations, there may be some good lessons in how wrong many people were about competition with Japan.

Finally, while China would certainly like to maximize its power, it is not seeking "global dominance" in the way some people in the U.S. conceptualize this goal.

2. How critical are the minerals? It worries me that we are seeing what looks like an imperial expansion race to access minerals, for example in Greenland. This competition is dangerous and creates serious security risks of its own.

3. The military-industrial complex is more complex than ever. Pentagon purchasing is not just about buying F-35s anymore. An Economist article from February of this year lays out some worrying details about Silicon Valley getting into defense contracts, enticed by "the sweet smell of financial success." Big Tech used to be more pro-peace ("Don't be evil," Google proclaimed). But now, not so much. The upshot is that important parts of the private sector have an interest in driving conflict, and we should be aware of their motivations.

4. Trade can promote peace. When she was U.S. Trade Representative during the Biden administration, Katherine Tai questioned the idea of trade promoting peace, as did Paul Krugman. But in my view, their questioning mischaracterizes the claim. The argument was never that "trade guarantees peace" or "trade prevents all war." Rather, the argument is simply that "trade reduces conflict and promotes peace," and there is plenty of evidence that it does. Trade can't stop countries from going to war if they are determined to do so, but it does give them reasons not to.

5. Got to have good faith. For both domestic security policies related to trade and security exceptions in trade agreements, implementation has to be done in good faith. If not, every product is fair game – even peanut butter, as the CIT once discussed – and trade tensions will escalate. Can we get to good faith here? It feels pretty far away at the moment, but Section 232 reform by Congress and an approach at the WTO that steers us away from litigation could be two elements.

Summing all this up, security has often taken precedence over trade in policy debates over the years, so these recent developments aren't coming out of nowhere, and perhaps it shouldn't be too surprising that security is swallowing up trade policy at the moment. But the trade actions being taken on the basis of security have ratcheted up in recent years, and that is leading to significant changes in how trade policy is being carried out. A situation with almost unlimited executive power to restrict trade in the name of security, with little judicial oversight or legislative checks, is not ideal, and it would be even worse if others started to copy it. It's easy to imagine security arguments being applied by other countries to U.S. agriculture exports and digital services, among other things.

If we could get the security policies right, there would be less of a problem here, but as suggested above, I think that is likely to be a continuing challenge. The result is that we in the trade policy field will have to deal with the consequences and figure out the difficult politics of pushing back.