Jamieson Greer on the 30 Year Aberration in U.S. Trade Policy
When he was in Davos last week for the World Economic Forum, U.S. Trade Rep. Jamieson Greer talked a bit about U.S. trade policy history and described a recent period during which, in his view, U.S. trade policy shifted away from tariffs/protectionism and towards free trade. Here are a couple things he said in that regard.
First, as part of a speech, he argued that after the Cold War ended, the U.S. "pursued hyperglobalization" and "bound our hands with NAFTA and the World Trade Organization":
At the end of the Cold War, as many reveled in what they thought was the “end of history,” American policymakers largely jettisoned our historic and pragmatic approach to trade—or perhaps grew complacent on the assumption of endless prosperity. We pursued hyperglobalization regardless of the consequences, and we bound our hands with NAFTA and the World Trade Organization in ways that made it impossible for the United States to effectively respond to foreign practices and defend our industrial production.
Along the same lines, in two TV interviews while over there, he talked about the " 30 year aberration" in U.S. trade policy:
We had this 30 year aberration where we pretended that we were at the end of history and we didn't need to protect our supply chains and we didn't need to protect American workers. And that was the aberration. So now we're actually back into normal history, which is, we have to use tariffs, we have to use trade measures, we use them for protection, we use them for geopolitical ends.
...
Free trade is not an end in itself, and if it doesn't result in the outcomes you want, you need to change. And when we see all this offshoring that's happened, the 70,000 factories we lost during globalization, the 5 million manufacturing jobs that went away, we have to change that. You can't just be beholden to some system because it's a system you all agreed to in 1992 or 1994.
If I'm understanding correctly the dates and time periods he is putting out there, Greer seems pretty clear in drawing a dividing line between the GATT era and the WTO/NAFTA era. It's this latter era that has been the problem, in his view, and that's what he hopes to shift U.S. trade policy away from.
In response, I'm going to raise some questions and make a couple points.
First, I wonder what exactly he sees as so different in the world trading system as between the GATT and the WTO. If I were asked this question, some of the biggest additions during the GATT to WTO transition that I would cite are:
- Rules on IP protection (TRIPS)
- The beginnings of liberalizing services trade (GATS)
- A somewhat more enforceable dispute settlement system (DSU)
But I'm curious how Greer and other critics of recent U.S. trade policy would respond to this question. Why exactly does the WTO era constitute "hyperglobalization," whereas the GATT version of liberalization seems to be an acceptable level of globalization?
Of the three additions I mentioned, I assume he would only object to the dispute settlement changes. He's not against the TRIPS Agreement or the GATS, right? Focusing then on dispute settlement, this is clearly a key part of the criticism, as he says the following in his speech:
The GATT rules were intended to be flexible. They allowed countries to use the methods they need to support their economy while resolving the conflicts that inevitably emerged.
But these original goals and principles were rejected as the Cold War ended. With the WTO, we created a rigid dispute settlement system, filled by unaccountable bureaucrats in Geneva, that interpreted the rules so narrowly that they lost much of their intended flexibility. The United States changed our laws based on the outcomes of these disputes, even if it was contrary to our negotiated rights under the GATT or WTO agreements or against our national interest. We allowed large non-market economies into the world trading system, gave them the same tariff treatment as we did our closest friends, and did not hold them accountable to the commitments they made in the process.
Were the Uruguay Round dispute settlement changes really big enough to shift us from an acceptable to an unacceptable world trading system? It's true that the WTO dispute settlement system is less flexible than the previous system under the GATT, but there is still a good deal of flexibility built in there. I would not characterize it as "rigid." Over the years there have been some very prominent examples of governments being found in violation of the rules and not coming into compliance; and many disputes have been settled through diplomacy rather than litigation.
Greer and others with his perspective might say the WTO dispute settlement system was a particular problem for U.S. trade remedies such as anti-dumping/countervailing duties (AD/CVD). This may be what he is getting at when he says "made it impossible for the United States to effectively respond to foreign practices and defend our industrial production." But as I'll get to below, the impact of the WTO on AD/CVD – which the U.S. has used extensively during the period in question – is not as great as some think.
(Greer also says: "We allowed large non-market economies into the world trading system, gave them the same tariff treatment as we did our closest friends, and did not hold them accountable to the commitments they made in the process." I think that last part is true to some extent, but I would say the answer is to hold them accountable.)
Second, turning to NAFTA, I have similar questions, although here I have a better sense of his answer as to what the problem was: Under NAFTA, virtually all ordinary U.S. tariffs on imports from Mexico came down to zero. (The U.S. and Canada already had an FTA that they signed in 1988, so the impact of NAFTA on imports from Canada was much less). Arguably, this was a bigger deal than the more modest U.S. tariff cuts under the Uruguay Round.
On AD/CVD, NAFTA had a special dispute process to hear domestic appeals of these cases (carried over from the U.S.-Canada FTA). This was controversial in terms of both sovereignty in general and the impact on the use of AD/CVD, although my sense is that after a few years went by, NAFTA Chapter 19 appeals evolved into something pretty similar to U.S. court appeals in terms of the results.
In addition, as with the WTO, there were new rules on IP and services in NAFTA, which were U.S. demands. There was also the controversial ISDS, which, as I think everyone knows, I'm skeptical of, but this was not something foisted on the U.S., but rather something U.S. negotiators wanted. Unlike with IP and services, though, I think Greer and those with similar views are now opposed to ISDS, at least to some degree (and it was scaled back considerably in the USMCA).
So with NAFTA, I can sort of see why Greer wants to go back to what came before, although I'm curious whether he objects to the U.S.-Canada FTA as well or whether he would be OK with that.
Third, I want to point out something that I think gets lost in the rhetoric of the "neoliberalism" vs. "post-neoliberalism" debate and the talk about "hyperglobalization" arising from the WTO/NAFTA: During this period, despite all the talk of free trade and free trade agreements, the U.S. has had plenty of tariffs, with much of the tariff imposition being turned over to lawyers and economists in the form of trade remedies, in particular AD/CVDs.
Were the hands of the U.S. "bound" by the WTO/NAFTA in this area? The data show that the visible hands of protectionism in the U.S. were moving around pretty freely during this period. The Commerce Department keeps track of AD/CVD orders, and you can see the significant expansion over time. There are 804 orders currently in place, along with 90 investigations in progress, covering a wide range of products from various countries; and the vast majority of these were imposed after 1992. (To make this subject more concrete, I always enjoy the opportunity to pull out my Slovenian mattress example: Anti-dumping duties of 744.81%!) Thus, while the WTO or NAFTA may provide some modest constraints here, and there were strong objections to specific WTO dispute settlement rulings, these agreements haven't done much to rein in the use of AD/CVDs.
Are these AD/CVDs as extensive a use of tariffs as what we've seen since Trump first got elected? Definitely not. But the point is, there is no tariff-free period where the U.S. wasn't protecting the domestic industry from imports. AD/CVDs involve a lot of technical language and calculations, and don't always get much media, or even policy wonk, attention. But if you look at the data, it's clear that tariffs never went away even when globalization was at its most "hyper" and "neoliberal."
Summing all this up, you could take Greer's remarks to suggest that the Trump administration wants to go back to the era of the GATT and the U.S.-Canada FTA. But I don't think their actual policies reflect that, and in fact they seem to want to take us back a lot further. (When you ask Trump, he highlights the 1890s as the ideal time for U.S. trade policy.)
Of course, all this talk about trade policy history is largely about where things should go in the future. That, it seems to me, is up for grabs, and will take a few years (and elections) to sort out.