Crafting trade policy - how does one find that middle path?

Foreign Affairs carried this piece on the vision of Robert Lighthizer on how a trade policy must be crafted. The thrust was on charting a middle path - so that got me interested considering treading the middle path is the punch line of my blog!

Titled "How to make trade work for Workers", it outlined recent US trade policy, its approach to NAFTA, trade deficits, loss of jobs due to free trade as well as its view of China and the WTO. It talks about the losers of globalisation, the obsession with economic efficiency and comparative advantage and the need to find the balance to protect one's own citizens.

On how trade policy should not be a mere extension of foreign policy:

That debate should start with a fundamental question: What should the objective of trade policy be? Some view trade through the lens of foreign policy, arguing that tariffs should be lowered or raised in order to achieve geopolitical goals. Others view trade strictly through the lens of economic efficiency, contending that the sole objective of trade policy should be to maximize overall output. But what most Americans want is something else: a trade policy that supports the kind of society they want to live in. To that end, the right policy is one that makes it possible for most citizens, including those without college educations, to access the middle class through stable, well-paying jobs.

On making concessions to India to join the WTO, as a grand diplomatic bargain (that failed):

There may be situations when it is appropriate to make concessions on trade in order to achieve broader diplomatic aims, but one should keep in mind that such bargains can prove costly in the long run. Letting India join the General Agreement on Tariffs and Trade (the precursor to the WTO) in 1948 with nearly a third of its industrial tariffs uncapped, for example, no doubt made sense to Cold Warriors, who thought that it would help bring India into the U.S. camp. Yet the negative repercussions of that decision persist to this day, now that India has become one of the world’s largest economies and, at times, a troublesome trading partner for the United States. Over the years, such concessions have piled up. 

 So, if one thought that there were equal partners at the negotiating table in 1948 to rule setting agendas, one might just have to rethink on what actually were the motivations!

On labour provisions in the USMCA:

The USMCA requires Mexico to eliminate protection contracts, ensure basic union democracy, and establish independent labor courts. Rather than seek to micromanage labor policies in Mexico— as critics have charged—the USMCA sets reasonable standards that correct a major source of labor-market distortion in North America. Although the new labor provisions received a chilly reception by some parts of the Mexican business community, they were warmly embraced by President Andrés Manuel López Obrador and his government. The new obligations will not prevent companies from taking advantage of efficiencies in integrated North American supply chains. But they will eliminate a form of regulatory arbitrage that hurts American workers.

Are we going to see the first labour dispute under USMCA a la the dispute with Guatemala under another trade agreement that the US initiated? 

On the future of the WTO:

The challenges in the WTO are also vexing. Like many international organizations, the WTO has strayed from its original mission. Designed as a forum for negotiating trade rules, it has become chiefly a litigation society. Until recently, the organization’s dispute-resolution process was led by its seven-member Appellate Body, which had come to see itself as the promulgator of a new common law of free trade, one that was largely untethered from the actual rules agreed to by the WTO’s members. The Appellate Body routinely issued rulings that made it harder for states to combat unfair trade practices and safeguard jobs. This was one of the reasons why the Trump administration refused to consent to new appointments to it, and on December 11, 2019, the Appellate Body ceased functioning when its membership dipped below the number needed to hear a case. 

The United States should not agree to any mechanism that would revive or replace the Appellate Body until it is clear that the WTO’s dispute-resolution process can ensure members’ flexibility to pursue a balanced, worker-focused trade policy. Until then, the United States is better off resolving disputes with trading partners through negotiations—as it did from 1947, when the General Agreement on Tariffs and Trade was signed, until 1994, when the WTO was created—rather than under a made-up jurisprudence that undermines U.S. sovereignty and threatens American jobs.

Well, the above view is not surprising considering the unfolding of events that the stated policy on the WTO. 

Lessons for other trading nations:

1. Look at one's national interest when framing trade policy - look international but be local.
2. Trying to find the middle path between opening up and protecting one's interest is not always easy - but recognising the need for it is the first step. Calibration is what was called for.
3. One would have been rather surprised at this view a decade ago - this would have been a view held by globalisation baiters from the global south rather than the crafters of multilateral rules.
4. Articulation of one's interest in clear policy terms and translation of that policy into implementable action points resulting in impact on the ground - the hardest lesson of 'em all!