International Trade

Thoughts on the Senate Finance Committee hearing

Like many trade junkies, I am listening to the Senate Finance Committee hearing.  Unfortunately, it is a dance around the key questions.
Here’s some things USTR should do.

  1. USTR needs to address how it (or the USG) can use trade agreements to help the middle class.  USTR must provide clarity on whether trade agreements really create or destroy jobs.. the current mercantalist language is not helpful.   Our tax system favors investment in technology, not people. We never link US trade policy to the larger context of tax, education and social welfare policies.  We have to explain these links in order to explain why individuals can’t and shouldn’t hold trade policy responsible.
  2. USTR must clearly explain that trade agreements can’t directly include actionable provisions to address income inequality but that trade agreements may indirectly affect income inequality within and among nations.   Everyone now understands that globalization has made it easier for businesses to rely on workers from other countries who are willing to work for lower pay, while technologies such as robots and computers have rendered many jobs obsolete. But policymakers also made some decisions that perhaps without intent facilitated economic inequality and economic insecurity.  In recent years, some countries (and US states) have made it harder or less attractive for workers to organize and bargain collectively.  At the same time, some workers have turned against unions an organization working in their interest.  In the wake of these developments, unions have declined and worker bargaining power has decreased. At the same time, corporate officials have focused on quarterly results rather than investing in the skills and long term productivity of their employees.  Some people blame trade policies and agreements for these problems and do not believe that trade creates jobs or raises wages.   Scholars have determined that while trade plays a role, the most important factor contributing to rising income inequality is not trade, but rapid technological growth in exportable sectors.  However, technological change, while scary and threatening to jobs, is essential to productivity and economic growth.  The US must find ways to encourage technological change while making sure that trade agreements are not written in ways that could foster further income inequality by favoring certain interests at the expense of the broad interest.  So as example, agricultural subsidies or export subsidies, while politically necessary, do not help us use trade agreements to ensure that we do not foster income inequality.
  3. What is USTR doing to involve the American public (not Wash representatives of civil society, business and labor) in developing and understanding trade?
  4. What changes can USTR make to trade policymaking to involve more Americans more directly?  Why not experiment? Why not ask Americans to suggest language related to the free flow of information?  Perhaps this brainstorming could yield new ideas?
  5. USTR must rethink its template for trade agreements. If these agreements are to promote “middle class” jobs, employment and labor issues must be embedded throughout the agreement.  The agreement also addresses labor issues in the services chapter; in the chapter on regulatory coherence; and indirectly through language related to investor state dispute settlement. The services chapter could be helpful to individuals who want to move to other countries to sell services over borders, although most such chapters generally address skilled labor such as architects.  However, critics of TTIP raise concerns about proposed language in the investment and regulatory coherence chapters; they fear it might lead to a labor rights “race to the bottom.”  They argue that these chapters are designed to reduce regulatory burdens by eliminating alleged unnecessary or costly regulations.  But one man’s costly regulation is another man’s much needed job protection. Since the US and EU have relatively similar labor costs and productivity, firms may choose to produce and invest in the venues with less or less expensive regulations.  Since the US has not ratified the same ILO conventions related to health and safety as has the EU, generally US workers have fewer protections and employers have relatively lower costs (despite an appreciating dollar). Moreover, the US and the EU have not clarified how they will achieve regulatory coherence given different approaches and levels of regulations, nor have they explained how higher standards can be maintained in the venues that have such higher standards. Activists are concerned that in the interest of achieving regulatory convergence and reducing administrative costs, policymakers could undermine domestically determined regulations. But we do not know how much convergence policymakers want to achieve or if the main threats to higher labor standards are within EU member countries and between US states, rather than between the two trade giants as a whole
  6. USTR needs to be more transparent about how trade agreements affect Internet openness and freedom and how USTR might use trade agreements to challenge filtering and censorship.  But the exceptions here are key: when can nations limit the free flow of information to protect privacy and national security?


Susan Ariel Aaronson is Research Professor at The George Washington University's Elliott School of International Affairs and the former Minerva Chair at the National War College. She directs a project funded by the US Army on repression, civil conflict, and leadership tenure. Aaronson also directs a fellowship fund for students working on internet issues, the eBay Policy Scholars, and organizes seminar series on Internet issues. While at GWU, Aaronson has received grants from the MacArthur, Ford, Swiss National Science Foundation and Ford Motor Company for her work on internet freedom and trade, corruption, and business and human rights. Her current research focuses on WTO membership and conflict; repression, civil conflict and socio-economic outcomes; and on how trade agreements affect digital rights and Internet governance.

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