America’s dominance in international trade is under threat, as global practices are rapidly changing. “Trade is no longer just about trade,” said Stephen Olson, a research fellow at the Hinrich Foundation* and former NAFTA trade negotiator. In a wide-ranging discussion, Olson highlighted the economic rivalry between the U.S. and China and the two countries’ strategies for engaging in trade with other countries during the International Trade Fellowship. [Transcript | Video]
5 takeaways:
➀ Trade agreements now go beyond fiscal policy.
Increasingly, countries are using trade to accomplish non-trade objectives. “So, we are now using trade and trade agreements to advance a whole bunch of stuff that has nothing to do with trade,” Olson said. “We’re now talking about human rights, labor rights, climate change, what’s the right approach to address climate change, freedom of religion, governance practices, indigenous rights, diversity and inclusion,” Olson said.
If a country has highly valuable resources, though, its values may not matter. “There is an incredible amount of hypocrisy … in the way the West applies these value considerations to their trading relationships,” Olson said.
➁ Stay skeptical of bilateral talks.
“Correctly or incorrectly, China believes pure and simple, the United States is determined to block China’s rise,” Olson said. The U.S., similarly, believes China aims to disrupt the existing global trade system.
“Nothing that has happened in the meetings which have already transpired, and nothing that will happen in the meetings that we can safely expect to see between senior officials in the weeks and months to come, will fundamentally alter the antagonistic dynamic that exists between these two countries and the adversarial perceptions that each country holds of the other,” Olson said.
But the ongoing conversations are encouraging. “Talking is always better than not talking,” Olson said. “I’m happy to see it. We should welcome it. We should regard it as a positive development.”
➂ What’s on the horizon:
“I think you can bet on most if not all of the U.S. restrictions that have been put in place on China remaining in place,” Olson said. He said the Commerce Department may also strengthen its restrictions on semiconductors to curb China’s development of artificial intelligence. “Now of course, this will only deepen China’s perception that the United States is determined to block China’s rise,” Olson said.
➃ Re-establishing leverage.
After former President Donald Trump withdrew from the Trans-Pacific Partnership three days after entering office, President Joe Biden has focused on the Indo-Pacific Economic Framework. Part of what sets it apart from past free trade agreements is that it lacks traditional market access commitments, like tariff reductions. But the U.S. has traditionally used market access to entice its trading partners, Olson said. “That leverage now does not exist in the IPEF, so it raises the question: how is the U.S. going to coax the others to go along with a higher ambition level trade agreement?”
The IPEF also distinguishes trade, supply chains, clean economy and fair economy, meaning negotiations on the issues don’t intersect as much. Usually, “horse-trading” across these sectors would result in a higher-level or higher-quality trade agreement, Olson said.
It’s currently “entirely unclear what, if any, enforcement provisions the agreement is going to contain.” Olson said.
➄ Developing countries want more action, less talk.
“They say, from China, we get an airport, from Americans, we get lectures,” Olson said. Developing countries are less interested in hearing about press freedoms or strategies for equality or democracy. China, instead, often invests direct capital into developing countries.
*This fellowship is part of an ongoing program of journalism training and awards for trade coverage sponsored by the Hinrich Foundation. The National Press Foundation is solely responsible for the content. All programs are on the record and resources and transcripts from this and previous fellowships are published.
