Trade, Merkel, and Meh

Joanne Butler Contributor
Font Size:

Some financial sector ‘experts’ say Angela Merkel is the ‘head of the free world’ as she is a globalist and President Trump is not.  They’re appalled at the administration’s sanctions on a small Chinese bank that is claimed to have business dealings with North Korea. http://www.cnbc.com/2017/06/29/ex-cia-agent-says-us-sanctions-against-chinese-bank-long-overdue.html Sanctions on larger Chinese banks may follow if they too have had dealings with Pyongyang.  The President’s action is a stark lesson to the globalist believers:  our nation’s interests always come first.

Mrs. Merkel’s fans also want a globalist (multilateral) round of free-trade talks.  Seems they’ve forgotten what happened the last time we tried multilateral negotiations (AKA the ‘Doha Round’).  Discussions and negotiations churned for fourteen years (starting in 2001), then collapsed.  Just last year the Round’s director made it official:  it was dead. https://www.nytimes.com/2016/01/01/opinion/global-trade-after-the-failure-of-the-doha-round.html

Certain big-brains in think tanks and merchant banks must have very short memories.

Multilateral negotiations were easier in the last century, when the goal was reducing tariffs.  The main tool negotiators used was a spreadsheet to compare U.S. tariffs to other nations’ tariffs.

The next step was negotiating tariff cuts, usually on a straight percentage basis (e.g., the U.S. will cut its tariff on X by five percent, the E.U. also cuts by five percent).

However, as the toilers in the dud Doha Round learned, 21st century multilateral negotiations are anything but simple.  Intellectual property protections, state-owned enterprises, preferential loans made by state-owned or affiliated banks – these factors don’t fit easily into a spreadsheet, yet are crucial in determining the terms of trade.

President Trump, in my opinion, is right to concentrate on bilateral trade agreements.  Mrs. Merkel may frown, but the President doesn’t work for her.

Bilateral agreements, as you’d expect, are more targeted, as they involve just two parties.  The factors I mentioned above (intellectual property, etc.) pop out as problem areas, instead of being sunk in a morass of other issues with other countries.

Another plus: the give-and-take on certain products and services can be tracked more easily by interested private sector parties. 

More transparency in the negotiation phase will change the mindset of the U.S. trade interlocutors; they will know how would-be losers (and their Congressional representatives) will push back hard on any concessions in a particular sector.  This will act as a brake against being idealistically generous and instill a sense that the outcome of an agreement must be in America’s best interest.

One reason Americans are fed up with trade agreements is how past administrations (under both parties) made up warm, fuzzy stories about how trade agreements were good for our country.  Once the agreements were implemented, reality struck our nation’s workers, and the stories slid down the memory hole.

For example, a U.S. Department of Commerce paper touted the 2005 Central American Free-Trade Agreement (CAFTA) as a way to stabilize civil society in the region and lessen drug trafficking (http://ita.doc.gov/cafta/why_cafta.asp). All good and noble reasons.

CAFTA’s aftermath paints a different picture.  Almost overnight, a large portion of the U.S. sock industry (located in the southern states) went to Caribbean nations. According to this article (https://www.linkedin.com/pulse/fighting-jobs-americas-former-sock-capital-world-heesun-weeCAFTA cost Fort Payne, Alabama, 6,000 jobs in sock production, an enormous blow to a town with 12,600 people. 

What does Hillary Clinton think of the Fort Paynes of America?  Stuffed with ‘deplorables’?  Do career U.S. trade negotiators share her attitude?

And why didn’t the U.S. Trade Representative and the Commerce Department foresee the wave of U.S. job losses under CAFTA?  If they did foresee it, was this negative information suppressed as unhelpful to CAFTA’s passage?

As a former trade wonk, I have a few ideas for President Trump.  The next time Mrs. Merkel scolds him for not supporting multilateralism and globalism, he should deploy this two-word answer: Doha Round. 

Or, in New-York-City style, he could say: You mean like that Doha Round flop?  No thanks, missus.

Further, is the administration aware of the government’s webpages that contradict the President’s trade policy?  The Commerce Department’s CAFTA page is a great example.  Departmental secretaries ought to assign a person to find trade policy webpages – and revise them to be compatible with President Trump’s agenda.

Lastly, to counter those who tout Mrs. Merkel as the leader of the free world, the President ought to use this classic NYC response: ‘Meh’.  (Translation: Who Cares?)