In One Sentence

• Pascal Lamy, who served two terms as Director-General of the WTO, observed that the “weight of money in the [U.S.] electoral system” as well as rejection “of any international discipline that might not work to [America’s] advantage” are key factors behind the U.S.’ “protectionist turn.” 
• In response to Republican criticism of the lack of a robust U.S. policy, USTR Tai asked Republican lawmakers to “meet me on the terms that we need to do things differently.”
• Faced with congressional and industrial concerns, Tai conceded that the U.S. critical mineral deals with Japan and EU will not produce tariff relief and better reciprocal market access for U.S. automakers. 
• The Commerce Department announced disbursal rules related to a $39 billion program to prevent CHIPS Act funds and benefits from flowing to “malign actors.”

Mark the Essentials

• Pascal Lamy also noted that the U.S. started a structural shift towards trade protectionism as early as 15 years ago and will continue the shift for long. Lamy proposed the building of a coalition “promoting open trade while respecting various collective preferences” but without the U.S., “hoping to create a disadvantage for them that would make them change their position.”
• In the 2023 Economic Report of the President, White House advisors argued that the U.S. and its partners have reached “a turning point in international economic policy” and though it is “desirable to maintain the benefits associated with international trade and investment,” the focus of trade policy needs to “expand beyond reducing barriers.”
• U.S. importers decided to appeal a court ruling that upheld the United States’ Section 301 tariffs on Chinese goods, arguing that the former Trump administration “flouted congressional limits in increasing tariffs seven-fold to cover virtually all trade with China.”

Keeping an Eye On…

• Pascal Lamy would know a thing or two about trade negotiations and trade protectionism. As the EU’s trade commissioner and later the WTO’s Director-General, he was at the high table during those fateful days in July 2008 in Geneva when USTR Susan Schwab de facto killed the Doha Round negotiations by demanding an unrealistic ‘exchange rate’ of guaranteed agricultural market access in developing countries in exchange for moving on material reductions to the U.S.’ bloated agricultural subsidies. Agricultural interests groups can be quite the juggernaut on Capitol Hill, after all. The public narrative of Geneva July 2008 is remembered differently, of course; it was the Indians’ habitual naysaying—this time on the special safeguard mechanism—that effectively killed the Doha Round in Geneva. New Delhi’s reactionary trade negotiating stances are (almost) never deserving of sympathy. But truth be told, Geneva 2008 was the moment when it became clear that trade partners would have to concede an arm and a leg in multilateral negotiations for the U.S. to sign on the dotted line so as for the agreement to pass muster on Capitol Hill. It is not a coincidence that the U.S.’ fascination with large regional plurilateral agreements started post-2008. By the late-2010s, even conceding an arm and a leg was not good enough for a plurilateral negotiation to pass muster on Capitol Hill, Obama USTR Michael Froman’s brave signature on the TPP dotted line notwithstanding. And today, under the Biden administration, even a conventional bilateral trade agreement—one featuring tariff cuts—is hard to come by (whatever IPEF may be, it is not a conventional trade agreement). Having politically self-excluded itself from conventional forms of liberalization, it is the U.S. that is increasingly finding itself on the outside looking-in. As noted earlier, the blunt truth about populism and protectionism today is that it is essentially about protectionism in one major country. The other key actors are all more-or-less committed to the rules-based trading system and conventional forms of liberalization, and the gravitational market pull of the latter far exceeds the pull of the former. The United States’ original sin on the trade policy front goes back to the dawn of the post-Cold War world. It was the failure at that time to engage with the notion that imports are just as important as exports in good trade-policy formulation. As bilateral trade deficits racked up over the past three decades, the political reservoir on trade opening was gradually and now completely emptied. There are no good domestic political choices on trade anymore…but USTR Katherine Tai’s choices today seem to be particularly ill-conceived ones.

Expanded Reading

• The slow American protectionist turn, VOX EU, March 27, 2023
• Katherine Tai goes viral, Politico, March 27, 2023
• Hearing on the Biden Administration’s 2023 Trade Policy Agenda with United States Trade Representative, Ambassador Tai, House Ways & Means Committee, March 24, 2023
• 2023 Economic Report of the President, The White House, March 2023
• Commerce Department Outlines Proposed National Security Guardrails for CHIPS for America Incentives Program, Department of Commerce, March 21, 2023
• U.S. Court of International Trade Upholds Section 301 Duties on China, Wiley, March 21, 2023