Discussion: (0 comments)
There are no comments available.
Democrats' 'Better Deal' is strikingly similar in tone and substance to Trump's economic nationalism.
On trade policy, Democrats have heeded the lessons of the last election – and apparently turned to the president’s assistant Peter Navarro and White House chief strategist Stephen Bannon for guidance on “economic nationalism.”
Actually, they haven’t, but congressional Democrats’ new set of trade proposals, “A Better Deal for Trade and Jobs,” with the exception of a few tidbits from Massachusetts Sen. Elizabeth Warren, could well have been written for the two White House aides. In both tone and substance, the document mirrors the mercantile, protectionist stance of the Trump campaign and presidency.
In presenting the Senate Democrats’ version of the new proposals, Sen. Chuck Schumer, D-N.Y., proclaimed that, “Trade is the core of our economic agenda. … Our trade laws have shortchanged American workers for too long.” And Sen. Joe Manchin, D-W.V., complained, “Anyone that believes that free trade is fair trade, come to West Virginia.” The rhetoric of the document reflects these attitudes, replete with references to “trade cheating” and “countries that manipulate trade laws.”
Attempting to outflank the president, Schumer charged that thus far, “Trump has talked a good game and done virtually nothing on trade but study it. We need action.” And to give them credit (alas for free traders), the Democrats have advanced concrete proposals. At the core of their plans to “fundamentally transform [U.S.] trade policies” are two reforms: creation of an independent so-called Trade Prosecutor to “combat trade cheating”; and the establishment of an American Jobs Security Council to govern foreign investment in the U.S.
The Trade Prosecutor would be “housed in” the International Trade Commission but authorized to act on his/her own. The prosecutor would be granted broad power to investigate and act upon multiple “unfair” trade practices, including blocking U.S. exports, unfair subsidies, forced technology transfer, cyber-espionage of intellectual property, violations of labor and environmental agreements and favoritism for government-owned enterprises. Of signal importance, with far-reaching ramifications for the multilateral trading system, the new process would allow retaliation “without authorization of the World Trade Organization.” Further, the prosecutor is given a mandate to review WTO decisions impacting U.S. enforcement actions and “determine” whether the U.S. should comply with these decisions. Though the Trump administration has obliquely criticized the WTO, the “Better Deal” document goes well beyond this with its explicit vow of defiance under terms dictated unilaterally by the U.S.
The American Jobs Security Council would review foreign companies’ proposed mergers and acquisitions, and have the authority to block any that would create “significant market distortion” or have “detrimental economic impacts, including U.S. job losses.” (The U.S. already has a process that screens foreign acquisitions for national security implications.) Besides job losses, the Council would consider factors such as intellectual property leakage, loss of market share in critical industries and the foreign investor’s home country practices.
Much of this proposal is directly aimed at China, which Schumer labeled “rapacious.” But the reach and sweep goes far beyond one country and would represent an unprecedented reversal of the traditional U.S. policy of open investment – in addition to introducing economic criteria that are almost impossible to evaluate technically.
Finally, the Democrats are advancing a series of other protectionist proposals, including “Buy America” for any projects utilizing public funds, tax incentives for U.S. companies to bring back jobs and penalties for outsourcing, as well as retaliation against countries that allegedly manipulate their currencies to gain trade advantages. On NAFTA, they bow to their labor union and environmental constituencies with demands for stricter and more legally enforceable rules, with Mexico targeted specifically.
Stepping back, historically the Democrats are actually following an anti-trade path that goes back two decades to the original NAFTA debate and the subsequent opposition of many congressional Democrats (particularly in the House of Representatives) to free trade agreements, even when advanced by a Democratic president. The real revolution in trade policy has come in the Republican Party with President Donald Trump’s “America First” protectionism that has upended decades of Republican free trade doctrine. With “A Better Deal on Trade and Jobs,” the Democrats are just scrambling to recapture their own historic economic isolationism – and trump Trump in the process.
There are no comments available.
Expert analysis from AEI's Economics Policy scholars
1789 Massachusetts Avenue, NW, Washington, DC 20036
© 2017 American Enterprise Institute