US Trade Rep Katherine Tai Describes the New Era of Globalization

things like that as well. But then the other component of it, I think is you hear terms like unfairness, maybe even cheating, People talk about China not playing on the same playing field that everyone else is, and so

it seems to be driven by those twin concerns. And I think again, like when the Trump administration ended and Biden came into the presidency, I don't think anyone really expected the extent to which a lot of those tariffs would be carried over, and yet here we are almost four years later, and there has been this kind of incredible continuity.

or cheating or something like that. You know, there's obviously just a lot of anxiety about the fact that in many advanced technological areas, China is building a lot of very competitive things. And whether it's I'm particularly thinking in areas like batteries or evs, where it looks like in many cases they're ahead and there's a lot of anxiety. These are key areas for the future, and the US is behind and the europe is behind.

the interests of the United States. That's the entire United States, the entire economy, all of its people, from coast to coast, from top to bottom on the coasts and the middle and to represent Americans and the American economy in international trade. What that means is trade is a very interesting thing. We are both a part of the Foreign policy team because international trade is something that you do with other countries. There's that foreign relations aspect to it. But also we

are part of the economic policy team. Is what you do in trade, it impacts your economy. It can help to grow your economy, and it can help to shrink your economy if you depending on how you do trade policy. So what we were oriented by at the beginning of this administration, President Biden Vice President Harris gave me at

USTR and my team two charges. The first one was America's back and so you must do everything you can to repat relations with our trading partners, to be as constructive as possible to demonstrate that the United States is engaged with the rest of the world and that the United States is a force for good. The other charge that we had was you must also be a part

of our economic policy team. You must also get in line to make sure that you are pulling in the same direction as we heal ourselves from the hardships of the COVID pandemic. The COVID pandemic was not just a global health crisis, it also was a global economic crisis. You must be a part of the team to get us past COVID and then to help us to build the United States economy so that we can be strong today, tomorrow,

and for the years to come. So our orientation has required us to do trade differently to ensure that we are still engaged with the rest of the world constructively, but also also to really stand up for US economic interests. And so where I want to start the conversation with your first question and getting into the US China trade relationship, is you talked to some about the technology competition that we have. You talked about the national security and the

geopolitical tensions. One piece that I think is going to be really important for us to focus on is this concept of economic security, and that has at least two facets that I want to lay out for you. One is the economic security of the entire United States, the economic security of the nation. And the other concept is the economic security of the people within the United States,

the economic security of our working people. And it's really through that lens that I think that it will be important to start taking on some of your questions about the US China trade relationship.

and growing GDP. This seems to be something a little bit different.

and data and statistics and trends. What gets lost in all that conversation is that the whole point of economic policy is to ensure vibrancy, economic opportunity, livelihoods, futures, hope, and vitality for your nation. It is about how the people experience their lives, what kinds of jobs they have, what kinds of education and training that they have to pursue these jobs, what kind of industries we're growing here.

So the worker center trade policy is to remind ourselves that, Tracy, exactly as you've noted, the way we've pursued trade policy for decades in a bipartisan way has been about growing GDP, growing the overall pie, facilitating volumes of trade. And what's cut and lost in all of that conversation is what has been the impact on our economy. Are we actually as we grow the pie, are we actually seeing that

more of our people have access to that pie. And what I will say is, when we look back at our trade policies over the past twenty and thirty years, we see the overall numbers grow here in the United States and around the world, but you also see significant de industrialization in some critical industries where we have really just hollowed out. We've lost a lot of capacity, especially in hard and heavy manufacturing, light manufacturing as well.

growing opportunity for a middle class. The middle class in America is this incredible concept because almost everybody thinks that they're in the middle class or is aspiring to be in the middle class. It's that really important, vibrant part of the economy that ensures that you are growing and ensures that you are providing opportunities for all of the

people in your economy to contribute. So yes, absolutely, the way that we are pursuing trade policies, the way that we are thinking about and talking about it, is different today because we have seen the limits of where that pursuit of trade liberalization, the pursuit of overall macro views on trade and economic growth have really fallen short in the last several decades.

I think that those are worthy goals. The issue is that you look at the goals that you are pursuing, the ways that you've been pursuing them, and then you have to look around you for the data and the indicators around what the results of these policies have been. And so let's take since I think that this is the eightieth year of the eightieth anniversary of the Breton Woods Agreement. You look at the last eighty years and there has been a lot of prosperity, marked by also

periods of peace in large parts of the world. But you look at the more recent years and what you see is that today our economy and the global economy feels more fragile, geopolitical tensions feel higher than they have been in a very long time. And it's important then to look at what's been going on. This concept of free trade and the goal that we were pursuing through free trade. It's a very very beautiful concept. The issue

is that it is entirely theoretical. There is in fact no free trade in the world, and maybe one of the most important pictures I can paint for you is to look at what has happened in the global economy, global markets in the last twenty five years since China has joined the World Trade Organization, the Chinese economy has

grown significantly. It has been miraculous to see. That said, the Chinese economy is fundamentally structured differently from the economies of the countries that started the system that eventually became the WTO in that post World War two period. The General Agreement on Tariffs and Trade was a group of very like minded countries that emerged from World War Two

and to pursue a set of principles. When we brought China into the WTO, what we were hoping, and this is based on looking at a lot of literature at from that time, talking to the people who cast those votes in the US Congress for China's accession to the w two. What we were hoping was that there would be a significant wave of economic reforms in China that would make the Chinese economy more market based, more open, more capitalistic, and that democratic reforms would follow in terms

of China's political system. So the first thing, the first indicator, is then to look at what have the results been. If you're looking at the PRC economy and the PRC political system today in twenty twenty four, from colleagues and friends who have visited China, the China that we see is significantly different from the China that was negotiating in seccession to the WTO at that time nineteen eighties and the nineteen nineties, there was a lot of talk about reform.

Those reforms have really petered out. What we see today is maybe the most repressive version that we've seen of China in the past decades in terms of the political environment. But then if you look at the economic environment, I would say you go back to twenty eleven. In twenty twelve, the American Chamber of Commerce AmCham in China for the first time. In those years twenty eleven, twenty twelve, twenty thirteen, they put out I think it's called a white paper.

They put out basically a book every year describing the economic environment that American companies experience in China. And around those years is when AmCham, which had been one of the biggest cheerleaders of US China trade bringing China into the global economy, started to identify a downturn in the economic environment and in the sense of opportunity and fairness that big American companies were experiencing in the Chinese economy if you followed what was happening in Chinese politics at

the time. That coincides with the transition of leadership to the current president, President Chi Jinping, who is now in the midst of his third unprecedented term as president of China. So I think that the scales started falling from the

eyes of the American business community. Certainly that the Chinese economy is structured to pursue goals that are different from the principles of free trade and open markets and market based economics, and that I think is a significant contributor to this bipartisan and very very broad consensus that we have in the United States now that the trading system globally is not working the way that we had wanted it to, that we dreamt that it would starting in

the nineteen forties and on and through the nineteen nineties, in the two thousands, and what you hear now also from our administration Secretary Yellen at Treasury Layel Brainerd, head of the NEC, the National Economic Council, Secretary Blincoln State Department, certainly from me, is a concern about what we're calling Chinese over capacity and excess production that in these years post the height of the pandemic, as everyone is building

towards their economic recovery and the strength of their economy going forward, we see China doubling down on an export

led growth, export led recovery. And what you're seeing from the United States, and it's not just us, and it'll be interesting to get into that conversation too, is what you're seeing from the United States and other countries is a pushback that having experienced China Shock, the China Shock from the two thousands and twenty tens where Chinese industrial non market policies really allowed them to export a lot of the externalities from their policies to the rest of

the world, that we are standing up and others are standing up to say we will not tolerate, we cannot tolerate a China shock two point zero. And I think that those are elements of the larger context that you are seeing today involving our trade policy and beyond.

discussion from you? Is the idea here that the ITO provides perhaps some guiding principles for trade policy, or are you actually interested in creating something that would potentially compete with the WTO.

are a central part of this. A lot of the challenges that we are seeing developed today are reminiscent of the challenges that we as the United States saw in

the nineteen thirties and the nineteen forties. A trend towards authoritarianism, fascism, corporate concentration, significant imbalances in our economy, imbalances and power coming through then World War Two, the need to come up with the vision for a more coherent and cohesive world order, including a world economic order that would be better and that would allow us to take lessons from

very painful experiences and apply them forward. And so that has led us to go look at the Breton Woods agreements coming out of World War Two that desire to build institutions like the World Bank, like the IMF, and then to revisit our own history and trade and to see that the original vision for the trade institution, the trade pillar of Bretton Woods was this International Trade Organization.

I'm so glad you brought it up. And then looking at what the components of that were to building a better, brighter, more resilient world from those years in the nineteen forties, and what we see is an application of FDR's vision domestically through the New Deal era and translating that into the international context and seeing that in the original architecture

of the International Trade Organization. Sure, there was a tariff liberalization program, and remember this was among very very like minded countries coming out of very traumatic World War II experience coming together around common principles. But it wasn't limited

to just tariff liberalization. That there were important additional elements to the ITO Charter that is really important for us to look back on and to think about, because it turns out there are actually major points of preoccupation for us today in our economic policy. So one aspect of the ITO disciplines includes meaningful standards on labor and workers.

And if you think about the ITO Charter coming out of the New Deal perspective, and you look around the world and at the time also it was a period where a lot of countries were achieving their independence from previous colonial masters, that focus on labor and worker protections becomes very very interesting, especially in light of the challenges that and the conversations that we're having today around the need for workers to have more leverage and power in

terms of that balance with the big companies. The other piece of it is anti monopoly rules, anti monopoly disciplines, and again that is a huge part of the conversation today and looking at corporate concentration and looking at companies that are acting as monopolies and distorting opportunity and markets, but also countries that are behaving as monopolies and understanding that back in the nineteen forties, what we were looking at around the world was a program to defend against

the challenges of both fascism on the right and communism on the left, and applying that to today's challenges. I don't think it's about constructing an alternative model to the wto again where the products of our history, but taking lessons from the way we had approached a period of thoughtfulness, a period of institution building, a period of pushing forward in terms of reform, and really thinking about how we can take inspiration from those experiences to apply them to where we are today.

really great question. So when we talk about a worker center trade policy, what we're doing is looking at again the trade policies that we've pursued in the last several decades and then seeing the version of globalization that we have around us today is one that has really incentivized the minimization of costs and input costs, So it rewards the exploitation of people and workers. The more you exploit workers, the less you have to pay them. It also rewards

the exploitation of the planet. The less you have to worry about environmental regulation carbon protecting the environment, the cheaper

it is to produce. So we often call that structure of incentives the race to the bottom, where you're rewarded for undermining standards, you're rewarded for having low standards and undercutting each other on standards, and at the end of the day, what you discover is a less sustainable world in terms of our climate future that's a very very good example, but also a less sustainable world in terms

of the experience of our people in our economy. So this allows me to get into a little bit of a frame here which is that we've justified that race to the bottom on the basis of, well, you know, if producers can cut their costs, then they can bring prices down, and so consumers who are people will have the benefit of low, low prices, low prices when they

go to the market for essentials and also non essentials. Right, the important part about a worker center trade policy, as we call it, is to remind everybody that in all of that logic, what's gotten lost is virtually every consumer that consumes in the marketplace and spends in the marketplace is also a producer. Is a wage earner, is someone who has a livelihood and has to make the money that goes in their pocket so they can spend it

in the marketplace. So the human being in the economy is multifaceted and at the very least is both a consumer and a producer. And if your policies are just justified on the basis of low cost, low prices for the consumer, and you are ignoring the fact that in a very interconnected and globalized world, suppressing the rights of workers and exploiting them in one country in one economy is going to have downward competitive pressures on those workers.

In another economy and downward pressures on their ability to earn better wages. Then overall you've ignored an important part of the calculus over whether or not you're actually creating utility, if you will, in the economy for your people. And

that's a large part of what we've seen. So absolutely, what we are fundamentally trying to do through a worker center trade policy is to take a more holistic, comprehensive view of the primary beneficiary in terms of our economic policies, which is the human being, to take into the fact that they are both a consumer and a producer, and to try to flip the script on trade and trades'

contribution to globalization. The globalization that we're experiencing right now is just one version of versions of globalization that we've had before. In fact, if you go back far enough and you look at, say the founding of the colonies that became the United States, you know that it was all about supply chains and trade. Yeah, so the version you.

the Caribbean. You have the labor force here in the United States producing tobacco, cotton, raw materials that then went back to England and the European countries for value addition, and then you had those high value products then sold back to the folks in these in these input economies. So, just to get back to the point, the version of globalization that we have today is advanced from what we

had before. We are in an inflection point right now where I think that we really are evolving into the next version of globalization. And the point of a worker center trade policy is to make sure that our goal is not just trade volumes. Our goal is not just the concept of free trade. Our goal is much more pragmatic to achieve, including through our trade policies, more sustainability, resilience,

and more inclusiveness in our economic outcomes. That's for both us and for our trading partners, so that we can evolve into a version of globalization that can start to realize what we call the race to the top, a version of globalization where incentives are over time to raise standards, where you're rewarded for not exploiting, but your reward or for thinking three steps ahead to the sustainability of your

business models, your economic models. And that's fundamentally the opportunity that we have today.

from doing it is we would worry about retaliation. And just to take a recent example, I mean, Canada decided to tax evs coming from China, and China has now launched an anti dumping investigation into Canadian exports. How do you think about that particular risk.

And so that's been a critical part of what we've been doing the Biden Harris administration, which is to build and rebuild our relationships and to ensure that our approach and our actions are well understood by our partners. So that gets to retaliation. If people don't understand what you're doing, right, tit for tat you get a lot of that, and

we've seen some of that in our past. The third piece on tit for tat retaliation is this one, which is in your example of Canada taking steps on increasing terroiffs on certain Chinese imports in some critical industries including evs and China's response. Part of what we have seen in the last twelve years is an increasing willingness by the PRC to weaponize the dominance that they have achieved in the global marketplace. And there's two elements to this.

There are dominance in terms of being a producer and a supplier, so you know, a monopolistic kind of dominance. And then also there are dominance in terms of being a consumer in the global marketplace. And I think that the term that we use in economics, there is a monopsony monopsonistic dominance.

them more resilient. Is the need for us to have more supply chains and more options so that we can insulate ourselves, our partners can insulate themselves from this kind of economic bullying, economic coercion, and weaponization of marketplace dominance. So that's the third point I wanted to make around the example you provided with respect to Canada, which is we've seen Canada take measures that actually align their economic

defenses with ours. It's actually really important when you look at the North American economy, the US economy, and the level of integrations with both Canada and Mexico, and the need for US actually to think about not just taking individual defensive measures, which these tariffs I would characterize them as defensive measures, but to coordinate our defensive measures in order to I'm not going to call it protectionism, right, but in order to protect our North American economy from

the distorative effects of this unbridled, non market based Chinese excess production impacts on our competitiveness and frankly, our ability to continue to produce, to be able to thrive, to have our producers in terms of EVS, in terms of steel and aluminum, to be able to grow, but to

survive in the first place. We have seen time and time again industries that China has identified as strategic for not just domination within their own market, but domination in the global markets wipe out industries in very very open market based economies like ours. And so that is in large part why you see the steel owned aluminum industries

in the United States. You see us taking new kinds of measures to ensure that we can continue to produce steel and aluminum, which is critical to our economic security and our national security, but also with respect to solar panels, and now also so in terms of EVS. The ability for us to coordinate those defenses also helps to insulate us from those coercive effects of China's economic dominance. Trade

defensism is that a word, trade defense absolutely. In fact, we have a whole system of trade measures that we call trade remedies. The Europeans call them trade defense instruments. There they're the anti dumping duties, the countervailing duties. They're to level the playing field. What we've discovered though, is that set of tools they're really industry specific. They are

country specific. They are people have compared them to scalpels or you know, kind of specialized tools for defending against unfair trade practices with respect to China's footprint in the global economy, and the result of these decades of very very powerful industrial targeting policies, and what we mean by that is industrial policies targeting market dominance, international market dominance, we are needing to develop an entirely new set of tools to defend, to defend on our part, to have

coordinated defenses. And then let me just say one more word about what we're doing here. We need to be playing a new game on defense. That's where the tariffs come in. But we also know that you can't just rely on defense. You need to have an offensive game too. And from our perspective, then what are your tools for

mounting an economic, industrial, and competitive offense. Those are the investments that we are making, the investments that we are making in our people, the investments that we are making in our infrastructure, the investments that you see as starting to make in critical industries like semiconductors, but also the

clean energy industries. And you have to take these suite of tools together in order to be able to continue to compete against a very very strong competitor whose economy and whose theory of their place in the world economy is quite different from yours. I'll just share with you an analogy that a former colleague of mine has made

publicly also I'll given credit for it. It's Tim Stratford, who had in earlier administrations been the assistant US Trade Representative for our China Affairs Office, and he's worked in and near and around China economic issues for I think most of his career, and his analogy is this when you're looking at the US China trade relationship, but that could include other economies that are built on the same

foundations as ours, which are open market based economies. What you see is two teams that are on a playing field, but they're fundamentally playing two different games. And in his analogy, it's like one team is out there playing American style football and the other team is out there prepared to play what the Europeans and the rest of the world called football, but what we call soccer. In his analogy, if you play it out a little bit more, I

think it's a very interesting analogy. His analogy is that it's actually the PRC's economy is on the field. As the American football players, they've got the padding, they have more players, they are out there kind of doing this kind of brutalistic kind of competition, and it's our market based economies that are out there playing the more European style football and the playing soccer where it's more agile. You have fewer players, and you're fundamentally playing two different games.

And the issue is that we've gotten to the point in our relationship and in accepting the reality of the trajectory of our economies and understanding the fundamental policy goals of each economy where we're starting to realize we can't keep playing soccer on an American NFL football. We have to fundamentally change the way that we approach competing, and we're gonna need new defensive strategies and we're gonna need new offensive strategies.

our incredible resources here. I know that's not what's being pursued, but you know, obviously there's a range of different approaches to worker safety, there's a range of different approaches to the degree to which government supports private industry, and every country does it to some extent, some further, some less. What are the limiting principles of the new version of globalization? How do you know what's too far? What are the constraints great?

a little bit more texture here. And this gets us into the US Mexico trade relationship and a lot of the scars that we bear from the original negotiation and passage of NAFTA to then the reason why there is a renegotiation of NAFTA and the birth of the US Mexico Canada Agreement. The concern early on in the nineteen eighties, when NAFTA was being negotiated in the first place, was we already had a trade agreement with Canada. There was

a US Canada bilateral and ween Canada are very very close. Canada, I think today is one tenth the size in population of our economy. I think that that was a nineteen eighty five agreement. The big push then over the course of that next ten years was well, you know, think about North America. Let's combine this US Canada trade relationship and bring Mexico into it. And the concern there was Mexico was then and continues to be just at a different level of development than the US and Canada. It

is a lower cost country, lower labor cost country. It is a country where rule of law is also at a different level of development. And the concern was that if you took away all the barriers between all three economies, what was going to happen. And there's a very famous quote by Ross pro that I'm not going to repeat here, but I'm going to talk about it in more kind

of objective terms. The concern and was that your words, not mine, but you know that it's that logic then that as you take away the barriers and in that push for efficiency and you know, bottom line, the incentives would allow everything in terms of production to flow into Mexico.

then buy more things from the United States. Right, Okay, The issue is that when you look at industrial relations in Mexico, what you see is Mexico is a democracy. Mexico has labor unions, but the tradition has been that and they have some truly independent unions, but by and large, for most of this period of NAFTA. Actually it's true even today, most Mexican worker organizations and unions are what we call corporatist. They are extensions of the employers that

they don't actually represent the interests of the workers. That they will often negotiate collective bargaining agreements before a single worker is hired at a facility, and the workers come in not knowing what's in the agreement, and obviously they haven't voted on it, they haven't voted on the union, and those agreements are not working to empower those workers, or they're not looking after the worker safety, or they're

working conditions and their wages and their rights. Right. So, over the twenty years twenty five years of the NAFTA, you saw so much production leave the United States go to Mexico on the backs of an entirely exploitative model

with respect to Mexican workers. And the way that American workers experience this in all the industries that went south was the loss of jobs, the hollowing out of communities, and for the jobs that we retained in some of our industries, a constant pressure from management to say, well, you know, the collective bargaining agreement is up for renegotiation. Here are our terms. These are the best terms we're

able to offer you. And frankly, if these don't work for you, we're just going to close up shop, and we're going to move this south to a place where your compatriots on the Mexican side of the border have no rights to negotiate agreements that actually reflect their interests. Right, So that fundamental mismatch has been across that we have

born as part of NAFTA. You get to the renegotiation of the NAFTA and some people will say, well, you know it was time, was over twenty years, and you know we needed a modelies an update, and that's true. But the real opportunity in the renegotiation of the NAFTA was to address some of these original sins of the NAFTA, to address the fact that we didn't adequately provide for

mechanisms to counterbalance the race to the bottom. And so what you have in the USMCA, which is this very very interesting product of the Trump administration and Congressional Democrats, was among our existing trade agreements, the USMCA is the one that has the highest standards for labor and worker protections.

It has, in particular a labor and worker specific enforcement mechanism that was the key to the renewal of the NAFTA in the form of the USMCA, that won at eighty nine percent support in the House and Senate, and even one at the endorsement of key labor union side, like the AFLCIO and like the steel workers. And this mechanism, then, which is so key and novel in the USMCA to worker centrism is a facility specific labor enforcement mechanism that

allows for anybody to petition the US government. The Canadians have their version with Mexico or the Canadian government to take up with Mexico concerns that there are specific facilities in Mexico that are not affording the right to freedom of association or collective bargaining to its workers as required not just by the treaty, but as required by Mexican law. We have invoked this mechanism, which is very very novel, almost thirty times now. We have settled and resolved about

twenty four or twenty five of the cases. In every single one of the cases that we have resolved to date, we have allowed for workers at specific facilities to have a free and fair election of an independent union of their choosing to be able to negotiate new collective bargaining agreements that reflect their interest to increase their wages to get back pay. We have directly benefited over about thirty thousand Mexican workers five to ten I think is the

number of million dollars in improved benefits and wages. And people will say this feels like a drop in the bucket in terms of addressing that race to the bottom. But what I need for you to know is this is the beginning of the flip to a race to

the top. If you think about what we have made possible through this mechanism in the USMCA, for the first time in our history, maybe for the first time in history, there is a mechanism that is uniquely available in a trade agreement that is empowering workers in Mexico and therefore also empowering workers in America. We have demonstrated that trade is not inherently inimicable to the interests of working people, but that trade can be a part of the solution.

And so what I wanted to do with your question is really to flip it and to say we are just getting started. We are very very far from the conversation around what are the limits and have we gotten to access The balance is so far weighted in favor of the race to the bottom, that we are still in the process of innovating how we can do trade

to benefit more segments of our economy and society. And it's actually a very very exciting time for us to be doing trade and is requiring a lot of the spirit of innovation and advancement and to keep our eye on the ball that the race to the top is possible.

And then, secondly, you've been in this role since I think twenty twenty one, do you have any interest in perhaps continuing it under a Harris administration?

of that in context. But what I really really want you and your listeners to take away is that a very important aspect of the Biden Harris Administration's approach to trade and economic policy is that you have to combine defensive tools with offensive tools. You have to combine trade measures with all of the other policies that make up your economic toolkit. Those are policies of the US Treasury.

Those are policies of advancing competition and opportunity, and all of this is trained on the America of today and how we get from today to the America of tomorrow and to prepare ourselves to be the strongest economy for American workers and American consumers.

one regime. And as Ambassador Tie noted, there is truly no such thing as free trade anywhere, which I thought was an interesting line. So at any given moment, what free trade or what we call trade or what we call globalization can change.

in sort of nineteen nineties early two thousand terms. Yeah, trade, liberalization, bring down the barriers and all of that, but there happened instances throughout history where trade meant something slightly different, and the sort of nineteen fifties analogy of I guess using that word again, trade defensism or perhaps more like activist maybe trade management is an interesting one totally.

do think it's interesting. You know, she talked about the China shock, right, and China shock one point. Oh, but you know that was in we know about sort of various textile areas or other low end manufacturing that just got completely decimated the moment that companies were able to move overseas and build the exact same thing with cheaper labor costs, lower environmental standards, lower labor rights, and so forth.

It's interesting, though, and so we've seen the playbook before and we don't want to repeat it, and I get that. It's interesting though to think about it in the context of some more of these high end areas it really is about like, no, we are catching up.

you to our producer Moses Adam. For more Oddlogs content, go to Bloomberg dot com slash odd lots, where have transcripts, a blog and a newsletter and you can chat about all of these topics, including a trade and China and domestic investment twenty four to seven in our discord with fellow listeners Discord dot gg slash odlines.