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Kantor and Schwab: “Prioritize Trade”

With 60 percent of global trade at stake in pending deals, now is the time to make trade a priority.

Mickey Kantor | U.S. Trade Representative

Susan Schwab | U.S. Trade Representative

The United States is currently negotiating two “mega-regional” trade deals—the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP)—that would encompass 60 percent of the global economy.

U.S. trade negotiators are also seeking important global agreements in such key sectors as services, information technology, and environmental goods while at the same time laboring at the World Trade Organization (WTO) to rescue and conclude key multilateral agreements on trade facilitation and trade and development.

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“The logic of a rules-based trade regime is unassailable.” – Mickey Kantor

Completing and enacting these wide-ranging trade deals will almost certainly require Congress to pass “trade promotion authority” (TPA) legislation.

This legislation would set broad objectives for the pending agreements, enable Congressional input into the negotiations and create a process for prompt, up-or-down approval by Congress of the final deals.

During their respective tenures serving as U.S. Trade Representative (USTR), Ambassadors Mickey Kantor and Susan Schwab shepherded the negotiation and approval of many of America’s most significant trade agreements in recent years.

As USTR (and later Commerce Secretary) under President Bill Clinton, Amb. Kantor concluded negotiations on the North American Free Trade Agreement (NAFTA), led efforts to secure its approval by Congress, and was America’s chief negotiator during the creation of the WTO.

As USTR for President George W. Bush, Amb. Schwab finished trade deals with Peru, Columbia, Panama, and South Korea and worked with Congress to normalize trade relations with Vietnam and to gain approval of trade agreements with Oman and Peru. She also negotiated the bipartisan “May 10, 2007” deal on trade, labor and the environment.

Amb. Kantor and Amb. Schwab are, respectively, a partner and a strategic advisor with the global law firm Mayer Brown. Both say that the United States is entering a pivotal moment on trade policy, and that the need for U.S. leadership is crucial.

Question: What are some of the major shifts you’ve both witnessed in the political and substantive landscape around trade?

Schwab: The first major trade vote I was exposed to was the Trade Agreements Act of 1979, when I was a career agriculture negotiator, and Bob Strauss was the USTR.

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“Trade agreements haven’t evolved as fast as governments have in figuring out how to intervene in markets against the interests of U.S. exporters.” – Susan Schwab

We lost 11 votes in the House and four votes in the Senate – all dairy state members – and that was the vote approving the Toyko Round of multilateral trade agreements.

There was a whole lot of work leading up to that [vote] – lots of negotiations, a huge amount of consultation with the private sector, and constant interplay with all the constituent interests that members of Congress cared about.

But constituent interests and export interests, while they still play an important role, seem to have been eclipsed by partisan politics. Labor unions that once supported trade agreements or were neutral on trade agreements – and that arguably have an interest in increased trade – now oppose trade agreements.

In 1979, the AFL-CIO and the UAW were either supportive or neutral. The Teamsters were supportive. That gives you a sense of history and a sense of context.

Question: What happened to the politics of trade?

Kantor: The logic of a rules-based trade regime is unassailable. What happened is that because trade is not a front-page issue, and the American public is not as informed as it should be, there’s a fear of the unknown.

As technology and globalization took hold, and people were either not aware of or unprepared for the impacts it has had, the American public has been driven to fear the loss of jobs, the loss of income and [the loss of] American manufacturers and businesses.

Fear always wins if you don’t have information.

And it’s been a great challenge to argue that because of our open trade regime, trade agreements are always in our favor – [that they] create rules and open up the economies of other countries for our exports.

Even today, we’re trying to fight that fear and bring about some broader discussion to illuminate trade as a critical factor for building jobs and income in our country.

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 Manufacturing output in the United States has steadily increased in all but maybe one or two years in the last several decades. –Susan Schwab 

Schwab: The opponents of trade blame trade for all manner of things that have nothing whatsoever to do with international trade because it’s easy to point to. It’s easy to do a video of a factory closed with a lock on the gate.

It’s just easier PR, and in fact [trade has had] virtually nothing to do with the transitions in the economy that have resulted in a reduction in manufacturing employment. Manufacturing never actually left the United States.

Manufacturing output in the United States has steadily increased in all but maybe one or two years in the last several decades.

Kantor: No trade agreement would precipitate [a company] moving its manufacturing either to the maquiladoras or to China or anywhere else. It was technology and globalization that allowed that to happen.

Major economic shifts in the world have affected the way that goods and people and services move, and that’s always going to be the case. The question is, as that becomes more pronounced – and it will – are we going to have rules or not?

Question: What advice do you have for advocates of open trade?

Kantor: We’ve got two large trade agreements and trade promotion authority [(TPA)] that have to get through Congress.

You cannot get these done unless it becomes a priority for the President of the United States. [That’s] because of two things: One is information flow. If it doesn’t come from the White House, it’s not listened to.

The second is the emphasis and priorities [that this signals].

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 No trade agreement would precipitate [a company] moving its manufacturing either to the maquiladoras or to China or anywhere else. It was technology and globalization that allowed that to happen. –Mickey Kantor

Susan’s been through it, and I’ve been through it – if you do not have a White House that is focused and makes it a priority, it’s not going to happen.

Let me give you an old man’s story, but it’s illustrative of what we’re talking about. In trying to get NAFTA passed in 1993, the President of the United States would go to the Roosevelt Room or the Cabinet Room nearly every other day with a group of members – from the House particularly – and attempt to persuade them that NAFTA was good for them and their districts.

It made a huge difference. But it took enormous amounts of the President’s time to get that done.

Schwab: I agree entirely. It’s doable if it’s a high enough priority. I think they missed a real opportunity when they decided they wanted to send [former Senate Finance Committee Chairman] Max Baucus to Beijing – that’s water under the bridge. We know that there’s a [TPA] bill that he would have endorsed.

[Current Senate Finance Committee Chairman] Ron Wyden will obviously have his own thoughts on what he wants to do, but the question is what the Administration and Wyden would be interested in doing – recognizing that you’re not going to bring all of the Democrats on the Senate Finance Committee along on this particular project.

One of the mistakes that this Administration has made from time to time on trade is that they have tried to pander to groups that will never vote for a trade bill as opposed to trying to work with groups – Democrats and Republicans – who are sincerely interested in trade agreements and trade legislation and would end up voting “yes.”

Question: What are the stakes in these agreements, and what emerging issues do you see?

Kantor: There are issues and concerns and opportunities that we need to address in the future certainly in Geneva [at the WTO] but even in large free-trade agreements.

For instance, compatible standards and reg[ulations] – We’re going to have to address that in food, drugs and other things.

Antitrust issues – We’re going to have to look at how we deal with data flows and how we protect privacy on one hand but [allow] the free flow of information on the other.

And what do we do about [sanitary and phytosanitary measures] (SPS) and the non-science-based decisions being made, particularly in Europe and other places about [genetically-modified organisms] (GMOs) and other matters?

Are we finally going to address bribery and corruption in trade agreements? We should. It is one of the great scourges of international trade.

Not to mention labor agreements and environmental agreements being updated, made stronger and made more viable. [We should also be] looking at intellectual property and how we protect it and what we do about protecting investment with fair rules. There is so much to do.

Schwab: Let the record show that I’m quite content with the May 10 [bipartisan] agreement [on labor, environment and other matters] as it is and wouldn’t venture any further along that path. I think that’s shown to be working.

TPP and T-TIP are vitally important for a variety of reasons, but these need to be high-bar agreements. These need to be agreements that are “WTO-plus,” or “FTA-plus.” They can’t be “FTA-minus”; they can’t be “WTO-minus.”

We can set a higher bar that ultimately can be migrated into future agreements with other countries or migrated into the WTO.

And even if there are issues where the U.S. and the E.U. don’t have problems with each other, we have an opportunity here to create common standards – that are performance-based rather than process-based, outcome-based and science-based – that we can then apply elsewhere in other agreements. And the way to get there is trade promotion authority.

I’m very concerned that trade agreements haven’t evolved as fast as governments have in figuring out how to intervene in markets against the interests of U.S. exporters.

And that is particularly damaging to small and medium-sized U.S. companies – but also to major corporations that end up being forced to invest more overseas because they have to invest behind barriers rather than export.

[These barriers include] things like forced localization; forced technology transfer; some of the rules being imposed on cross-border data flows; some of the intellectual property rights challenges we’re facing; investment rules; and the use of anti-monopoly laws as an excuse, quite frankly, for trade protectionism.

That sort of activity is multiplying. There’s a proliferation of those kinds of protectionist interventions going on globally, and trade agreements haven’t kept up with them.

Question: What about the status of the WTO as a negotiating body, especially with the recent breakdown of the trade facilitation agreement pending in Geneva? Where do you see the future for the United States and the world in the WTO or multi-lateral trade negotiations generally?

Kantor: What’s interesting is that the [WTO] dispute settlement mechanism continues to operate well. It’s been effective.

Trying to get a negotiation through the WTO with its 160 members is very difficult – admittedly so – but it’s also a great opportunity because what you’re talking about is almost 100 percent of world trade sitting there in Geneva with the chance of getting something done.

It takes leadership at the top of the WTO – which has been somewhat weak, frankly, and [WTO Director-General] Robert Azevêdo has made some strides – but it also takes [President] Dilma Rousseff in Brazil, [Prime Minister Narendra Modi] in India, and [President] Obama to make it their priority.

And if they don’t, it’s not going to happen. These are policy issues at the upper level of every government on the face of the earth, and they have to be treated as such. Our ability to relate to each other and to move in other areas like security or other economic issues are dependent on it.

Connecting to [other nations] through trade agreements is probably easier than certain other kinds of agreements we’d like to have. And it makes it much easier to reach agreements in other areas and to avoid a conflict in other areas if you have those kinds of connections.

Schwab: I’m an unabashed multi-lateralist – even having had my teeth kicked in multiple times on the Doha Round. I think there is absolutely no substitute for a healthy multilateral system, and that’s the WTO.

I’m a great fan of Robert Azevêdo, and I think he’s in a position to really invigorate the organization.

What happened in December at the Bali [ministerial] was a great signal of the potential for moving the organization forward beyond the dispute resolution area where – yes, it’s working – but it’s enforcing rules that stopped being negotiated in 1993 when the Uruguay round was concluded.

But what happened subsequently with India again being the “turd in the punch bowl” was unconscionable.

It’s absolutely unconscionable that the new Modi government should ruin a deal that the previous government had reached after much agonizing by every WTO member. We’ll see whether they’re able to walk that back – I certainly hope so.

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If you don’t have [trade] as a priority, if it’s not at the top of the agenda economically, it’ll be very difficult to get anything done. –Mickey Kantor

Again, it comes down to leadership, but presumably that saga is not over yet, and what the WTO needs to see are confidence-building measures like trade facilitation, or like the information technology agreement that the Chinese are now holding up.

The Chinese will want some deliverables when they are hosting APEC in November in Beijing, and perhaps they could see their way clear not to hold up a plurilateral agreement that’s certainly in their best interest. There’s also an environmental goods agreement that shows great promise that could also be a WTO initiative.

Kantor: Susan strikes the right tone. We have got to have confidence-building measures, and one of the ways to do it among many is for the U.S. to successfully deal with TPP and T-TIP and get a fast-track agreement through Congress. If we are able to do that because of the leadership we show, that will make a huge difference in Geneva.

Question: So what is the political path forward on trade – and on TPA in particular – for those who want to see these trade agreements move forward?

Kantor: You’ve got to organize first. You can’t do it without organizing the community that is in favor of these agreements – the business community, major parts of the ag[riculture] community, think tanks and others – into an advocacy force that will help you work with the Congress. And it needs to be done in an intense way.

Number two, the talking points and the rationale need to be well articulated starting at the top.

The President, his economic team, and of course his USTR Michael Froman – but also his secretary of Commerce, his Secretary of Treasury, and others – are going to have to spend their time on this as well and use the issues they have leverage on to help push this through.

It’s got to be done, and if it’s not done, it just won’t happen. If you don’t have it as a priority, if it’s not at the top of the agenda economically, it’ll be very difficult to get anything done.

Schwab: I agree. It has to be a priority of the White House. It’s a lot of work, it’s hard work, but it’s worthwhile and ultimately redounds to the benefit of American workers, businesses, agriculture and consumers. goldbrown2

Kantor-03540
Mickey Kantor served as United States Trade Representative from 1993 to 1996.

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Susan Schwab served as United States Trade Representative from 2006 to 2009.

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