WEBVTT - Michael Froman on the New 'Polyamorous' Global Trading System 0:00:02.720 --> 0:00:16.360 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.040 --> 0:00:21.240 Hello and welcome to another episode of the Odd Lots podcast. 0:00:21.320 --> 0:00:23.600 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:23.960 --> 0:00:26.360 Tracy, you know, we're several months, I guess, like five 0:00:26.400 --> 0:00:29.600 months or so, recording to September sixteenth, five months or 0:00:29.640 --> 0:00:34.040 so since Liberation days, since the trade war started. By 0:00:34.120 --> 0:00:37.479 and large, the world is still kind of working right. 0:00:37.520 --> 0:00:40.560 You could see its effects for sure, and certain categories 0:00:40.600 --> 0:00:42.959 and so forth, but by and large, I don't think 0:00:43.000 --> 0:00:46.000 the contours of the economy look that much different than 0:00:46.000 --> 0:00:47.839 they did, say in March or April. 0:00:47.960 --> 0:00:50.880 Look, I'm still missing my auction item that's supposed to 0:00:50.880 --> 0:00:54.080 be mailed from the Netherlands, so it has affected me directly. 0:00:54.280 --> 0:00:56.200 Wait what happened with it? Wait? Say more? 0:00:56.440 --> 0:01:00.000 Okay, So I won something from a Dutch auction house 0:01:00.480 --> 0:01:03.400 and they were supposed to mail it in house shipping, 0:01:03.560 --> 0:01:05.679 and instead of mailing it, they sent out an email 0:01:05.800 --> 0:01:08.399 saying that they can't mail it because everyone's trying to 0:01:08.400 --> 0:01:11.520 figure out the new tariff schedule and customs and things 0:01:11.560 --> 0:01:13.400 like that. I still haven't heard from. 0:01:13.200 --> 0:01:15.600 Them, but it still feels like something happened. There was 0:01:15.640 --> 0:01:19.759 some sort of rupture. Kind of hard to imagine going 0:01:19.880 --> 0:01:24.080 to a March twenty twenty five world again, but also 0:01:24.560 --> 0:01:28.120 hard to imagine going to a pre Trump one world ever, Like, 0:01:28.160 --> 0:01:31.040 it's hard for me to imagine that in my lifetime 0:01:31.480 --> 0:01:34.880 that there will ever be a sort of twenty fifteen 0:01:35.000 --> 0:01:37.520 style trading relationship between the US and China. 0:01:37.840 --> 0:01:40.160 Well, I could be wrong, never say never, but. 0:01:40.600 --> 0:01:42.080 It's just hard for me to see at this point. 0:01:42.160 --> 0:01:45.360 At this point, like, it's not a single administration thing. Right, 0:01:45.400 --> 0:01:48.720 We've had Trump one point oh, and then Biden continued 0:01:48.720 --> 0:01:51.080 a lot of the tariffs and even added some new ones, 0:01:51.120 --> 0:01:53.080 and then we have Trump two point zero, which is 0:01:53.640 --> 0:01:56.680 arguably going even harder on China. So it does seem 0:01:56.720 --> 0:01:58.880 like at least a durable trend. 0:01:59.080 --> 0:02:02.400 Yeah, not a fly. And as we've discussed, you mentioned 0:02:02.480 --> 0:02:05.680 the fact that Biden was a continuation arguably an expansion 0:02:05.760 --> 0:02:08.680 of Trump one, particularly with some of the export restrictions 0:02:08.680 --> 0:02:14.080 on technology. Yeah, this is one of the rare trade 0:02:14.440 --> 0:02:18.560 rethinking the global trading system, whatever that means, is one 0:02:18.600 --> 0:02:21.960 of the rare areas of bipartisan consensus in dc IS, 0:02:22.120 --> 0:02:23.440 as has come up in many episodes. 0:02:23.480 --> 0:02:25.880 Yeah, that in housing, that in. 0:02:25.800 --> 0:02:28.440 Housing right, that housing is very expensive. We really do 0:02:28.520 --> 0:02:31.240 have the perfect guest, someone who has a very big 0:02:31.280 --> 0:02:35.200 picture view on trade, someone who has been directly involved 0:02:35.280 --> 0:02:40.760 in trade negotiations, someone who remembers the sort of pre Trump. 0:02:40.520 --> 0:02:42.720 One, the long long long ago, the. 0:02:42.720 --> 0:02:46.800 Long long long ago global trading system, and who could 0:02:46.800 --> 0:02:49.800 talk about whatever remnants of that are left, or even 0:02:49.840 --> 0:02:52.120 maybe who can explain to me what the global trading 0:02:52.120 --> 0:02:54.880 system was. We're going to be speaking with Michael Frohman. 0:02:54.960 --> 0:02:57.840 He is the President of the Council on Foreign Relations 0:02:58.080 --> 0:03:00.600 and he was the former US Trade repper reve during 0:03:00.639 --> 0:03:05.080 the Obama Obama two administration twenty thirteen to twenty seventeen. 0:03:05.480 --> 0:03:08.040 Has continued to write a lot about this topic. So, 0:03:08.720 --> 0:03:11.480 Michael Frohman, thank you so much for coming out odd last, 0:03:11.639 --> 0:03:14.400 Thanks for having me. Absolutely What does the US trade 0:03:14.440 --> 0:03:17.040 representative do? You had that job? I actually realized I 0:03:17.040 --> 0:03:17.520 don't really know. 0:03:18.160 --> 0:03:22.000 It's a great job. It really has the function of 0:03:22.200 --> 0:03:28.600 negotiating trade agreements and enforcing US trade rights under previous agreements. 0:03:29.680 --> 0:03:32.080 The reason I love the job is that it combines 0:03:32.520 --> 0:03:36.240 high diplomacy, sitting down with ministers, presidents, prime ministers of 0:03:36.280 --> 0:03:39.800 other countries, trying to reach agreements with having to have 0:03:39.840 --> 0:03:43.040 a really detailed understanding of elements of the US economy. 0:03:43.400 --> 0:03:48.000 I mean, I learned more from American farmers teaching me 0:03:48.080 --> 0:03:50.000 the five hundred things you can do with a molecule 0:03:50.040 --> 0:03:53.560 of milk and how they manipulate a molecule of milk 0:03:53.600 --> 0:03:57.760 to circumvent trade restrictions and get around tariffs, so you 0:03:57.800 --> 0:04:01.360 export it as butter or his way, or as low 0:04:01.640 --> 0:04:04.280 calorie powder or whatever. 0:04:04.560 --> 0:04:07.640 This is a whole episode episode, right, But that's really 0:04:07.680 --> 0:04:11.360 one example of the literally thousands of issues you have 0:04:11.440 --> 0:04:13.400 to learn as US trade rep to be able to 0:04:13.400 --> 0:04:16.680 sit down with your counterparts in other countries and negotiate agreements. 0:04:16.960 --> 0:04:19.040 Can you give us an idea or a sense of 0:04:19.160 --> 0:04:23.280 the average negotiation? What exactly is the process? Like do 0:04:23.360 --> 0:04:26.760 you meet for the first time in a designated room 0:04:26.839 --> 0:04:29.480 somewhere or is there prep that goes into these you're 0:04:29.520 --> 0:04:31.919 exchanging emails? What exactly happens? 0:04:32.360 --> 0:04:35.600 So in the past, and of course it's a very 0:04:35.600 --> 0:04:38.760 different situation now, But in the past, the US or 0:04:38.800 --> 0:04:40.560 another country might come up with an idea of what 0:04:40.600 --> 0:04:42.839 they wanted to do in a trade negotiation, a set 0:04:42.839 --> 0:04:44.720 of issues they wanted to take on a set of 0:04:44.760 --> 0:04:47.400 countries they wanted to negotiate with, and they would go 0:04:47.480 --> 0:04:50.600 around and do consultations with other countries, float the ideas, 0:04:50.640 --> 0:04:53.480 see what kind of feedback they got, and scope out 0:04:53.720 --> 0:04:56.159 the nature of the negotiation. Is it going to be 0:04:56.240 --> 0:04:58.680 just about goods and tariffs? Is it going to touch 0:04:58.760 --> 0:05:02.919 upon agriculture, sure and regulations and services and labor and 0:05:03.040 --> 0:05:05.720 environment and all various other issues that have become part 0:05:05.720 --> 0:05:09.039 of trade negotiations in the past, and get agreement by 0:05:09.120 --> 0:05:12.080 the other countries that this was the agenda. And then 0:05:12.279 --> 0:05:14.960 in the past usually it's the US that has been 0:05:15.040 --> 0:05:17.599 sort of driving the agenda. These would be the topics 0:05:17.640 --> 0:05:19.359 we would deal with. The US would come up with 0:05:19.400 --> 0:05:22.040 proposals of what are the disciplines that we would like 0:05:22.080 --> 0:05:23.440 to see in each of these areas, what are the 0:05:23.520 --> 0:05:25.440 rules that we'd like to see. And it was the 0:05:25.480 --> 0:05:29.680 way the US brought other countries along to adopt high 0:05:29.720 --> 0:05:34.520 standard rules across one sector, one subject matter or another. 0:05:34.600 --> 0:05:37.640 And the idea was, we know, we live in a 0:05:37.720 --> 0:05:42.960 high wage, highly regulated economy. We compete with economies that 0:05:43.120 --> 0:05:46.559 oftentimes have lower wages, lower regulation, and if we could 0:05:46.760 --> 0:05:49.920 raise other country standards closer to our own. It would 0:05:50.000 --> 0:05:52.520 level the playing field for American workers and farmers and 0:05:52.600 --> 0:05:54.880 ranchers and make it easier for us to compete. 0:05:55.720 --> 0:05:59.360 I mean, for better or worse. It really just seems 0:05:59.360 --> 0:06:01.320 like a totally different era and out the idea of 0:06:01.360 --> 0:06:04.159 getting to the idea of going back to some world 0:06:04.440 --> 0:06:07.440 where the US is actively working with a bunch of 0:06:07.480 --> 0:06:11.160 country on rules rather than rates terror for it really 0:06:11.240 --> 0:06:14.000 does seem it seems like ancient history. Now, it just 0:06:14.040 --> 0:06:15.360 seems right. 0:06:15.560 --> 0:06:17.080 Look, I think that's right. First of all, I think 0:06:17.200 --> 0:06:21.039 I think the international trading system had been under stressed 0:06:21.080 --> 0:06:23.840 for some time. President Trump, in some ways put was 0:06:23.880 --> 0:06:27.000 the final nail in the coffin of it. But you know, 0:06:27.080 --> 0:06:30.839 the global multilateral rules based system, that's like the wto 0:06:30.920 --> 0:06:33.960 the World Trade Organization, where one hundred and sixty plus 0:06:33.960 --> 0:06:36.719 countries got together, agreed to a set of rules, agreed 0:06:36.720 --> 0:06:40.600 to some mechanisms for enforcing those rules and for monitoring them. 0:06:40.839 --> 0:06:44.440 That's been under stress for a long time. There's been dissatisfaction, 0:06:45.040 --> 0:06:47.640 and I think now, in fact, you're right. I think 0:06:47.680 --> 0:06:50.400 we can't go back to the way things were pre Trump. 0:06:50.440 --> 0:06:52.320 We're gonna have to think about what comes next. 0:06:53.640 --> 0:06:56.159 Just to play a devil's advocate for a second, to 0:06:56.240 --> 0:06:59.599 what extent did we actually have a rules based trading 0:06:59.640 --> 0:07:02.960 system in the sense that everyone was actually beholden to 0:07:03.240 --> 0:07:06.919 the same limitations or the same rules, Because looking back, 0:07:07.320 --> 0:07:10.680 there were always accusations about China cheating or maybe the 0:07:10.800 --> 0:07:14.160 US was taking advantage in some way, And in fact, 0:07:14.560 --> 0:07:18.560 you could argue that that sense of unfairness is kind 0:07:18.560 --> 0:07:21.400 of what got us to where we are today. So 0:07:21.760 --> 0:07:24.240 was it really rules based for everyone? 0:07:24.520 --> 0:07:26.840 So I think we have to look back at the 0:07:26.840 --> 0:07:30.440 whole history of the post war period because for decades, 0:07:30.680 --> 0:07:32.800 China wasn't a factor, it wasn't part of the global 0:07:32.800 --> 0:07:35.280 trading system, it wasn't a major economy, and it was 0:07:35.360 --> 0:07:39.440 the US and Europe, Japan, others who came together to 0:07:39.560 --> 0:07:42.920 really form this set of rules. And it's never a 0:07:42.920 --> 0:07:47.520 perfect system. My sense is what rules means is that 0:07:47.560 --> 0:07:50.480 most countries follow most of the rules most of the time, 0:07:51.240 --> 0:07:53.600 not that it's one hundred percent perfection. By the way, 0:07:53.720 --> 0:07:56.040 that's true when you have laws in the United States, 0:07:56.080 --> 0:07:57.680 I mean we have laws of the United States because 0:07:57.680 --> 0:08:00.520 people do commit crimes. The existence of laws does not 0:08:00.560 --> 0:08:03.120 prevent people from committing crimes. That's why you need enforcement. 0:08:03.400 --> 0:08:06.640 Same thing is true on the international side as well. 0:08:06.960 --> 0:08:09.080 The big difference, as you pointed out, Tracy, is when 0:08:09.200 --> 0:08:12.840 China became a major factor in the global economy and 0:08:12.960 --> 0:08:16.560 began to integrate globally. On one hand, there was an 0:08:16.600 --> 0:08:19.080 opportunity to say, Okay, this is an opportunity for bring 0:08:19.160 --> 0:08:22.360 China into the global system, get them to adopt the 0:08:22.440 --> 0:08:24.240 set of rules that the rest of us have all 0:08:24.480 --> 0:08:27.440 agreed to, because they appear to be on this path 0:08:27.480 --> 0:08:31.520 towards market reform, openness, liberalization. I think what happened in 0:08:31.560 --> 0:08:36.880 reality is that trajectory wasn't as linear, didn't go as far, 0:08:37.000 --> 0:08:39.760 didn't go as fast as people anticipated. And what we 0:08:40.040 --> 0:08:43.120 did not anticipate is that somebody like President She would 0:08:43.160 --> 0:08:45.920 come in and in fact stop or reverse it. And 0:08:46.000 --> 0:08:48.679 so now we have an economy that is huge, second 0:08:48.720 --> 0:08:52.240 largest economy in the world, biggest manufacturing part of the 0:08:52.520 --> 0:08:56.040 global economy, likely to be accounting for something like forty 0:08:56.080 --> 0:08:58.800 five percent of all global manufacturing in a few years, 0:08:59.200 --> 0:09:01.240 which is the I guess that any country has ever 0:09:01.280 --> 0:09:05.160 been in history, and it's following a fundamentally different set 0:09:05.160 --> 0:09:06.880 of rules, and that has led to a law of 0:09:06.880 --> 0:09:08.600 the stress in the international system. 0:09:25.000 --> 0:09:29.840 Can you explain maybe the philosophical premise behind the idea 0:09:30.200 --> 0:09:35.719 that trade with China? I guess, why do we care 0:09:35.760 --> 0:09:40.960 about what their internal rules are? Right theory of trade, 0:09:41.120 --> 0:09:44.240 it's sort of okay, they're cheaper for whatever reason, or 0:09:44.240 --> 0:09:47.720 they're more efficient, et cetera, and so you know, comparative 0:09:47.720 --> 0:09:52.120 advantage we benefit from that. Why does the global trading 0:09:52.360 --> 0:09:55.440 system why is it or was it or is it 0:09:55.600 --> 0:10:00.280 premised on this notion that all of the participants would 0:10:00.000 --> 0:10:03.080 and in some sort of more liberal direction with their 0:10:03.080 --> 0:10:04.000 domestic economies. 0:10:04.440 --> 0:10:07.080 You know, I think it's because the actions that China 0:10:07.120 --> 0:10:11.880 has taken domestically to drive they're really quite remarkable economic 0:10:11.920 --> 0:10:16.120 growth over the last few decades does have ramifications outside 0:10:16.160 --> 0:10:18.439 of China, has ramifications for the rest of the world, 0:10:18.480 --> 0:10:22.000 for manufacturing in the rest of the world, for other factors, 0:10:22.320 --> 0:10:24.640 and so it's not something that can be limited to 0:10:24.720 --> 0:10:27.840 China if China gets to where it's going, because it 0:10:28.000 --> 0:10:33.840 steals intellectual property, because it produces over capacity, so it 0:10:33.880 --> 0:10:36.600 creates far more factories than it needs to for the 0:10:36.600 --> 0:10:39.280 reasonable demand for a product in order to drive other 0:10:39.920 --> 0:10:43.520 producers out of the market in other countries that has 0:10:43.520 --> 0:10:46.040 an average effect on us. If they subsidize state owned 0:10:46.080 --> 0:10:49.840 enterprises or even private enterprises in such a way that 0:10:49.880 --> 0:10:53.480 it creates this unlevel playing field, then it affects the 0:10:53.480 --> 0:10:55.120 rest of US as well. And I think that's what's 0:10:55.160 --> 0:10:59.280 really happened, is that China, whether it's a state owned enterprise, 0:10:59.360 --> 0:11:04.240 is subsidization, intellectual property rights, theft, government intervention into the 0:11:04.280 --> 0:11:09.439 private sector, all towards positioning China as the leading manufacturer. 0:11:09.600 --> 0:11:12.520 But it has come at the expense of other industrialized countries, 0:11:12.800 --> 0:11:15.880 in some cases other emerging economies, and that's why there's 0:11:15.880 --> 0:11:16.840 been thisess counter reaction. 0:11:17.480 --> 0:11:20.679 So I know you were trade representative before the tensions 0:11:20.720 --> 0:11:24.960 with China really ramped up under the first Trump administration, 0:11:25.360 --> 0:11:30.240 But how were you thinking back then about incentivizing other 0:11:30.320 --> 0:11:33.480 countries when it comes to trade negotiations like KARRA and 0:11:33.480 --> 0:11:37.040 stick strategy. Was it mostly about incentives and if so, 0:11:37.280 --> 0:11:41.320 what were you giving them or was it sometimes maybe threats? 0:11:42.160 --> 0:11:44.200 So you have to use both. I think on the 0:11:44.240 --> 0:11:47.040 threat side, it's not really threats. It was enforcement that 0:11:47.080 --> 0:11:50.440 we would bring cases against countries, including China at the 0:11:50.559 --> 0:11:53.920 WTO or against other trading partners where we had arrangements 0:11:54.600 --> 0:11:57.360 if we felt that they were violating our rights under 0:11:57.360 --> 0:12:00.640 those agreements. We brought during the Obama I think we 0:12:00.679 --> 0:12:03.120 brought the most cases ever brought against China. We won 0:12:03.240 --> 0:12:05.840 all the cases that got to conclusion. The problem was 0:12:05.920 --> 0:12:08.920 China would find ways either of delaying implementation or by 0:12:08.960 --> 0:12:13.240 the time the fix was implemented, the relevant industry in 0:12:13.280 --> 0:12:15.880 the United States or elsewhere was gone, and so it 0:12:15.920 --> 0:12:18.400 was really sort of cold comfort. And that's one of 0:12:18.400 --> 0:12:20.840 the challenges I think that we saw in the World 0:12:20.880 --> 0:12:24.600 Trade Organization. I think on the incentive side, that's where 0:12:24.640 --> 0:12:28.640 trade agreements, real trade agreements come into play. I was 0:12:28.640 --> 0:12:31.800 involved in something called the Transpecific Partnership, which was twelve 0:12:31.840 --> 0:12:35.760 countries around the Asia Pacific region that were working on 0:12:36.000 --> 0:12:38.959 opening their economies to each other, abiding by a high 0:12:39.000 --> 0:12:42.600 standard set of rules. Some of the countries already had 0:12:42.600 --> 0:12:44.760 free trade agreements with US, about half of them did, 0:12:45.000 --> 0:12:48.200 so we weren't giving them any more access to our economy. 0:12:48.200 --> 0:12:51.400 We'd already given them access. But at the table we 0:12:51.440 --> 0:12:55.400 had Japan, and Japan was an economy that had never 0:12:55.480 --> 0:12:58.679 really opened up to other markets, and these other countries 0:12:58.760 --> 0:13:01.440 knew that they couldn't get Japan to open on their own, 0:13:01.600 --> 0:13:04.120 but if the US was pushing Japan to open, they 0:13:04.120 --> 0:13:06.960 would benefit from it. So you had countries like Peru 0:13:07.240 --> 0:13:09.559 or Chile who already had free trade agreements with US 0:13:09.920 --> 0:13:13.199 willing to raise their labor standards or willing to enforce 0:13:13.360 --> 0:13:17.480 environmental laws because they were getting access not to our market, 0:13:17.559 --> 0:13:20.640 but to Japan, and that incentive was one that was 0:13:20.679 --> 0:13:21.440 powerful for them. 0:13:21.679 --> 0:13:25.120 That's a very uh, that's a very interesting dynamic. Talk 0:13:25.120 --> 0:13:28.760 a little bit more about those years twenty thirteen pre 0:13:28.920 --> 0:13:31.760 Trump in the actions towards China, because if you said, 0:13:31.880 --> 0:13:36.080 by that point Obama had already introduced a record number 0:13:36.160 --> 0:13:40.400 of actions against China, winning many of them, winning all 0:13:40.440 --> 0:13:41.640 of them to do something, well, all of them that 0:13:41.679 --> 0:13:43.960 went to conclusions, all of them that went to conclusion, 0:13:44.080 --> 0:13:45.720 but it didn't really matter because either there was some 0:13:45.720 --> 0:13:49.040 way to evade or the US industry had been decimated. 0:13:49.600 --> 0:13:52.200 Was there something pre Trump, I mean, I don't know. 0:13:52.240 --> 0:13:56.400 Whenever that was there a feeling that something has to 0:13:56.520 --> 0:14:00.640 change fundamentally in how the US and China trade or 0:14:00.679 --> 0:14:02.079 the rules governing that trade. 0:14:02.360 --> 0:14:05.280 At that point, no, absolutely, Look the day one of 0:14:05.360 --> 0:14:09.720 the Obama administration. The world had been involved in something 0:14:09.760 --> 0:14:12.760 called the Doha Round of negotiations at the World Trade 0:14:12.840 --> 0:14:14.960 Organization had been going on since two thousand and one, 0:14:15.679 --> 0:14:18.040 and I remember going to a G twenty summit. There 0:14:18.080 --> 0:14:20.720 was one in April in London, and all the other 0:14:20.800 --> 0:14:23.280 leaders around the table here was the new President of 0:14:23.280 --> 0:14:27.200 the United States. On their mind was asking him, Okay, 0:14:27.440 --> 0:14:28.800 what are you going to do to bring the Doha 0:14:28.960 --> 0:14:32.760 Round to successful conclusion this year? And the President said, 0:14:32.760 --> 0:14:33.880 all right, We're going to go back and take a 0:14:33.880 --> 0:14:36.120 look at this, and he asked a group of us 0:14:36.120 --> 0:14:38.520 to do a study, and by the summer we had 0:14:38.520 --> 0:14:41.320 come back to him and said, this Doha Round isn't 0:14:41.320 --> 0:14:43.960 going to get done. The door A Round was founded 0:14:43.960 --> 0:14:46.960 on this fundamental premise in two thousand and one that 0:14:47.280 --> 0:14:51.280 basically developing countries. It was called the Development Round, and 0:14:51.520 --> 0:14:53.880 the primary beneficiaries of the door A Round would have 0:14:53.880 --> 0:14:58.080 been developing countries, not industrialized countries. And the fundamental premise 0:14:58.240 --> 0:15:00.840 was developing countries shouldn't have to live by too many 0:15:00.920 --> 0:15:06.040 rules industrial countries should, and this would help the developing 0:15:06.080 --> 0:15:09.600 countries catch up. By two thousand and nine, when we 0:15:09.600 --> 0:15:11.760 saw what had happened with China between two thousand and 0:15:11.760 --> 0:15:14.080 one and two thousand and nine. There was no way 0:15:14.600 --> 0:15:17.400 that an agreement that gave China a pass on rules 0:15:17.720 --> 0:15:21.920 so they could continue to expand its manufacturing and undermine 0:15:22.160 --> 0:15:24.360 manufacturing around the world, that that was going to fly. 0:15:24.760 --> 0:15:27.160 And the President went back to the other leaders at 0:15:27.160 --> 0:15:29.640 the next year twenty meeting and said, the Doha Round 0:15:29.680 --> 0:15:31.240 is not going to get done on the path that 0:15:31.320 --> 0:15:33.880 is currently on. And I remember we were at a 0:15:33.920 --> 0:15:37.160 G twenty summit and the other leaders all went around 0:15:37.160 --> 0:15:39.760 and read their talking points. The traditional talking point at 0:15:39.760 --> 0:15:42.720 the time was the Doha Round will get completed by 0:15:42.720 --> 0:15:45.960 December this year or by the ministerial this year. And 0:15:46.320 --> 0:15:49.000 you know, President Obama intervened, He made his point. The 0:15:49.040 --> 0:15:52.200 other leaders read their talking points, and he put his 0:15:52.240 --> 0:15:55.760 flag back up and said, you know, you guys aren't listening. 0:15:56.080 --> 0:15:58.280 This isn't going to happen. And that was the first 0:15:58.280 --> 0:16:02.600 indication that something needed to change. And then we were 0:16:02.600 --> 0:16:06.600 sitting down with the Chinese bilaterally in lots of consultations, 0:16:06.960 --> 0:16:10.440 sort of on ending consultations, and we'd have this conversation 0:16:10.520 --> 0:16:15.200 with them and remind them that their tremendous success was 0:16:15.280 --> 0:16:20.000 based on a benign international environment, the capacity to export 0:16:20.000 --> 0:16:21.400 to the rest of the world, and that if we 0:16:21.400 --> 0:16:26.720 didn't address these underlying concerns, stayed on enterprises, subsidization, IPR rights, etc. 0:16:27.720 --> 0:16:30.480 That benign international environment was going to disappear. And that, 0:16:30.520 --> 0:16:33.920 of course, is exactly what's happened, and that's the bipartisan 0:16:34.320 --> 0:16:38.440 consensus against China that has now emerged. We started warning 0:16:38.440 --> 0:16:41.200 them of that back in two thousand and nine twenty ten, 0:16:41.640 --> 0:16:44.040 and I think we made some modest progress during the 0:16:44.040 --> 0:16:47.720 Obama administration to get them changed certain practices. But by 0:16:47.760 --> 0:16:49.680 the time President she came in and made it clear 0:16:50.280 --> 0:16:52.520 he was going to be dominant in the following sectors. 0:16:52.520 --> 0:16:54.640 He was going to reduce his dependency on the rest 0:16:54.640 --> 0:16:57.120 of the world and increase everybody else's dependency on China, 0:16:58.000 --> 0:16:58.640 the game was over. 0:16:59.800 --> 0:17:02.840 Lead into my next question, which is we've talked a 0:17:02.840 --> 0:17:05.359 lot about how you know there was this break in 0:17:05.400 --> 0:17:09.240 the rules based liberal trading order. Was there a single 0:17:09.359 --> 0:17:14.520 moment where you went like, Aha, this has fundamentally broken 0:17:14.920 --> 0:17:18.680 instead of just like slowly declining, slowly changing, was there 0:17:18.720 --> 0:17:21.399 something that sticks out to you about, Wow, this is 0:17:21.440 --> 0:17:23.320 actually changing right now. 0:17:23.960 --> 0:17:26.879 So I think that Doha moment back in two thousand 0:17:26.880 --> 0:17:30.520 and nine was one of them. I also think later 0:17:30.600 --> 0:17:34.600 on in the Obama administration, we were trying to negotiate 0:17:34.840 --> 0:17:38.320 an agreement over environmental goods. It was a list of 0:17:38.480 --> 0:17:41.520 two hundred and fifty or so products that would have 0:17:41.560 --> 0:17:44.879 been good for countries to buy more of and produce 0:17:44.920 --> 0:17:46.800 more of because it was good for the environment, for 0:17:46.840 --> 0:17:50.760 climate change or otherwise. And it failed. It failed over 0:17:51.240 --> 0:17:56.480 bicycles that between China and the EU. The EU was 0:17:56.560 --> 0:18:01.560 protecting the Polish bicycle industry. I wanted to put bicycles 0:18:01.720 --> 0:18:05.199 on the list, and they couldn't agree on what to 0:18:05.240 --> 0:18:08.440 do with bicycles, and so the entire agreement fell over 0:18:08.480 --> 0:18:13.119 that one issue. And to me, it's sort of underscored. Okay, 0:18:13.200 --> 0:18:15.600 we're pretty far from reaching consensus that if we can't 0:18:15.640 --> 0:18:19.040 reach agreement over bicycles, we're not going to reach agreement 0:18:19.040 --> 0:18:20.600 over things that are much more meaningful. 0:18:21.280 --> 0:18:23.240 Were you surprised at all? I want to we start 0:18:23.280 --> 0:18:25.560 to move a little bit closer to the present. But 0:18:25.600 --> 0:18:29.240 before we go to the present, was it inevitable that, 0:18:29.680 --> 0:18:32.359 in your view, that the Biden administration ended up as 0:18:32.400 --> 0:18:36.920 a continuation slash expansion of some of the Trump restrictions. 0:18:37.200 --> 0:18:41.679 Was there still an opportunity to turn somewhere closer to 0:18:42.400 --> 0:18:43.440 a pre Trump path. 0:18:44.720 --> 0:18:47.840 I think there was an opportunity to make some changes, 0:18:48.320 --> 0:18:50.960 but not to go back to the way things were before. 0:18:51.640 --> 0:18:54.520 The Biden administration, for example, launched a review of the 0:18:54.600 --> 0:18:57.439 China tariffs, and I think in many respects, the by 0:18:57.480 --> 0:19:01.879 administration was very strategic in how it approached export controls 0:19:01.960 --> 0:19:06.120 and foreign investment constraints, was very targeted the tariffs. They 0:19:06.200 --> 0:19:09.439 launched a review to try and distinguish between strategic and 0:19:09.520 --> 0:19:12.800 non strategic tariffs. There's a case to be made for 0:19:12.840 --> 0:19:15.320 tariffs if there's unfair trade practices, or if it's a 0:19:15.320 --> 0:19:17.600 product that you really need to produce here in the 0:19:17.680 --> 0:19:20.199 United States. You don't want dependency, But do we need 0:19:20.240 --> 0:19:23.360 tariffs on t shirts and underwear and socks? Is that 0:19:23.440 --> 0:19:28.440 important to our national security? And they never got themselves 0:19:28.480 --> 0:19:31.359 to the position of reducing those tariffs. And to me, 0:19:31.760 --> 0:19:35.159 it's not necessarily a criticism of the Biden administration. I 0:19:35.160 --> 0:19:37.439 think it just goes to show that tariffs are easy 0:19:37.480 --> 0:19:40.160 to put on and hard to take off, because once 0:19:40.160 --> 0:19:45.040 they're on, there are constituencies that are supportive of them, 0:19:45.240 --> 0:19:49.480 and any movement to reduce tariffs, particularly in this political context, 0:19:49.760 --> 0:19:52.679 is seen as being weak on China, even if it 0:19:52.720 --> 0:19:56.640 makes pure sense from an economic point of view. Who 0:19:56.760 --> 0:19:59.879 is hurt most by tariffs on underwear t? Shirts? And 0:20:00.320 --> 0:20:02.320 it tends to be low income Americans who spend a 0:20:02.359 --> 0:20:06.280 disproportionate amount of their disposable income on imported goods, And 0:20:06.960 --> 0:20:10.720 we could afford to bring in those products from China 0:20:10.760 --> 0:20:12.680 without questioning our national. 0:20:12.440 --> 0:20:16.760 Security, without losing our strategic underwear producing capacity. Although I 0:20:16.760 --> 0:20:21.200 think the US military does actually have some strategy. 0:20:21.000 --> 0:20:25.000 There are restrictions. Yeah, under I used to call it 0:20:25.000 --> 0:20:28.160 the Department of Defense the Department of War, that require 0:20:28.320 --> 0:20:30.679 uniforms for where to the things to be made in 0:20:30.680 --> 0:20:31.240 the United States. 0:20:32.040 --> 0:20:36.320 Fun fact, how would you actually describe the current state 0:20:36.400 --> 0:20:39.280 of the global trade system, because you know, I've heard 0:20:39.320 --> 0:20:43.480 people say there are shades of mercantilism, protectionists, that sort 0:20:43.520 --> 0:20:46.960 of thing. What's your description of where we are right now? 0:20:47.760 --> 0:20:49.360 Well, I think the challenge of where we are right 0:20:49.400 --> 0:20:52.080 now is you have the two largest economies in the world, 0:20:52.440 --> 0:20:55.600 the US and China, basically following their own set of 0:20:55.680 --> 0:21:00.159 rules rather than the multilateral rules based system that the 0:21:00.240 --> 0:21:04.560 US was very much driving the creation and the defense 0:21:04.600 --> 0:21:07.400 of over all these over all these years. And when 0:21:07.400 --> 0:21:10.760 you have the two largest economies doing that, the question is, well, 0:21:10.800 --> 0:21:12.439 what are their other economies going to do? Are they 0:21:12.480 --> 0:21:15.440 going to start imitating the US or China? Will they 0:21:15.720 --> 0:21:18.000 continue to abide by the rules if nobody else does. 0:21:18.920 --> 0:21:21.199 I think they're all sort of wrestling with that question 0:21:21.280 --> 0:21:24.040 because for some of them, like the European Union, European 0:21:24.119 --> 0:21:28.840 Union is more ideologically in favor of free trade, integration, 0:21:29.000 --> 0:21:30.959 the rules based system. The whole notion of the European 0:21:31.080 --> 0:21:34.240 Union is based on that bringing the European countries together, 0:21:34.359 --> 0:21:37.560 let alone the rest of the world. So it's harder 0:21:37.600 --> 0:21:39.920 for them to make this leap than it has been 0:21:40.359 --> 0:21:43.680 for the United States. But I think the reality is 0:21:43.680 --> 0:21:47.120 is that the system is under great stress and we're 0:21:47.119 --> 0:21:49.240 going to have to think through how does it evolve, 0:21:49.560 --> 0:21:51.840 What are the elements of it that we want to 0:21:51.840 --> 0:21:55.680 try and preserve or reconstitute, and how does it need 0:21:55.720 --> 0:21:58.520 to change to take into account not only the lessons 0:21:58.520 --> 0:22:00.840 of the last eighty years prior to Trump, but the 0:22:00.920 --> 0:22:03.240