i3 - November/December 2020 - 25

By Peter Allgeier

Policy

G U E ST B LO G

A New U.S. Trade
Policy for 2021
This is the final article in our three-part series. Ambassador Peter F. Allgeier
served as Deputy U.S. Trade Representative from 2001-2009 and U.S.
Ambassador to the World Trade Organization from 2005-2009.

Milena Boniek/Getty Images

lthough not coming from a trade policy expert, or
even a trade commentator, some commonly quoted
advice could be relevant for fashioning a new U.S.
trade policy: "You can't go back and change the beginning,
but you can start where you are and change the ending."
Briefly, what is our starting point?
First, the trade deficit. It's not the most
important metric of successful trade policy but it is the primary focus of President
Trump. Compare the pre-Trump 2016 deficit with 2019, before the COVID disruption. China was Trump's main target, and
our deficit with China fell from $346.8
billion to $345.2 billion - a decline of
0.46%. But our overall merchandise trade
deficit grew from $735.2 billion to $854.4
billion - an increase of 16%. These numbers demonstrate the fallacy of Trump's
assertion that trade deficits are a measure
of economic failure. Actually, trade deficits
increase when our economy is growing
faster and unemployment is falling. The
Trump tariffs on China have increased the
cost of Chinese goods for American consumers and businesses, but have not
"corrected" the deficit.
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We're also starting from a position of
being sidelined from international trade
negotiations and influence over the trading system's rules. We've alienated ourselves from our closest trading partners
- Canada, the European Union (EU),
Japan and Mexico - by applying illegal,
unilateral tariffs on them. And we've
incapacitated the World Trade
Organization (WTO) Dispute Settlement
Understanding (DSU) mechanism.
What will it take to "change the ending" after four years of idiosyncratic
trade policy?
First, we should return to the negotiating tables that the Trump administration abandoned. We need to rejoin the
Trans-Pacific Partnership (now the
CPTPP) to obtain improved market
access to Japan, Malaysia, Vietnam and
other Pacific countries. Membership in

the CPTPP is important for us to exercise
influence on the trading rules in AsiaPacific to counter the influence of China.
We also should resume the over 50-member strong Trade in Services Agreement
(TISA) negotiations that we previously
led. The U.S. is the most competitive
supplier of international services in the
world. We've run services trade surpluses
every year since 1971. It's in our interest
to update the rules for services to reflect
the explosion of digitally-provided international services.
Second, we should refashion our relationship with Europe to reflect the new
situation post-Brexit. That means negotiating a free trade agreement with the UK
and taking the next step for closer trade
ties and regulatory cooperation with the
European Union.
Third, we must resume our position
as a constructive player in the WTO.
Most important is genuinely and constructively participating in the reform
of the DSU. We've lost credibility to lead
that effort, but we can work with openminded members and the new DirectorGeneral to rejuvenate the dispute
settlement function. We must work with
our allies on new rules governing staterun economies, digital services and
fishing subsidies.
Of course, a necessary step in
rekindling our trade partnerships is to
dismantle the tariffs that the Trump
administration has imposed, citing
national security claims. And eventually,
we need to ratchet back tariffs on China
as part of a mutual establishment of
fair-trade practices.
Finally, we need to address domestic
concerns with trade. Most significantly that
means an overhaul - and possible expansion - of trade adjustment measures that
support displaced workers and prepare
them for work in the new economy.
If we take these steps, we will "change
the ending for our benefit as well as the
global trading system, including China.
NOVEMBER/DECEMBER 2020

10/20/20 10:19 AM

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i3 - November/December 2020

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