Odd Lots - US Trade Rep Katherine Tai Describes the New Era of Globalization

Episode Date: September 9, 2024

One of the rare areas of bipartisan consensus in the US right now, is on the need to change our trading relationship with China. Former President Donald Trump started a process of putting tariffs on Chinese goods and limiting the export of certain key technologies. This has only expanded under the Biden administration, with expanded restrictions on things like electric vehicles, solar panels, and semiconductors. So what's the thinking behind this drive? What are the goals and what are the risks? On this episode we speak with the United States Trade Representative Katherine Tai. Ambassador Tai describes what she sees as a rethink, or a new version of, globalization. She explains the new worker-centric priorities, how trade fits into domestic investments, and what a healthy version of international economic relations actually looks like. See omnystudio.com/listener for privacy information.

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Oh, and welcome to another episode of the Oblods podcast. I'm Jill Wisenthall. And I'm Tracy Allaway. Tracy, one of the things that we've noted from time to time on the show is, you know, when it comes to trade with China specifically, trade in general, but I would say trade with China specifically, one of the rare areas where there seems to be a bipartisan, and consensus, that maybe the way we did it in the 90s, 2000s, probably most of the 2010s, was not desirable, was costly in certain ways, and that the whole thing needs everything.

It is kind of amazing that that's the thing that people have landed on as an area of agreement. I think in retrospect, it would have been kind of unexpected, but you're absolutely right. There seems to be these dual concerns, I would say. One is national security. So the idea that maybe China is a strategic competitor. in terms of security. And so you should be worried about what they're building, what they're doing over there, all of that technology competition, 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. Continuity and arguably even expansion in certain areas. And of course, if we were to get another Trump administration, then very likely a further expansion of some of these trade restrictions. We seem to take two components. So there's obviously tariffs on certain key areas. And then, you know, there's so much attention on technology. And so technology

export controls. And when you mention, you know, the sort of unfairness 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 U.S. is behind and the Europe is behind. Absolutely. Well, I'm very excited because we truly do have the perfect guest to talk about this big pivot, where it's going, some of the theory behind it. What does this new approach look like and what is it supposed to accomplish? We're going to be speaking to the U.S. Trade Representative

Ambassador Catherine Tai. Thank you so much for coming on odd lives. Thank you so much for having me. I'm delighted to be here with both of you. Fantastic. Let me just start with a really big picture question. You know, for decades, there was a certain status quo with trading with China. There seems to have been a sharp pivot. Is this the new normal? Is this going to be with us, this new relationship with U.S. China trade? Is this going to be what it's like for years to come? So I cannot wait to get into some of the specifics on this question, but I want to start at a slightly higher level. And just to orient what I do and what trade policy is.

So as the U.S. Trade Representative, my title is a bit of a mouthful, but it's actually one of the most self-explanatory positions in the president's cabinet. My job is literally to represent 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 those coasts and the middle, and to represent Americans and the American economy in international trade. And 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 because 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 repair 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 U.S. economic interests. And so where I want to start the conversation with your first question in getting into

the U.S.-China trade relationship is you talked some about the technology competition that we have. You talked about the national security and the geopolitical tensions. The one piece that I think is going to be really important for us to focus on is, 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 U.S.-China trade relationship. Fantastic. Okay, well, let me ask one more broad-based question than maybe we can get more into China. But when you say representing U.S. interests in terms of economic security, has that always been the case for U.S.T.R. or does this represent some sort of policy shift? Because putting my, you know, international relations cap back on, I took I are at university, I think back to a, you know, trade in like the 1990s and 2000s. So much of it was just about exports and growing GDP. This seems to be something a little bit different.

100%. The approach that we are bringing, we have called a worker-centered trade policy. And the point of the worker-centered trade policy is to constantly remind ourselves that at the end of the day, when it comes to your economic policy, the beneficiary of your policy, the beneficiary of your policies is the people in your economy. I think that quite often when we get into economic policy and it can get quite complicated, it can get theoretical, we often gravitate to talking about the economy as a set of numbers and data and statistics and trends. What gets lost in all of 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-centered 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 gotten 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 on our trade policies over the past 20 and 30 years. We see the overall numbers grow here in the United States and around the world, but you also see significant deindustrialization 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. And then the other piece of it is we are also seeing here in the United States and around the world a growing wealth gap, significantly growing levels of inequality within our economies and between our economies. And that is giving us pause and reason to reassess

how we do trade. We still need to be the great trading nation that we are. We know that the global economy is interconnected. The question is, how can we be doing trade, better so that we are actually not just growing the overall numbers, but we are 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. Since you mentioned the last several decade. And this is very helpful, obviously, sort of the big picture philosophy behind the trade pivot, but maybe I'll try again with my first question. Could this be a new several decades of the things going shifts? Could you imagine that the sort of new restrictions on trade with China is also something that will last for several decades? So here, let's take a couple steps back and look at the context for what's developed over the last many years. And I think that there are multiple

factors. One is that since World War II, the Bretton Wood system has grown up, and there has been this important concept that liberalizing trade, taking away barriers between countries, promoting more trade, the more we trade with each other, the more peace and the more prosperity there will be in the world. I think that those are worthy goals. The issue is that you look at the goals that you're 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 80th year, the 80th anniversary of the Bretton Woods Agreement, you look at the last 80 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 goals 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 25 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 II period, the general agreement on tariffs and trade was a group of very like-minded countries that emerged from World War II 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 from that time, talking to the people who cast those votes in the U.S. Congress for China's accession to the WTO, 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 2024 from colleagues and friends who have visited China, the China that we see is significantly different from the China that was negotiating in its succession to the WTO. At that time, in the 1980s, in the 1990s, 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 2011 and 2012. The American Chamber of Commerce, Amcham, in China, for the first time in those years, 2011, 2012, 2013, 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 U.S. China trade, bringing China into the global economy, started to identify. 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 Xi 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 1940s and on and through the 1990s in the 2000s. And what you hear now also from our administration, Secretary Yellen at Treasury, Lail Braynard, head of the NEC, the National Economic Council, Secretary Blinken, State Department, certainly from me, is a concern about what we're calling Chinese overcapacity 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 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 2000s and 2010s 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, We will not tolerate, we cannot tolerate, a China shock 2.0. And I think that those are elements of the larger context that you are seeing today involving our trade policy and beyond. Median women are looking for more. More to themselves, their businesses, their elected leaders, and the world are out of them. And that's why we're thrilled to introduce the Honest Talk podcast. I'm Jennifer Stewart.

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we're all over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen. Since you mentioned both Bretton Woods and China's ascension to the WTO, I really want to ask you about something that you've been talking about quite a lot recently. The ITO, the International Trade Organization, which is something that I remember for, from international relations. I think it was proposed by FTR, like, back in the Bretton Woods era, but never really got off the ground. How literally should we take that 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? So what we've been doing is looking back at our history for indicators, lessons, we're all probably, of our history. It's actually a really important exercise to know that history. And there's been a lot of talk about FDR and a lot of focus. The reason I think it's obvious once you think about it is a lot of the challenges that we are seeing today, and this gets us beyond even trade and economics, but certainly trade and economics are a central part of this. A lot of the challenges that we are seeing develop today are reminiscent of the challenges that we, as the United States saw in the 1930s and the 1940s, a trend towards authoritarianism, fascism, corporate concentration, significant

imbalances in our economy, imbalances in power coming through then World War II, 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 Bretton Woods agreements coming out of World War II, that desire to be. 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 biller 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 1940s. 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 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 in 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 1940s, 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. So, again, we're 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. Since you talked about worker safety as one element of thinking about trade and worker-centric trade, is it okay for a country to have as part of its growth strategy the fact that conditions may be less safe there than they are for U.S. workers? This is a great question. I think it's not just about worker safety, but also workers' rights. Yeah. The ability to organize, to collectively bargain, to advocate for better working conditions, including safety conditions, but also advocate for better wages, better benefits, that whole suite of rights that are internationally recognized.

Really, really great question. So when we talk about a worker center trade policy, right, 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, right? 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 market.

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 costs, low prices for the consumer and you were 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're, 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-centered 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 trade's 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 of global... They wouldn't let us process our own room. It wouldn't.

We were part of it. Labor came from Africa to the United States. Talk about exploitation. Those labor that you did not have to pay, free labor. That's a tremendous unfair advantage, and you could talk about it as a subsidy. You pick up the sugar in 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. then you had those high value products then sold back to the folks 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 you're rewarded 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. How do you judge the potential for tip for tat retaliation when it comes to trade protections? So if Joe and I are running the Oddlots Republic and we're wildly populist and we want to appease, I don't know, our base of semiconductor workers, we could just erect, you know, massive tariffs or ban imports of semiconductors from somewhere else. But I imagine one of the things that would stop us 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? Okay. I've got three points for you here, and I'm going to try to keep them all in my head.

One is your use of the word to protect is very, very interesting. And so I want to come back to that as a separate matter. And I hope that we have time to do that. Okay. The second piece is this. When you take trade actions, it is actually really important to explain what you're doing and why you're doing it and what your objectives are. And it is really important for you to be able to be understood by your trading partners.

And those are trading partners who might be foreign policy allies and strategic partners and also trading partners with whom you have more tense relations. And so that's been a critical part of what we've been doing in the Biden-Harris administration, which is to build and rebuild our relationship. 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 tariffs on certain Chinese imports. in some critical industries, including EVs, and China's response. Part of what we have seen in the last 12 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 a monopolistic kind of dominance. And then also their 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.

We need the monopsony claxon. Sorry, we always joke about having a sound effect whenever anyone says monopsony. And I didn't know about that. I'm so curious what the sound effect is going to be. We don't actually have one. Okay. So we have developed a vocabulary to call this phenomenon an exercise of economic coercion. It's a, if you want to break it down, it's basically bullying at the highest level in terms of a country, taking its economic tools and bullying another one for exercising rights that are within its sovereign power to exercise.

And the particular danger here, and this brings us back to the work that we're doing on supply chains to diversify them and make 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 weapons. 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 aligned their economic defenses with ours. It's actually really important when you look at the North American economy, the U.S. 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 distortive 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 and very, very open market-based economies like ours.

And so that is in large part why you see the steel and 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 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 defenseism. 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. 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 scalples 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 us 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,

and I'll give him credit for it. It's Tim Stratford, who had an earlier administration's been the assistant U.S. 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 U.S.-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 field. We have to fundamentally

change the way that we approach competing. And we're going to need new defensive strategies and we're going to need new offensive strategies and goals. Canadian women are looking for more. More into themselves, their businesses, their elected leaders and the world around them. And that's why we're thrilled to introduce the Honest Talk podcast. I'm Jennifer Stewart. And I'm Catherine Clark. And in this podcast, we interview Canada's most inspiring women.

Entrepreneurs, artists, athletes, politicians, and newsmakers, all at different stages of their journey. So if you're looking to connect, then we hope you'll join us. Listen to the Honest Talk podcast on IHeartRadio or wherever you listen to your podcasts. I'm Francie Lacqua, an award-winning journalist. And I've got a new podcast. leaders with Francine Lacroa from Bloomberg podcasts. I've interviewed everyone from heads of state to fashion icons about the news of the moment.

But I've always been curious who are these people as leaders. I don't think there's one right way to be a leader. Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow leaders with Francine Lacroix wherever you get your podcasts. So I guess I just have one last question about this sort of the new version of globalization that we're pursuing as you've characterized it. What are the limiting

principles? Because there's always more steps you could take to sort of boost the position of American workers. And, you know, I've said before jokingly, but also kind of made it, like, I think if there's one country in the world that could like truly do autarchy, it's probably the United States, given 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. So what I would say is let's have

this conversation about limiting principles when we have made more progress in terms of reversing the trend of the downward spiral and the race to the bottom. We are so significantly on one side of the balance. So let me give you a little bit more texture here. And this gets us into the U.S.-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 was a renegotiation of the NAFTA and the birth of the U.S.-Mexico-Canada agreement. The concern early on in the 1980s when NAFTA was being negotiated in the first place was we already had a trade agreement with Canada. There was a U.S. Canada bilateral and we in 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 1985 agreement. The big push then over the course of that next 10 years was, well, you know, think about North America. Let's combine this U.S.-Canada trade relationship and bring back. Mexico into it. And the concern there was Mexico was then and continues to be just at a different level of development than the U.S. 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 then I'm not going to

repeat here. But I'm going to talk about it in more objective terms. The concern was that... Is that the giant flushing sound? Your words, not mine. But, you know... Ross's words. It's, 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, right? And, you know, the goal has never been in our trade agreement negotiations to ensure that we have wage parity with Mexico. That's not the goal because they're at a different stage of development. The goal has been, how do we help Mexico build its middle class? That's what we used to talk about, which is, oh, well, you know, the NAFTA will allow growth in the Mexican middle class,

growth in the number of consumers in Mexico who will then buy more things from the United States. Right. 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 called corporatist. their 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's safety or their working conditions and their wages and their rights, right? So over the 20 years, 25 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 experienced this in all the industries that went south was the loss of jobs, the hollowing out of communities, and for the jobs that we retain. 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, it was over 20 years, and, you know, we needed to modernize and update it. 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 the renewal of the NAFTA in the form of the USMCA that wanted 89% support in the House and Senate and even wanted the endorsement of key labor unions, like the AFLCIO and like the steelworkers. And this mechanism then, which is so key and novel in the USMCA to worker centristism,

is a facility-specific labor enforcement mechanism that allows for, anybody to petition the U.S. 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 30 times now. We have settled and resolved about 24 or 25 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 30,000 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. 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 excess.

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. Speaking of just getting started, we began this conversation talking about bipartisan consensus when it comes to China trade. and to some extent the continuity between the Trump administration and the Biden administration on this particular policy aspect. I have to ask, do you anticipate at all that maybe Kamala Harris's trade policy would differ in any way to Biden's? And then secondly, you've been in this role since I think 2021. Do you have any interest in perhaps continuing it under a Harris administration? So you've asked that question very artfully. And this is how I'm going to answer.

answer your question. In your framing of the question, you're still focused where we started on the continuity of, say, the tariff actions with respect to China. And what I've tried to do is to paint for you the picture of the reality of the U.S.-China trade relationship, China's role in the global economy, China's own pivots away from reform economically and politically to put all 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 U.S.

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. You have very artfully deflected that question, I got to say, but that was a fantastic conversation. Ambassador Ty, thank you so much for coming on Adla. Thank you so much. Tracy, I really enjoyed that conversation.

I feel like there are a number of just sort of like, I guess, big ideas to pull out of that that sort of inform the new globalization. In fact, I would probably start with that, that it's like this idea that globalization can take many forms. We sort of got used to one, perhaps maybe starting in the early 80s or maybe you could market to when China entered the WTO or whenever else. But this idea like there doesn't only have to be one regime. And as Ambassador Tai 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.

I think that's my takeaway as well. I also thought the throwback to the sort of 1940s, 1950s, Breton Woods era of trade. of trade was really interesting because as you mentioned, we are very used to thinking about globalization in sort of 1990s, early 2000s terms. 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 1950s analogy of, I guess, using that word again, trade defensism or perhaps more, like activist maybe trade management is an interesting one.

Totally. And she made that point about how it's important like, okay, if we're going to erect these trade barriers, particularly on things like, you know, the high tech areas, then it only makes sense to do it in conjunction with sort of offensive strategies and the domestic investments, which we're, of course, seeing with things like the Chips Act or on the energy front in the inflation reduction act, and so that it has to be sort of this coherence. I do think it's interesting, you know, she talked about the China shock, right? And China Shock 1.0. But, you know, that was, and 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. Yes. And also, I have to say, she was very skilled at deflecting that last question. So I guess we'll have to see what happens. Yeah, post-November. Yes. We'll find out. But in the meantime, shall we leave it there?

Let's leave it there. This has been another episode of the Oddlots podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway. And I'm Jill Wisenthal. You can follow me at the stalwart. Follow our guest, Ambassador Tye. She's at Ambassador Tye.

Follow our producers, Carmen Rodriguez, at Carmen Erman Dashobinette at Dashbot and Kail Brooks at Kail Brooks. Thank you to our producer, Moses, and Dom. For more OddLod's content, go to Bloomberg.com slash OddLots, where we have transcripts, a blog, and a newsletter. And you can chat about all of these topics, including trade and China and domestic investment, 24-7 in our Discord with fellow listeners, Discord.gG slash outlines. And if you enjoy all thoughts, if you like it when we talk about trade with China and other policy issues,

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