- Former U.S. trade ambassador Robert Lighthizer spoke at the Crossroads of the World summit in Salt Lake City.
- Lighthizer argued industrial policy, not tariffs, is the biggest obstacle to balanced international trade.
- A coalition of liberal democracies could provide the best defense against China's aggressive trade strategies.
Former U.S. trade ambassador Robert Lighthizer has spent his career immersed in the intricacies of international trade, serving under Presidents Ronald Reagan and Donald Trump and, in between those stints, running the international trade team for a leading Washington, D.C., law firm.
On Thursday, Lighthizer was a featured speaker at the Zions Bank/World Trade Center Utah Crossroads of the World trade summit in Salt Lake City. And his message to the Utah audience was blunt: The current trade system that has been in place with little change since just after World War II is no longer working.
“I would say that system has failed America dramatically,” Lighthizer said.
He noted that while the system, which was built on a strategy of domestic industrial policy and international trade tariffs, has had plenty of victories, including helping to rebuild Europe and Japan after the devastation of WWII, it has been obsolesced by the evolution of international markets.
That evolution includes the widespread development of new industrial policies by individual countries and the wave of “hyperglobalization” that sprung out of the 1990s.
“I refer to it as the trifecta of stupid,” Lighthizer said. “Which was (the North American Free Trade Agreement), the (World Trade Organization) and letting China into WTO and granting permanent most-favored nation status.”
What’s the real barrier to balanced trade?
Lighthizer said that while characterizing tariffs as the biggest obstacle to balanced trade between countries may have been true at one time, that is no longer the case.
“The belief is that the principal barrier to trade is tariffs. And therefore you negotiate tariffs,” he said. “But that hasn’t been true for a generation and a half. The principal barriers to trade are a whole bunch of things we call industrial policy.”
Industrial policy, Lighthizer explained, incorporates a wide range of domestic policies that can include banking systems, currency policy, labor laws, regulatory burdens, subsidies and more.
“These are the principal barriers of trade … and really can’t be negotiated," he said. “They are too complicated.”
Lighthizer said he believes Trump was elected largely due to dissatisfaction with the current global trade environment. He praised the president for his actions on trade policy, which he characterized as first steps toward positive change. A raft of punitive tariffs imposed by Trump earlier in his second term were struck down by the Supreme Court in February. On Thursday, a federal court ruled that a nearly universal 10% tariff put in place following the high court’s ruling is also illegal.
A new international approach to reducing surpluses
Lighthizer also offered a rough sketch of what a new and improved global trade system might look like.
“We ultimately need a new system, an international system where liberal democracies come together, have a relatively open system with tariffs among the group that are reasonably low level,” he said. “And a commitment to balanced trade. Not bilateral balanced trade but global balanced trade.”
Under a new system, Lighthizer explained, countries outside the coalition, which could include China and others, would face much steeper tariffs that would “force them to reduce their trade surpluses.”
While Lighthizer called out NAFTA as one of the harbingers of failure in international trade policy, he was among the chief negotiators in an effort that led to reworking the 1994 pact into what would become the United States-Mexico-Canada Agreement, which was signed into law in early 2020 and took effect later that year.
While Lighthizer described the USMCA as an “important trade agreement ... with a lot of innovative ideas in it,” a formal review of the trade pact is scheduled to begin in July. A report from the Center for Strategic and International Studies suggests the Trump administration is “poised to seek additional concessions from Mexico and Canada on longstanding trade disputes, while also leveraging the review to address non-trade issues such as migration, drug trafficking, and continental defense.”
In a panel discussion following Lighthizer’s presentation, former Canadian trade minister Mary Ng, and Jesús Seade, Mexico’s ambassador to China and the country’s former USMCA chief trade negotiator, both argued the basic structure of the USMCA was well grounded and current issues could be addressed through relatively minor changes to the current agreement.
