New Directions for U.S. Trade Policy: A Conversation With Sander Levin

U.S. Representative from Michigan Sander M. Levin joins CFR’s Heidi E. Crebo-Rediker to discuss trade policy in the United States. Levin discusses a new direction for U.S. trade policy.

SPEAKER

Sander M. Levin, U.S. Representative from Michigan (D)

PRESIDER

Heidi E. Crebo-Rediker, Senior Fellow, Council on Foreign Relations

This symposium, presented by the Maurice R. Greenberg Center for Geoeconomic Studies, is made possible through the generous support of the Bernard and Irene Schwartz Foundation.

CREBO-REDIKER: Well, thank you very, very much for joining us today. I think if you’ve been here for the whole discussion so far, since this morning, we’ve had a very amazing lineup—distinguished speakers on the impact of trade on labor and the politics of trade. But we have a very distinguished guest with us today, who is actually in the arena on trade policy and politics, Congressman Sandy Levin, who is the ranking member of House Ways and Means, someone who cares deeply and thinks deeply about trade issues. And we are delighted to have him with us today.

I think just a word of format, we’re going to hear the congressman speak for about 10 minutes, he has some opening remarks he would like to make, and then after that we will have a brief discussion before we open it up to Q&A with the audience. We have—as I’ve warned the congressman, we have a lot of serious trade specialists in the audience today. So he’s prepared for some tough questions and welcomes them. So with that, Congressman, I invite you to give your opening remarks.

LEVIN: Well, thank you. As I look about I’m especially glad to be here. And I congratulate the Council. We need much more of it. As I laid out—I did prepare a paper—I think this crisis that has come, the crumbling that the economists talked about in terms of globalization and trade, I don’t think is just an election year politicking phenomenon. I think its roots go far back. And as I lay out, I think, to some extent, it shows that some of the old doctrine was very much outdated. And I think some of the framework that we lived within, and I did, in trade really also is outdated.

Probably some of you have heard me talk about 18th- and 19th-century economics. And I really think comparative advantage really remains so much overused. And I think really has been in many respects left behind by the dynamics of the economics today. It doesn’t begin to touch issues like currency or ISDS or state-owned enterprises. Maybe there were such in the 19th century, but not like they are today. And I’ve talked often about the ghost of Smoot-Hawley. And I remember how every time we raise trade issues the answer often was, well, that’s protectionism.

And I think that kind of attitude led to the way we handle issues. For example, the battle we had over China PNTR. And a number of us fought to get into it several provisions. They included an annual review and a surge provision. And the annual review was essentially left by the wayside by the Chinese and by our government. And when it came to the surge provision, four times the ITC said we should take action and four times the Bush administration said that we should not do so.

And so I laid out in the paper what I think comes next. And what’s happened, I think, is that we then began to hear from economists. And they began to say, you know, there’s been an impact, and there’s been a serious impact. David Autor and others began to trace the impact on the lives of people, especially from China, including as manipulation of currency. And they said, look, theory is not the same as reality. And the realities were that millions of people lost their jobs in this country, many of them middle class, many in—most in manufacturing, because of the failure of our policies.

And so I lay out in this paper why we need to take a fresh look at trade policy. In my judgement, a fresh look means the TPP should not be brought up in the lame duck. I think if it were brought up, it would fail. And I think essentially it would send the message to people in this country who don’t have trust in trade policy that we’re proceeding regardless. I think a fresh look—and I’ll do this quickly so we can have a lot of back and forth—what does it mean?

I lay out a few examples—currency. We’ve had nothing but talk about (jawboning/job owning ?), and it did not work well. The whole ISDS issue, we haven’t had an honest, full discussion about it as its utilization has changed. Worker rights, we need to look at the practices in countries that are part of TPP. Mexico, Vietnam, Malaysia. And I won’t go into details here, but before we proceed in Congress, the language in TPP has to be examined in terms of whether it’s true in reality. I was in Vietnam some time ago, and met a woman who had been in jail for four years. Her sin was trying to form an independent union. And her two partners are still there.

So I think a fresh look has to also include democratic processes. I think the present structure is really most inadequate. And I’ll just mention this, I just heard the last part of your discussion here. We really have not had a full congressional hearing on TPP. I think not one that I remember. There have been pieces of it. Also, I think a fresh look is going to require that we have analyses of trade agreements that scratch far beneath the surface.

And we urged the ITC to do this, to look at sectoral impacts, to look at issues like income inequality. And it failed to do so. And I know the Peterson Institute and others have their analysis. In my judgement, again, they more scratch the surface. And even when they do that, they come out with an answer one-tenth of 1 percent over 10 years in terms of growth, when in terms of the lives of Americans they want to know what’s going to happen to me?

So let me close by just touching on a couple of issues that are raised to try to say let’s proceed with TPP. One relates to technology. And the argument is, it’s technology, it isn’t anything else basically. It isn’t trade. Well, in the last months we’ve looked at what’s happened to the steel industry. And the data are dramatic. Fifteen years ago or so we made as much steel in this country as China. Today they make 10 times. And if we don’t do something, despite the fact the steel industry has adopted major technology, we’re likely to continue to lose much of it. And so I acknowledge the importance of technology. I also acknowledge the other gains within our trade negotiations. But to just say it’s technology and not trade won’t sell.

And I finish by talking about globalization. I think you had some discussion of this. And I understand Secretary Kerry gave a talk on it today. Everybody understands—everybody understands that in terms of geopolitics—not globalization but geopolitics—there is that aspect of trade negotiations. But long ago USTR was created because of the notion that trade was something beyond diplomacy. And it is essential for us to make sure that trade agreements stand on their own two feet.

So I’ve been urging this fresh look at trade. I understand all the other aspects, including the geopolitics. And to add a little partisan note, maybe this will increase the intensity of our discussion, I have faith that if Hillary Clinton will be elected—and I think she will be—that the geopolitical aspects of trade and globalization will not be lost. I’m also sure, though, that was has to happen would happen, and that is that there will be a fresh look at the economic impacts of any further trade agreements, because—I just want to close where I finished.

This issue, I think it’s a crisis in trade policy, has been coming for a long time. And I dislike some of the rhetoric and the politics of today, but we will be making a serious mistake if we think this major crisis problem—this major crisis is simply the result of a lot of political rhetoric. In terms of the lives of Americans it’s real. And until our policies catch up with reality, there will continue to be an immense shortfall in terms of the views of the American public.

OK, so let’s go. I’m looking about. I expect we’re going to have a vigorous discussion. I look forward to it. We haven’t had enough. This has been beneath the table.

CREBO-REDIKER: Well, for those who are focused on the issue of trade, I think the fact that it’s come to the fore—you know, there are pros and cons, but it’s a good time to have this conversation. And we appreciate that you’re here to have it.

So I’d like to start off by asking you a little bit more, you know, when you negotiate trade agreements, I think both sides of the aisle when they are embarking on the negotiation have the best interests of the United States and try for the best agreements. And while there are ways that we can look at improving agreements, there’s a flipside which we touched on in earlier conversations of trade adjustment assistance, reskilling, retraining. There are people who lose from trade and globalization. And how do we, from a policy perspective, actually really ramp up our support?

And just to—just to clarify, you said that it’s not—that it’s all technology not trade, that did not come through in the conversations today. There’s—it’s a combination. It is more—the speakers this morning said it is more heavily weighted on technology. I think the basic concept is if we can’t get the trade adjustment and support for workers who are dislocated from trade and globalization right, then the very scary part ahead of some of the monumental changes that are coming down the pike on the technology, AI, and robotics side get a lot more daunting.

So what, from your perspective, does the political debate look like on support for those who are losers from trade, because that is a very key component of how we figure out how to move forward on trade?

LEVIN: Well, first of all, I think the heavy load becomes overweight. And the focus becomes more and more how we train the dislocated instead of also asking how do we prevent dislocation. So let me speak quickly as someone who’s been one of the authors of TAA, and who’s even at time proposed what seemed like radical approaches in terms of combining our unemployment compensation system with major retraining, because this country does a poor job compared to Canada, where’s there’s dislocation there’s early intervention. We do that poorly in this country.

But this is the message from the public in substantial measure: We need to improve TAA. Ironically, some of those who say it’s technology in the Congress often are the ones who drag their feet in terms of TAA. There’s a real inconsistency there. But as a champion of TAA, and I’ll continue to be so, it cannot essentially overcome a discussion about trade policy. I gave the example of steel. And I suggest, because I’ll be doing some of this, go out with me on the campaign trail and talk to people in the steel industry, and talk to them about what China’s doing with its huge, huge increase in production, subsidized by the Chinese government, running through their state-owned enterprise. And China flirts with the idea of becoming part of the TPP, with I think a state-owned enterprise provision that would essentially allow China to continue to do what they’re doing.

But you talk to a steel worker who wants to continue in the steel industry, who in many cases has been trained and retrained, you can’t only talk about TAA. And they’re going to ask the question: What is our government going to do about the fact that China essentially is swamping our markets? And I also say this—I mentioned in my remarks, Amo Houghton and I went—some of you ask I look about maybe remember this—many years ago to Geneva.

And over the resistance at times of USTR, we kind of took over the negotiations almost, and insisted on a strong anti-dumping countervailing duty provision in WTO. And we won 90 percent of what we were asking. But as important as that is, you’ve had this flood of cases, AD CVD cases. They are not going to solve enough of this issue, is what do you do in a globalizing economy, where you have a country that is essentially, as a matter of their economic policy, flooding everybody’s markets, and having more production than most of the major steel producers combined? So I’m all in favor of a strong TAA, but I worry that that’s going to lead us to ignore the need to get trade policy itself straight. And that’s why we need a fresh look.

CREBO-REDIKER: So this is the Council on Foreign Relations. And the U.S. is not the only country in the work that’s taking a fresh look at issues around trade. We’ve seen in Europe a pushback against TTIP from several countries. We’ve seen a lot of the sentiment, often driven by some similar currents that we’re seeing in the U.S., but certainly resonating with many countries around the world. When you think about the future and the new direction for trade, how do you see our new direction linking in with, you know, our major trading partners and their new direction in trade?

LEVIN: That isn’t working well? OK. It’s the microphone. (Laughter.) I’m sorry, I couldn’t resist that.

Look, my basic feeling is, as someone who understands the importance of expanded trade, is to just build some reality in understanding the impact, and having a much more democratic process. With TTIP, the negotiations basically stalled. I think to some extent Europe is—some of the countries on a reflexive position, and it’s fueled by other things than trade. So I don’t want to say this is all trade, and technology’s a part of it. Issues like immigration feed into what’s happening in Europe and, to some extent, in the U.S. And it’s a bit—it’s a somewhat economic issue. So my own view is the importance of a fresh look is that it will allow us to move beyond a lot of, I think, outdated notions and also kind of frameworks that aren’t working in terms of producing the results that matter in the lives of people.

CREBO-REDIKER: Well, the last question before I open it up the audience is one where—it’s a what-if question. But we’re 40 days away from the election. We’ll have someone on the other side of that who is the next president of the United States. And both candidates have expressed concerns on trade policy. But one of the candidates has very extreme positions on trade policy. Now, Congress has a very important role, a critical voice, in U.S. trade policy. It has for many years.

When you think about some of the most extreme actions that the executive branch could take in the event of the Republican candidate winning the election, how do you think Congress will approach—and particularly sitting where you are on House Ways and Means—how will you look at a potential major shift in the way that we approach trade and trading partners? And the reason I want to ask this is because 40 days before June 23rd, with the Brexit vote, there was really no one I spoke to in U.K. institutions or government that thought it could happen. And so there were no real plans being made. And so I’m just—I’m putting it out there as a bit of a charged question for you in terms of executive versus congressional in the trade arena. How is Congress looking at some of the statements that are being made on trade policy?

LEVIN: Well, we really don’t talk much about it. And we don’t talk across party lines. And I’m in favor of a resurgence of the role of Congress. You know, years ago we had a committee. Now I ever forget its name; it’s long ago. And we met periodically—this was leadership. It was structured. I think essentially what Congress did, it just took a backseat. And I’m in favor of changing that. And I think there has to be a much more vigorous participation by Congress, but also by the public. You know, our whole advisory committee system for trade is really unbalanced.

So we haven’t really had a very effective public discussion on trade issues, including a much more vigorous role of Congress. And we’re paying a very high price for it. And I think when you don’t have that full-blown discussion, it leaves it open to demagoguery. So I’m all in favor of our having a most vigorous debate with the important role of Congress. I think together the administration—the new administration and the Congress need to take a comprehensive, fresh look at trade policy.

CREBO-REDIKER: Thank you very, very much. I hope everybody has been thinking about their questions. And I’ll start with Ed Luce over here.

LEVIN: Hey, Ed. How are you?

Q: Very well. How are you, Representative Levin?

LEVIN: This is working now? OK.

Q: Just a quick question about what you’d like to see a Hillary administration do in terms of side deals and amendments to TPP for you to be able to vote for it—you and your colleagues to able to vote for it?

LEVIN: Which amendments?

Q: To the TPP. What changes would you like to see to TPP?

LEVIN: My basic position is to essentially right at the beginning start this fresh look at trade policy. I think—an I mentioned some of the issues that have to be involved in it. I think—I mentioned, for example, ISDS. You read the recent report by one reporter about ISDS. And people who think, you know, we had some suggestions, a few were adopted, the rest were passed off. If people think that there isn’t a resonance when it’s attacked—that local and state programs can be attacked not through suit in the American system by a corporation coming in and asking for an arbitration panel, if one doesn’t think that resonates they’re wrong.

And when you hear about tobacco controls being challenged—like in Australia or whatever—or the president’s position on the pipeline being attacked by Canada not through courts but through an arbitration panel in addition to courts, if people don’t think—I mean, the public may not know even what ISDS is, but if you indicate that this local or state regulation can be challenged not by going into a judicial system that’s a fair one, but through an arbitration process which itself is so flawed—it has immense weaknesses in it—if you don’t think it’s easy to put that into, if not a 30-second ad, a 30-second statement—I’ll show you how it’s done.

That’s why we need a basic fresh look at overall trade policy. And the same is true in terms of the role of workers. Look, we put forth May 10th. It was our initiative. It was accepted. It became part of the trade structure. The problem is that it hasn’t been effectively implemented. If you look at the history with Peru today, we put together a very innovative set of provisions on the whole issue of timber. And because the Amazon affects all of us. And after six, seven years, there has been very unsatisfactory progress.

I mentioned Vietnam. I mentioned Malaysia. The move of Malaysia from tier three to tier two when there are 4 million people in Malaysia, half of them from other countries, half of them documented half of them undocumented, working for 80 cents an hour, some of those products come here. We need to make sure that in addition to our language, we have reality in our trade agreements.

CREBO-REDIKER: Right back there.

Q: Thank you, Congressman Levin. Patricia Wu, C&M International.

You talked a little bit about China and state-owned enterprises. We’ve also heard candidate Trump come forward with some proposals regarding slapping tariffs on China and Mexico. Peterson Institute just came out with a study last week that said that the net job impact of those would, and the trade retaliation that they believe would follow, would be 4 to 5 million U.S. jobs. I’m curious, as you’ve been looking at this issue, as perhaps options have been discussed with you, what are some workable options that you have been seeing or considering with regards to addressing China and state-owned enterprises?

LEVIN: Well, I’ve mentioned some. By the way, I don’t think that Trump’s ideas are at all workable. He essentially pushes buttons. But you know, there has been allowed a kind of a vacuum. I also don’t agree with the Peterson notion that so much could be done through executive power. I think that’s overstated. A lot could be, but, you know, we have a lesson, when Congress fails to act, then the executive does, that’s unrelated to trade.

So I think in terms of China, for example, with steel, we have to engage internationally and force a conclusion. And what happened at the last G-20 was essentially talk. I don’t want to minimize the importance of talk, but that won’t solve the issue. Are we going to allow China to essentially destroy the American steel industry, or other steel industries? If they continue to do what they’re doing that could happen. And by the way, when we talk about national security, that would have a major impact on national security. This whole battle—I come from an industrial state. And I care about manufacturing.

In addition to making automobiles, in my district you have TACOM and TARDEC, the major military vehicle institutions in this country. The back and forth between TARDEC and TACOM and the domestic industry not only occurs daily, but often hourly. And if we had not saved the American auto industry, the domestic industry, then we would have seriously undermined the military security of this country.

So it’s one example, but we have to face up to it. And so far, we haven’t—except using these anti-dumping CVD. And I’m in favor of utilizing them. I’ve talked about my role. But it isn’t enough. In the public, there is a discontent, there’s a disquiet, because they think that people at the top aren’t putting themselves in the shoes of the typical family. And we need to do that in trade, as well as everything else. That’s why we raised worker rights in May 10th. That’s why we did that.

CREBO-REDIKER: Right here in the front, please.

Q: Irving Williamson, International Trade Commission.

I would like to—in this review of trade policy, to what extent should we also be looking at domestic policies? And I’ll give you a concrete example. At TPP hearing, the mayor of east San Francisco, California said: In terms of worker rights he was as much concerned about low-wage, non-unionized, you know, workers in the South and how they affected his workers, as he was about worker rights in other countries. And then you think about the question of income in equality and if you get benefits from a trade agreement, they may not be distributed very well in the U.S. just because of, you know, domestic tax policies. So should we be looking at domestic things at the same time as we do a trade policy review?

LEVIN: I think they’re going to accuse you of a softball. (Laughter.) And I was a pretty good softball player, except I was a pitcher.

The answer is for sure. You know, for sure. I don’t want anyone to think that we’re talking about worker rights just theoretically or internationally. But there is an interaction. There’s an interaction between the role of workers and the level of compensation in Mexico and in the United States. In Mexico, the wage scale and benefit scale in the assembly industry is about one-sixth. In the auto parts industry, I’ve been told—I was there a number of times—that workers make in some of the auto parts plants $80 a week. Now, we have to have rules of competition that begin to address these differences. So the answer is they’re related, but we need to focus on both.

CREBO-REDIKER: Right here, please.

Q: I’m Francisco Martin-Rayo of the Boston Consulting Group.

You talked about how when you first created the USTR position, it was because, you know, trade was seen as beyond your traditional diplomacy efforts. Would you like to see a more activist trade representative in the next administration? So not just responsible for negotiating the trade agreements, but also for enforcing existing trade agreements?

LEVIN: Well, the answer—and this is a somewhat sensitive issue—in terms of enforcement is, I said, I think in previous administrations the enforcement record was basically miserable. I think the failure of the Bush administration to accept and act on the ITC recommendations in those four cases sent the absolutely wrong signal. And as I said, I think it was a hangover from this notion, more trade is automatically better. As Tom Friedman, I guess—I quote him in my paper—he said: I don’t know what’s in CAFTA, but if it’s free trade I’m for it. By the way, we lost the battle over CAFTA by a couple votes.

Now, I think there’s been an improvement in enforcement, except it isn’t nearly enough. And I mentioned a number of the cases—Colombia, Peru—and there is a proposal, as you know, for a trade enforcer. And I think it’s part of the fresh look that we need to undertake. We have to do—we have to be much more vigorous and get away from this notion—and I’ve been arguing against it—that these problems solve themselves. You know, there is a comparability between the notion in domestic economics that these issues will solve themselves, so don’t bother too much. And that has been carried over times in to the international sector. And I think it’s a serious mistake, and is part of the reason for disillusionment.

CREBO-REDIKER: Way in the back, please.

Q: Hi. Len Bracken. Reporter with Bloomberg BNA.

Congressman Levin, as you know there is a new mechanism in the trade promotion authority that allows members to try to withdraw trade promotion authority. And do you intend to use that, or do you know of any other members that would also use that? And, you know, that is if the objectives of TPA are not met in an agreement, such as TPP. And also, would you discuss just this idea that it’s unprecedented not to have a hearing on an agreement the size of TPP before a vote?

LEVIN: Well, on the latter, I didn’t say before a vote. I said up till now we haven’t had, at least on the House side, serious hearings on TPP. And when you think of all of the exhortations about its reach and its importance, not to have that is a serious mistake. It’s one of the reasons this kind of a session is so important. We need to bring this all out into the open.

In terms of the provision, I voted against TPA. And I led the effort against it, in part because I thought the objectives were so mushy they didn’t mean much. And it’s turned out that’s true. I never thought that withdrawal was very meaningful. It’s very difficult to do that. As I said, I’m in favor of the next administration taking this comprehensive, fresh look at overall trade policy. That’s what needs to happen next. And Congress needs to be an important part of that.

CREBO-REDIKER: I think we have time for one more question.

LEVIN: We got two. Can we squeeze in two?

CREBO-REDIKER: All right. We’ll do two.

LEVIN: I always do that. I’m—

CREBO-REDIKER: Two questions, and then you get the benefit of choosing.

Q: Hi, Congressman. Brian Bradley from International Trade Today. Thanks for taking my question.

You had said that you believe the TPP should—or a lame duck vote on the TPP should be blocked, if it were to come up. I know the ball is kind of—or would be in the Republican majority’s court. However, do you think TPP will be brought up for a lame duck vote, or at least a tangible attempt? Thank you.

CREBO-REDIKER: And I think we have one more question up here in the front.

Q: Hi. I’m Robert Lawrence from Harvard University.

I’d like to ask you a question about labor standards. You mentioned the May 10th agreement, which as I understand it is written into the TPP, so that we have in fact the rules are written. And your objections that you enunciated earlier had to do with enforcement of the agreement. And my understanding, but I’d like clarification, is that one reason why the labor unions are against TPP has to do, again, with the issue of enforcement, as opposed to the specific rules. But maybe I’ve got that wrong. But surely we’d be better off having an agreement with rules, and then bringing pressure to bear on our administration to enforce than, in a sense, rejecting an agreement and not having the rules at all.

LEVIN: OK. I’m glad you raised it. And we’ll end with that. My own judgement is if TPP were brought up in a lame duck, I think that would be a mistake. And I think it would fail. And I also think it would send the wrong message instead of having a fresh look try to push that through. And I don’t think it would succeed.

So I’m glad you asked that, because we’re proud of May 10th. It took a long time. As I said earlier, it was—worker rights were dismissed as social issues. And I would say to some of my Republicans, you favor right to work and you call worker rights social issues? Part of—they’re very much economic issues. So we put May 10th into these—into these agreements, starting with Peru. A number of things: Before we voted on these agreements, the countries had to make the changes. Before we voted, I actually—well, I won’t talk about the Panama agreement, where we participated in the rewriting and then they were blocked.

The problem is that right now if there were a vote Mexico insisted that worker rights be outside of TPP. The administration agreed to that, and it was a mistake. And thus far, from what we can tell, there has been no action—concrete action within Mexico to change their rules. You know what the picture is in Mexico? Just go down there. There are protection agreements, so-called. What are they? They are agreements put together by an employer, by a union, and the government—the union is affiliated with the government. Workers never vote on them in most cases. And often these so-called protection agreements are written before there are any employees. So while it isn’t true throughout, in many, many places, including much of the auto and auto parts industry, but beyond, there is no reality to worker rights.

And so to have the language in there without the steps having been taken to make it real before we vote is a serious mistake. And the same is true as to Vietnam. And there is a provision in there that after five years if they haven’t changed and allowed independent unions that the additional tariff reductions, those not in play already, can be withdrawn. But if that language is going to have any believability there has to be some actions before TPP would be considered to make it real, to make it believable—to make it believable. In Colombia the action plan did incorporate some changes, and some changes were made before voting. But the history has been—and I know it’s complicated because of the negotiations—peace negotiations, which I personally have favored. But there hasn’t been implementation.

So it’s like any other important agreement. There has to be reality to it. And I close with this—because I want to emphasize—this present predicament we have with trade is not just an election year phenomenon. There is a history to this, a history of overreliance on outdated nostrums, or they were more than that, outdated doctrines. And also, the notion that more trade is just better, and problems with trade agreements will work themselves over time. And those who believe in expanded trade have a responsibility to try to craft agreements that really are going to address the basic aspirations of workers in this country, as well as corporations.

And also, as I said, we have analyses of them that really address the realities in the lives of people. And just doing GDP over 10 years—you can’t sell trade agreements on GDP one-tenth of 1 percent over 10 years. People want to know what’s it going to mean for my pursuit? What’s it going to mean for my livelihood. That’s what people want. And in a democracy we should respect that. And if we don’t, we leave openings for people who have either demagoguery or total disbelief in the benefits of globalization. That’s the challenge that we face.

And I just want to close by thanking the Council, because I hope you can expand this. And I hope you can have some—foster some big town hall meetings. I think people would come. And I think in a sense—in a real sense, the more debate and the more constructive argument we have about this the better. If not, we’re going to pay a high price. Thank you for inviting me.

CREBO-REDIKER: Thank you so much, Congressman. Excellent job. (Applause.)

(END)