In the coming weeks, WITA will be launching a new series to look at the USMCA Review process that will play out throughout 2025 and into 2026. For more information on the series, including sponsorship opportunities, please click here.

The next White House occupant will have the unprecedented opportunity to decide the United States-Mexico-Canada Agreement’s (USMCA’s) fate. USMCA contains a sunset clause, Article 34.7, which terminates the Agreement in 2036 unless the parties agree to extend it through a “joint review” process set to begin on July 1, 2026. Readers facing more immediate challenges in 2024 might question the urgency of a decision that lies two years in the future, under an undetermined administration, and whose direct legal effect is delayed for ten years after that. But the USMCA’s implementing legislation, 19 USC § 4611, requires the President to “consult with the appropriate congressional committees and stakeholders”, as well as relevant executive branch officials, and to “provide opportunity for the presentation of views in relation to the operation of the USMCA, including a public hearing” at least 270 days before each joint review. To readers with a stake in North American trade—that is, at minimum, all North Americans: the time to strategize your participation is now.

The sunset clause was controversial, not least because it introduced little more to the Agreement than the fretful insistence of a doomsday clock. As former President Trump’s Trade Representative (USTR) Robert Lighthizer has noted, “[m]ost trade agreements, for reasons that don’t make any sense to me, are eternal… this one is temporal, although it’s complicated how it works.” The Agreement is initially set to expire 16 years from the date it enters into force. Every six years, the Free Trade Commission (or FTC, a group of minister-level government representatives from each party) conducts a joint review during which they decide whether or not to extend the Agreement by six years. If they extend the Agreement, then they can simply wait until the next joint review; otherwise, they must conduct annual reviews until the original expiration date. At any time in between, they may change their minds and extend the Agreement. The FTC may also, of course, meet between joint reviews and establish, dissolve, or otherwise collaborate with committees, working groups, and other subsidiary bodies to aid its decision-making. In May 2024, for example, the FTC held its fourth meeting, where it “took note of readouts from the Working Group for Cooperation on Agricultural Biotechnology and the Committees on Textiles, Technical Barriers to Trade, Good Regulatory Practices, State-Owned Enterprises and Designated Monopolies, and Small and Medium-Sized Enterprises.” Aside from consultation with and reporting to congressional committees, USMCA does not reserve any particular authority for Congress in the joint review process, so from a legal perspective the outcome depends on the executive branch—Congress’s role is essentially political.

Read the Insight Here

10/04/2024 | Adrienne Braumiller | JD Supra

International trade has gotten a bum rap in recent years, despite accounting for 25 percent of U.S. economic activity and its significant contribution to raising productivity and real incomes. Middle-class Americans gain about a quarter of their purchasing power from trade, while nearly half of imports are inputs for U.S. businesses. Exporting firms also pay higher wages, and the United States is the global champion in services exports.

Nonetheless, former President Donald Trump tapped into a growing popular resentment of trade and has continued with his hallmark assertion “that foreign countries… have been ripping us off for years” and they “come in and take advantage of our country.” The Joe Biden administration has continued in the same vein, claiming that trade has “contributed to the hollowing out of the American industrial base and vital U.S. jobs, and harmed many of our communities and working families, undermining support for democracy itself.” With such portrayals, it is hard to see how anyone would favor trade.

In a speech at the Brookings Institution in April 2023, National Security Advisor Jake Sullivan cited trade liberalization—together with markets allocating capital efficiently and productively and the notion that all growth is good growth—as assumptions whose limits were laid bare by the “the shocks of a global financial crisis and a global pandemic.” He proclaimed that a new consensus is needed to “build a fairer, more durable global economic order, for the benefit of ourselves and for people everywhere.”

Smart industrial policy to advance national security, address climate change, and promote innovation can have its place. But it is a mistake to give short shrift to markets, trade, and growth, as they are the very mechanisms that raise incomes, a necessary part of addressing the unfairness issues cited by the last two administrations. Two phenomena are at play: a misperception and a misplaced perception.

Misperception

The misperception is the apparent view of Biden administration officials that the usual levers of fiscal and monetary policy were not working properly. During the Great Recession, the prime age employment-population ratio—which tracks the proportion of all Americans between the ages of twenty-five and fifty-four who are employed—tumbled from 80 percent in January 2008 to 75 percent by October 2009 and took nearly a decade to recover. Journalist Matthew Yglesias has suggested than rather than admit the Barack Obama administration stimulus measures were inadequate, the notion took hold that the sluggish labor-market recovery was due to something more “profound and conceptual.” Perhaps this is why officials rolled out a “worker-oriented trade policy” that has maintained the Trump administration’s tariffs, eschewed new market-opening arrangements, promoted onshore production, and expanded Buy American provisions.

But, in fact, the economic machinery of the United States works fine. As the COVID-19 pandemic dropped the prime age employment-population ratio down to 70 percent, the Biden administration’s massive stimulus package and a forward-looking Federal Reserve headed off another slow labor-market recovery. The prime age employment-population ratio popped back up to 80 percent within two years, faster than forecast. Whatever merits the worker-oriented trade measures could have had to create jobs, they are not appropriate in a relatively tight labor market with unemployment at 4.2 percent.

Misplaced Perception

The misplaced perception is that trade has few benefits when they are overwhelmed by other unfavorable economic conditions. Intuitively this makes sense. When Walmart shoppers’ savings on purchases of a tradable items—produced abroad or in the United States—are more than eaten up by rising rent and medical costs, awareness of any benefits from trade quickly evaporates like water on a hot rock.

This dynamic was evident during the Great Recession. Those who believed trade was good for the country collapsed from 78 percent to 58 percent and never fully recovered. When the pandemic undercut the economy, the 79 percent who thought foreign trade presented an opportunity for growth in 2020 slipped to 61 percent, according to a Gallup poll. 

Even though more recent headline data suggest that the economy is doing well, a May 2024 Pew survey reported that only 23 percent of respondents believed that economic conditions in the country were excellent or good. It is no wonder that 59 percent of respondents believe that the United States has lost more than it has gained from increased trade with other nations, a 3 percent increase from 2021.

Read the Article Here

09/20/2024 | James Wallar | Council on Foreign Relations

At the 13th Ministerial Conference in 2024, World Trade Organization (WTO) members demonstrated their commitment to advancing digital trade rules—those which govern both the trade of digital products and the digital processes used in international trade—by calling for the revitalization of the 1998 work program on electronic commerce. That directive is the foundation of the work that follows: a comprehensive and robust approach to creating a set of global rules that will support all member nations in maximizing the opportunities of the digital economy. The envisioned approach extends and enhances existing efforts. 

This brief outlines three activities that WTO members could undertake to facilitate digital trade: 

• Design an agreement on data for trade that sets clear guidelines for data exchange across borders 
• Establish a governance structure for digital trade that keeps rules updated 
• Create a community of practice that consolidates existing digital trade efforts 

Each of these activities must acknowledge the realities of the digital divide for trade facilitation, the features of which are detailed in the final section. 

Before considering the next steps in facilitating digital trade, it is important to establish the complexities in defining digital trade and the characteristics that differentiate it from traditional trade. 

Gaps in the Definition of Digital Trade 

It is essential that any approach to the global rule regime address the gaps in the definitions of digital trade terminology before diving into new activities. There are several imperfect definitions of digital trade in use today. One that has been referenced in WTO documents is that “all international trade that is digitally ordered and/or digitally delivered.” In practice, a broader definition is often employed: the intentional application of digital technologies at any stage of the trade process. 

From a technology perspective, both definitions are incomplete. They are rooted in the concept of physical trade, which assumes features about trade transactions that do not always hold true for today’s internet-based technologies. Four ways that digital transactions differ from other types of trade are described in detail below. 

Read the Full Policy Brief Here

10/09/2024 | Alisa DiCaprio | Mercatus Center

How the Circular Economy Can Revive the Sustainable Development Goals