President Obama's recent appointment of an Interagency Trade Enforcement Committee to stop unfair trade and ensure a "level playing field" for U.S. industry and workers made me smile. In the mid-1980s, I was appointed director of the Reagan administration's Strike Force, a similar interagency group, that was to seek out unfair trade wherever it might be and smite it down.
The first target was then-heavy European subsidization of the development of the Airbus. The Airbus looked like a sitting duck. The whole development program was clearly in violation of a number of the rules of the General Agreement on Tariffs and Trade (GATT), the predecessor to today's World Trade Organization (WTO). Nevertheless, the Airbus was also the last target of the Strike Force. Why? Well, when the proposal to take action against the Airbus subsidies reached then Secretary of State George Shultz, he said any such move would "shatter NATO." This not only stopped the complaint against Airbus in its tracks. It also scuttled the Strike Force before it could claim any strikes.
What was going on? Business as usual for the United States, for which geopolitics is the paramount national interest. For as long as I can remember, there has never been a military base, a U.N. vote, or a smooth state visit for which Washington was not prepared to make a trade concession or sacrifice a U.S. industry. (As a young Foreign Service officer on my first assignment in the Netherlands, I was told that my job was to promote Dutch exports to America.)
After the Strike Force incident, I was on another Reagan administration team tasked with dealing with unfair trade by Japan under the direction of then Vice President George H.W. Bush. It was agreed at the beginning of the mission that the vice president would make no celebratory trip to Japan unless the task force succeeded in halting the offending trade practices. In the end, there was no halt to such practices, but Bush made the trip anyhow after the National Security Council director for Asia emphasized that "we must have those bases. Now that's the bottom line."
What he was suggesting was that if Bush offended the Japanese by not coming to celebrate a non-agreement with them, use of Japanese military bases would somehow be denied to the U.S. forces then defending Japan. In fact, there was never any chance of losing access to the bases, but the National Security Council and the State Department cared more about keeping relations smooth with Japan than they did about the fate of U.S. exports and U.S. industries being hurt by Japanese trade practices.
If you think this is all in the past, fast forward to November 2009 when President Obama concluded his first trip to China with a press conference in Shanghai. In it he noted that the United States had agreed, among a bunch of other things, to assist China in the development of its own indigenous commercial jetliner. Whoa, I thought. Why are we agreeing to do that? We have a huge trade deficit with China, and jetliners are one of the few things we can actually export to them.
So why are we going to help them make their own? I followed that thought up with friends at the State Department who informed me that America wanted China to help with dealing with North Korea, Iran, and other pressing global issues; and anyhow, it would be years before China could field a viable commercial jetliner.
And just last year, Washington concluded a bilateral free trade agreement with South Korea. Do you think this deal will really open up the Korean market and produce a surge of U.S. exports that will wipe out the U.S. trade deficit with Korea? Think again. According to President Obama's own U.S. International Trade Commission, the deal is likely to result in a bigger U.S. trade deficit. When I noted this in meetings at the White House last year, I was told that the deal was important to demonstrate America's "commitment to Korea."
In short, it had little to do with trade and everything to do with geopolitics. Why we needed to demonstrate commitment was never clear to me. After all, we have 30,000 troops in Korea and the U.S. commander is the commander of the Korean army in the event of any outbreak of hostilities. But never mind all that. We did the trade deal primarily to show our "commitment."
Wait, it gets better. Washington is now in the midst of negotiating the so called Trans-Pacific Partnership, a regional free-trade agreement to cover much of the Asia-Pacific area. When I was consulted on the deal by the White House, I noted that the proposed deal doesn't cover a number of key issues such as currency manipulation, anti-trust and competition policy, compulsory technology transfers as a condition of market access, and state-owned corporations. Again, I asked what the main purpose of the deal was. The response from the key White House officials driving the negotiations: America needs to demonstrate its commitment to Asia and to show that it is determined to remain an Asia-Pacific power.
I rest my case. America systematically subordinates its economic interests to achieve geopolitical objectives. What it should do is give back the military bases and go for the exports, and for greatly increased domestic production.
This post is part of the HBR Insight Center on American Competitiveness.
This blog first appeared on Harvard Business Review on 03/13/2012.
View our complete listing of Labor Markets blogs.