Schwab on trade: in an exclusive interview, America's chief trade negotiator assesses the world

International Economy, The, Fall, 2007 by Susan C. Schwab

So why do we focus so much on agriculture relative to other parts of our economy? Agriculture's share of GDP and employment is less than the shares of manufacturing and services. Yet agriculture as a constituency has paid a lot more attention to trade negotiations than have either the manufacturing or the services sectors. Why aren't our elected representatives hearing more from, say, the financial services sector about the Doha Round? The answer is that for someone focused on profit and loss on a daily basis, a multilateral trade negotiation that has gone on for six years is bound be boring. Part of the problem is that trade negotiation has so much jargon: Swiss coefficients, for example, and amber boxes and green boxes. No business person makes decisions on the basis of Swiss coefficients, right? So until this negotiation gets far enough along to offer potentially tangible results for a business person, it's not surprising business people don't pay a whole lot of attention.

I wish the business sectors of our trading partners would pay more attention because I wish they were pushing their negotiators. In the United States we have statutory private sector advisory systems, so even if the private sector per se is not paying attention, we are still meeting with a thousand advisors who offer advice and sharpen our focus. And we're constantly going up to Capitol Hill and getting input. In many other countries, negotiators either fly blind or only hear from those industries or businesses that feel threatened. Then the negotiators come to the table so focused on their defensive interests that they ignore their offensive interests. That's one of the biggest problems we've had with the Doha Round.

TIE: There's a theory that China, India, and others are quickly heading toward excess capacity in manufacturing, and just to survive will jump into services--the mainstay of the U.S. economy. Do you see a tidal wave of political reaction coming to competition in services?

Schwab: The debate on the future of services trade could in fact be very interesting. One of my favorite examples of how convoluted all this can be is call centers. In the big debate over outsourcing call centers to India, I always ask how many call center jobs were lost to outsourcing relative to the number of call center jobs lost to the do-not-call list. My guess is that significantly more jobs were lost to the advent of the do-not-call list than anything that could be accounted for by outsourcing. The flip side--and the biggest challenge for anyone trying to make a pro-trade argument--is the notion that trade and trade agreements represent a positive-sum game. Some activists would have you believe it's a zero-sum game and everybody loses.

U.S. Treasury Secretary Hank Paulson has been leading the Strategic Economic Dialogue with the Chinese and one of the issues we've tried to address is what happens if you let markets work relative to overregulation. Look at businesses such as express package delivery, or EBay, or Starbucks--industries that simply did not exist or would not have developed in the face of over-regulation. UPS tells us for every forty new packages being shipped overseas, they add a job in the United States--a Teamsters job, I might add. The challenge here is staying focused on moving up the food chain. That requires education, access to capital, the free flows of ideas, and the capacity of entrepreneurs to succeed. It's a hard concept to translate overseas, let alone at home.