Trade Policy: What Next?

W. Bowman Cutter: My inclination is to address the question that this panel’s title poses narrowly, directly, and completely by saying, “Not much in the near term.” The following remarks expand on that otherwise complete presentation. I talk about the narrow question and its implications and conclude with some thoughts about a possible way forward. Let me begin by explaining my “not much” response. My key point is that I see absolutely no visible support—either deep or superficial—for ongoing innovation and creativity in trade policy. This lack of support persists despite the fact that the United States is in the middle of what appears to be a profound transformation in growth and productivity that has made irrelevant most of the standard arguments against continued trade policy liberalization. Part of the left has launched itself into a campaign against the whole idea. American labor has reversed its historic pattern of support. American business, and particularly business linked to the new economy, has not emerged as a meaningful force on trade, probably cannot do so, and certainly does not want to. Furthermore, both political parties are deeply ambivalent. Where a force for liberalization of trade policy is going to emerge from is unclear to me. This assessment raises the question, why? Let me offer some of the reasons I have thought about over the past few years. First, the nature of trade and trade issues has changed. (Agriculture may be an exception, as an area that will never be resolved but instead managed from day to day.) As many other participants in this conference have already discussed, trade policy is no longer about tariffs. Neither is it really about arm’s-length transactions that are clearly across borders. Instead, it is about nontariff barriers. Often this means that trade policy today is about an underlying set of transactions that occur between affiliated groups, and that are therefore by no means arm’s length,