Parsing a Key Phrase from the Trump-EU Press Conference
Trade deals take more than an afternoon chat.
From earlier this week, Trump stated at a press event:
This is why we agreed today, first of all, to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.
There are a couple of phrases in here that deserve more attention than they are receiving, and there is a broader set of issues that need addressing.
First: “we agreed today, first of all, to work together toward.” That just means that there will be more talks if anything substantive is going to happen. North Korea is a great example of this: some talks led to a press conference but to no formal agreement. Another example is Trump’s baseless claim that after talking to NATO leaders he has a commitment for them to spend up to 4% of their GDP on defense. I vacillate between thinking Trump really is so ignorant that he thinks having a chat really is making a “deal” and thinking he knows good and well that his supporters will accept bluster over substance and is putting on a show for their benefit.
Again: like with North Korea the lack of formal talks will underscore the pointlessness of these kinds of press statements.
To continue some analogizing I started in the comments of another post: just because you have a nice chat with the real estate agent about the price of a house doesn’t mean you can start moving in next week. There is a considerable amount of formalization of those “talks” that have to occur, culminating in a formal sit-down with some attorneys to sign a boatload of papers. You don’t get the keys until all of that is done.
Second, and this one is big: “zero non-tariff barriers.” There are a number of other factors that can affect trade, such as regulations or other factors. If the US has different regulatory barriers for getting pharmaceuticals to market than do other countries, that can be a non-tariff barrier. The EU considers, for example, internal US regulations on state-to-state sales of wine and spirits to be a non-tariff barrier. In general, differing regulations between countries can constitute a non-tariff trade barrier.
Guess what? Negotiating such things will take more than a chat one afternoon. Indeed, it is this kind of thing (and other regulations, like security issues in the PATRIOT Act, for example) that require a lot of talking, agreeing, and documenting. Indeed, changing regulations often requires legislative action in all the countries negotiating. This is not easy and takes more than an afternoon to accomplish.
Third, “zero subsidies on non-auto industrial goods.” Beyond non-tariff barriers, true free trade means no subsidies for domestic products. Are we going to do away with farm subsidies in the US? Other subsidies? Any comprehensive trade deal around tariffs and non-tariff barriers will have to address such questions.
This is all very complex. Further: any agreement is going to ultimately require give-and-take (and leads to things like NAFTA and the TPP).
To reiterate: agreeing to talk further is not an agreement. Trump seems not to understand that, and likewise his supporters need to realize the difference between saying that there will be talking and actually having said talking lead to an actual, enforceable agreement.
Also, I would note, that as Steve Verdon noted in an earlier piece here at OTB: even a world with zero tariffs does not means a world without a trade deficit.
An obvious observation, assuming one knows what a trade deficit is. Which would exclude our President*.
@gVOR08: Indeed. It is insane that it even has to be stated.
@Steven L. Taylor: @gVOR08:
Indeed it could widen the trade deficit as easily as narrowing it. And good luck killing agriculture subsidies, the Congressional delegations of two dozen or more states won’t be having any of that.
And, just look at the various tax breaks for this industry or that, all of which could be seen as non-tarriff barriers. The idea that this all managed in an afternoon schmooze is amazing.