On December 19, Teddy Downey sat down with Ambassador Katherine Tai to discuss trade policy under the Biden administration. The full transcript, which has been modified slightly for accuracy, can be found below. Listen to the conversation as a podcast here.
TEDDY DOWNEY: So, Ambassador Tai, having followed you closely the past few years, I think I can fairly say that you’re a student of history. And so, my first question for you is how do you think about your legacy, President Biden’s legacy, on trade and how that legacy fits this particular moment in history?
AMBASSADOR KATHERINE TAI: Thanks so much, Teddy, for having me on. And you’re right, I am a student of history. I was a history major in college. And along the way, realized that history is so important. Because it’s the story that we tell about ourselves so that we can understand who we are. And it’s really, really important to understand where we’ve come from and who we are today, to have a good idea for who we want to become and where we want to go in the future.
So, the marriage of history with a role in policy and policy leadership is an incredible privilege. I really appreciate this question about legacy, because it does seem like it’s the season for mostly looking back too, and understanding what we have been doing here in the Biden administration, what my team and I have been doing here at the Office of the U.S. Trade Representative over these last four years, and what we feel we have been trying to contribute, and where we see our contributions having an impact.
And I think the big picture way to answer your question is to go to where the President’s head is in terms of his legacy on economic policy. And he’s now given a couple speeches where he has taken great pride in really taking down the myth and the fiction of trickle-down economics.
We talk about it as trickle-down economics. We sometimes, in other contexts, describe it as a neoliberal economic policy. Essentially, it’s this story that we’ve told ourselves that if you aim your economic policy at benefiting and enriching the richest among us, the biggest corporations, the most well-resourced stakeholders in our economy, that their riches will necessarily trickle down with gravity to those in the middle and to those at the bottom.
And over a couple generations now, what we have seen is that trickle-down economics, while a beautiful concept, has really not worked. And it’s really been a kind of a myth and maybe a lie that we have been telling ourselves and each other.
So, this vision of President Biden, this guiding principle over the course of the last four years, has been around an economic model that is about building our economy from the middle out and from the bottom up. And middle out, bottom up, that’s a lot of prepositions. And it makes sense when you understand that middle out and bottom up is in contrast to trickle-down. And what I am very, very proud of, and what my team is proud of, is in terms of our work here at USTR over the last four years, it has been to align our trade policies, our international economic policies, and to be a part of our domestic economic policy conversation, to align all of these streams of work with middle out, bottom up economics, and to really reverse the path of trickle-down.
Because what we’ve seen is that you keep enriching and benefiting those at the top, and all of that wealth ends up being captured at the top with very little that trickles down. And something that I think is very much on our minds today is looking around us in America, in the American economy, looking around us in the global economy, and appreciating that the levels of economic inequality are so high that they are rivaling the levels of inequality that we saw here in America in the Gilded Age.
And so, this middle out, bottom up economic approach, taking on trickle-down, has required an entire team of leaders within the Biden administration. And that, as the head of USTR, we have made trade policy a part of this economic agenda that is going to be so critical to remedying the economic inequality and the loss of opportunity and vitality that we are struggling with and grappling with today.
TEDDY DOWNEY: I’m glad you mentioned the Gilded Age. Because you talk a lot about FDR and his policies and vision. And I was wondering if you could talk about why you see FDR as instructive for you during your time as Trade Representative.
AMBASSADOR KATHERINE TAI: That’s a great question. So, President Biden has this great portrait of FDR in the White House, in his work suite. And so, anytime we assemble for a cabinet meeting, we see that portrait of FDR. So, I know it’s very much on his mind.
The reason why we find FDR to be so relevant to this moment in history is that FDR was a wartime president who saw a rise in authoritarianism, the loss of democracy in Germany, experienced World War II, and then advanced these incredibly progressive economic policies here at home to safeguard economic prosperity and opportunity for all Americans and to safeguard American democracy and democracy writ large against the forces of autocracy, whether it represented itself as fascism on the right or communism on the left. And his approach was one that was really deeply embedded in an economic outlook that looked at the class struggle within American society, and that was happening around the world.
So, when we examine the origins of our current international trading system, the Bretton Woods institutions that include the World Bank, the International Monetary Fund, and then the origins of the World Trade Organization, to understand that the World Trade Organization evolved out of something earlier that had been the trade pillar for the Bretton Woods vision, the International Trade Organization, it’s been an important moment for us to return to our roots and to really examine what the principles were for internationalizing FDR’s economic vision here in the United States and to examine where that vision might have gone off track and whether and how that explains where we find ourselves today, which is in a very, very distorted economic environment.
TEDDY DOWNEY: And you talk about FDR’s holistic vision for economic governance, and we’ve talked a little bit about that here already. I wanted to ask you specifically how do competition and anti-monopoly policy intertwine with trade?
AMBASSADOR KATHERINE TAI: That’s a really great question. So, when we looked back at the original vision in Bretton Woods for the trade pillar, the vision had been for something called the International Trade Organization, the ITO. And it was amongst a group of like-minded countries coming out of the wreckage of World War II. It had tariff disciplines, but that wasn’t all. In addition to the tariff disciplines, it included meaningful rules for worker protections, meaningful rules on labor, and also very, very interestingly, disciplines on competition and anti-monopoly.
And what we see then is if we put ourselves in the place of these leaders who experienced the 1920s and the 1930s, into the 1940s, and the tragedy and suffering that they had seen on a worldwide basis, and what they were trying to create in the architecture of these Bretton Woods institutions, what we understand from that original vision for the International Trade Organization, was a much more holistic and comprehensive approach to economic governance worldwide that looked not just at tariffs, which was the only part that survived, but these other pieces dealing with workers and full employment on the one side and disciplining the ability of corporate power to become concentrated and to become distortive of not just economic opportunity, but also political pluralism.
TEDDY DOWNEY: And we’re hearing a lot of talk these days in Europe, and even in the U.S., about national champions. And I wanted to get your thought about what your view on that is just in light of what you just said about the problems with monopoly and concentrated economic power.
AMBASSADOR KATHERINE TAI: So, it’s been a very, very interesting conversation that’s come up through trade. Because we have had our own tradition based in a neoliberal trickle-down approach to really aligning U.S. trade policy and even aligning USTR with the biggest corporate stakeholders here in the United States. USTR is very, very well known to the big companies, to the Chamber, to the Fortune 5100, et cetera. USTR is much less well known to the rest of America, to small businesses, to workers, to small family farmers, and so on.
The risk that you have when you are so closely aligned with the biggest companies is that you lose sight of the fact that, for example, at my office, which is the Office of the U.S. Trade Representative, the job is to represent the interests of the entire U.S. economy, not just of the biggest companies.
Now, what I’m trying to get towards is we’ve had a tradition of defending the interests of the biggest American companies and engaging with foreign governments and our trading partners to make sure that our companies are not discriminated against. Those are some of the founding principles of the trading system is fairness, that you don’t discriminate between your companies and your trading partners’ companies, and you don’t discriminate as between companies from one trading partner versus another.
One of the challenges that we have had in recent years is the growth of some U.S.-based companies to become so powerful and so dominant, not just here in the United States, but in the global marketplace, that efforts to regulate those companies or those sectors start to run into this dynamic where if they are foreign companies attempting to regulate, that they could appear to be discriminatory because these companies are almost all exclusively U.S.based.
And so, that’s been actually quite a large part of the conversation here over the course of the last couple of years, especially in light of, for example, the tech sector, where European attempts to regulate, they might have discriminatory overtones, or they might not. But attempts to regulate at all, because the affected companies tend to be only U.S. companies, we here at USTR have had to build in additional levels of examination, analysis from a governmental perspective to try to engage with our trading partners and to really try to suss out, are the governmental measures, that our companies are complaining about, are they actually discriminatory and therefore something we need to really push back on from a trade discipline perspective? Or are they instead legitimate attempts to regulate that we need to make room to have conversations about and we can’t just assume are discriminatory because the affected companies happen to all be U.S.-based?
So, this has been one of the most interesting aspects of the way we’ve been evolving the perspective here at USTR, which has really put us in conversation with our competition authorities to create that space to say that not every foreign government regulatory measure is necessarily discriminatory when you look at the dynamic in the domestic and the international marketplace, where you have a set of dominant players that happen to be U.S.based.
TEDDY DOWNEY: You mentioned the lobbying power of consolidated industries and the ways they historically have influenced trade policy. Obviously, you pushed ahead with policy in the public interest despite all that influence. But I’m curious if you have any thoughts on how that can be done in the future or if there’s anything that would help to ensure that USTR is not recaptured by those interests. Just any thoughts on that would be interesting.
AMBASSADOR KATHERINE TAI: Teddy, your question is really artfully posed. Because I think that the part that you are referring to is that our work to create the space for rational policy conversation to include an examination of consolidation and dominance in markets to complement our perspectives on trade policy have been met with furor from some of these big businesses and big business associations. And it’s been very, very interesting.
I’ll just go back to the early days of being here at USTR. President Biden articulated that he wanted an approach to foreign policy that took into account the interests and the voices of our middle class. And that was really, I think, a direction to the State Department, to the National Security Council, that we need to have an American foreign policy for the middle class. The corollary for our trade policy was that we needed to correct for the distortions in our trade policy trajectory by refocusing our trade policy on the needs and interests of America’s workers.
So, that for us meant that there was a foreign policy for the middle class and we had an agenda for a workercentered trade policy. We’ve had a lot of time now to put meat on the bones of what worker-centered trade policy means. But fundamentally, it was a recognition that our trade policies had been conducted for decades to prioritize the interests of American businesses, especially American businesses. When we thought about the benefits and the interests of American people, that our frame was limited to American people as consumers who benefited from trade policies by virtue of having lower prices that came from trade and failed consistently to take into account the other dimension of the American, which is not just as a consumer at the marketplace, but also as a worker and a producer in our economy. And that for every good you find at the market that comes in cheaply because of trade, that the forces of international trade could also be creating downward pressures on the ability of American workers to advocate for themselves, to organize, and downward pressure that was reflected not just on their rights, but also their wages and their ability to secure wage increases, that reflected also the increases to their productivity.
So, when we started talking about the worker-centered trade policy, there was actually quite a bit of head scratching from our traditional stakeholders who still remain important stakeholders, and that is the business sector. And one of the questions that was posed to us early on by someone I’ve known for a long time, and it was a genuine and sincere question, which is, well, you keep talking about this worker-centered trade policy, and it makes us as big businesses feel left out. Could you instead just clarify that a worker-centered trade policy is also a business-centered trade policy? And at the time I thought about it, and I thought, well, legitimately we’re not excluding businesses from the consideration in our trade policy. Businesses still have an important role. Big businesses have an important role.
But what we really wanted to do was call to attention the fact that our workers have been left out and needed that recognition in our orientation and in our guiding light in terms of how we’re going to conduct our trade policy. And I just go to that initial conversation around could you call this a worker and business-centered trade policy, just to note that the sense of privilege that translated into a sense of entitlement by our big businesses and business associations to being the only stakeholders in our trade policymaking has been a really powerful force to come up against. And that need to make trade policy, trade policymaking, more inclusive has really run into a tremendous amount of resistance from those who have been favored for a very, very long time.
So, that capture, as you’ve put it, is really powerful and very profound. And I think that is one of the most important things to carry into these next years and this next generation of thinking about international economic policy as part of America’s economic policy writ large.
TEDDY DOWNEY: Yeah, I do think that watching how these consolidated interests exert influence over the entire government is a pretty good argument in itself that antitrust enforcement has a — there’s good reason to keep staying aggressive on that front. And one of the other tactics that consolidated industries have is to say that it is in the national security interest of the U.S. to support national champions, that they’re necessary to the national security of the country. I wanted to get your take, not just on that argument, but also on how national security is also intertwined with trade and how you think of that.
AMBASSADOR KATHERINE TAI: That’s also a great question and something that we have had to grapple with. National security obviously is extremely important. And its intersection with consolidated industries here in the United States is a very interesting and very powerful phenomenon.
Let me say this, whether we are talking about what I call bread and butter economics, or the economics that starts to really converge with national security and that kind of national economic security, there is a very important conversation that we are having, and that we will continue to have, I feel, around the challenge that we have with the People’s Republic of China. And that whether you’re in the national security community or you’re here from the trade community, one of the significant challenges that we have when we look at the economy and the economic system and policies and practices of the PRC is to understand the state capitalist model, China Inc., that when individual U.S. companies are competing against Chinese companies, it’s not on a level playing field.
Because the Chinese companies and the Chinese entire economy, whether you’re dealing with straight out stateowned enterprises or enterprises that look very much like private entities, that the power of the state is so infused throughout the economy that it is hard to separate out the state, its power, its support, its resources, from the entities and the participants in its economy. And that presents real challenges for our economy, which is much more market-based, much more if you’re in the private sector, you should compete on the basis of supply and demand, of meeting your bottom line, of being profitable, of having revenues that are greater than your cost.
So, one of the ways of understanding the China challenge from an economic, and maybe even a national security perspective, is to understand that with the backing of the state, that many of these Chinese economic players present as monopolies and monopolistic challenges.
When we turn that mirror around on ourselves — and I think that this was really the thrust of your question. It just took me a really long time to establish the first part. The first part of the landscape I wanted to cover is that for us, I think, one of the challenges that we have, that we should continue to work on understanding and figuring out from a policy perspective, is the degree to which American companies, companies that look like American state champions, are infused into the perspectives of our government and especially the national security establishment.
So, in a way, the question that I am posing from this chair that I occupy at USTR is when it comes to national security and U.S. companies, U.S. champions, are we reflecting kind of the other side of the coin, which is not companies that are difficult to compete with because they have the backing of the government, but instead companies that are difficult to compete with because they are driving governmental positions and governmental perspectives.
So, we’ve got a state capitalism challenge in China. You’ve got companies that are susceptible to direction and control by the government. My question here, for us, is the degree to which our government national security establishment may or may not be captured by industry interests. And I think that is a question that I have had for a long time. But I think that is a question that will be called into even sharper relief going forward these next couple of years.
TEDDY DOWNEY: I know we’re out of time. So, I want to ask the last question. We talked a lot about legacy. What are you optimistic about in the future coming out of your time in the government?
AMBASSADOR KATHERINE TAI: This is a great question because I do want to cap off this conversation with you with a sense of optimism. Over the course of these last four years, it feels a bit unsung, but having been a part of this team in the Biden administration, I know how much progress we have made, how much partnership I have had inside this administration with fellow travelers and economic reformers, people who are well known to you and your listeners, who are really good friends of mine who are so smart, Lina Khan at the FTC and Jonathan Kanter at DOJ, Rohit Chopra at the CFPB, Julie Su at the Department of Labor, Jennifer Abruzzo at the NLRB, that when you look at this group of colleagues that you will see in the work that we have been doing, the logic that has driven what we have been calling Bidenomics, but it’s really just the Biden economic agenda, middle out, bottom up economics. It’s undergirded by three pillars, investment in America, the empowerment of our workers, and a commitment to promoting real competition and opportunity in our economy.
And what I am really optimistic about is that we have started a conversation that is a movement that is growing. Because for all reasonable Americans, all Americans who are paying attention, Americans that are really smart and comparing the public policy debate to their lived experiences, that we are making arguments that resonate with what people know are problems that we’re facing today.
And I feel confident that we will continue to be able to build on this record, including through this next administration. Which, by the way, I think the politics of many of the areas that we work on are not polarized, are actually cross-cutting. And I think that our ability to continue to make progress is going to be the basis for success and a brighter future for all Americans.
TEDDY DOWNEY: I can’t think of a better way to end on. Thank you so much, Ambassador Tai, for doing this. It’s been a real honor to have this conversation.
AMBASSADOR KATHERINE TAI: Thank you so much for the opportunity. I’ve really enjoyed this conversation.
