Democrats, not Donald Trump, are the real populists on trade in Washington.
That’s the major takeaway from the Democrats’ bold new trade platform that they unveiled on Wednesday morning, the second rollout of their “Better Deal” messaging agenda in the runup to midterm elections in 2018.
It's a collection of proposals aimed at protecting American workers from foreign competition — and it’s designed to edge out Trump's own messaging on how he's going to transform US trade to help bring back jobs to America.
“Trade is at the core of our economic agenda,” Senate Minority Leader Chuck Schumer said in a statement ahead of the formal launch. “We’re going to propose a better deal for American workers — one that puts their well-being at the center of our trade laws, not just the bottom line of huge corporations. Our trade laws have shortchanged American workers for far too long, and we Democrats are aiming to change that.”
The most striking proposal is a call for the creation of an “American Jobs Security Council,” a body that would review and potentially bar foreign purchases of American companies if they are deemed to be a major threat to American jobs.
That kind of scrutiny and interference with foreign investment would be unprecedented for the United States, says Edward Alden, a trade expert and senior fellow at the nonpartisan Council on Foreign Relations. “The US has had a very open stance on foreign investment — it’s only restricted if it’s considered a national security threat,” he told me.
The US already has a national security watchdog called the Committee on Foreign Investment in the United States (CFIUS) that monitors whether a foreign company investing in, say, a US defense company could help give a foreign rival some kind of dangerous upper hand over the US in terms of technology.
But the appointment of a council that determines if foreign investment would impact jobs would be a whole new ball game — and one that could radically reshape the way foreign investors look at the US market.
Democrats are willing to get tough on China
The Democrats’ new proposal singles out China as a particularly serious threat to American jobs. (It also mentions Russia, but the focus is clearly on Beijing.) The document slams China for using its “state-owned enterprises to acquire US companies in an effort to gain an unfair advantage over US industries and workers.”
The Democrats’ main concern is that a Chinese investor could buy an American company and then outsource its operations back to China, or “siphon trade secrets and technology to directly compete with other U.S. firms.”
The idea of evaluating foreign investment to ensure it doesn’t pose a threat to American jobs is bound to be incredibly controversial in Washington.
Monica de Bolle, a senior fellow at the generally pro-free trade Peterson Institute for International Economics, explains that foreign investment is “not usually politicized to this extent,” and says that concerns about this would typically be sorted out through bilateral negotiations, rather than subjected to an entirely new panel of judges and enforcers.
“It’s making the issue political when it’s not; it’s technical,” de Bolle tells me. What’s more, she adds, such measures “would serve to escalate tensions” with China. It’s worth driving that last point home: The Democrats’ new language on trade is in some respects more aggressive on China than even Trump has been so far.
And it’s more than just an idea. Schumer is reportedly crafting legislation that would effectively allow CFIUS — the current security watchdog — to start doing some of what the Democrats want the new American Jobs Security Council to do as far as ensuring foreign investment doesn’t hurt American jobs. He also called on Trump on Tuesday to use CFIUS to block Chinese investment in the US unless it does more on North Korea. It’s difficult to ignore how badly the Democrats want their thunder back when it comes to trade.
Another stand-out feature in the proposal is the call for an “independent trade prosecutor” who would be based in the International Trade Commission and whose job would be to challenge unfair trade practices by other countries. What’s most crucial about it is that it would take up trade disputes with other countries “without relying on the years-long World Trade Organization process.”
That’s a big deal: The WTO effectively serves as an international Supreme Court for trade, and any attempt by the US to circumvent it would undermine its authority and likely inspire at least some other countries to do the same. What would that mean? Instead of going through a neutral, internationally administered process to solve problems, countries would start taking unilateral punitive actions against trading partners they’re unhappy with. That could in turn spark trade wars.
But some analysts and policymakers who are skeptical of the power of the WTO are not bothered by the idea of working outside of it. They argue that the organization is simply not equipped to handle some of the most pressing challenges for global trade, like reining in China, which benefits enormously from its membership in the WTO but refuses to play by the trade rules that most advanced economies do.
Alden told me that he found the proposal for the independent prosecutor “odd” because the economic research-focused International Trade Commission would be a strange way to place an official involved in legal enforcement. But nonetheless the optics are clear: The Democrats are signaling that they’re willing to get creative and increasingly think outside the box on trade as they attempt to rebuild their party.
Congressional Dems’ trade ideas are now in vogue
Todd Tucker, a trade expert at the left-leaning Roosevelt Institute, told me that the Democrats’ trade platform breaks new ground by focusing on particularly concrete outcomes.
He said that the way the Democrats discuss the specifics of issues like how NAFTA should be reformed to level the playing ground for American workers, through policies like new labor standards for Mexican workers, is notably committal.
“There is no legalese about ‘striving’ to meet nonbinding ‘declarations.’ It's outcome-focused: full stop,” Tucker says about the Democrats’ proposal.
There are number of other proposals in the new platform, including cracking down on foreign currency manipulation; taxing companies for outsourcing; and strengthening regulations that require the government to use domestically made materials when it does things like build infrastructure.
These ideas build on trade policy proposals that the congressional wing of the Democratic Party has been pushing for years. They’ve generally grown more skeptical of free-trade arrangements since NAFTA was instituted in the 1990s and developed a reputation as a job killer.
But Democratic presidents have been more pro-free trade — Bill Clinton and Barack Obama were strong advocates for major free trade agreements and disinclined toward protectionism of any kind.
Now congressional Democrats are in the peculiar position of sharing much in common on trade with a Republican president. GOP presidents have been pretty zealous free traders for decades, and Trump offers a rare departure from that trend. That means Democrats lawmakers could try to exploit the opportunity and work with him on legislation built on the principles in this platform.
But it also showcases how tight of a competition they’re in with him in terms of the next election. In 2016, Trump coopted a lot of their messaging on trade. As they look to 2018, the Democrats’ main goal appears to be to revive their claim that they are the true champions for Americans who have been battered by globalization — and that they have the policy chops to back it up.