World Trade Organization (WTO)
Trade disputes between the United States and its allies are looming over the upcoming Group of Seven summit in Canada on Friday and Saturday. CFR senior fellows Edward Alden, Sebastian Mallaby, and Miles Kahler will discuss how tariffs, the North American Free Trade Agreement, and the World Trade Organization will factor into the talks.
Bernard L. Schwartz Senior Fellow
Paul A. Volcker Senior Fellow for International Economics
KAHLER: Thank you. And welcome to this media call on “Trade Troubles at the G7” sponsored by the Council on Foreign Relations. I’m Miles Kahler, senior fellow for global governance.
Let me introduce our speakers: Ted Alden, who is Bernard L. Schwartz senior fellow at the Council on Foreign Relations; and Sebastian Mallaby, who is Paul A. Volcker senior fellow for international economics at the Council.
We’re going to be discussing trade disputes between the United States and its allies, which are overshadowing the upcoming G-7 summit in Canada on Friday and Saturday. But we’ll be open to other topics as well, such as NAFTA, the World Trade Organization, and other issues that will factor into the summit between—among the G-7 countries.
I want to note that a transcript for this will be posted on CFR.org after the call, and additional resources are available on the G-7 and these other issues on the CFR’s website. Also, you should know that this will be on the record. It’s an on-the-record teleconference.
So let me begin by asking Ted the first question. Trade is, obviously, a big issue at the summit that’s coming up, Ted. There have been a lot of trade disputes in the past among the G-7 industrialized countries: a longstanding fight over government subsidies to Boeing and Airbus, and imposition of steel tariffs by the Bush administration over a decade ago. Are the steel and aluminum tariffs that have created so much conflict in the recent weeks, imposed by the Trump administration, different? And if they are different, how are they different?
ALDEN: Thanks very much, Miles. And it’s great to be on the call with Sebastian as well.
Yes, I believe that they are rather fundamentally different. The disputes that have been dealt with over the past couple of decades have by and large played out under international trade rules, particularly the rules of the WTO. You know, as the people on the call will know, the Boeing and Airbus dispute has been running about a decade now in the WTO. The Bush administration’s tariffs on steel in 2002 were conducted under agreed rules that allow for temporary safeguards if an industry is deemed to be damaged by import competition. At the end of the day, of course, the WTO ruled that the Bush administration had not followed the agreed international procedures for invoking those safeguards, and when that was done the U.S. administration lifted those tariffs. So all of these disputes were conducted more or less under agreed rules.
This is very different. The Trump administration has invoked a national security claim as the basis for the tariffs on steel and aluminum. That’s created a lot of ill will among its closest allies, including the leaders who are going to be at the—at the G-7 in Canada this weekend. When these investigations were conducted in the past—and they’re not that common; you know, it’s a law that goes back to 1962, but there haven’t been that many investigations—it’s always been quite clear that products imported from reliable allies—Canadians, Mexicans, the Europeans, and others—would be considered part of the U.S. industrial base. The Commerce—excuse me, the Commerce Department’s analysis in the steel and aluminum case differed substantially with how this was done in the past, saying that we’re only going to look at domestic American sources of supply. So this was—this was clearly quite insulting to the Canadians and the Europeans and others targeted by this.
The second concern is simply the breadth of the national security exception, that there is a fairly large carveout under WTO rules. This will now all be litigated at the WTO. But the Trump administration has made it pretty clear that it’s going to continue to move forward on this basis regardless of how the WTO rules, the comments by National Economic Council Director Larry Kudlow this week pretty clear on that. The administration has announced that it’s going to do another Section 232 investigation into autos, where I would argue it’s even harder to find the national security justification for restraints than in steel and aluminum.
So we are really now operating very much outside the rules as agreed to under the WTO and here in North America under NAFTA.
What’s interesting to me, though, is that there are some parallels to the early G-7 meetings going back to the—to the 1970s, which was a time of considerable economic disruption when the dominant U.S. economic position in the world was weakening and there was a need to negotiate out new economic arrangements among the great economic powers that would reflect those new realities. I think that’s the moment we’re in. We’re going to need—and it remains to be seen whether it can be done—but high-level, serious negotiations among the United States and its allies to try to work out new forms of economic relationships that are acceptable all around. That’s a huge challenge, but at some level that’s what the G-7 was created for initially.
KAHLER: Great. Thanks, Ted.
Well, that segs, well, nicely into my first question to Sebastian, which is about the G-7, an organization or a set of—a group that goes back more than 40 years. The first summit of the G-6, without Canada, was held in ’75. And Canada joined the following year, which created the present G-7 in 1976. So now we have such deep divides between the U.S. and its other members not only on the trade issues that Ted just discussed, but also on Iran recently and a host of other issues with the Trump administration. Sebastian, do you think the G-7 will survive this kind of crisis? Or is it really a crisis? Or more likely with international institutions, if it doesn’t survive, will it just become moribund? And if it does, if it’s not functioning anymore, what are the consequences of that?
MALLABY: Well, thanks, Miles.
I think you’re obviously right that there have been fights within the G-7 before, you know, beyond trade fights, those being big disagreements about climate change, the Iraq War. Obviously, the Western democracies have not always been on the same page.
But I would underscore what Ted says. This is a different quality of attack because it’s neither a division over a new part of the international architecture—so if you think about climate change or maybe the landmine treaty, where the U.S. was an outlier, those were new agreements that the international—that the leading democracies wanted to adopt. And when you’re doing a new agreement, it’s sort of probably more acceptable and predictable that not everybody agrees what that new agreement should look like. But when you are talking about a long-established set of rules—I mean, the WTO has been around since 1995, and the Uruguay Round system obviously since the Second World War. So, you know, this is a very long-established set of norms around trade. And, as Ted says, when you’re not merely complaining specifically within those rules about your partner’s behavior on, let’s say, steel, but rather you are taking a sledgehammer to the whole set of rules, it’s a very different type of challenge.
So I think this is a deeper division within the G-7 and does justify your question, which is sort of the existential one: You know, what is—what is the future of the G-7, and is there a future? My guess it that, so, in the short term, so long as the U.S. government persists on its present course of sort of, you know, the instinct is to undo anything which is already there, whether it’s the Iran deal or the trading arrangements, then the G-7 is, obviously, divided, ineffectual, and is more a source of displaying the weakness and disunity of the democracies than it is of any constructive diplomatic energy.
But I also think that if you take a kind of more medium-term view, if there were to be a different U.S. government with a different agenda, the G-7 would come back to life pretty quickly. And the reason I think that is sort of, you know, the Groucho Marx quote about, you know, I don’t want to belong to any club that would accept me as one of its members. It’s kind of a rule of life, both in international relations and in everything, that the weaker, lower-status members of the club really, really want the club because it enhances their status and their power to belong to it. It’s the powerful members who can exert power and enjoy status without the club that are more tempted to dispense with the club. Hence, the Groucho Marx quote.
And so I think, you know, if you look at it from the point of view of Canada or Japan or the European members of the G-7, they really, really want to be in a club with the United States. And I don’t think they’re going to walk out. They don’t have an alternative. The United States accounts for more than half of the GDP of the total G-7. So without the United States, the G-7 really isn’t anything.
So I think that the Western democracies outside the U.S.—the G-6, as Bruno La Maire, the French finance minister, called it last weekend—they’re going to be looking forward to the day when there is a different type of administration in Washington. And then the G-7 not only will become relevant again, but should be because, you know, we have the G-20, sure, but the G-7 is specifically a club of democracies. And I think that is a valuable thing to have.
KAHLER: Great. Thank you very much.
Ted, going back to you, let me ask you a follow-up question about trade. You mentioned that—well, I think the EU, Mexico, India, and China on my last count have now opened dispute-settlement proceedings against the U.S. tariffs on steel and aluminum at the World Trade Organization. You mentioned that the World Trade Organization is, of course, the repository of global trade rules in many ways. But what are the implications of the trade conflict for the WTO itself, given the skepticism that President Trump and members of his administration have expressed about the WTO? This is exactly what the WTO was set up for, to deal with disputes of this kind among major trading powers. But is the WTO going to be able to deal with this in an effective way?
ALDEN: Yeah, I mean, I think I can answer that pretty quickly. I think Canada has also now filed, joined into WTO cases as well on the steel/aluminum tariffs.
I think the WTO is completely incapable of handing this. I mean, we’ve been—you know, we’ve been having discussions in the trade community the last four or five years about whether the dispute-settlement system could continue to operate effectively in the absence of any ability by WTO members to update the rules. I mean, the rules that govern global trade were largely written in the early 1990s. There have been some modest updates in places. But by and large, it’s been impossible to do any kind of comprehensive rewriting of the rules. The Doha Round was not successful. And so, you know, there have been debates for some period of time: Can you have a successful international court system for trade in the absence of sort of a legislative equivalent, the member states being willing to revise and update the rules?
This, I think, just—you know, will just push the system over the edge. I mean, there are obviously problems just, you know, with the Appellate Body having to do with U.S. resistance to new members on the body. But apart from that, these issues are simply too fundamental for the WTO process to resolve. They’re going to have to be negotiated out by the countries themselves. And, you know, if the—if the WTO 18 months from now or two years from now rules against the United States, I think the Trump administration has made it very clear it will ignore that ruling. If it rules in favor of the United States, it will have opened up this huge national security loophole which will allow for all sorts of future protectionists measures.
So I think, unfortunately, the WTO is in a no-win situation. At the end of the day, it is a creature of its member states. The U.S. is the most powerful of those member states. And unless the member states can find a way to resolve these disputes, in effect, outside the WTO context, I don’t think there’s any way for the WTO to handle this.
KAHLER: Great, thanks.
And a final question to you, Sebastian, before we turn over to the questioners who are on the line. If the summit this weekend in Canada had not been completely overshadowed by these trade disputes and tariffs that the Trump administration has imposed, you mentioned that the G-7 has considerable value as a club of democracies and has for a long time, a club of the industrialized countries. What are some of the other agenda items that should be and might still be on the G-7 agenda, apart from trade?
MALLABY: Well, ironically, actually, one thing that would have had more oxygen is a China-driven global steel glut, an issue on which it might have been possible to make common cause between the Europeans, the U.S., Canada, and Japan. The common cause is rather undermined when those countries are fighting among themselves about steel. So that’s a sad irony.
Beyond that, obviously, the G-7 traditionally has ranged across development policies for countries, democratization pushes. Climate has sometimes been a big issue. There are issues like, you know, global tax policy—how to have less tax evasion, best practices on global tax to prevent a sort of race to the bottom.
You know, one issue which I think might potentially have been raised at this sort of summit—to my knowledge, it’s not going to be raised—is one that the Trump team has shown an interest in, which is the pricing of pharmaceuticals. I mean, there is a legitimate debate to be had about the fact that U.S. consumers pay for very high prices on pharmaceuticals, which finances pharmaceutical innovation, and then other countries which have more statist procurement systems the pharmaceuticals—buy those pharmaceuticals sort of at the marginal price with the development costs having been defrayed by selling at a high price to U.S. consumers. So I think that that would be a fair issue to raise at the G-7, but it’s the kind of thing that, you know, just doesn’t have a hope when it’s being pushed to the sidelines by the headlines on the trade dispute.
Well, let’s turn to those who have questions who have called in. So, Samantha, do you want to open the line?
OPERATOR: Yes, sir. At this time we will open the floor for questions.
(Gives queuing instructions.)
Our first question will come from Peter Coy with Bloomberg Businessweek magazine.
Q: Hello. I’d like to zero in on the national security question. The U.S. 1962 law that provides for the national security exemption is broader than the exemption allowed under the WTO. But is there a legit way of allowing for national security to be a consideration for countries, and yet circumscribe it in a way that it doesn’t create the kind of loophole that Ted warned about?
KAHLER: Go ahead, Ted. Why don’t you take that question?
ALDEN: I mean, the answer—I mean, the answer, I think, is yes. The person who’s been doing the best thinking and writing on this is Jennifer Hillman, who was formerly general counsel at USTR and was a member of the Appellate Body in Geneva. And she has argued that the—that the national security exception in the WTO is quite—is quite precise. It essentially, you know, applies to, you know, trade in nuclear materials, arms and ammunition, essential security concerns in a time of conflict, and that it really was intended to allow for a carveout when countries really felt their security to be threatened, not as a provision that you could use to make general claims about the defense industrial base and, you know, the need to maintain X amount of steelmaking capacity or others.
The WTO is going to have to rule on this now. And we will find out as a result of those decisions how narrowly or broadly the organization is going to interpret that exception.
You know, I have the same reading as Jennifer, which is that that exception was intended to be a narrow one and the Trump administration is making a very, very broad claim. Other countries—interestingly, Russia among them—have made similar claims, that basically, if a country claims national security, the issue is then effectively not reviewable by the WTO. If that’s the standard, then I think it blows an enormous loophole into the system. If the standard is the narrower one that Jennifer Hillman suggests it should be, then I—then I think it could be a workable standard. We will, you know, at least in the legal realm, see that all played out over the next couple of years with these challenges to the U.S. actions.
OPERATOR: Thank you. Our next question will come from Roberta Rampton with Reuters.
Q: Hi. Yesterday, in his briefing, Larry Kudlow called the president a couple of times—referred to him as a trade reformer. And so I was wondering if there—if there is any lens that we could, you know, sort of view the president as taking actions to sort of reform the WTO. Are there specific changes that the administration could suggest or sort of advocate for that could eventually sort of—you know, sort of prompt actual reforms?
And, secondly, you had mentioned that ultimately it will be up to the countries to negotiate among themselves, on steel and aluminum tariffs specifically, or steel and aluminum issues. And I’m wondering whether that—those negotiations are—whether you expect them to begin this weekend at the G-7 summit or whether you would expect that to be more likely to begin down the road, after the WTO rules. Thanks.
KAHLER: Ted, do you want to take that one?
ALDEN: Do you want me to take the second one and then—and then maybe Sebastian can comment on the—on the WTO and, you know, Trump as a trade reformer?
ALDEN: I think what will happen now is that any possibility of negotiations is going to be on hold for a period of time. That’s true for NAFTA. That’s true for negotiations on lifting the steel and aluminum tariffs.
I think what’s going to happen is that the other countries are going to retaliate. They’ve made it very clear they will do that. The Canadians, the Mexicans, the Europeans are all going to retaliate against the United States. And then I think what you will get is a period of time where each of the countries is going to have to evaluate the impact of the new tariffs. I suspect the Trump administration will try to double down and find other tariff penalties to impose. There is, of course, the 232 investigation into auto imports which has just recently been begun.
I think the only way this moves towards a deal is if the concern grows among the G-7 countries about the economic impact of this, that Trump begins to feel some pressure from farmers and small manufacturers and others that are harmed, that other countries are feeling the pressure from the decline in their steel and aluminum exports to the United States and it—and it causes some reconsideration of the current positions. But at the moment I think everybody is dug into a hardline position in which they are not prepared to negotiate seriously, so I don’t expect negotiations for a while. I hope it doesn’t take two years until a WTO ruling because there could be a lot of damage over a period of time that long, but I think it’s going to take a while before we see serious negotiations begin.
KAHLER: Sebastian, do you want to discuss the WTO reform issue?
MALLABY: Yeah, I mean, look, the way I heard the question is whether, you know, you can find a lens that allows you to view the Trump administration’s action as a sort of constructive attempt to drive reform of the international trade rules. What I’d say about that is that, you know, there are clearly facets of the trading system which could be improved. I mean, I was somebody who supported—in the period, I guess, you know, up to about three or four years ago—the idea that currency manipulation in China was a systematic violation of the spirit of an open trading system. When China was running a current account surplus of 10 percent of Chinese GDP, that was really, really out of whack, and it was doing damage and putting stress on industry all around the world. And that struck me as an invitation to, you know, protectionist responses and just simply not how the playing field was meant to served. Now China’s current account surplus has now collapsed from 10 percent of GDP to something like 1.5 (percent) or something, so I think that issue has solved itself.
But there are other issues that you can point to, notably China being the kind of focal point of these sorts of debates about the respect or lack of respect for international—(audio break)—joint ventures, and so forth. So I think there are things that could be fixed, and you could argue—or you could have argued a few months ago, when the Trump administration was talking about punitive tariff specifically on China—that, hey, maybe that’s a legitimate tool you could use to force discussion on issues which the Chinese have not been adequately willing to discuss hitherto.
But I think that kind of lens has a sort of coherent way of understanding what the Trump administration’s policy is; it just doesn’t work anymore when the attack is not restricted to China but it includes, you know, attacking the countries that would be your ally in any debate with China. And so I think right now it’s hard to understand—in any constructive, positive way—what the administration’s strategy is.
KAHLER: OK, thank you. Next question?
OPERATOR: Thank you. Our next question will come from Heather Timmons with Quartz.
Q: Hi, thank you. I had two, but they are short.
Can you—Ted, can you tell us, then, what’s the future of the WTO? I mean, Larry Kudlow was pretty straightforward yesterday when he said the U.S. is not going to listen to multinational, international organizations. If they rule against the U.S., and the U.S. just shrugs and says, we don’t care, then what happens?
And separately—this may be something you guys haven’t thought about, but I’m very curious at what—the U.S. defense relationship with Canada is so tight and so important to our security. Are there any concerns about that unraveling right now?
ALDEN: So on—
KAHLER: Do you want to take the—
ALDEN: Yeah, go ahead, Miles.
KAHLER: No, go ahead.
ALDEN: On the future of the WTO, I think the WTO, as it was created in 1995, is dead. The idea was that you would have a binding set of international arbitration procedures that most countries would respect most of the time. I think that’s done. I don’t think that’s entirely the Trump administration’s doing. I think China’s unwillingness to adhere to the spirit and often the letter of the rules, I think, was a bit part of the undoing.
So I think we’re moving into a new era. The question is what it is. It could—it could be a reversion to something like the old GATT system where you had rules, and countries negotiated on rules, but they weren’t binding. If you lost a dispute before a GATT panel, it was actually up to countries to decide whether they were willing to abide by those rulings or not, and what you often got was negotiated settlements of one sort or another. There was more unilateral pressure in the system of the sort that we’re seeing the Trump administration use.
That was a workable system for many, many years, and we saw enormous trade growth under it, so the death of binding rules doesn’t mean a collapse into a chaotic free-for-all. So I think we could go back to that.
I also think there is the most serious threat I’ve certainly seen in my lifetime of moving back into a much more kind of free-for-all, tit-for-tat sort of protectionist set of responses. I do think that’s a real danger.
Quickly on the U.S.-Canada defense relationship, I would think the likelihood of a negative impact is very small. I mean, so far the Pentagon is the—is the agency of the U.S. government that’s been probably the most insulated from the president’s mercurial nature. And those—you know, those relationships go back a long time, they’re solidified through NATO and NORAD and other longstanding treaty arrangements. I think the likelihood of this spilling over into defense arrangements is fairly small—I mean, not zero, but fairly small. I don’t know, Sebastian, if you have a different take more broadly with Europe, but I think those will probably remain solid.
MALLABY: I mean, I agree with—
KAHLER: Sebastian, do you want to comment?
MALLABY: Yeah. I mean, just briefly, I agree with Ted that, you know, the rest of the world is not actively trying to pick a fight with the United States. I mean, that is just is not in their interest. And so something like the U.S.-Canada defense relationship will remain, I would have thought, continuing along the same lines, unless the Trump administration decides to reopen that question, which they haven’t so far.
So, and I think for similar reasons I’m a little bit more optimistic than Ted sounds on the future of the WTO. You know, maybe I’m wrong, but I feel that the—you’ve got this body of rules. You’ve got a dispute settlement or a tribunal. It can go through a very bad period because the Trump administration blocks confirmation of judges to the tribunal and there’s all sorts of noncompliance, which creates a pattern of noncompliance of the—some past dependency in that. But doesn’t it spring back if you have a different type of administration in the future, because the underlying incentives for trading countries to have rules are going to be still there. And certain machinery won’t have totally evaporated. And so it seems to me that I’d just be a bit more optimistic on the potential for reconstructing the status quo ex ante.
KAHLER: Thanks. Let me note, for those who are calling in, that this is a Council on Foreign Relations Council Call on the upcoming G-7 summit and the trade troubles that surround it, with Senior Fellows Ted Alden and Sebastian Mallaby. So let’s take the next question.
OPERATOR: Thank you.
(Gives queuing instructions.)
Our next question will come from Catherine Lucey with the Associated Press.
Q: Hi. Thanks for the call.
I was hoping—I know you touched on this a little bit—but I was hoping you could talk a little about what the tariff move and the other sort of actions by the Trump administration, where things stand in terms of relationships between the U.S. and the other G-6 countries. Is this the lowest point in recent history? And also, what does that mean moving forward in terms of U.S. influence on the world stage?
KAHLER: Sebastian, do you want to take that one?
MALLABY: Sure. I mean, look, you know, this—I grew up in Britain. And, you know, I can remember sitting in the—in the student bar at Oxford University in sort of, you know, the mid-1980s, and having people decry the United States. And that was the way to, you know, get yourself another drink. I mean, it was, you know, absolutely standard in the era of the deployment of intermediate nuclear forces in Europe for lots of people in Europe to be anti-American. So some of this stuff has been there forever. I think, as I said earlier, that, you know, it is a new level of crisis because it’s not a specific U.S. action that’s the problem, it’s a general U.S. attitude towards the international system. It’s a much broader kind of challenge.
So, you know, I’m worried. But I think the pattern of the last, you know, 30 years still holds, which is that the U.S., as Secretary of State Madeleine Albright used to say, kind of is the indispensable country. Other democracies want it to be the ally and want it to be the security umbrella, want it to be the consumer of last resort for its exports, and to provide, you know, financial rescues when there’s a financial crisis because that tends to demand dollar liquidity, which only the Federal Reserve can provide in big quantities. So there are lots of moments when U.S. power and U.S. collaboration and cooperation is simply the only game in town. And so I think that on a longer-run view, if you look through the current political configuration in Washington, Europe-U.S. relations, you know, will bounce back a bit.
ALDEN: Miles, if I could just say, I would argue it’s a little worse within North America, because I think that the underlying bargain in the North American Free Trade Agreement, and before the U.S.-Canada Free Trade Agreement was that the U.S. neighbors in North America would receive special treatment in economic relationships. I mean, Canada and Mexico, for instance, were exempted from the Bush steel tariffs in 2002. And I think both Canada and Mexico have believed that their economic interests would be protected to some extent by the U.S. government. I mean, you look at the U.S. actions after NAFTA came into force to help bail out Mexico during the peso crisis in the late 1990s. And I think in both countries that expectation has now been quite seriously damaged. Not to say it can’t possibly be reconstructed, but I think the damage to economic relationships in North America is probably deeper at the moment than it is to U.S.-European economic relations.
KAHLER: OK. Next question.
OPERATOR: Thank you.
(Gives queuing instructions.)
Our next question will come from James Siemens (sp) with Pacifica Radio.
Q: Yeah, hi. Thank you very much. I was wondering if you all could give some insight into how you see these protectionist measures interacting with domestic politics. For example, you know, we’ve heard for decades how the steel industry has been hit with deindustrialization. And part of the strategy of the Republican Party was to appeal to this disgruntlement. What do you feel about that in terms of actual facts versus myths?
KAHLER: Either of you can take this, I think because this would reflect on what’s going in Europe as well as what’s going on in the United States. Ted, do you want to start?
ALDEN: Do I want to start here in the U.S.? Yeah, I mean, I think by and large Trump’s actions on trade are pretty popular, and particularly popular in the places where he won the election, which were the industrial states that were hardest hit by the combination of technology and import competition—you know, the Ohios, and Pennsylvanias, and Michigans. I think it’s not coincidental, actually, that his approval ratings are rising. I think, you know, for a long time manufacturing workers in the United States were told, you know, this is just the global economy and, you know, we’re getting cheap consumer goods. And if we lose some jobs in manufacturing, well, that’s just the price we’re going to have to pay. We in the United States have probably the weakest safety nets—safety net of any advanced industrial economy in terms of helping people who lost their job—just whether to import competition or new technology or other causes.
So I think, you know, one of the big reasons Trump won the election was he was seen as fighting for those people. Now, the question going forward is as the—both the impacts of the U.S. tariffs and the retaliatory tariffs begin to bite, does that calculus change? There will be a lot of small manufacturers hurt by the rising costs of steel and aluminum imports. There are going to be a lot of farmers who are very important in the Trump political coalition who are going to be hurt by the retaliatory tariffs. It may be that that calculus begins to change as this bites. That’s part of why I think we’re not going to see negotiations quickly. We’re going to have to see how this first round of sanction and counter-sanctions plays out. But for the moment, I think it’s actually playing fairly well for Trump politically.
KAHLER: Well, I would just—I would just interject there that the recent surveys suggest there’s a tremendous Trump effect—I think we can interpret it that way—in that there’s a huge partisan divide on trade. And oddly, in compared to the past, Democrats now are overwhelmingly negative on what’s been happening, at least on the recent surveys I’ve seen, and Republicans are much more supportive, which is kind of a flip of what was the traditional position on free trade and tariff types of issues. But anyway. Sebastian, did you want to add to that, looking at it from a European perspective?
MALLABY: Well, I think there’s a general point about the psychology of how voters react to policy change, which is that when there is a policy change and it creates winners and losers in the economy, the winners who have, you know, suddenly a bit more income, tend to think to themselves, hey, I’m doing better, that’s because I’ve done well at my job, you know, I earned this, I deserve it. The losers don’t like to say that was my fault, I deserve to have less. They like to blame the government for the policy change. So whatever the policy change is, it tends to be unpopular because of that asymmetry in the reaction.
So I think the interesting experiment to which, you know, Ted was alluding is that supposing—you know, we’ve had this sort of rachet since the Second World War where in general trade policy change has been a liberalizing direction, and certainly trade volumes have been growing dramatically. Supposing you reverse that, would the psychological point I just made mean that actually trade closing suddenly became very unpopular because the losers got absolutely serious and if there are any winners they won’t actually credit the government?
KAHLER: OK. Thank you. Next question.
OPERATOR: Thank you. There are no further questions in the queue at this time. I would like to turn the call back over to you for closing remarks.
KAHLER: OK. Thank you. Well, thank you, Sebastian and Ted. And thanks to all who called in. And for those who are still listening, the transcript of the conversation will be posted on CFR.org. And there are also other resources regarding the G-7 and trade on the Council on Foreign Relations website. Thank you all very much.