Following a warm and insightful introduction from former U.S. Trade Representative Ambassador Susan Schwab, Bill Reinsch stood at the lectern and delivered a masterful commentary on trade policy.  Ambassador Schwab had described Bill, who is left-handed, as ambidextrous.  That was her metaphor for his ability to function in different if not opposite environments. She noted that on Capitol Hill, Bill Reinsch had worked first for Senator John Heinz, a Republican, and then for Senator John D. Rockefeller IV, a Democrat; that he has worked on both import issues as well as export issues; and that he knew from the inside both the Congress and the Executive Branch.

And indeed there was a certain duality to Mr. Reinsch's presentation.  As he explained at the outset, he wanted to talk about two things: "how the trading system has changed since I started doing this sort of thing [in the early 1970s] and ... how trade politics has changed during the same period."

The first of today's featured quotes is from that first major segment of Mr. Reinsch's talk, when the focus was on the changes in trade and the trading system over the last 40 years.  The second is from his discussion of changes in the politics of trade.   There isn't room here for the full speech, but you can listen to it at Reinsch Reflections, February 24.  His portion of the morning's proceedings begins at the 38:15 mark.

Let's start with a fuller version of that first quote.  We'll dispense with the usual speaker identifications.  From here on, it's all Bill Reinsch, with just a few editorial stage directions.

The Big Change: "When I started, it was simple.  You know: you made it here and you shipped it over there, and it was called an export.  Or they made it there and shipped it here, and it was an import, and that was it, and the main trade issues were tariffs and some NTBs - the occasional quota - and then we had dumping and countervailing duties to deal with various sins that violated the rules. 

"For a lot of reasons and over a period of time that you all know about, we've transitioned now to a [world] of global value chains, where, as one of my coworkers, a guy I met a long time ago, said a long time ago, "Everything is made everywhere."
 
For Companies: "It's given them the opportunity - it's really incentivized them - to take their manufacturing process apart and divide it into little pieces.  And, rather than look for the cheapest place to produce a defined single product, to look for ways in which they can minimize the cost or maximize the benefit of each component part of the process, whether it's a manufacturing process or even a service providing process." 

For Countries.  "If you're a medium sized or a smaller country, you're interested in, how do I ...  fit into these global value chains?   We are not a big enough country to ever have our own aerospace industry or our own automobile industry, but we certainly ought to be able to be part of Toyota's supply chain.  Or part of Boeing's supply chain.  How do we get into that?" 

For the Trade Policy of Governments: "If governments want to think pro-actively ... [these new economic realities present] a different calculation.  And it often leads you, on the trade side, not in the direction of multilateral negotiations but in the direction of bilateral FTAs, so you can construct a special relationship with the other countries or country that operates or is involved in that supply chain."

The Alternating Party Positions. "One of the ironies ... over the last hundred years has been essentially the flipping of the two parties.  Republicans for a hundred years, they were the party of protection.  They were the party of high tariffs.  They represented manufacturing interests largely in the Northeast.  The Democrats were the party of Southern farmers. They were the party of low tariffs and free trade all the way through the Roosevelt Administration and well into the 50s and 60s. 

"And now the parties have taken exactly opposite [positions], partly because they have begun to represent different parts of the population, I think, but there [are] other reasons too."

The Political Dilemma of Trade Negotiations:  "There are always winners and losers, but the losses tend to be short-term and specific and the gains long-term and diffuse.  The losers tend to be self-identified, and they identify very quickly.  The winners often don't know they won, for years." 

An Illustrative Hypothetical.  "In TPP, if we had made a concession to the Australians on sugar, I guarantee you Don Phillips and his army would be up on the Hill the next day saying, 'This is going to cost us $x million dollars and x thousand jobs.'"  [Mr. Phillips is Trade Adviser to the American Sugar Alliance.]

"And somebody like me would then be testifying and some Member of Congress would say, 'Well, what did we get for that?'

"And I would say, 'Well we got better rules on SOEs [state-owned enterprises].'  And the question would be, 'Well, how many jobs is that?' And the answer is, 'I don't know.'"

Of Companies and Incentives: "What I have learned at the NFTC is that you  cannot bludgeon multinational companies into doing what you want. And I fault my own party, the Democrats, for doing this for years.  They think that you can punish them into submission.  You cannot, because they can always move.  What you can do, however, is bribe them into submission.  And you can create incentives [for firms] to do exactly what you want, and you do that through the tax code."

The Tripod of Remedies.  That last comment was from the prescriptive portion of Mr. Reinsch's remarks, and the core of his prescription was a tripod of remedies: better adjustment assistance for those harmed by trade, better education for a workforce that will face increasing challenges of adaptation, and a recommitment to the kind of basic research that has helped to make the United States the global leader in innovation.

On The Trans-Pacific Partnership Agreement.  We'll end this very truncated summary with the response he gave to a question about TPP.  The question was, will it be possible to put together the necessary majorities to pass TPP implementing legislation this year?  In response, Mr. Reinsch said:

First, we have left out a lot here, including Bill Reinsch's engaging humor, from the levers one person can pull in Washington to export controls and sadomasochists. You'll want to explore that for yourself.

Second, when someone says something interesting, important, or both, you want to respond.  You can't help it.  We want to respond and we will, but not here.  We'll do that in the many entries to come on the issues Bill raised.

Our only comment here is a sincere Thank you! to everyone who helped make this year's GBD Breakfast of Champions a success: Tim Reif, Peter Allgeier, Susan Schwab, and, of course, Bill Reinsch.

From Breakfast of Champions II is the audio recording of this event held in Washington on February 24.  This was the source of all of the above quotes.