U.S.-EU Trade and Agriculture

March 17, 2020

U.S.-EU Trade and Agriculture

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host jill o'donnell Jill O'Donnell
guest Douglas Lippoldt
Douglas Lippodt

Dr. Douglas Lippoldt, Chief Trade Economist at HSBC Global Research in London, explains why the U.S. and EU are each other’s largest trade and investment partners despite never having negotiated a free trade agreement, what’s at stake as the two parties negotiate a limited trade deal, and why agriculture is a longstanding sticking point in U.S.-EU trade. He also explains what Americans and Europeans might misperceive about each other’s agricultural systems.

Opinions expressed on Trade Matters are solely those of the guest or host and not the Yeutter Institute or the University of Nebraska-Lincoln.

Show Notes

 Trade and American Leadership: The Paradoxes of Power and Wealth from Alexander Hamilton to Donald Trump by Craig VanGrasstek

Lippoldt, D., “Labour markets trade up: International commerce delivers economy-wide benefits”, HSBC Insights, 4 October 2019

Lippoldt, D., “New trade deals deliver: early gains from Pacific Basin and EU-Japan accords”, HSBC Insights, 16 May 2019

OECD (2012), Policy Priorities for International Trade and Jobs, (ed.), D. Lippoldt, Organization for Economic Cooperation and Development

Lippoldt, D. (2015), "Innovation and the Experience with Agricultural Patents Since 1990: Food for Thought", OECD Food, Agriculture and Fisheries Papers, No. 73, OECD Publishing, Paris


Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the audio before quoting in print and write yeutterinstitute@unl.edu to report any errors. Transcripts will be posted within one week of the show.

Jill O'Donnell: Welcome to Trade Matters. A podcast of the Clayton Yeutter Institute of international Trade and Finance at the University of Nebraska-Lincoln. I am Jill O'Donnell. Our guest today is Dr. Douglas Lippoldt, chief trade economist at HSBC Global Research in London. He has also worked at the Organization for Economic Cooperation and Development in Paris, and as an international economist with the US Department of Labor in Washington D.C. Doug Lippoldt, thanks so much for joining us today on Trade Matters.

Douglas Lippoldt: My pleasure, thank you.

Jill O'Donnell: We're going to talk about the US-European Union Trade relationship and a potential US-EU mini deal that is reportedly in the works, but first I want to set the stage for our listeners a little bit in talking about this fast trading relationship that we have. The US-EU trade investment relationship is the largest one in the world. The US and EU are each other's largest trade and investment partners with about $1.1 trillion in annual two-way trade, according to the US Trade Representative's office, and yet both US trade representative, Ambassador Robert Lighthizer and EU trade commissioner, Phil Hogan seem to agree that there are longstanding issues in this trading relationship that need to be addressed, both of them have said so publicly. So I want to start by asking you a couple of questions to set the stage. One, what is the basis for such a robust trade and investment relationship between the US and the EU, even in the absence of a bilateral free trade accord between the two entities so far, and secondly, what are some of the key long running issues that both sides have said they need to resolve?

Douglas Lippoldt: Well, first of all, I mean, I think the relationship between the EU and the US or the EU predecessors dates back to the period after World War II when both sides were looking to rebuild the institutions governing the global economy to consider new approaches. And we had the experience of the near completion of the International Trade Organization's mandate after World War II, and in its stead the evolution of the general agreement on tariffs and trade, and through seven rounds of negotiations, the US and the EU, or the EU's predecessors that have worked together to develop the system for multilateral on governance of trade. I guess what I'm getting at is, this collaboration is longstanding, in thinking about how to develop a liberal and open system for the world's trading system governance. So that is immediately after World War II, the special relationship between the UK and the US played a particular role in the foundation, this was broadened out as well to include Japan and Canada, the so-called Quad together with the US and the EU. So there's a certain amount of like-mindedness in this that's evolved over decades. And to some extent, I think this is actually, these key stakeholders were able to address some of their immediate concerns through this mechanism, through the gap to negotiate a way or reduce tariffs that were a particular concern to either side. This helped to build trust. And there's an element of like-mindedness in some areas of the economy, so that a shared business culture and trust that evolved. So I think this evolution, this long-term evolution and collaboration has been critical in building confidence and rapport and openness in areas of mutual interest, such that we can see this development of trade and investment in bilateral fashion, in a manner that's worked to the mutual advantage, I would stress. And I think we see that in the scale of the flows in both directions.

The openness detained has been proceeding in a rule's based manner through these various ways of negotiations, and that has also helped to reduce the uncertainty in the conditions for doing business. And together with domestic and unilateral reforms, these parties on both sides of the Atlantic, the US and EU score very well in the World Bank doing business indicators. So it's domestic reform, that's been a mutually consulted in some cases, as well as a reduction in tariffs and some non tariff barriers. And so businesses have taken advantage of that openness to build out their presence on both sides of the Atlantic and in trade and investment. I think when it comes to next steps, I mean, we've done better in liberalizing mutually goods trade than we have in services trade, or is getting more work to be done. We've done better. When we look at goods trade, we've done better with tariffs than we have with non-tariff barriers. And therein, in particular lies the rub for goods trade, non-tariff barriers pose a particular challenge. There's some differing approaches to regulation that have emerged on both sides, and the EU has taken up precautionary practice with respect to its development of regulation at Health and Safety and Environmental Regulation. So that has led them to err on the side of caution where there's not a clear evidence of their policy objectives being met in terms of Safety, Health, and Environmental Protection. The US side is taking a more science-based approach from the get go, looking for of course safety and efficacy, but tending to err on the side of more liberal approach. And so there's been some divergence in terms of non-tariff barriers, and with the US and the EU having now facing this challenge in a number of areas. There's a further complication here, and that is in terms of agricultural policy. If you look at the OECD Policy Monitoring and Evaluation Reports, the OECD indicators of state support for agriculture, there's been a different approach in the US and in the EU. The EU is using agricultural policy to hit a number of policy objectives. They have revised their approach to support for agriculture to include things like what they call cross-compliance objectives such as, I mean, with respect to environment, animal welfare, food safety and they've tied their support in part to that. And they provide a much more generous level of support, something like 19% of farm receipts are associated with state support, whereas in the US, there's been an effort to remove distortion to decouple payments and focus. A big chunk of the support went on income support for food consumption and low income household. And as a result, US state support is averaging according to the OECD, something like 10% of farm receipts, so a much lower level of protection than we see in the EU. So these are some of the big challenges we have to figure out how to work through. I think it's going to take a dialogue, it's going to take efforts through dialogue to have convergence on internationally accepted standards. And we see this, it's worked to some extent with respect to food. We have the Codex Alimentarius, based through the Food and Agriculture Organization of the UN that's provided a basis for shared standards and some products, and that is facilitating trade to some extent, but of course, more can be done.

Jill O'Donnell: Thanks for that background there, Doug, including the long standing shared interests of the US and EU over decades, starting in that post World War II period. I think that's important context to keep in mind here in this one. So I want to get to a little bit more recent history and just remind listeners how we got to where we are today with the potential US-EU mini deal, as some are calling it, that may be announced yet, even in the spring, there are a longstanding tensions in the US trading relationship, and you hinted a little bit at agriculture and we'll come back to that. There's also more recent ones, such as the US imposition of steel tariffs in 2018, which did apply to the EU and the resulting retaliation by the EU on US products. And then there's a Trump administration section 232 investigation into imports of autos and automobiles parts, and whether they pose a threat to national security. And to deal with some of this president Trump and then European Commission President John-Claude Juncker announced back in July of 2018, the formation of an executive working group to work toward "Zero tariffs, zero non-tariff barriers, and zero subsidies on non auto industrial goods." And that's an important qualifier there at the end on non-auto industrial goods. So what has that working group achieved to date a little over 18 months later here, would you say?

Douglas Lippoldt: Right. For one thing, this group has promoted dialogue, so there has been ongoing dialogue, and I think that's absolutely critical to resolution of the disputes, these technical discussions. Some of these issues, the points of divergence are remarkably complex and it requires this technical level discussion to work through the challenges, I think. There have been some concrete results. We had the European Commission authorized the use of US soybeans for biofuels in last year. That was one achievement which the EU highlighted its progress report, its one year on progress report. There were other, I think, benefits with respect to the longstanding EU-US trade dispute over beef trade, in particular related to the use of hormones in the US and the EU views on that. And that led to the mutual understanding that the EU would revisit, review, its quota, it's tariff rate quota access for US beef into the EU market, leading ultimately to a tariff rate quota for US hormone free beef will boost a trade over the seven years as it's phased in. And this is something that in the US trade representatives, annual report for 2020, the report for 2019 and the trade policy agenda for 2020, that recent publication issued on February 28th, I guess it was. The USTR has highlighted that as a particular achievement in the interest of US beef producers. And then there's a number of other works in progress as a consequence of this dialogue, and we'll see how this advances. There's cooperation on standards that's still under discussion. There's been some progress with respect to other products such as good manufacturing practices for pharmaceutical products and recognition of this good manufacturing process approach via a mutual recognition agreement. These are agreements whereby both sides come to agree that a certain set of standards or testing facilities will be recognized as qualified to apply those standards for use in conformity assessment certification for bilateral trade. There's already, I think, seven of these MRAs that operate in various sectors between the US and the EU, and there's prospects to broaden to the things like electromagnetic conformity assessment, things like pharmaceutical, good manufacturing process and well, a few others. There's more that could be done, I think, with respect to trade and agricultural products, and hopefully, there'll be some progress in that as well as the consequences of this ongoing dialogue.

Jill O'Donnell: So let me pick up on that point there with agricultural trade, you've mentioned this already. The negotiating objectives published by the US trade representative's office explicitly say that agriculture should be on the table in this negotiation, while the EU mandate explicitly excludes agriculture from this negotiation, so let's talk a little bit more about that. Why is that? Why are the two sides... so why is there such a gulf between them and how they're viewing agricultural trade in the context of this negotiation? You talked a little about the precautionary principle being at odds with the US science-based approach. So I suspect some of that is at the heart of this, but tell us a little bit more about why the two sides are in such different places when it comes to negotiating over agricultural trade.

Douglas Lippoldt: Right. I think there's a couple of fundamental points of divergence that have led to this. I think there is an element, of course, there's a political element in the EU they're trying to bring along now that the UK is exited, there's 27 countries to bring along. So there's a broad range of interest, and in some countries, there's a strong attachment to traditional agricultural economy. So there is a challenge within the EU to hammer out a open approach to the agriculture. There is, as I mentioned before, the common agricultural policy that has delivered a much higher level of support for agriculture than the US farm bills have in recent years. So, that's one issue. A second issue is that the EU has established a policy for its new free trade agreements that the counter party be a signatory and a participant in the Paris Agreement on climate change, and that's seen as a precondition by the EU for any deep and comprehensive free trade agreement. So the US exit from the Paris Agreement. In the eyes of some European policy makers, that means that there needs to be some quid pro quo. So there's a further point, I think, to supplement here, that the US and the EU had a long running negotiation in the hope of achieving a mega regional trade agreement in the years leading up to the Trump administration, that is. So prior to the Trump administration coming into office for a transatlantic trade and investment partnership. And this was an ambitious agreement covering not only trade, but also investment, it was intended to be comprehensive and this proved to be very challenging. If you look at the European Commission's public information on the conduct of the negotiations, it's clear that this was very challenging for the EU with respect to the US partners. But also, within the European Union, there was a lot of public discourse about the agreement, things such as the ability of US investors to challenge violations of the agreement that could potentially occur on the European side. And so as a consequence, I think there was also a sense of caution on the part of the European authorities in this current round, as they set their mandate to narrow the scope and to not be overly ambitious in their objectives to focus in on something that was more readily attainable, in particular, zeroing in on tariffs on reduction in tariffs or elimination of tariffs on industrial products. So that was a further element in the defining of the EU's mandate for the negotiations.

I should add one other point on the US side, and that is one that's been a concern to me in my own research and writing, and that is that the US has emphasized in its objectives, the goal of boosting employment and narrowing the trade deficit with Europe, alleging that there is an imbalance in the tariff rates and the non-tariff barriers, and that this difference in the trade regime is fueling the continuation of the US trade deficit. And actually, in some of our work where we've looked at this and you take a step back to consider the macro economics of the US economy, I think that we need to be careful here. As I mentioned in the earlier question, the US and the EU have negotiated down tariffs through multiple rounds in the general agreement on tariffs and trade, and subsequently in some areas via the WTO as part of the multilateral negotiations and plural lateral negotiations that have gone on. So tariff levels are mutually quite low, they're in the low single digits on average for both the US and the EU. And both sides have made progress in improving the transparency of their regimes for non-tariff barriers related to clearance of goods in each other's economy. Now, there's more work to be done, but characterizing the trade protection in Europe as the driving factor in the US trade deficit could be challenged from a macro economic perspective. The reason is that the US has a relatively low savings rate. We consume a lot more of the GDP than an average high income economy. If you look at the US data for 2018, the US consumption, household consumption was about 68% of GDP. In a typical high income country, it's actually a lower, it's about 60%. And the difference is partly a much higher savings rates in many other advanced economies. At the same time, the US maintains a relatively high level of investment in the national economy. And the difference is an inflow of capital from abroad into the US economy, which fuels consumption, a level of consumption and investment that draws in imports. So the point here is simply that, as they set these negotiating, as the EU and the US set their negotiating objectives and mandates in looking on how to handle this relationship, the US objective of reducing the trade deficit via liberalization of European import protection may not do the trick.

Jill O'Donnell: Okay. So about three different things I want to pick up on there, so we'll take one at a time. One is going back to your point about the political element here and the European Union needing to bring along 27 different member States in terms of how they view agriculture in this negotiation and how difficult that can be, and agricultural seems to occupy a really special place in just about every economy around the world, and I think we see that here as well. So, I wanted to ask, is there anything that you think Americans and Europeans misperceive about each other's agricultural systems? I think that's something that might be useful for people to hear your perspective on here. Of course, I'm sitting in Nebraska where the EU is the fourth largest export market for this State and the top seven exports to the EU from Nebraska are all agriculture food related. So it's top of mind here for people looking at this understanding why agriculture may not be on the table. So is there anything you think each side or the citizens and residents of each side misperceive about each other's agricultural systems?

Douglas Lippoldt: Oh, I do. I think, well, as we've been discussing in the US side, I think there may be a misperception about the level of impediments to trade in Europe. Certainly, more progress can be made to improve transparency in the European trade regime and to liberalize, and perhaps do a better job of recognizing equivalents in regulatory regimes, even where the approach to regulation differs, and so I think US, there could be, how should I say it? Some misperception about that. Now, I'm careful when I say that I recognize that the EU is providing a larger lack of support to its agricultural economy than the US does, in terms of farm gate receipts. And there are distortions to be tackled here, so I don't want to minimize that. But sometimes I think that we lose sight of the openness and transparency that there is on the European side of the pond. In the other direction, European perceptions of the US, I think that there's some exaggerated concern about the US regulatory approach to food safety, and there's an under appreciation of the science basis for some of the US regulatory decisions. And I think that could also usefully be reconsidered on the European side, and this is the kind of thing that needs to be tackled through a dialogue. And both of these issues are the kinds of things that need to be tackled through dialogue, and raising public awareness on both sides of the Atlantic, I think.

Jill O'Donnell: Okay. And the second point I wanted to pick up on from your earlier comments are the importance of autos in this negotiation, or the lack thereof of the appearance of these items, I'm on the table at this time. And so I mentioned at the outset, the section 232 investigation of the Trump administration undertook to determine whether imports of autos and auto parts threatened to impair the national security. So that began in 2018, and then in 2019, that investigation concluded that these imports do in fact threatened to impair US national security, although the administration's report on this has not been made public. But auto trade is really important as you know, to both sides here. The US is the EU's most important export market for autos and EU auto companies have a lot of major investments in the US. So how does this section 232 investigation impact the negotiation that's going on now? Is it a negotiating tactic or leverage over the EU, or how do you see that playing in here?

Douglas Lippoldt: Well, I hope that. We have the security exception and the WTO framework has not been heavily utilized for trade protection by WTL members, and there's a reason for that. When you start invoking national security as a basis for trade protection, there's a real risk of having arbitrary, unilateral decisions being taken. So the US recourse to section 232, starting with the steel and aluminum tariffs in March of 2018, and then followed by the next steps with the auto case under section 232, raised some real concerns for the conduct of international trade. It's a unilateral mechanism, it's pushing the tolerance and the WTO for the sovereignty and national decision making with respect to security issues. So it's increasing the uncertainty for parties engaged in trade in the sectors that have been targeted by the US in the section 232 cases. I guess the other thing is that when we were talking about EU-US trade, it's quite surprising to see the EU countries covered by this section two 232 investigations, both autos and the aluminum and steel, that you have... for some of these countries, it means that the US is reviewing, or viewing potentially NATO packed allies, military packed allies of the US as security risk, with respect to their supply of aluminum or steel or potentially autos. So that's added to the trade policy uncertainty, so I think, in the multilateral environment and it risks having other WTO members follow the practices of the largest trading nation that is the US are engaged, that the US is a pursuit, I should say. So with respect to autos, it's also highly unusual that we have the report developed according to the US statute, the section 232 of the Trade Expansion Act of 1962. And we have a report and a decision taken. And the president exercising authority to find harm and use that to launch negotiations, which is over a set time frame after the finding, but then failing to respect the provision of the statute requiring publication of the report. To have a statement issued in October and November, where there's an indication that the US had been holding discussion with EU automakers about investment in the US to build out their productive capacity in the US, and saying that was helpful in addressing the US concerns. But never issuing a formal conclusion of the case having the deadline expire without the publication even in other report, that is the deadline for the period for negotiation following the president's finding last May, the deadline was in November of 2019. So it's left this up in the air. Some legal scholars have looked at it and said, "Well, the passing of that deadline means that the authority to act under the section 232 has probably expired, and that this would mean that you might have to restart the process if you wanted to take auto action under section 232." So, I'm not a legal scholar, let the disclaimer be clear, but it does raise questions about what the next steps are and this auto case in particular.

Jill O'Donnell: Okay. One more point there to follow up on, and that was something you mentioned earlier, and I'd like to bring that out and note that US trade representatives, negotiating objectives that the office published for this US-EU negotiation, clearly state that the US, "Seeks to support higher paying jobs in the United States," through increased trade and investment opportunities for the US and the EU. So this is a bit of a bigger question, but how well do trade agreements do that in general, that is to say, create jobs and what are the prospects for such job creation in this case specifically?

Douglas Lippoldt: Right. I guess there's a fundamental point here which is that these trade agreements generally don't lead to net job creation in a significant manner. What they do is they tend to increase openness, tends to fuel competition, and that drives the deployment of assets toward more productive pursuits. That is if you're facing competition, you're focusing on what you can do best, where your productivity is the highest, and new investment tends to pursue new opportunities that are unlocked from the increased openness that these deals can bring. So the objective, in as far as it's focusing on improved employment conditions, it's a reasonable objective that as these assets are deployed, and I mean capital being deployed toward more productive pursuits, and businesses are exposed to more competition, they respond by... the more productive firms respond by trying to invest in training, in the building out their human capital and drawing in talent, and this increased productivity tends to be a channel for the payment of better wages. So there is a tendency for this to be the case, and businesses that are able to boost their productivity, they're reaping the benefits from openness in two ways. One is, they're drawing in competitive inputs from a global pool of suppliers or from the pool of suppliers covered by these trade agreements. So they're able to, often to improve their own competitiveness by drawing these more competitive inputs, and then they reap economies of scale on the other side, selling into a larger addressable market, and that's giving them power, it's giving them leverage to really grow their productivity. And well, as I said, that's associated then with improved conditions of employment.

I was at OECD in Paris, worked there for a couple of decades, actually, and there was a big study that we concluded in 2011, 2012, there were a series of working papers and then a publication that called the... it resulted in a publication called Policy Priority for Trade and Jobs, and we engaged seven or eight international organizations in a combined effort. And across a broad range of economies, we found this again and again to be the case that increased openness was fueling this employment transformation. And I think, in the case of the US, we've already seen this, with the... Although trade accounts for relatively small share of employment directly, those jobs do tend to, maybe, better paid and to be associated with skill upgrading. And so the US has already reaped benefits from the openness it's already achieved, and of course it's a relatively open economy. But I do think there's more gains to be had in that department.

Jill O'Donnell: Okay. So I'd like to ask a question then about the bigger context here. So the European Union recently concluded free trade agreements with Canada, Japan, and Vietnam, all major trading partners with the US as well. Did these new agreements put the US at a disadvantage in the EU market? And does that add any urgency for the US to conclude this negotiation with the EU?

Douglas Lippoldt: Well, I would say these trade deals are potentially putting the US at a disadvantage in some of these destination markets, I mean, by pulling out of the comprehensive and progressive agreement for Trans-Pacific partnership that had been negotiated under the Obama administration or concluded under the Obama administration. The US loss it's potential preferential access to markets such as Vietnam or Japan, so there's some loss on that side in terms of the desk competition in the destination markets. And the US partial trade agreement with Japan, it's very narrow. It is a partial agreement focus in particular on a few agricultural sectors, beef and pork among them, but it's far less market opening than the CPTPP would have been. So, that's one point.

In the EU market, certainly there's some direct competition in particular in industrial sectors with an advanced economies such as Japan. The economic partnership agreement with Japan has set Japan on a path to have them duty free access for automotive trade going forward after a phasing period its providing preferential access to the EU market for Japanese, the parts and components suppliers. So, there is some disadvantage to the US not having a comfortable treatment. Otherwise, I'd the tariff levels in most sectors of the EU economy are relatively low. Autos, they do tend to be higher, it's true. From motor vehicles, we have a tariff of approximately 10% and we've... for passenger vehicles anyhow. And our parts as well tend to be mid single digits, so there is a margin of advantage then, for supplier such as Japan. And actually Vietnam, as well is growing, its participation in component supply. It started in motorcycles but they're moving in and broadening that into other aspects of motor vehicle. So there's some potential there for competition from Vietnam that would, once that agreement is ratified. Later this year, it's expected the EU and Vietnam will have preferential advantage in their trade relations compared to the US with respect to tariffs, potentially some non-tariff barriers as well.

Jill O'Donnell: One more question for you regarding this bigger context here, and I realize this next question is really a counterfactual, but I'm interested in your view on this, with respect to US-China trade tensions. Many people over the last 18 months or two years or so have critiqued the US administration's unilateral go-to loan approach to China as potentially damaging to US alliances and arguing that instead the US should have taken a multilateral approach toward pushing back on unfair Chinese trading practices. But building consensus does take time, and I wonder, do you think the European Commission sees this problem the same way, or how hard or easy would it have been for the US to act in concert with the EU on these trade tensions with China?

Douglas Lippoldt: Well, I think the European Union has faced similar challenges in its relations with China, [inaudible 00:41:58], that the ones that remain is potential for collaboration in addressing this problem between the US and the... that is the EU and the US certainly have ample mutual interest here. You hear similar complaints from European multinational businesses, just as you hear these, whether you're in Paris or Milan or Frankfurt, just as you hear it in New York or Chicago or LA or wherever in the US. And I think the preceptor is the preceptor, there's a realism here, and we have this... Phil Hogan, the EU Trade Commissioner was in Washington in January, and gave a very nice speech, looking at this and looking at a range of trade of mutual interests that the EU and the US share. Highlighting this, it's some of these challenges that businesses have faced in emerging market economies might be best addressed by having an aligned approach from the advanced economies. I think there's a will to address this.

Jill O'Donnell: And some of that, we do see of course, through the US, EU, Japan trilateral. So there is that separate track there to tackle some of these problems with China in a different channel. As I ask every guest on this show, I'd like to know what you've read lately about trade, whether it's a book, article reports that's been particularly striking to you.

Douglas Lippoldt: Well, one study that caught my attention is a book by Craig VanGrasstek, and it's entitled Trade and American Leadership. This book was published last year, I heard Craig presented it at the LSC and subsequently got a copy and dove in. And it's interesting for me as a trade economist to take a look at this because it's coming at it more from a political science or a political economy perspective. And in a nutshell, I guess the book is highlighting that US leadership was an essential component to the emergence of the multilateral trading system that we had, this rules based approach that led to the creation ultimately of the WTO. The notion, this offer that openness can be extended, including preferences for developing countries and bilaterally even with advanced economies that this openness, it enabled not only the US to prosper, but it also enabled our allies, and more recently emerging markets to begin to catch up. It's almost a paradox that the US economic power and strength that's helped to enforce provide a... well, Craig at one point, he calls it US [inaudible 00:44:57], it's enabled the rules based system that serve US as... I prefer to see it as the US is a guarantor for the system that has also enabled peers and emerging markets to prosper, which is in a way undermined the US relative advantage. US has certainly prospered from this as well, but its relative position has been undermined and it's how the system has helped to fuel the growth of China in particular, and there's an element of rivalry that's come with that. And it's challenging public perceptions in the US of the fairness of the system.

If you see this increased openness in the US and this process that I described earlier of the reallocation of capital, the shift in mind with competitive advantage has left some regions, some sectors disadvantaged in the US and led to a measure of breakdown and support. And so I think Craig does an excellent job of providing an exposition of the evolution of this system looking, starting from Alexander Hamilton and carrying it forward all the way to the arrival on the scene of the Trump administration. And it's a useful reference, I dip back into it from time to time looking for a specific reference to how we got where we are. And one other point related to this, more recently, I did a little paper looking at advancing US trade policy interests. While the US recourse to protectionism in some areas and some sectors, and unilateralism was done in part with these labor market objectives that we've mentioned earlier in mind, we've actually seen in recent months, some deceleration in the growth of employment in the manufacturing sector, in the pace of employment growth in the manufacturing sector. We've seen a rise in trade policy, uncertainty that's led... it's been at least statistically associated with the decline in the pace of investment we've seen in recent quarters, the pace of investment declining quarter by quarter basis in recent quarters. And I guess where I'm headed with this though, is it dawned on me as I was taking stock of these developments, as I have other trade economists, by the way, so I'm not alone in this. Doug Irwin has done a piece and Mary Amiti, and others at the Federal Reserve Board have taken a look at this. The point here is that there's a counterpart that I hadn't appreciated until the drafting this little paper, which is that the US public perception of the fairness of trade has increased this substantially. And with the renegotiation of the NAFTA agreement, replacing it with the USMCA and now nearly ratified, we're waiting for Canada to complete the process in April or May, hopefully. There's this public perception that there's better enforceability of labor provisions that there's more stringent protections for environmental concerns. Gallup, according to Gallup poll, US popular support for trade, seeing trade as an opportunity for economic growth that's grown from a little from about 55% in 2013 to something like 75% of the population affirming that trade is an opportunity for growth in 2019.

So my point here is that I'm wondering if we might not see some political capital here that can be used to build down some of the protection. And if we, in the context of the EU-US bilateral negotiations, the US may be able to take a more ambitious approach to reducing protection, not only the unilateral measures, but also addressing some of the mutual concerns on remaining tariffs and tackling non-tariff barriers, capitalizing on this improve public perception of the benefits from trade in the US. And that could be a positive outcome that from these years of trade policy uncertainty and turbulence, so taken aback some participants engaged in international trade in the US and among its partners.

Jill O'Donnell: I think that's a really interesting point you just made there about public perception. Certainly it's important to remember that it does have an impact, perceptions do. And it's interesting to hear you say that the increased positive perceptions of trade may in fact provide an opening here to make the system even better going forward. Thank you for that, and thank you for those reading recommendations. Doug Lippoldt, thanks so much for being on Trade Matters today.

Douglas Lippoldt: It's my pleasure. Thank you so much for the opportunity.

Jill O'Donnell: That's it for this episode of Trade Matters. Thanks for listening and a big thank you to Bryce Doeschot, Alex Pochoskey and Brianne Wolf for helping produce this podcast. Please subscribe to Trade Matters on iTunes, Spotify, Stitcher, or wherever you get your podcasts. If you have ideas or topics you would like to hear about on Trade Matters, we'd love to hear from you. Send us an email at yeutterinstitute@unl.edu, that's Y-E-U-T-T-E-Rinstitute@unl.edu, or follow us on Twitter at @YeutterUNL [corrected]. Opinions expressed on Trade Matters are solely those of the guest or host and not the Yeutter Institute or the University of Nebraska-Lincoln.