The Corner Newsletter: June 23 , 2023
Welcome to The Corner. In this issue, we look at U.S. Trade Rep Katherine Tai’s new vision for trade, which she detailed in a groundbreaking speech hosted by Open Markets.
At Open Markets Conference,
U.S. Trade Rep Katherine Tai Details New Trade Policy That Puts Security and Working People First
U.S. Trade Representative Katherine Tai laid out a new trade vision under President Biden at an Open Markets Institute conference last week in Washington. At the event, titled “The Next World System: Can U.S. Trade Policy Make Us More Secure, Democratic, & Prosperous?”, Tai emphasized that “de-risking and resilience in supply chains is about improving our national security and economic security for working people.”
Ambassador Tai noted how the shift in trade policy could help support a vibrant tech sector in the U.S., saying, “We must be agile in making connections between our work in trade policy and what is happening in domestic policy. That includes digital and technology policy.”
Other speakers included Tim Wu, who led the creation of the Biden administration's competition and antitrust agenda; AFL-CIO International Director Cathy Feingold; and Josh Tzuker, chief of staff at the U.S. Department of Justice Antitrust Division; and Rana Foroohar, the Global Business columnist at the Financial Times.
Tai’s talk built on a major speech in April by National Security Adviser Jake Sullivan, who announced a “new Washington consensus” to trade policy to “build capacity, to build resilience, to build inclusiveness, at home and with partners abroad.”
More details on the event, which received coverage in the Wall Street Journal, the Financial Times, and Politico, can be found here.
Trade Rep Tai Says Trade and Competition Policy Must Be Integrated
Audrey Steinon
At an Open Markets Institute event last week, U.S. Trade Representative Katherine Tai delivered a groundbreaking speech laying out the vision for a new model for American trade policy. Ambassador Tai's remarks followed recent speeches from Treasury Secretary Janet Yellen and National Security Advisory Jake Sullivan describing Biden Administration efforts to reassesses core assumptions underpinning the economic policymaking of recent decades. Beyond describing the role of trade policy in these efforts, Ambassador Tai's speech underscored the important ties between trade and competition policy, especially as both fields respond to changes in the national and international economy.
"Our focus has shifted," Ambassador Tai declared, "from liberalization and the pursuit of efficiency and low costs to raising standards, building resiliency, driving sustainability, and fostering more inclusive prosperity at home and abroad." This statement alone, coming from a top American trade official, represents a profound departure from the standard American trade policy model of the past three decades.
Reflecting on Ambassador Tai's speech, Tim Wu, the former Special Assistant to the President for Technology and Competition Policy, concluded: "if we have changed fundamentally what our starting assumptions are in trade, […] that is a massive accomplishment, more important than any agreement.”
In much the same way as American competition policy was radically transformed when antitrust enforcers adopted a singular focus on low prices as a measure of their success, American trade policymakers from the 1980s onwards assumed that removing trade barriers benefited everyone through cheap imports. This faulty logic profoundly shaped U.S. trade agreements, incentivizing specialization, offshoring, and brittle supply chains.
In the past three years, however, repeated collapse of these supply chains owing to the pandemic, climate change, and Russia’s invasion of Ukraine offer evidence of the failure of this efficiency-focused trade model. “The decision to allow artificially low costs and low prices to lead U.S. economic policymaking has made us less secure, less free, and less prosperous,” Ambassador Tai noted.
With this challenge in mind, Ambassador Tai urged greater cooperation between the trade and antitrust communities as part of the new trade vision, saying, "I think that when we [in the trade community] talk about creating resilience and de-risking, we are talking about wanting to do the same things that our competition brethren are talking about in terms of breaking chokepoints. It is about allowing for more options, more vibrancy."
Although strategies for managing the overlapping risks of market concentration, geographic chokepoints, and geopolitical power have been mostly absent from trade policy in recent decades, the U.S. has a long history of using trade and competition policy in tandem to address domestic and global risks.
In the 19th century, the country’s first signature economic policy, the American System, used high tariffs to prevent dependence on Europe. Later, as domestic industries grew enough to compete without tariffs, the U.S. encouraged industrial growth across trade partners to prevent any one country from cornering a strategic market.
The U.S. has also successfully used trade policy to supplement domestic competition policy, and vice versa. For example, imports of Japanese and German cars increase competition in the American auto sector, which otherwise might require antitrust policy to manage. On the flip side, Tim Wu described how antitrust action such as AT&T’s break-up, helped the U.S. develop globally competitive technology companies. "We have had the most successful track record in this country when we challenge our monopolists, sometimes break them up, and watch what grows," he noted. "That's our comparative advantage. Not national champions."
Despite this interdependence, members of the antitrust community have raised concerns that new trade agreements will limit governments’ freedom to regulate sectors, undermining future competition policy, especially in tech and A.I.
Acknowledging these concerns, Ambassador Tai argued that "trade policy must respect the space for our domestic policymakers, regulators, enforcement officials, and legislators to debate and determine appropriate frameworks governing the relationship between government, technology, business, and the public interest." The affirmation signaled her commitment to moving away from past trade dogma.
"We are doing non-traditional things," Ambassador Tai noted. "The question we are asking is not: 'does this maximally liberalize trade'. The question is: 'are the things that we are doing going to promote resilience, sustainability and inclusiveness in terms of economic outcomes.'" This, she concluded, allows for competition policy ideas in the trade arena, and thus for more synergy between the two fields.
Open Markets Europe Director Speaks Before UK Parliament on Major Digital Markets Bill
Open Markets Institute Europe Director Max von Thun testified before the UK Parliament on the Digital Markets, Competition and Consumers Bill in addition to submitting written evidence on the bill, currently under scrutiny by members of Parliament. Welcoming the ambitious legislation, von Thun said it would keep the UK at the forefront of international efforts to rein in Big Tech while injecting competition into digital markets. He suggested targeted improvements to the bill such as applying a backward- rather than forward-looking test to establish a firm’s market power and introducing a tougher merger control regime. He also called for measures that would keep Big Tech from evading the Bill’s requirements like limiting the countervailing benefits exemption, and increasing transparency for third parties. View the recording here and read the testimony here.
Open Markets Institute Submits Comment to USDA Supporting Product of USA Labeling Rule
Open Markets Institute submitted a comment to the U.S. Department of Agriculture in support of a “Product of USA” labeling rule, urging the agency to finalize the proposal. The comment, led by food program manager Claire Kelloway, read in part, “Current labeling standards allow foreign meat corporations to deceive consumers and unfairly compete with domestic producers by selling meat born, raised, and slaughtered abroad as a ‘Product of USA’ if it simply passes through a USDA facility. USDA’s proposed rule would end this deceptive practice and ensure integrity and fair competition in meat markets.” The comment noted that consumers are willing to pay a premium for products stamped with a U.S.-origin claim, with one 2016 analysis showing American shoppers were willing to pay $3.57 more per pound for domestic beef in 2016. An earlier study found over a quarter of U.S. consumers would avoid imported beef when given the choice. Read the comment here.
📝 WHAT WE'VE BEEN UP TO:
Open Markets Institute Europe released a statement commending the European Commission for considering requiring Google to divest parts of its online advertising business. “The evidence is overwhelming that Google has used its dominance across the adtech supply chain to favor its own platforms, at the expense of publishers, advertisers, adtech rivals and consumers,” Open Markets said. Europe director Max von Thun was quoted in SHOOT and PBS commenting on the EU’s investigation of Google. Common Dreams also quoted the statement from Open Markets Institute.
OMI senior reporter Karina Montoya published an article in the Washington Monthly explaining how retailers are selling consumer data and earning juicy profit margins in the process with implications ultimately threatening the future of privacy and journalism. Montoya writes, “This is terrible news for journalism. In this new system, retailers don’t need to leverage data from news publishers as Google and Facebook did when they started building their ad business. Instead, multiple retailers can now auction their shoppers as ‘audiences’ to multiple brands that target them across the web.”
Claire Kelloway, manager of Open Markets’ food program, wrote an article for Washington Monthly decrying a proposed plan to tackle carbon emissions by allowing major agriculture companies to purchase carbon offsets from farmers, who then store carbon in soil to make up for their carbon emissions. “These private, voluntary farm-based carbon markets don’t actually do what they purport to do,” Kelloway writes. “In fact, they don’t even really function as markets at all. Within these shadowy, private exchanges, there is no agreed-upon standard for what counts as “sequestered carbon”; no central oversight mechanism; no cap on corporations’ total allowable carbon use; and no penalty for cheating.”
Open Markets’ legal director Sandeep Vaheesan published an article in The Atlantic on how large drug companies use an unfair market tactic that keeps lower-cost generics off the market. “Using a tactic known as ‘pay for delay,’ brand-name drug companies who hold the patents to blockbuster medications pay other companies to put off introducing generic equivalents. This lets them keep charging high prices,” writes Vaheesan.
Senior reporter Karina Montoya wrote an article for Tech Policy Press calling for Europe’s investigation of Google for monopolizing the digital advertising market should expand to the entire adtech space. “Ideally, the scrutiny that antitrust enforcers are placing on Google’s business model in the ad tech sector should prompt all market players, including web publishers and advertisers alike, to rethink how this market should be organized,” she writes.
Europe director Max von Thun published an article in City A.M. critiquing a proposed merger in between Vodafone and Three, which would create the U.K.’s largest mobile operator with half of the country’s subscribers. “This sharp increase in market concentration would almost certainly increase prices for consumers,” he writes, noting it could increase individual bills by up to £180 ($230) per year.
Senior legal analyst Daniel Hanley was quoted in The American Prospect in an article describing the lack of nuanced understanding of antitrust by Biden’s judicial nominees, who fail to understand that market share is not the only measure in an antimonopoly case.
Bloomberg Law quoted Open Markets’ strategic councilor on democracy and power, Caroline Fredrickson, on recent reports of ethical breaches at the Supreme Court as saying, “The justices must act if they want the court’s reputation to be beyond reproach.”
Open Markets Institute’s senior fellow Johnny Ryan joined the NewsTalk podcast to discuss the EU’s crackdown on Google, which could lead to the divestment of its digital advertising business.
🔊 ANTI-MONOPOLY RISING:
The Federal Trade Commission sued Amazon for misleading customers into signing up for its Prime service and making it difficult to cancel the subscription. The lawsuit, filed with the U.S. District Court for the Western District of Washington, is the most aggressive action against Amazon by the agency to date and could soon be followed up with efforts to rein in the tech giant on antitrust grounds. (New York Times)
The Department of Justice said it will increase scrutiny of bank mergers by looking beyond traditional metrics and instead examine a variety of factors including fees, interest rates, and even customer service. The DOJ will move away from asking merging banks to divest of specific branches as part of the approval process. (Politico)
The New York state assembly passed a law prohibiting employers from using noncompete agreements. The bill now awaits the signature of Governor Kathy Hochul before going into effect. (National Law Review)
📈 VITAL STAT:
$17,000
The amount in donations Rep. Lou Correa, the leading Democrat contender for the party’s highest-ranking position on the House judiciary antitrust subcommittee, received from tech companies Amazon, Google, and Meta. The California lawmaker, who has previously opposed efforts to rein in Big Tech, would strike a very different tone from the person he would replace on the House subcommittee, Rep. David Cicilline. (CNBC)
📚 WHAT WE'RE READING:
“Don’t Blame Medicare for Rising Medical Bills, Blame Monopolies.” Writing in the current issue of the Washington Monthly, Dartmouth researcher and Vermont state healthcare regulator Thom Walsh shows how the commercial health insurance sector faces far greater long-term financing deficits than Medicare, and how the crisis is largely the result of monopoly pricing by hospitals.
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