Episode 80 – Gregory Shaffer (International Trade Law)

This podcast audio has been transcribed by an automatic transcriber.

Fred Rocafort  00:07

Global law and global business go hand in hand, but never seem to keep pace with each other. The importance on the global stage of developing and developed nations waxes and wanes, while consumption and interconnectedness steadily increase all the while laws and regulations change incessantly requiring businesses to stay nimble. But how do we make sense of it all? Welcome to Global Law and Business hosted by Harris Sliwoski International Business attorneys. I’m Fred Rocafort.

 

Jonathan Bench  00:37

and I’m Jonathan Bench. Every week, we take a targeted look at legal and economic developments in locales around the world as we try to decipher global trends in law and business with the help of international experts. We cover continents, countries, regimes, governance, finance, legal developments, and whatever is trending on Twitter. We covered the important the seemingly unimportant, the relatively simple and the complex.

 

Fred Rocafort  01:02

We hope you enjoyed today’s podcast. Please connect with us on social media to comment and suggest future topics and guests.

 

Jonathan Bench  01:21

Today we are joined by Gregory Shaffer, Chancellor’s Professor at UC Irvine at the Law School and President-Elect of the American Society of International Law. He is a leading international trade expert, author and consultant on the World Trade Organization, European Union law, globalization, transnational legal orders and legal ordering. He is a prolific author and one of the most cited international law professors in the world. Greg, welcome to Harris Sliwoski Global Law and Business.

 

Gregory Shaffer  01:48

Thank you for having me, Jonathan.

 

Jonathan Bench  01:50

We’re very excited. And I love it’s probably my favorite part of these discussions. Can you tell us a little bit about where you came from and how you got to where you are now?

 

Gregory Shaffer  02:00

Oh, great. I, you know, I was a kid, I was born in Cincinnati, Ohio, my family had never traveled. But somehow I was, I became very interested in the world and I had a globe as a child, I had a world map on my wall. I had an interest in history and foreign affairs, I thought of becoming a diplomat. And so that was that was my youth through high school and college. And then I went to Stanford Law School. And my favorite class there was on international trade law. And I was taught by Tom Campbell, who became a U.S. congressman and was fascinated by international trade. And I from there, I went, and I went to Europe, I went to practice in Paris, France. And so I never actually practice in the United States at practice in Europe. And this is in the late 1980s. And early 1990s, when the Berlin Wall had just fallen is the end of the Cold War, there was a lot of transactions constructing a single market within Europe. And that’s, and that was actually happening in parallel to the move towards creating the WTO in 1995. And so that was central to my work. And then I went into teaching. And, and I’ve been going back to Europe, and back to Geneva and the World Trade Organization every year since I started.

 

Fred Rocafort  03:27

So Greg, I’d also like to welcome you to the podcast. Let’s talk about your your latest book, which was published by Cambridge University Press, emerging powers on the world trading system, the past and future of international economic law. My understanding is that you started researching this book nearly 20 years ago, tell us about the book, tell us about its main thesis, tell us about the intended audience. And 20 years is a long time. So I imagine that as you went along, there were changes. And your views must have some degree changed over over that period of time. It’s been a very interesting time period as well. So that must have impacted the development of the book.

 

Gregory Shaffer  04:11

Thank you, Fred. So yes, the world changed significantly while I was researching this book, so let me tell you a bit about it. So at the core of the book, lies a paradox. And the paradox is why the United States, which was central to creating the World Trade Organization, and its binding dispute settlement system, after the United States was triumphant in the Cold War. Why is it that now the United States has attacked and undermined that system? The World Trade Organization largely reflected U.S. law and U.S. preferences. Other countries, in contrast, complained they had to change sometimes thousands of laws and regulations. They had to create entirely new institutions. So the prediction across the social sciences is that emerging powers will be the revisionist ones. And the incumbent powers, like the United States will try to defend and retain the system that they created. But in the case of the WTO, the opposite has been the case, the U.S. has become the revisionist power neutering the WTO dispute settlement system. And China, Brazil and India now defend the system about what to say earlier complaint. So, the book investigates why the book central contribution is to trace how these countries developed what I call trade law capacity to take on and challenge and go lawyer to lawyer, expert to expert with the United States in Europe, whether in the negotiation of new rules, or litigation and settlement negotiations under existing rules. They invested in broad based trade law capacity, and were able to use the system to challenge the United States, to its consternation. So the book investigates how they adapted their institutions develop new professional expertise, both within and outside of state institutions. They created new think tanks, academic specialization, the private legal bar, civil society, organizations and networks among them. The result was enhanced state capacity within these countries. If you think about the development of infrastructure and how that was central to China’s economic success, trade law, capacity represents a form of legal infrastructure. Now you asked what changed was fascinating is this is not the book I initially set out to write. The world changed so dramatically as I conducted this research. The project started with the question of how developing countries could build trade law capacity, defend their interests, and assist them so dominated by the United States in Europe. The project’s focus then evolved as it became a parent, that by building this legal capacity, engaging with the trade system, these three emerging economies, Brazil, India and China, were transforming themselves internally, it became further evident that when successful, they were also affecting the trade legal order itself. So it’s through these internet processes, domestic and international that we can better understand the book central paradox, which is how is it that the United States now caught has called into question, the trade law system it created? Well, emerging economies that log criticize that system, for its bias in favor of us entries, now defended?

 

Fred Rocafort  07:58

Greg without going to off topic and without stepping over boundaries that you might prefer to respect, do you see any parallels to this paradox? In other areas, where perhaps there’s been as especially over over recent years, a disconnect between traditional U.S. values or at least the values that we typically associate with the U.S.? And with the reality on the underground? Is there anything that that that comes to mind where we see a similar trend?

 

Gregory Shaffer  08:36

Well, of course, at the last administration, you see that solid, dramatic change in U.S. policy in terms of global endeavors, generally, but the United States being surrounded by two oceans is obviously very different than Europe. It has a very different experience than Europe in terms of the impact of World War, there’s been no World War on U.S. territory, unlike Europe. And so you for Europe, economic integration, was central to its conception of peace, bringing Germany into the European single market was central to its view of its own national security. The U.S. has never had thought in those terms. War has generally been far taking place far away. So there are you know, so the U.S. has always been a little more reticent with respect to international institutions in the protection of its own sovereignty. And so there there are parallels here, but it’s been much more dramatic. Because since World War II, the U.S. was the Global Head trombone. And now it faces a challenger which has changed both the domestic politics and the International calculations of this country.

 

Jonathan Bench  09:55

Greg, let’s continue on this thread because I love speaking with guests who have bigger brains than I do. I love hearing the macro view. You know, I think Fred and I are pretty well read. But we obviously have gaps in our experience. And certainly, you know, in 20 years when I’m approaching my 60th year on this earth, I will probably have a much different perspective than I do now. But I’d love to hear, you’ve been someone who’s studied this and the world order. It is amazing that the U.S. has been distancing itself from the world trading system, right from facilitating a global security interest, right. I mean, we have been pulling back and of course, the Biden administration is, is trying to reengage, but even you know, pre Trump, for this length of time you’ve been you were writing and studying for this book, we could say the U.S. has been ongoing. This going on this path of disengagement with the world or at least lessening? Right. So I’m curious, do you think the U.S. has been successful as it’s been a U.S. policy decision? Or is this been more reactive decision? And what do you think the general effect is on the world order if the U.S. continues to protect its interests, be more strategic about how it engages with the world, rather than running to chase after every fire?

 

Gregory Shaffer  11:16

Yeah, all right. Well, thank you, Jonathan, for that. So I think there is there are continuities, but then something shifted within the continuity. So here are the continuities to us turned away from the WTO. Back in the Bush administration. When Robert Zoellick who was the United States Trade Representative under President George W. Bush, became frustrated, particularly with the three countries so the subject of my book, Brazil, India, and China, who, during the WTO, has ministerial meetings every two years where the trade ministers from around the world come together. And that minister at the ministerial meeting at 2003, was in Cancun, Mexico, and Brazil, India, and China coordinated their positions in these at this meeting, to thwart a joint position being presented by the United States in the European Union. And typically, the history of the gabinete WTO when the U.S. and the EU coordinated their positions that determined the outcome, and they were blocked. And so Zelich at the end of that meeting, he called for a quote Coalition of the Willing on trade, which, of course, was the phrase of the day, the Coalition of willing, and the U.S. turned away from multilateral WTO negotiations to bilateral negotiations. For the Secretariat at the WTO. In Geneva, this sucked the energy out of the WTO as a negotiating forum, because all trade negotiations, the trade ministers there were occupied outside of it. At first one could view this strategy of the United States in terms of build erecting building blocks that could then later embed new rules and practices that would eventually migrate to the WTO. The most ambitious agreements, of course, were under the Obama administration, the Trans Pacific Partnership and the potential for new agreement with Europe called the Transatlantic Trade and Investment Partnership, where the U.S. to sign and ratify those agreements, and then combine them, you would have an entirely new in a sense multilateral organization for trade. But this changed, of course, under the Trump administration, when the U.S. abandoned the Trans Pacific Partnership that it signed and raised tariffs on products, not only from China, but also Europe and most U.S. allies. In parallel, it ended binding dispute dispute settlement the WTO by refusing to approve new members of the WTO is appellate body when their terms expired, so that there are no appellate body members today, and disputes cannot be resolved through this binding mechanism. In fact, it was just yesterday that China appealed a decision that at last quote into the void, which means it’s not binding on China. That leads to the question how successful was the U.S. ban and turning away from the WTO, arguably not very successful, China responded to U.S. tariffs by raising its own on U.S. products. U.S. producers who needed key ingredients such as steel had become less competitive, U.S. domestic politics are unraveling. So it’s hard to come up with a strategy which is bipartisan, to build infrastructure and better compete with China. What does this mean for the future? It depends on what we do today and in particular, domestically here in this country. The book simply notes what’s at stake, and including not only competitiveness, domestic solidarity grounded in a sense of fair distribution of economic benefits, peaceful trade relations that are important when crises strike, and perhaps peace itself.

 

Fred Rocafort  15:14

Greg, I’d like to go back later in the podcast to, to this issue of of where we go from here and look at what we can expect in the coming years. But I’d like to talk a little bit about the book and about the present and past all three of these countries on which you focus our countries of great interest to me, and I certainly have questions about all of them. But let’s start with with Brazil, you describe it as the the first emerging power to invest significantly in building trade law capacity. That’s interesting, right? Because I mean, when we look at Brazil, we see a large economy, of course, certainly a regional power. But but this was this was interesting. And at the same time, it wasn’t completely surprising. I used to work at the State Department and was was familiar with Brazilian diplomats and understood that Brazil had more so than than other countries of its own size, you know, it had really devoted considerable efforts to, to building up its diplomatic service to making it very professional. So it’s not entirely surprising, but I’d like to learn more about this. What was it about Brazil that gave it the incentive to be the one to really tackle these issues? What advantages perhaps it had have over China and India, and, and others. And I was also very interested in reading about the role that law firms played in this process. And of course, for obvious reasons. I’m always interested in in hearing about how law firms fit into into the bigger picture. So just tell us a little bit about Brazil and its own role in this story.

 

Gregory Shaffer  16:59

Great. I mean, Brazil had a head start. And the reason why is that of the three countries, Brazil, developed a model that was most likely United States based on what it already had. So it already had large private law firms that it worked on investment issues, including International Commercial Arbitration. It had, as you noted, and very impressive, meritocratic Diplomatic Corps. The diplomats of Brazil are the elite of the elite. The percentage who take the test who were actually selected, I think, is like the top 1% of those who actually take the diplomatic exams, and then they go through intensive training. It had well organized trade associations of businesses, very much. The closest to the U.S. model, the way business organizes itself is compared to India and China. You put these together? And what do you have, you have expert lawyers, you have an engaged private sector, and you have competent government, which is a recipe for it being the first to learn how to use the World Trade Organization, to its advantage. This became clear, when Brazil successfully challenged U.S. and EU agricultural subsidies, in a very complicated cases. It was a momentous victory for Brazil, it pressed Europe to change its system of subsidies and the U.S. to move in that direction as well, while the U.S. paid to settle the case, over 800 million U.S. dollars to Brazil, and thus, in effect subsidizing the Brazilian agricultural sector and parallel to the subsidies it gave to U.S. farmers. So each of these countries tapped into domestic law firms in different ways. For Brazil, it these large Brazilian law firms, they actually sued the Brazilian government to require it to either hire Brazilian law firms in parallel with U.S. law firms, or independently, which the government did, varying with the nature of the case. Many of these Brazilian lawyers had connections with U.S. law firms. Some had worked in the United States in Washington DC on trade. They This facilitated a form of legal technology transfer. They worked with U.S. firms, they could see what U.S. firms were doing. And then for smaller cases, which were less complicated, they actually could handle these cases. And they did they won cases, working with the Brazilian government, and what could be called public private partnerships, using private law expertise in combination with the expertise within the government to bring cases the big difference between Brazil, India and China is that the private sector was willing to pay the fees of the Brazilian law firms. So the cotton trade association with Brazil challenged us cotton subsidies raised a couple of million dollars to pay attorneys fees, which the Brazilian government didn’t have to pay. So they could they hired an elite U.S. law firm working in parallel with Brazilian firms for support. And with it, they set up an internal dispute settlement core within the the Brazilian Ministry of Foreign Affairs to handle WTO disputes. And they work together to successfully bring these types of cases.

 

Jonathan Bench  20:49

Greg, let’s turn to China. Now, Fred and I are big China hands. We’ve studied the language for years, we’ve lived in China. And so we’ve seen a lot of these China issues firsthand on the ground, and certainly in our work day to day at our firm right now. So in the Chinese collective psyche that the accession to the WTO is such a watershed event for China, right? It’s almost mythical. And so do you see China’s entry into the WTO as a cause or an effect of China’s development?

 

Gregory Shaffer  21:21

It’s a great question. Chinese entry for me was both cause and effect of that successful economic development. My book is built on the concept of recursive city. What that means is that one needs to assess the recursive impacts the back and forth impacts of the domestic plane and the international one. China already was on the path of reform during the 1990s. It wished to join the GATT and WTO which also provided leverage for Chinese reformers, internal Chinese debates about which way China was going to go. It finally joined the WTO in 2001. By interviewees in China, uniformly stressed the importance of the entry of China into the WTO for their country. Some viewed the who listened to this as a form of constitution for China. In terms of the major institutional and normative effects that it had is one interview, he told me who works for general counsel, major Chinese state owned enterprise, joining the WTO completely changed our mentality, about law, about international economic relations about going out into the world and trading. Once China joined the WTO, it helped to embed legal and economic reforms, and it created greater security, that exports from China would be protected from high tariffs and discrimination. This made China a much more attractive place to invest, including for U.S. and European companies, both because China’s internal market was growing, as China grew economically. And because of China’s attractiveness, as a manufacturing base for exports, as China became the manufacturer of the world. This is very interesting, this concept of the WTO as a constitution for China, and how expression changed the views of many in China with regard to to law, is it fair to say that there was a similar dynamic at play in the case of India, obviously, we’re talking about very different political systems. India, certainly had plenty of loss, the time period we’re talking about. But you do mention in your book that joining the WTO did really help shape India’s internal institutions, if perhaps, the impact is different, in qualitative terms, that there was still a huge impact. Could you could you talk about this? Yes. So again, I think we can look at this, you know, in terms of the impact of reforms already taking place within India, and then the stimulus at the WTO. In India, of course, was is it’s a cacophonous country. There’s huge debates, protests and so forth. So, when India joined the WTO, there were mass protests against especially on agricultural issues on intellectual property issues with the TRIPS Agreement, for example. But already before India joined the WTO, they engaged in economic reform of opening up India. These are referred to us in 1991 reforms with India to began to reduce its tariffs and make it easier for imports to get into the country. This, but this these reforms in a sense were locked in by the WTO. But India still there is still a lot of resistance to comply with its WTO obligations. And there were some big cases against India, after a joint brought by the United States, one with respect to its import licensing system, which it was forced to remove compliance with its commitments. And the other was with its implementation of the agreement on trade related aspects of intellectual property rights, the TRIPS agreement with respect of patents, and in particular, these two cases were Wake Up Calls for the Indian government, it realized it needed to invest in significant legal capacity, that the WTO was somehow different, that that legal cases are going to be brought against India, and it had to defend them. And they were going to be covered in the Indian media. And so it brought a lot of attention. What’s fascinating is that India, then it actually went to the United Nations to create a program for building legal capacity that brought together lawyers, businesses, civil society organizations to try to understand what were India’s trade interests? How could it also use the WTO to bring cases against Europe, the United States and so forth, as well as how could it build expertise to better defend its own development initiatives. And so, it then after it created this external program, it then merged it into the Department of Commerce of India as a think tank, which still exists today. And that think tank in the Ministry of Commerce, then x is a node in terms of the government’s relationship with private lawyers with private business, in terms of the different institutional changes, you saw India, they have new topic, the US new import relief institutions to then bring cases regarding a quote dumped products or subsidized products, so that they could raise tariffs to protect their domestic industry, they also completely changed radically changed their views towards intellectual property. So even though India still you know, has real concerns about the structure of the system, now I was told, this is a quote, we went from, you know, patents in we perish to the phrase patent or perish. And he saw an increase in patenting of U of Indian firms shifting their their their business model from a production of a basically outsource manufacturing low cost goods to more higher value goods. And so you sort of see that saw this in the course, India, then its exports became a significant part of its overall economy, much more significant than ever before, and it changed the mindset of India. So all of these countries, India, then its law firms started to invest in expertise in WTO law, where they could work with the private sector and with the government. And so this was a major shift in, in, in, in this country, just as in Brazil and China.

 

Jonathan Bench  28:33

Greg, you conducted extensive interviews in person in country in for this book, I’d love to hear more about this personal aspect of what you did, who did you interview? How many people did you interview? And what surprised you as you were engaging in these interviews?

 

Gregory Shaffer  28:51

So that was the fascinating part of the of the methodology behind the book was actually meeting and interviewing people at the highest level, but across different sectors public and private. So I interviewed the major stakeholders in the trading system, including the director generals and Deputy Director generals at the WTO. Secretary, members of the WTO current and former ambassadors to the WTO. From these countries, officials at their WTO missions and Geneva, government officials in their national capital, private lawyers in their national capitals and major commercial cities who are engaged in trade law practice. I interviewed both their domestic lawyers but also foreign lawyers who work for these countries or against these countries. I interviewed company and trade and industry association representatives regarding the challenges they face, working both with these countries and against these countries. I interviewed the heads of think tanks and researchers within them. Academics in these countries and law, political science, economics within representatives of nongovernmental organizations, news reporters writing on trade off of one of these countries, which became quite fascinating as the investment and expertise to broadcast the importance of trade law to a broader population through the media in these countries. And what struck me is the engaged level of active thinking regarding the challenges the trade system posed, and their engagement on immediate tasks and crises before them, as well as the broader systemic issues. They were very interested in it within the interviews of trying to understand what was taking place and what their immediate day to day responses, how they tied into these bigger systemic issues. I always felt I was actively learning from the interviews. And when the interview was successful, I believe they felt the same way.

 

Fred Rocafort  31:02

So turning our conversation once again to to the future and what comes next. What are some countries that you see as potential influencers? Obviously, when we look at the countries that we have been discussing, we’re talking about some of the largest economies in the world, obviously, countries with with with a lot of heft generally, perhaps there, there might not be countries that are going to be able to to exercise similar influence? Do you see countries that are striving to become heard when it comes to trade issues, and these might be countries that are smaller than Brazil and India and China, but might be able to still have an impact that at a regional level, they might be able to have greater impact? What what are some of the emerging players in the trade law world? Yes.

 

Gregory Shaffer  31:52

So it ties into what my initial question was for this book, which was, if the U.S. has, and Europe have these, you know, big law firms with incredible trade law expertise, and then lawyers within government who have trade law expertise and big companies who can pay for the expertise to work with government, how do other countries stand the chance, and it’s a huge challenge for most countries is no, as you pointed out, these are large, these three countries are large, that the most important in their regions, Brazil represents roughly 50% of Latin American landmass and GDP. India until COVID, was the world’s fastest growing economy. And it has a huge population. China has been the growth miracle of the world over the last three decades. So these countries will remain critical, especially China and India going forward, as Brazil has been imploding over the last decade. But others that we should attend to over time, the Asian region, generally, it’ll be fascinating to see this combination of the cptpp What what became the Trans Pacific Partnership, and now are set which is the Chinese and Ozzy and grounded organization for Asia. Here, but there’s clearly an attempt to develop a to the Asia already is a regional economic hub, as you know, and to tie that in through a regional trade agreements to reduce tariffs and to smooth trade in and out of these countries as part of regional and global supply chains. And so, as we know, Vietnam now, Vietnam, that trade represents about 200% of US GDP. So it’s investing in, in, in trade. And with that, it’s investing in trade law expertise. I mean, Russia, for the rest obviously has its major challenges. But given its landmass, its raw materials, its scientific capabilities. It it has invested a lot and it trade law, it joined much later the World Trade Organization, these other countries, but it it’ll be interesting to watch. But I think that he, regardless of noting other countries, ASEAN countries such as Thailand, Indonesia, the world’s fourth largest country, in terms of population, they’re they’re going to be important, but nobody’s going to be as important as China and India. These are this is where most if they’re good, they’re going to be China’s going to be able to play a role in shaping global legal norms and a way that these countries, they’re going to be more on the defensive, but they will realize that having trade expertise in combination with trade expertise in terms of business expertise will be very important to protect their interests in advance them.

 

Jonathan Bench  35:09

And so, my macro question keeps creeping up in my head. We haven’t talked about Africa, we talked about a lot. We just don’t have time to cover all the areas I’d love to cover with you. But can you talk for a minute about a country’s willingness to engage with those other countries in trade, who they may find reprehensible? Or at least someone they’d rather not do business with? If they could avoid it? Can you talk a little bit about that kind of, you know, regimes change? You know, Africa has got a long history, there’s still a long way to go. But it’s rising as well. China’s getting deep into Africa, the US is trying to strong arm China. China doesn’t like being strong arm China strong arming everyone, it can just because it can now. Can you talk a little bit about the those geopolitical dynamics as they fit into? The question of who are we really willing to do business with at the end of the day?

 

Gregory Shaffer  36:06

Yeah, I see multiple parts of that question. So one is who are we willing to do business with? We had been the United States. And then who are other countries willing to do business with?

 

Jonathan Bench  36:18

Right? Right, exactly.

 

Gregory Shaffer  36:20

So on the other countries willing to do business, we’re in a sense, in a new economic Cold War. It’s this playing out before us. And it can provide potentially some advantages for countries in Africa. Why? Because United States and China are battling each other to be in good favor with these countries. So it means that probably the United States will be a little bit less tough on them, will provide better, better infrastructure loans in order to compete with Chinese infrastructure loans, the U.S. would do it more through the private sector with government support, China would do it through state owned enterprises. So these countries potentially have faith, they are in a better place than they were before. China’s investing massively in these countries, obviously, you know, their their potential costs to this. And there are some notable cases where that’s become the case, but But China also will be under pressure not to be too tough on these countries, because it’s also as part of its rivalry with the United States for leadership. These countries, many of them, of course, many of them are also had authoritarian rulers themselves, but they generally shaped at the United States telling them what to do as conditions for loans and World Bank loans or IMF support, and so forth, where’s China doesn’t impose those conditions on them. And so they prefer, they find that the Chinese model many of them, if that seems to be less meddling in their, quote, internal affairs. Okay. So that’s, that’s the way I see, by my sense of these other countries and their responses to the sort of Chinese model versus sort of the U.S. development model, which also comes with often comes with certain contingencies of what they need to do and totally for, for us, I mean, clearly, human rights and issues with labor rights are central to the Biden administration, which says it’s going to have a worker center trade policy. So how do we, where should we should we raise tariffs, not it simply with respect to the way it’s been done, which has not been rights focused, but tariffs where we think that production is being involves prison labor or other forms of labor, which which goes against what we view as our values? I think that we are going to see more of that under the Biden administration, we already see it with respect to production and shot of cotton and other products from challenging. There’ll be national security, of course, under the Trump administration, but the tandem with a Biden administration has become central, where it just didn’t play as much of a role for it trade. And part of this also is because of the way the economy is moving, as we move towards an Internet of Things. Products become more vulnerable if they are if they’re providing information as part of the feedback loop. And that information goes to China and vice versa for U.S. products such as electric cars in China. And so it’s going to create a we’re seeing this, of course, also information is not only a national security concern, but also a rights based concern. And so this is going to be make trade law and trade law policy much more interesting going forward in the Biden administration is already hiring people and focusing on these types of issues. And that will be ongoing.

 

Fred Rocafort  40:13

Greg, we started off talking about this paradox that you described, talking about how the U.S. has shifted over the years you you mentioned over at the USTR. And that shift, you touched upon the changes that took place during the last administration and how that took the country in a different direction. But I’d like to go back to this. Within the world of trade, there’s a narrative that that places a lot of emphasis on what happened during the Trump years and also analyzes to what extent there’s continuity and to what extent there is an effort to revert course by by this demonstration, but I think there’s also a bigger picture here, that that, frankly, transcends the ebb and flow of changes in the White House. And I think it has to do with our society at large. If you look at free trade, right, I think it’s fair to say there is considerable disenchantment, perhaps it’s largely the result of misunderstandings of what that means. But I do see changes in society where we are as a nation becoming increasingly disenchanted, as I said, with with certain economic ideas that for for a long time were thought to be beyond the bait. So what are your thoughts on where we are headed? As a country? I mean, U.S. has played a historically a critical role in promoting values of a free trade of global trade, and in setting the standards for for how that that takes place. But do you see perhaps I don’t want to use the term risk that that sort of implies a certain negativity. But could there be just an overall shift in the way the United States sees itself in terms of global trade, and our national politics might start leading the country to take a different direction, which further cements the role of countries like China in setting global standards?

 

Gregory Shaffer  42:23

Yes. That is the the big question before us. And it its ties to the core argument of the book that one can understand the international system separately from what’s happening within domestic politics and the domestic economy. So clearly, you know, it what has happened with the trade regime, is what we talked touched on earlier is that China, in joining the WTO, at least formally, legally was protected from high tariff walls and other countries, which created incentives for massive investment into China. And this, this investment could be seen as U.S. capital, and U.S. know how going into China and combining them with cheaper, skilled Chinese labor to produce products at very much lower prices, and consequently, that were much more competitive, which of course, then were sold back into the United States. And, and it resulted contributed to the decline in higher paid unionized manufacturing jobs in the United States. So it contributed to that. And with part of the result, what we still see today, is this massive inequality in the United States where the top 1% of wealth, those would represent capital, or in the eve of the CEOs and high level management, the companies that hold this know how they’re doing incredibly well. And the percentages inequality in this country right now are approaching what they were in the 1920s. And of course, we got with a Nikkei 20 was catastrophe in the 1930s. And so we have to do something about this. And so what are we going to do? What is we simply, you know, increase tariffs and become more protective. The other is either a compliment to this or separately from this is that we figure out a way to ensure that trade does not have these, these distributive effects, which get which create this massive disenchantment for most people who feel like they’re being left behind, or they’re certainly being left behind when they look at the web percent and how they’re doing. And so that’s obviously part of the politics of what sort of we did distributed mechanisms you should have in the United States. But what we decided that respect will have an impact on how we engage internationally, if we don’t return to the way income was in wealth were distributed in the United States in the 70s and 1980s, where people felt that they were benefiting from economic globalization, most people, then we’re going to see more and more walls going up. So the question my view is, is we need to retool trade agreements, to protect ourselves from, you know, what can be viewed as social dumping or other forms of dumping from abroad and not be complicit with human rights violations. But at the same time, we need to engage in some sort of redistributive efforts in the United States. If we don’t if our political choices not to do so, then I imagine we will see the United States retreating from trade agreements, China continuing to engage in them and the world being caught between the two.

 

Jonathan Bench  46:08

Greg, it’s been so great to have you on the podcast with us today. I feel like I’ve been one of your students and and wish I could sit down for another 10 hours and keep asking you questions, hard, hard questions. But we always love to end our podcast with recommendations from our guests. So anything you’ve read recently, or watched or listened to, we’d love to hear what you have to recommend for us.

 

Gregory Shaffer  46:30

Great. Well, thank you guys so much. I really appreciate it and your interest in my book Emerging Powers in the World Trading System: the Past and Future. So here’s, here’s a few recommendations. One is we’re we live in a polarized world both internally in the United States where people are talking with each other and externally with the way we are other people from other countries such as China. So I’d recommend that some books about these countries beyond the political sound bites, and the best books on China to be are by the New Yorker writer Peter Hessler. That is it. What’s fascinating about his books is that he has conversations with common Chinese people about their everyday concerns. And so I recommend his books country driving a journey through China from farm to factory, where he just gets on the road and talks to people who work in factories who work on farms, and oracle bones a journey through time and China. He goes through the Cultural Revolution up through today. In these books, which was really quite fascinating for us is he at times refers to the excitement among the people he encounters with China’s joining the WTO. At one point to say for example, he meets a photographer and a bridge and the Yalu River between China and North Korea small town who kept on bringing up the WTO. So Hessler asks him, why are you so interested? And this photographer, this little local photographer says all the newspapers say that if we join the WTO, we’ll have more foreign visitors coming to China. And of course, if China’s economy improves, then there’ll be more Chinese tourists coming here too. So it has an effect on the international law has effect on common people reading, reading, getting a sense of the people of China and not just the leaders of China gives us a more a broader sense of the challenges that we face going forward, and how we might try to determine ways in which to cooperate to meet the challenges we face. So two books, or podcasts in a book, more specialized one Trade Talks is the name of the podcast is by a former student of mine, Chad Bown. He’s at the Peterson Institute in Sumaya, Keynes at the Economist magazine, the niece of John Maynard Keynes. It’s incredible podcast on trade law developments, third book by Kristen Hopewell called Clash of Powers US-China Rivalry in Global Trade Governance. What’s great about it is it really puts forward this unique challenge of China, which is both a great power, but also still has a relatively low per capita income. And it’s the first time where we have this sense of a great power, which is also faces major development challenges, especially when you move away from the coastal provinces in the major Chinese cities. So anyway, I think those are some great places to start.

 

Jonathan Bench  49:41

Excellent. Thank you so much, Fred, what do you have for us today?

 

Fred Rocafort  49:44

Well, first of all, I’d like to endorse very heartily, Hessler recommendation. I still think it’s the best writing I’ve read on China. And I remember during my first few years in China, I found that so much of what was isn’t about China just seem to miss the mark one way or the other. I mean, there was, of course, a lot of writing that talked about how wonderful things were in China highlighting all the all the technological advancements and all the things that were being done. But that seemed to me to be missing something. And then when you read things that were perhaps a little bit more critical, very often it would, it would take this very dark tone where everything was about highlighting all of the negatives. So I found that that Hessler did a great job of really capturing that essence. And then this is coming from someone who who’s who’s spent many, many years living there, I would add River Town, to to the list. That was his, his first book on China. I think it’s the first one that I read. And it’s just a great story. And the other ones are as well. My original recommendation actually ties into many of the topics that we discussed today, especially as far as our own internal dynamics here within the U.S. It’s an article by David Brooks in the Atlantic, and it’s called How the Bobos broke America. Bobo’s is really a another way in which Brooks describes the creative class. And  he includes himself in that class. So there, there’s an element of self criticism in there. But really, what the article does is provide an x-ray of modern class dynamics in the United States, of course, how they’re having an impact in our politics and our national conversations. And of course, trade is, is a big part of this. Again, along the same lines of what I said about Hessler, I think David Brooks managed to capture certain nuances in a way that I haven’t seen anyone do so yet, when it comes to these topics, highly recommend that. Jonathan, what do you have for us?

 

Jonathan Bench  52:00

Two recommendations today. My first is thanking Greg for for mentioning his book, Emerging Powers in the World Trading System, Past and Future of International Economic Law. I’m about two chapters. And I think now and it is something I had to have the dictionary handy for because some of the words are not in my parlance, even though I think I have a pretty decent vocabulary. It’s been it’s been good mind expanding. And certainly I’ve loved the insights that I’ve read so far. So recommend his book, first of all. And second is an article in The New York Times called Reversing Gears: China Increasingly Rejects English and the World. And so I like this because it deals with something that’s near to my heart, which is the study of English in China. My wife and I, and we were newly married, in our early 20s, spent a year in Sichuan province in a fairly rural area by China’s standards. And we each taught several hundred students. And so I’m, I think about this quite a bit, I think about how we engage with the world, how the world engages with us, and certainly love the pluralistic viewpoints that come out of even an article like this. That said, you know, even though even though that the top, the top of the top in China in the CCP says, Alright, we need to we need to pull away from English let’s let’s focus more on Chinese and Chinese values. There are still a lot of people in China. And just because the Communist Party wants something doesn’t mean that every lay person in China wants it. And so I appreciate that I have many friends in China, many students that I still keep in contact with. And I feel like the reason why I continue to study Chinese after 20 years is my I just hit my 20th anniversary of when I started learning Chinese. And I have two of my children. Now, learning Chinese and my wife speaks some Chinese, and none of us are Chinese. We’re not ethnically Chinese at all. But I feel the importance of continuing to remain available and be able to engage with with China, even if it is just to talk to the cab driver when I go to get his viewpoint or the photographer, as Greg mentioned, so highly recommend that article as well. It’s not a long read, but it does give some great nuances into the U.S. China relationship. Reversing gears China increasingly rejects English in the world. With that, Greg, we want to thank you again for being on the show with us. We absolutely enjoyed it and and we look forward to following your work and hope we can catch up with you again at some point.

 

Gregory Shaffer  54:26

Thank you so much, Jonathan, in fact, really appreciate it.

 

Jonathan Bench  54:32

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