Former Trade Rep Schwab: US shouldn’t have a trade policy that jeopardizes its competitiveness

Former US Trade Representative Susan Schwab believes the United States should not pursue a trade policy that will undermine its competitiveness. Speaking on CNBC’s Squawk Box on Thursday, Schwab called for the Trump administration to formulate trade agreements by working with allies Canada and Mexico to compete with China.

Schwab explained that even though trade agreements must be enforced, China’s persistent failure to honor its commitments makes the country hard to work with.

“China is definitely an exception because China has systematically gone against a lot of commitments that it has made,” Schwab said. “It is overwhelming the world, not just the U.S., with its overcapacity, oversupply, basically exporting its economic mistakes and wiping out manufacturing capacity all over the world.”

She urged the US to collaborate with like-minded countries rather than imposing measures that could break its relations with allies. “We should be working with rather than hitting like-minded countries and allies on that score,” the former trade rep. remarked.

What America needs from the USMCA debate

Schwab was asked about where she felt the 2018 United States-Mexico-Canada Agreement (USMCA) stood as of now and if trade tariffs should be used as leverage to renegotiate aspects of the deal. 

CNBC mentioned Canada’s tariffs on US products like milk (270%), cheese (245%), butter (298%), poultry (238%), eggs (153%), barley (150%), and peanut butter (295%), were all in the USMCA.

The 69-year-old politician acknowledged the issues with Canada’s trade policies on products like dairy but defended the USMCA as an achievement for Trump 1.0. 

“Like any negotiation, like any deal, whether it’s a government-to-government deal or a commercial deal, you’re going to end up accepting things you don’t like,” she said.

Still, she criticized Canada’s supply management system, pinning the trade dispute blame on both sides of the border. 

“I hate Canada’s supply management. There are things about the Canadian trade regime that hurt us, no question at all. There are also things we do,” 

According to Schwab, renegotiating the USMCA through threats of tariffs is rather “excessive.” “Everybody had to suck it in and accept some things we didn’t like.”

U.S. tariff ‘strategy’ lacks clear goals

Schwab questioned the strategy behind US tariff policies, pointing out that they have been proposed for reasons that are not quite ‘concise,’ including unfair trade practices and supplementing US government revenue. Last Sunday, President Trump had said that tariffs would make America “very rich.”

“One of the issues that I have… I have a hard time identifying a strategy and a set of goals here because there are a lot of different asks going on,” she continued. “Yesterday was steel and aluminum. When the administration came in, it was fentanyl. It’s been immigration. We’re talking about unfair trade practices. We’re talking about pay-fors for supplementing US government revenues, for tax cuts, for the budget.”

She propounded that Trump’s objectives for these policies are imprecise. “If you’re using a tariff as leverage to get something else, then in theory, when you get that, you take the tariff off. Well, that means that if you wanted to use it as a source of revenue, you can’t because you’ve taken it off.”

Job losses and building manufacturing backup

The discussion also touched on the perception that America, as the Trump administration claims, no longer produces goods domestically. CNBC asked whether bringing manufacturing back to the US would help revive jobs in industrial regions like the Rust Belt.

“Politicians in many cases are fond of saying we don’t make things in the United States anymore. And that’s not true. We make a lot. In fact, manufacturing output has gone up pretty steadily in the U.S. It’s just manufacturing employment that’s gone down,” she surmised.

The former US trade representative asserted that policymakers should avoid trade policies that increase input costs for American manufacturers because they make US-based industries like auto and shipbuilding less competitive. 

“You shouldn’t be coming up with a trade policy that jeopardizes your competitiveness, where you are consistently raising the cost of inputs to your manufacturing capacity.”

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now