The Winds of War, With Susan C. Schwab and Rob Atkinson

In the inaugural episode of the Information Technology and Innovation Foundation's Trade War Podcast, host Stan McCoy discusses recent developments and challenges in global trade policy with Ambassador Susan C. Schwab and Rob Atkinson. The conversation covers the latest U.S. tariffs on steel and aluminum, the implications of President Trump's protectionist stance, and the strategic importance of recognizing China as the main adversary.

Mentioned

• “The Dumbest Trade War in History,” (Wall Street Journal, January 2025).
• The White House, America First Trade Policy Memorandum, (January 2025).
• Rob Atkinson, “We Are in an Industrial War. China Is Starting to Win.” (New York Times, January 2025). 
• Mario Draghi, The future of European competitiveness, (September 2024).
• Gerard DiPippo, Ilaria Mazzocco, Scott Kennedy, and Matthew P. Goodman, “Red Ink: Estimating Chinese Industrial Policy Spending in Comparative Perspective,” (CSIS, May 2022). 

Transcript

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Stan McCoy: Hello, everyone, and welcome to a new episode of the Information Technology and Innovation Foundation's Innovation Files podcast. And today's episode is actually two for the price of one because this is also the first episode of our new spin off series, the Trade War Podcast, which is an ITIF series where we're going to explore the roots and the realities of our global economic conflict.

We're recording this one on the 10th of February, so keep in mind that some things might have changed by the time you see this. I'm the host, Stan McCoy. I'm a non-resident senior fellow at ITIF and a former U.S. trade official, and I'm honored to be joined today by two outstanding guests for this inaugural podcast.

Ambassador Susan C. Schwab led the nation's trade policy as United States Trade Representative under President George W. Bush, and today she's Professor Emerita at the University of Maryland School of Public Policy and a Strategic Advisor at Mayor Brown LLP. In addition, she serves on the board of multiple leading U.S. companies, and Ambassador, we're honored that you made time to be here with us today. 

Susan Schwab: Happy to be here. 

Stan McCoy: And also joining us today is Rob Atkinson, the president of the ITIF. Under Rob's leadership, ITIF has been recognized as the world's top think tank dealing with issues of science and technology policy, shaping debate and setting the agenda across all the areas of policy interest to innovation and public policy, including trade policy. Rob, thank you very much for joining us. And, for all that you and your team have done to launch this new spinoff podcast.

Rob Atkinson: Stan, thank you so much.

Stan McCoy: It's a pleasure to be here. I want to jump right in, with Ambassador Schwab and say, Susan, we've just lived through the most interesting, wild, liveliest three weeks in the recent history of trade policy, and the headlines this morning, as of the 10th of February suggests that it's not about to stop. Yesterday after the Superbowl in a scrum with reporters, President Trump announced, new tariffs on steel and aluminum and a plan to announce reciprocal tariffs later this week. That of course comes on the heels of new tariffs on China and China's retaliation, as well as the tariff threats now postponed against Canada and Mexico.

Some frustration shared by the president in his remarks at Davos about some very big complaints with the EU that span a range of tax, trade and regulatory issues. On top of all of that, we've had a wall street journal editorial talking about “the dumbest trade war in history”. So, it's been a very lively period in the history of trade policy.

Very interested in your, reflections, Ambassador, on what you've just seen and heard over the course of the last three weeks. 

Susan Schwab: Eell, it's been an interesting three weeks, as you said. I'm not sure that we've yet seen a trade policy.Tthe closest that we've seen was the America First trade agenda that was issued January 20th.

That really did outline a trade policy or what looked like it was going to be a trade policy, but since then, it looks like we're in sort of a multi-track world here. The official track was a series of studies and the articulation of concerns and grievances and to-dos, listed by agency and by issue in that America First trade policy document, which made a lot of sense. A lot of those to-dos being issued by April 1st, and then you had whatever the President says in the scrum or gaggle, when he says it .Whether it is consistent with or inconsistent with the processes that are ongoing with the institutions. You also have a series of topics that are the target of tariffs, not just trade, and these came up at a couple of the hearings, for the secretary treasury, for the U.S.TR, where trade tariffs were described as viable options, as revenue raisers, as responses to trade practices that we don't like, or as potential to change behavior of trading partners.

I would add one more that, that's quite evident, which is, for use as industrial policy. Infant industry policy, industrial policy, because this administration is already looking at that kind of thing. And certainly, the Biden administration did that. So we're seeing those kinds of things play out in parallel with what the America first trade policy agenda on January 20 told us would be the trade policy.

So right now it's a sort of a jumble and hard to know which way it's going to go. And in some cases the use of tariffs, for each of those, call it three, four buckets of purposes, could end up being, mutually exclusive, and it just, you know, hang in there and see what happens.

Our trading partners, their heads are spinning. 

Stan McCoy: Yeah, that's a good point. I mean, to the extent that you're successful in forcing reshoring of manufacturing, you're going to be unsuccessful to that exact degree in raising revenue, it seems like. 

Susan Schwab: Right. Exactly. Exactly. If you stop a product from coming in, you're not going to collect a tariff when it comes in.

Stan McCoy: Yeah. Well, this is a perfect lead-in to asking Rob about what he's, said and written recently about Trump the protectionist, where, Rob, if I can summarize, you said sort of that he's just a nationalist protectionist to the core. He's not going to stop being that, but it might be possible to convince him, that in terms of his targets, the real threat is China and dealing with the real threat requires a very different kind of response than what we've seen so far.

I'm wondering if you can walk us through your arguments and your reaction to what Susan has just shared in terms of her reflections on the last three weeks. 

Rob Atkinson: Yeah, I think there's a couple things going on. At one level we're sort of in, to use a term from the French Revolution, we're sort of in a Thermidorian reaction.

So, if there were any excesses in the last few years Trump basically is “I'm going to go to the exact opposite”. So, AID funds some things that yeah, probably shouldn't have funded, we're going to shut down AID. So, at one level, I think this initial flurry or fury is really kind of just pent up frustration and a reaction by Trump to kind of go the exact opposite of where everybody else is.

But at the same time, you know, if you look at the Republican Party before FDR, really from Lincoln all the way up to Hoover, it was a tariff party. McKinley was the tariff man of that era. And I think in a lot of ways the Republican Party wants to go back to the pre–New Deal, even pre-Wilson era. They just never accepted the modern world. 

Second, if you look at the people around Trump, Peter Navarro and others, you know, they really have this view. And you saw that coming out with Trump when he was talking about the Canadian tariffs, he said, you know, we can make autos. We can have timber, you know, so in the Trump world, we're so big that we really don't need anything from anybody else.

We could make it all here. I debated a guy, one of these guys from Coalition for Prosperous America, which was a, is a protectionist sort of pro-manufacturing group, who, their head of it, by the way, now is the deputy head of OMB. I said, well, at least we can all agree that we should have a free trade agreement with the UK, right?

No, no, we cannot! We've been hurt by trade so much. We can't have any. So, I think that's really what's going on here And hopefully calmer heads will prevail a little bit particularly as we have to really focus on China. That's the big threat.

Stan McCoy: Can you elaborate on China being the big threat?

Rob Atkinson: Yeah. So, you know, Canada, we run a trade deficit with Canada, but at the end of the day, if you take out oil, we run a trade surplus with them.

So, you know, who, what's the big deal? And secondly, the reason we run such a big trade deficit with so many countries is really currency. At the day, if the currency were allowed to decline to its natural level or to do what President Reagan did with the Plaza Accord in ’85, we would be running significantly fewer trade deficits at a lower level with fewer countries.

So, to sort of say, oh, it's the trade deficit and you slap on tariffs. No, that's, that's your currency policy that is leading to that. The biggest challenge to the U.S., in my opinion, really stems from China for two reasons. One is they're an adversary. They're not, they're not like the Japanese were. They weren't, Japan was never our military or foreign policy adversary. The Europeans aren't. And China is, and they are in a campaign to gain global dominance in a wide array of advanced technology industries. Aerospace, biotech, telecom equipment, semiconductors, you name it. It'd be one thing if they were just, you know, working really hard for that, okay, but most of what they're doing is completely illegitimate.

CSIS did a nice study looking at the amount of subsidies the Chinese put in place. It's, way, way over any kind of WTO kinds of limits. Massive technology theft, closing out American firms from their market. So, that's the big challenge, and to the extent that Trump is attacking our allies, he is just sending Xi Jinping such a wonderful message because you saw the President of the EU recently state that she wanted to go more towards China.

You've had that discussion in Canada. We need to get more towards China. Like, that's exactly the wrong thing we're doing. 

Stan McCoy: Susan, what do you think of Rob's thesis? 

Susan Schwab: I also worry a great deal that the more we appear to be slapping around our allies, the more we are just giving a gift to the communist party in China, and driving our allies into their arms because we're saying, you know, go away. We don't need you. when the fact of the matter is, the China challenge is so much bigger than just the United States, by ourselves, because, to stay competitive and to stay globally competitive, we need to be accessing the rest of the world and the rest of the world's markets, and if the rest of the world, feels that we're predators and more predatory than the Chinese, then we're not going to get a whole lot of help.

And that's, that's just, that's on the economic front, but it's also on the geopolitical front. And so, I worry that we are just giving one, you know, we're going to give one gift after another to the Chinese when the Chinese on this, on this front, the soft power, hard power, they've been their own worst enemies.

They're the ones who were driving, countries, their trading partners away because of their coercive economic and diplomatic activities. And now it looks like that's the road we're going to be on. And there's a risk inherent in that. 

And I would say, very, very instructive I thought, the finance committee hearing for Jameson Greer, who's up to be the next U.S.TR. The questions were about China. They were about retaliation against U.S. exports. And the reminder that, you know, 95 percent of the world’s population, the world's consumers are outside this country. And the question, if the big challenge is China, how do we make sure that the U.S. stays competitive?

And I think this is an objective shared, clearly shared, by the Trump administration. But the question is how do you go about staying competitive and having a, U.S. industry and agriculture and services, but, you know, we're talking now U.S. industry, core U.S. industries staying competitive.

And if you look at the model of the EU, where they have over regulated, for example, that's not the way to do it. And if you look at the model of countries that have been protectionists, that's not the way to do it either. So, the question is, what do you do to make sure that you are at the leading edge of competitiveness of innovation, and that requires some competition. Fair competition.

Stan McCoy: I'm curious what both of you think of the term trade war. We've provocatively called this the Trade War Podcast. And for me, it's kind of an oxymoron because trade is supposed to be the machinery of peaceful coexistence, yet the media is full of, the trade war has started, the trade war has ended. How does it sit with you, Susan? 

Susan Schwab: I guess I've grown up in this field and I'm kind of used to it. I think of it in terms of you have trade barriers, you've got trade attacks, you've got predatory practices and when the other side hits back.

And hits back hard. It's a trade war. And all you had to do is look at what happens periodically with the stock market, like last week, when the market tanks. The market knows that there's something going on that is a conflict of some sort that is going to have profound consequences for the economy.

Stan McCoy: Well, and I think your comment implies also that the trade war is not new. It didn’t just start. It has roots that are much deeper than the headlines of the last three weeks. 

Susan Schwab: Well, that’s right. What is different is the global economy is rather more integrated than it has been in the past.

Although I will put a caveat on that, which is supply chains. You know, we've been through the extended supply chains, and we have seen more regionalized supply chains, in the last, say, 10 years, 10, 15 years. Natural events, have sort of forced that the cost of transportation has forced that. COVID forced that. And what had been seen as efficient forced manufacturers to be thinking more in terms of resilience and adopting a different kind of trade off. So, I think that's come more naturally, There's enough integration such that if you start pulling on a string or set of strings, you're going to unravel certain things that you didn't actually know, were out there.

I mean, how many manufacturers know what their third tier or fourth tier suppliers are? Who they are, where they are. 

Stan McCoy: Rob, what do you think about trade war and its root causes? 

Rob Atkinson: So I think it's really related 100 percent to China. China started the trade war. China is not Ricardian in their theories.

You know, the Japanese, even though the Japanese wanted to win a lot, they were Ricardian, you know, they were like, yeah, we're not going to be very good at biotechnology and we're not going to be very good at software. We'll trade for those things. We just want to be really good at steel, cars, and electronics.

They still understood and respected the notion of comparative advantage. So, with Japan in the 80s and 90s, we weren't in a trade war, we were in a trade competition. I wrote an article or an op-ed a week or two ago in the New York Times, basically calling out the Chinese for being what I call power traders.

They're using trade as a way to gain national power. And they realize that having significant market share, dominating market share in advanced industries is how you get that power. And so they launched the trade war back in 2006 with the publication of what's called the MLP, the Medium and Long Term Plan for Science and Technology, and then Made in China 2025 articulated it even more. They plan to dominate these industries. 

Boeing and Airbus are not going to sell another single aisle plane in China after five years, might even be sooner than that, frankly. And you just go down the list of all the areas that China wants to win and not only win, but put us out of business.

And so it is a trade war. And what Trump did and what Biden continued was a response to that war. We didn't start the war. As Susan said, when you respond, it becomes, it's then seen as a war. Now, we can discuss whether we respond, we're responding the right way. But they're the ones who launched the war. They're the ones who are prosecuting the war. And you know, I frankly think the U. S. government has done a terrible job of that in the last eight years. Terrible job of articulating that. And it's allowed Xi Jinping to paint us as the bad guys. The Europeans think we're the bad guys. We're not the bad guys, we're the good guys here.

Stan McCoy: It's very interesting that you point this out because the President's comments about why tariffs and why he's putting so much emphasis on trade policy in the early weeks of his administration have tended to point to, closer neighbors, Canada, Mexico, the European Union, and, I'm curious if you can shed light on why all the talk and the initial targeting of some of these measures has been in that direction when the real threat as you describe it is, across the other ocean.

Rob Atkinson: Because if you look at the people who are advising Trump and you listen to Trump himself, their view is very, very simple, I think. One could say simple-minded, which is: All manufacturing is the same, and we just want more of it. And so if the threat is coming from Czechoslovakia, it doesn't matter. If the threat is coming from Canada, it doesn't matter. If the threat is coming from China, it doesn't matter. 

The only thing that matters is to restore manufacturing, farming, and ranching. That's it. So, they don't look at strategic industries. They're more than happy to say we should have, more milk production in the U. S. because of the Canadian subsidies to their dairy industry, and they're willing to fall on their sword for that.

They don't look at trade as a strategic focus on certain countries and certain industries. So, for them, you know, back in the first Bush administration, you know, Michael Boskin supposedly said, potato chips, computer chips, what's the difference? Which is kind of this, you know, sort of Neoclassical thing. All industries are the same. 

That's what the Trump people think. We need more potato chip factories. Now, that's not to say everybody in the Trump administration will have that view, because that's not correct. But many of them do, and I think Mr. Trump has that view himself.

Susan Schwab: Yeah, I must say that you're raising a really good question because I think it is one, you know, we're only three weeks into this, but, I think one of the things that is really quite puzzling, is the fact that if China is the principal challenge, competitive, geopolitical, then why is it that the focus is on Mexico, Canada, the EU countries that are arguably allies and our allies.

Now, you know, the first action was quote, immigration related. It was not quote, trade related. Well, you know, at some point do, does the use of tariffs sort of wear out? I mean, does at some point the trading partners say, you use this once, you've used it twice, at some point, why should we do a deal with you when we know you're going to do it a third time?

Probably would want to be focusing on shoring up your internal, and your allies. And, you know, I still believe in nearshoring, but you would think that there's a strategic approach that has to do with gaining competitiveness, and China, we can have a long conversation about China and the China shock and, and whose fault it is and whether it's predatory. It might not have started out predatory. You know, in 2001 there, there were certainly Chinese economists who were reformers and who actually believed that the Chinese economy could change and China's political system conceivably could change. But certainly their economic system could change.  

But the fact of the matter is it hasn't, and China is a non market economy, but it is such a large economy that they've got economies of scale that generate huge amounts of overcapacity, enable them to, you know, dump their economic mistakes all over the world, putting out a business perfectly viable and economically competitive, manufacturers all over the world, not just in the U S.

But if you're going to do something about it, you need to shore up your, your allies outside the U.S. as well as in the U.S. Because just shoring up your U.S., you know, putting up walls up around the U.S. is not going to help because the U S. market, serving the U.S. market alone is not going to enable U.S. competitiveness, global competitiveness. You need to have competition to make it work. And one of the advantages that China has even when they close off their market, they have enough economies of scale so they can have competition within their market among Chinese, you know, a couple of champions that have been identified.

And because you've got non-market players involved, they don't actually need to make profits. So, they can just kill each other off until you get two or three really strong players. and they're the champions and, at that point they're out innovating. Maybe based on stolen IP, but they're out innovating in many cases.

Stan McCoy: I can only imagine the conversations that are going on in the halls of power among trade ministers of our allies around the world who are trying to decrypt this situation. I'm curious, Rob, if you could offer words of wisdom to those trade ministers be it in Europe or in the Americas who are trying to figure out this situation. What would you say to them?

Rob Atkinson: Well, the first thing I would say to them is look, you know, I get so fed up with European posturing and pontification about America the protectionist. If you look, for example, at who buys Airbus and Boeing, you know, so yeah, we tend to buy more Boeing, they tend to buy more Airbus, okay, that's nationalistic, maybe.

Look at Japan, look at India, look at all these other countries, they buy a significant share more Boeing. So, the Europeans, talk about protectionism, man, I mean they're running a big trade surplus with us. They're engaged in things like, well, we're not going to let American cloud computing companies come into Europe because we have to have quote, digital sovereignty.

So, one thing I would say – Now, that doesn't excuse everything Trump's doing. Don't get me wrong. Trump’s not psychotic. There's a reason he's mad or upset with the Europeans. And I think the main thing trade ministers need to do is sort of, step down, think about it, and go, yeah, there is something that we've contributed to this.

We're not saints here and we're going to come to the table with an open mind and say, you know, why is the EU auto tariff higher than ours? You know, there's lots of things the Europeans could do to, make amends, make a deal. And I think they've got to start with that.

If they just get into their Americans are protectionist, we're going to go with China. that's going to be terrible. Trump got to respond to that. He's got to, you know, he's got to be open and fair. And so I'm not saying it's, it's all one sided, but that's one of the things I would say to trade ministers.

You got to understand America counts for about 75 to 80 percent of the global trade deficit countries. We're that. And for these countries to just sort of ignore that I think, is just short sighted. Now again, a lot of that's currency. If we just fixed currency and let it slide, a lot of that would go away.

Susan Schwab: Rob, before you go further, I should say something about currency. Which is, and it's funny, when I was U.S.TR, we were not allowed to talk about currency. No. Only Treasury. But, you know, there are macroeconomic factors underlying all of this, including in particular currency, and one of them is the U.S. economy is just stronger than everybody else's economy.

You know, you look around at growth around the world and we're doing really well, relative to everybody else and that again is going to strengthen your currency. So, there are some ironic factors here, but I agree with you entirely about the EU. Some of the, not just the, sort of latent anti-Americanism, but also some of the shoot yourself in the foot problems they have, which they are recognizing.

The Draghi report, I think, is a significant contribution. If they take it seriously and act on it. I think that's very important. And I think the new EU Commission has that intent. We'll see how that plays out. And some of the things that the EU does that is clearly discriminatory and going after our digital prowess, our social media, our digital cloud computing, some of the international tax issues.

You know, look to your own house first. And there's a basis for negotiations there. But it isn't the bilateral trade deficit per se. focusing on a bilateral trade deficit, I think is the result. It's not the cost, I guess. And you can't use trade tools to address the outcome.

You can only use tools that address the cause.

Stan McCoy: Digital services taxes, I think, are another bone of contention. It seems clear to me that some of tech CEOs are whispering in President Trump's ear about that issue and the range of issues that they face in Europe. 

Susan Schwab: As well they should. And there's an incoming now on the various sustainability reporting requirements that quite frankly will decimate small-, medium-sized businesses, in the EU. A set of, regulations that have been promulgated that nobody knows how to implement. And if they are implemented even close to what is implied, it's going to be another, self-inflicted wound on the EU economy and hurt everybody else.

So, there are things that Europeans need to be doing, and we need to be pushing, but we also need to be helping, because it's in our interest for Europe to have a strong economy. And be strong geopolitically. We need the EU to be strong and on our side.

I mean, what's happening now with the German economy and the German auto industry is a real problem and it's a real problem for Germany, but I think it's also a real problem for us. And having China pouring automobiles into Germany and wiping out the German auto industry, which refuses or basically refuses to respond because it's their investments in China that are partially responsible.

That's a terrible dilemma. 

Stan McCoy: Yeah, it is a terrible dilemma. Almost resonant of the reliance on Russian gas that the U.S. government complained about for many years.

Susan Schwab: That's absolutely right. And I give Brussels and the EU Commission credit for trying to go after this. 

Stan McCoy: No, I think the heart and soul of your point, if I get it, right, Rob, is don't assume that just because it's Trump and there's a lot of bluster involved with it, that there isn't some underlying validity or need to come to the table to try to resolve the underlying issues, whether it's digital services taxes or any of the other things we've just been talking about.

Rob Atkinson: Yeah, absolutely. I mean, just look at the USTR 301 list, look at the trade estimates report. I mean, there's, there's lots and lots of things a bunch of these countries are doing that if they wanted to change, they could change them. And, you know, I think that's the spirit at which people should do that.

You know, Ambassador Schwab mentioned the Draghi report. Last summer, I was over in Brussels, and I can't say who it was with, but let's just say a very, very high-level official involved in that report, and we were chatting about this notion that they had of reducing supply chain risks and dependencies, and he talked about reducing the risks from China and the U.S. I said, what are you talking about? You honestly think we would not sell you things? We would, we would love to sell you whatever it is you want because we make money that way. If you want semiconductors, take them. 

The reason I say that is, I think Europe has gone down this path in their minds. It's this long-standing thing from the 60s where they were worried about the so-called American invasion. That they still look at the U.S. in this strange way that, that, that were as much of a threat to them. And you hear that, frankly, with, when you read the Draghi report, there's a lot of it that's good but if you read between the lines, it's saying we should decouple or de-risk from the U.S. and China. And nothing could be worse. 

Nothing could be worse because, you know, this goes to investors point about markets, you know, this is the other thing I think that Trump gets completely wrong is that there are certain industries where the U.S. market is more than big enough to have as much as we want. But when you get into certain industries that fundamentally have to have global scale to thrive and succeed, and I'm talking aerospace, biotech, software, semiconductors, advanced equipment and things like that, you can't, you can't survive on the U.S. economy alone. It's not big enough. You have to have global scale. 

And if we shut these companies off, and like if we say, we're going to put up these barriers. They'll put up barriers to our advanced companies that need global scale. The Chinese won't face those barriers, and then they will begin to go even faster against us.

The fact that President Trump could talk about massive tariffs on semiconductors. You're not going to make all the semiconductors here with tariffs, and if you were to do that, you would basically price out many American companies that use semiconductors. And they would then move all of their production that they're used to export. They'd move all that export production overseas. So, we need to have a little bit more theory, a little bit more strategy based on how industries actually work and why they're different. Not all industries are the same. 

Susan Schwab: I would say one thing that is very important. And that is this administration appears to be receptive to listening to the private sector, which is a big improvement. I would hope that as officials come into place, one of the challenges is there are a lot of decisions being made right now by people who are not in the line of responsibility, people who have not been confirmed by Congress, people who are not in the agencies that have the expertise or the ability to advise the White House decision making. I think they will also be receptive to at least listening to all comers. And that includes the private sector. It includes consumers, includes agriculture, business, small business. And, and I think it is useful that they will have that input. That they will accept that input. Whereas, the last administration was not.

Stan McCoy: Speaking of listening to input, one of the things I hope we'll do with this podcast as it develops over time is also listen to input from, some people from outside the United States. I'm looking forward to having sessions on Europe and Asia trade where we, gather some diverse perspectives. So, we won't just be Europe bashing or, China bashing, as the case may be, but we'll hear what they have to say as well. Your comments about. the structure of who's deciding what Susan, I think, put on the table that question of the possibility of institutional changes in who's in charge of trade policy in the U.S. 

I've heard it said that there might be a trade czar position created in the White House, or that the Secretary of Commerce might take leadership or other. There's been a lot of questions about this in the confirmation hearings. I wonder what your perspective is on what you've heard so far about possible institutional structures for dealing with trade and this administration and going forward.

Susan Schwab: If you look at the America First trade agenda from January 20. The mandates, the to-dos line up, responsibilities line up with the structure that exists and that has been laid out by the Congress. You've got different agencies with certain statutory responsibilities. And those are the agencies that will, in conjunction with other agencies put together the reports, make the recommendations, and so on. So, that is how that's laid out. The system has a trade czar, and the trade czar is the USTR. That is a position that was created by the Congress. It is a Cabinet-level position, but it's also part of the executive office of the President.

And if you're looking at bang for the buck it is probably the most cost-effective agency in the U.S. government. You know, 250 people who are responsible for, trillion plus—Well, more than a trillion plus, but multiple trillions of dollars in trade. But they do it by, helping to coordinate and leading negotiations and advising the president on trade issues and going to the experts in different agencies and in the private sector and on the Hill who know more about the specifics, right? So, you go to the Commerce Department when you want to know more about manufacturing or certain services, go to the Agriculture Department about agriculture, you go to the Labor Department on labor issues, State Department for foreign policy input. 

That function at one point was in the State Department and Congress in 1962 said a little too much foreign policy, diplomacy content here. We want this to be in the executive office of the president. We want this to be in the White House. And that was how USTR was created. And so, that is the trade czar. And that entity gathers all the information from the other agencies. Ultimately, the president makes the decisions. Now there are decisions that are made, certain statutory decisions made by the Commerce Secretary, made by the Secretary of Agriculture. and so on, but, at the end of the day, the president will be listening to who the president listens to, and that may be NSC, the NEC, National Economic Council, and so on, but it's a combination of, statutory structure, And personalities and always has been. And I suspect will be for the foreseeable future. 

Stan McCoy: So what would your advice be? Your words of wisdom to people working inside USTR or, commerce where you've also held leadership roles in these uncertain times?

Susan Schwab: Play well with others would be the first one. The interagency process is set up so that you can have knockdown drag out fights and disagreements, and you move those disagreements up the food chain. You just keep moving them up the food chain, and at different levels as you try to resolve them. This obviously is as you get input from the private sector, as you get input from the Congress, as you get input from all different constituencies that are out there, because you want a full scope, and some of that, most of that is official.

You do hearings, you've got federal register notices and so on. At the end of the day, you have, a lot of information that trickles up that will be delivered, in the form of decisions. I suspect it will stay that way. The key though, is to staff up with people who know what they're talking about and know what they're doing.

USTR is largely career staff, has been pretty much forever, maybe 10 to 15 percent are political appointees but you wouldn't know whether the career staff is Republican or Democrat or protectionist or free traders, because they just—well, Stan, you know this, you were one of those individuals. They just want to get the job done and they are very patriotic and very pro-American and very pro-U.S. industry, agriculture, services, and they love negotiating and they love out-negotiating other people and they have a wealth and have had a wealth of experience. I worry a little bit about the attrition over the last couple of years. They haven't been treated terribly well. and, I'm hoping that, that, they will be treated well in this administration and I have every reason to believe they will. 

Jameson Greer, who is the nominee to be USTR was chief of staff in the first, in the first Trump administration. Some of the USTR people didn't agree with the first Trump administration trade policy, but they liked and respected Bob Lighthizer and they delivered for him.

And some of the names I'm hearing for the Commerce Department, and Ag Department, same thing. These are good, hardworking folks who will work their you-know-what's off for the United States. 

Stan McCoy: Thanks for that. And I wanted to connect up this, conversation about the institutional structures with something Rob was saying earlier about, needing a more conscious industrial policy.

It's not about potato chips. It’s about high technology and innovation. And, historically, industrial policy is not something the United States has always been good at. I'm curious to get your view on whether we're equipped to do industrial policy well in the U.S. government and if so, how does that work and what does it look like? 

Rob Atkinson: The problem with that term is it's really been bastardized and used by opponents to imply, you know, let's give a trillion dollars to Solyndra. Ha ha, look it didn't work.

We're not really talking about that. Let me back up by saying first of all, for a long time we've seen trade as an end. The trade is not an end, it's a means. We engage in trade, we want trade, because we think we're going to get some results that we like out of it. And that's why I don't think we need a trade czar to Ambassador Schwab's point. We have a trade czar. It's called, you know, the USTR. 

What I do think we need, though, is a techno-economic competitiveness czar. The NSC doesn't have that role. The NEC doesn't have that role. And I think we need somebody there who can say, all the various parts of government The Justice Department and Antitrust, Commerce Department, State Department, Treasury. Are they aligned in the way we want them to be aligned? 

And in a lot of ways, if you think about the auto sector. The auto sector is facing, the biggest threat it's ever faced. The Japan threat pales behind what's going on with China. What is our auto strategy? And the answer is we don't have an auto strategy.

The fact that we have environmental rules that mean that certain states in the U.S. are going to put in place laws that make it so you cannot sell an internal combustion engine car in that state, or you have to reduce your internal, your ICE sales in that state because you have to have this ratio of EVs, that ought to be a national policy question. We shouldn't let states deal with that. How are we dealing with issues around trade in the auto sector? What about technology in the auto sector? How are we dealing with helping their suppliers modernize through programs like what NIST has? What are we doing in tax policy with the R&D credit?

So, yes, of course, we've had an industrial policy since the beginning. Alexander Hamilton had an industrial policy that George Washington supported. Radio Corporation of America, RCA, was something that FDR helped create out of whole cloth, if you will. Federal governments always played a key role.

Now, the real question is, do you want to do that in the right way or the wrong way? The right way is industry led. You're not sort of putting too much of a thumb on the scale. You're not picking particular firms over other firms. You're focusing more on key sectors and key industries we need. But we have to be thinking about that.

And I think in a lot of ways, one of the reasons why trade has had such a hard time is because most other countries use open their open trading system and they complement it with smart industrial strategies so that their companies can be competitive, and we generally haven't done that very well or very much.

 think we've got to start doing that. I think that would help. It would take a lot of the pressure off of trade as well. 

Stan McCoy: Is there anything else that either of you would like to cover before we wrap up?

Susan Schwab: I guess the bottom line for me as a trade policy person is that we shouldn't be trying to fix nontrade problems with trade solutions because they're not trade solutions. That's kind of where I come from, but China has the presence of a large non-market economy on the global stage that has predatory intentions in many cases, has really changed the environment that we operate in.

And that's not to say that all Chinese industries or businesses, and certainly not the Chinese people, are what we're worried about. but it is a very, very different set of circumstances. than we were dealing with, say, 25, 30 years ago, and we just have to approach it differently, and, with a different kind of smarts.

Rob Atkinson: I would 100 percent agree with that. I think it frustrates me when I hear people, particularly in the last administration, or even in this administration, possibly, sort of demonizing trade and globalization. When 80 percent of the problem is China. If it wasn't for China, just imagine a world where we blot them out, most of these issues, we wouldn't have seen as many manufacturing job losses. I mean, there'd be some, it'd be slower. We would have seen more exports. I think a lot of the challenge was and is China and it spilled over into the broader sort of trade world. But at the same time, I think if we're going to acknowledge that, which I think is true, we have to come up with some new ways of thinking about that.

We can't just assume that the WTO is going to solve the China problem. And when we created the WTO, we never imagined that there'd be gangsters involved, you know, putting a horse head in your bed.

And that's where we are. Those of us who support global integration and global trade, especially with the allies, we've got to recognize that and say we have some solutions and some ideas and that the answer can't be sort of the Biden administration taking a pause on trade, which as far as I could tell meant permanent, or the Trump administration just simply saying we're going to tariff everybody and, you know, whatever, the devil can take the hindmost. I mean, we can't do that either. And so I do think that this is a great conversation that we all have to have and Stan, hopefully the podcast can play a role in helping to elucidate what those paths look like going forward.

Stan McCoy: Well, I hope it will, and it's gotten off to a tremendous start with the contributions from both of you, so I think it remains for me to say thank you to both of you, Ambassador Susan C. Schwab and Rob Atkinson from the ITIF, for your tremendous contributions today, and it's been a fantastic conversation.

I look forward to continuing the conversation and exploring some of the issues. Threads that we've, begun to tug on today, whether it's about China or the European Union or partners in the Americas, we'll be trying to go a little ways down all of those paths to, explore the way forward and the, whys and wherefores behind the front lines of today's trade wars.

So, thank you very much for getting it off to a good start.