CEPR Competition Policy RPN – Shifting the Trade Paradigm: Can we do Better for Global Citizens (and Democracy)?
22 July 2024
Transcript (slightly edited for clarity)
Cristina Caffarra
Good afternoon, good morning and welcome. I’m Cristina Caffarra and I am sending apologies on behalf of my usual co-host, Tommaso Valletti, who is traveling today. This is the Competition Policy Research Network of CEPR, which is where we aim to connect academe and policy making, and in particular connect areas of Economics and Policy which should not be siloed, especially in the current political economy. So we have antitrust policy, we have industrial policy, we have trade policy, digital policy, growth and innovation policy and it all links together. That’s my contention. And yet, the experience of these policy areas today, in many places, is that they’re separate and distinct, so much so that people have been asking me how are you hosting a discussion on trade in a competition/antitrust environment?
There could be no one better than the two people speaking here today, really to explain why we should not see trade and competition and antitrust as isolated pursuits only of interest to trade specialists and macro economists, but in fact, as essential to creating economic opportunities, reducing inequality, protecting workers, together with industrial policy, together with competition policy. It’s really worth remembering that antitrust has not always been a distinct domain from trade, and in fact, it is a nice coincidence that today, the 22nd of July, is the 80th anniversary of the wrapping up of the Bretton Woods Conference, which was about many things, but also affirmed a vision that trade rules should incorporate and embody competition values and protection of workers as essentially a protection against the kind of unsavory relationship that we saw developing between oligarchs and authoritarian regimes in Europe in the 30s and ultimately led to threats to democracy. So this was part of the vision at the time of the end of the war.
This vision has evidently been somewhat lost along the way, as we became wedded to a notion that ultimately governments should stay out of the way, that corporations know better about free trade, and free trade inevitably incorporates a notion of competition. It’s not quite true, because if you don’t have guardrails protecting competition and protecting workers, it doesn’t naturally happen. It is not globalization or hyper globalization being at fault per se, but the fact that the rules that govern trade rules agreements have been losing this focus along the way. So now trade is trying to figure out what should be the next world order, in a different version of globalization. Of course we are in a global world and will remain a global world, but we need a different vision for it, one in which we don’t really think that cheap consumer goods are what we all desperately need, to the exclusion of everything else. And we need to really reflect on the fact that we have allowed corporate entities a great deal of flexibility on setting the rules that we now operate under. And again, the question that we need to ask is, is this good? Is this good for citizen the world, democracy and prosperity?
Now I want to give the warmest welcome to our speakers. I am so thrilled to be able to have them here. These are two people I greatly admire. First, Katherine Tai really needs no introduction. Katherine is the US Trade Representative, and she’s been very clear on the need to reimagine some of the way in which we do trade for the benefit of prosperity, to create greater equality for citizens, for middle classes, not just in the North, but also in the Global South. And this kind of line Katherine has pursued has made enormous waves – if I may indulge for a moment, at my Brussels conference last January she had a standing ovation for the things she was saying. Was a great moment. I’m particularly happy to be able to also welcome Simon Johnson – he also needs no introduction: Simon is an incredibly distinguished academic, and his latest accomplishment is that he’s co authored a book which has been celebrated and translated in multiple languages, the focus of much attention, “Power and Progress” with Daron Acemoglu. What is remarkable and wonderful about the book is the way it tracks technological progress over the centuries, and sets out insights on how we should think about the institutions that allow technological progress to benefit humanity.
I’d like to give the floor first to Katherine with a broad question. How do we evolve the current trading regime, the trading rules that are prevailing out there, from reflecting increasingly the interests of large corporations to explicitly allowing instead for workers rights and competition in a way that ultimately redresses the balance – away from elites and towards citizens. Is there a possibility for consensus building around this?
Amb. Katherine Tai
Thank you so much, Cristina, I’m delighted and honored to be here with you and Simon. What a tremendous privilege to have this conversation with both of you, I really appreciate the way you’ve laid out the questions before us, because I think it really puts the focus on where we are today, in particular as it relates to power and as it relates to the people in our societies and our economies, ordinary people, very much like ourselves. And I think that the overall diagnosis is that we are facing a situation where power – whether economic or political, the two are very much related – is very much concentrated and over concentrated. The focus of antitrust is very much on concentration and consolidation. Coming at it from the trade perspective, I would say that from the very beginning of my time as US Trade Representative, the focus that we have had is to place the worker back at the center of our trade policy, and the reason is we have seen that the worker has not been at the center for a very long time. I also appreciate the fact that you’ve noted that today is the 80th anniversary of the conclusion of the Bretton Woods Conference, which was so foundational to the institutions and the economy globally that we have had for almost a century now.
But it is also a time to reflect on how we got to where we are today, and what the first principles were. And here I take your point about breaking down silos between trade, between antitrust, and other areas of economic policy. It is also about breaking down the barrier of time, and take this opportunity to look back at our own history, at what we had gone through in the 1930s with respect to the concentration of power, you very much talked about the distortion in global geopolitics that came through those types of concentrations of oligarchy and what then was the prescription in 1944 as we were looking at a post World War II opportunity to remake a world order. And what we see is a commitment, as you noted, to workers, working people, to the goal of full employment. That this was part of the trade pillar of Bretton Woods, which was originally enshrined in the ITO, the International Trade Organization, charter, not all of it made it across the finish line, which is why we have to revisit the original vision.
What wasn’t and still isn’t well known is that developing countries, many of them just finding their independence after long periods of colonialism and colonization, had prominent seats at the table at Bretton Woods. And something else that isn’t well known is that that conversation about labor and workers that went into the ITO charter originally was very much reflecting a concern that the developing countries had, that in the new economic order the United States didn’t export its employment. The concern of the developing countries was to protect their workers from exploitation by foreign companies. So I think that that’s a really important lens through which to understand that original vision more comprehensively. The position of the ITO charter wasn’t simply something that was imposed by a small group of advanced economies, but was actually the coming together of a new world order and a set of developing country perspectives transitioning out of an older version of globalization that we know as colonialism.
The other piece of this is the competition values, the anti monopoly rules that were reflected in the ITO charter. Now those did come from the United States, and came very directly from FDR himself. And I think that that would have come from the reflections of what we had gone through as a world through the 1930s around how monopolies can manifest, not just through corporations, but also a concern that monopolies could manifest through entire countries and economy. Those rules didn’t make it across the finish line as part of the ITO charter, so they are something for us to really revisit at this time in history.
I think the overall point is the challenges we’re facing today – and this is also a theme that comes up in Simon’s book, the challenges that we are facing today feel unique and overwhelming, but if we put everything through the lens of history, what we realize is actually none of this is new. We have been presented with similar challenges before, and we have found our way, and the first principles that came out of those kinds of trouble are tremendously valuable in informing us today around how We might navigate our way and evolve our way to a better future. Thank you.
Cristina Caffarra
This is wonderful, and I’m so grateful that, again, you picked up on the on the Bretton Woods anniversary, and very much the notion that we are contemplating questions and problems that we have contemplated before, there was a framing and an attempt to address these issues back then that embodied values and visions that somehow have gotten lost along the last 80 years. Now, let me switch to Simon. Simon, how did that happen? Your book, of course, takes a historic perspective on technology and the evolution of technology, but you also have a focus on, for example, automation as being a major feature of the last 50 years, and it having contributed to the loss of focus on these values. Would you elaborate on this, keeping the historical perspective?
Simon Johnson
Yes, absolutely. And thanks for framing it in terms of history, Cristina and Katherine. That’s absolutely spot on. And remember at Bretton Woods there were actually two competing visions. One was from the Americans who said, let’s have a more open trade system and a post colonial system, as Katherine said. The other was from the British: Winston Churchill said, let’s go back to having a British Empire and organizations like that, with trade running on an imperial basis, because he had a very different view of the world. And the Americans, to their credit, said, No, we’re not going to do that. And of course, the other context is that the American Roosevelt administration, really wanted the US to stay engaged. They knew based on experience after the First World War, that it would be very easy for the US to retreat from the trading system and from the world political system, and they feared what the political consequences of that would be, because of what had happened in the 1930s and World War II. But also economically, because of the Great Depression. So I think that the vision there was exactly “let’s build something for everyone. Let’s make a relatively open trading system. Let’s make it a rules based system, so that even the smallest country knows what the rules are, and if a big country bullies them or doesn’t follow the rules, they can challenge it”. Now that’s not a perfect process, but it’s worked out remarkably well, and we can find instances of countries that have benefited greatly from that trading system, including most of Western Europe and its reconstruction. Japan did much better after World War II, and we’ve had some remarkable success stories of up from the ashes, like, for example, South Korea, which is absolutely based on a free, open trading system. Follow the rules, with their imperfections, and the system can deliver prosperity.
But the question is, where did we go off track? I do think the system worked well for a number of decades – three or two and a half, then it started to go off track, mostly in the 1970s. And I think to your point about antitrust being related, Cristina, it’s really part of this: the Milton Friedman revolution, the free market view, just let big companies do what they want, let them maximize profits, and that’ll be good for society, good for everyone. Well, it turns out, that doesn’t work on a domestic basis reliably. That’s why you have to have antitrust rules, for example. That’s why you have to worry about political lobbying. That’s why you have to worry about corruption. But it also doesn’t work on an international level. And as Katherine said, the worker was central to the initial American Vision for Bretton Woods, and that was a big part of its success.
But by the 1980s and Ronald Reagan, the worker had drifted out of the limelight, and it’s all about what does big pharma or emerging software companies or media companies, what do they want in the Uruguay Round, and what are we willing to give up in terms of protection for textiles, for example, or shoes in the US in order to get what those big, strong, politically powerful American corporations want internationally. So the corporation is at the center and driving the Uruguay Round of the trade process, which had massively unfortunate consequences, including in the way HIV, AIDS drugs were treated (with some attempts to obviously fix that subsequently). But that’s a very telling example. Katherine and her colleagues have worked really hard, under difficult circumstances, to drag the discussion back towards the worker, and there were plenty other people. I want to shout out to Sandy Levin, who was for a long time the senior Democrat on the House Ways and Means Committee, who worked very long and hard to try and get workers and the environment more central to trade discussions. There’s no question that Katherine and her colleagues have really moved us in that direction. It’s obviously not a completed task, and we might well go back the other way, in a bad way, but I think this, this is where we need to be after 80 years.
Cristina Caffarra
And it is, of course, not a coincidence for someone who’s practiced antitrust that you date where we went wrong around the 80s, which is when we in the antitrust world have shifted towards a Chicago view, a pro-efficiency view, a notion that monopolies can be good and efficient, and that’s why they’ve become monopolies. And that is also the time when we in antitrust have completely lost sight of everything else. We developed this vision that antitrust is a science, it is pure. It doesn’t need to look left or right, and antimonopoly competition values don’t have anything to do with trade. Katherine is a unique voice in making these points in the international community. I want to go to the Global South in a moment. First, Kathrine: how do you think this vision that you are putting forward, this quest for going back to these values is working? My impression is that the general trade world is quite distant at this point from this and apart from a few isolated voices the trade world seems separate from these values as antitrust feels from trade? It is distressing to me that we are now seeing these links, and we’re not working towards them
Amb. Katherine Tai
Cristina I think that the experience in the trade community is probably very similar to the experience you’ve described in the antitrust community in terms of shifting over the decades, in terms of what the right answer is and what the goal should be. What we’ve seen in trade is the pursuit of more trade, more liberalization and a disconnect, a divorce from checking our programming and our pursuit against real world, real life outcomes. And this is where a lot of our work is really about keeping our eyes open and keeping our minds open. Where, to Simon’s point, did we start going off track? I think part of it is, where did we start seeing economic outcomes that were not the point of the original rules-based system? Even in the parts that survived into what’s now the World Trade Organization, the WTO, the founding document (the preamble), actually incredibly eloquently articulates the goals of full employment, raising standards of living, conserving our natural resources, sustainable development goals.
So I think Cristina we are actually making progress. I think there are those with truly open minds, with the curiosity to interrogate, to investigate reality and to revisit assumptions, those who are truly committed to optimal economic outcomes, not in terms of statistics, but in terms of the lived experiences, the livelihood opportunities of ordinary working people. These connections are being made, and we are making progress to evolving the conversation. I wanted to revisit for a moment your question about where things start going off track. And I think that Simon’s point is incredibly salient, and I listened carefully to his insights. I just want to connect that back to the original ITO charter and that more holistic, comprehensive vision that included meaningful labor standards and antimonopoly values, and to reflect on those as core principles, but also as safeguards and guardrails that were left on the cutting floor. The question then is why they were left behind, why that more comprehensive vision didn’t make it across the finish line. Just to complete the circle to where Simon started his comment, it was because of Senator Katz, who was then the chairman of the Labor Committee in the Senate, and the lobbying work of trade associations in Washington to leave those pieces behind that then allowed for the distortion that would come later in the decades that followed.
So just to cap off that discussion, and Cristina to your second question, I think that we are making progress, and I think it’s conversations like the one that you are convening here today that will allow us to make more progress and to break through those those walls of those silos, which I think are becoming more brittle as we see things change around us, whether that’s because of technological advances, whether that’s because of the Increasing obvious urgency of the climate crisis, whether that’s because of supply chain challenges that we have today, the challenges in terms of more equity and to address the inequality that we see growing around the world, in our own economies and between economies, I think that we are absolutely making progress, but no question, we need more of us making these connections
Cristina Caffarra
Wonderful. I have follow up questions, but before I go there, I’d like to give Simon the opportunity to comment on this.
Simon Johnson
I think you’re right to keep pushing us. Cristina, on trying to unify the antitrust and the trade pieces. We mentioned the Chicago school. My usual response when that comes up is to quote George Stigler and regulatory capture and the politics of that, which was an integral part of the Chicago reasoning but I think it’s been lost in the translation. Where do the rules come from? Who makes the rules? They don’t drop from the skies unassisted, right? And as Katherine said, there’s always a fault in the original DNA, which was already the power of the corporations, and by the way, that also came out of an excessively pro business Supreme Court in the 1930s, an issue that was never entirely resolved. It was dormant for a while, but has now reared its very ugly head again. So I think even though political economy is a vibrant field with a lot of really good research, there are many specialist economists on antitrust, I’m afraid to say, or trade, who say, well, no, no, we’re just dealing with technical issues. Politics is something separate. But the politics and the political economy of capture and power is exactly what unifies what’s gone wrong in those two fields, I would say. But then you got to think about structural changes, like breaking up companies, right? Because you may not be able to regulate them on a regular basis. And of course, if anyone thinks that monopolies are fine and global monopolies are even better, I presume they don’t subscribe to CloudStrike, the dangers of monoculture just slapped us in the face once again. And these slaps in the face, just like with financial crisis, slaps in the face from systemic risk should not be ignored.
Cristina Caffarra
I feel strongly that this call for joining the dots, as I keep calling it, is overdue. Let me go back to Katherine. I agree with you, Katherine, perhaps progress is being made. I agree there are conversations I witnessed that I find encouraging. What I found particularly elating, and a lot of people did in the room was again at my Brussels conference in January, you were talking about your vision for how to return trade to certain values, and how this was also embracing a vision for how the Global South should be seen in this as a partner. And at the beginning of your comments, you talked about Bretton Woods, and about how some of the drivers there came from developing countries. You also talk about how what you would like to see is policy that ultimately is is benign and beneficial to not just for the middle classes in the Global North, but also has benefits to developing countries. At my conference, you were speaking to the chief economist of the of the South African Competition Commission, who was emphatically agreeing that this kind of focus on what works for the Global South is so overdue. Would you like to expand on that.
Amb. Katherine Tai
I’d be delighted, I think it’s a great topic for conversation in terms of organizing my own week, because later this week, we will be hosting the AGOA Forum, that’s the African Growth and Opportunity Act forum here in Washington, DC, and that is our foundational trade program between the United States and the countries of Sub Saharan Africa. Also delighted to be having this conversation with Simon, who has, I know, spent a lot of time thinking about these development issues in his role formerly as chief economist of the IMF, I also know that he edited a multi volume study on Africa economic development, and someone that my team and I have been in touch with as we have worked on our trade and development program and our Africa initiatives in particular. You know, something that became very, very clear when President Biden convened African leaders here in Washington, DC in December of 2022 is that the demographics of Africa is really showing that the future is Africa and our success is actually about the success of the future of Africa. Our success will rise and fall on Africa’s development. The median age of the entire continent right now is 19. By the year 2051, one in four human beings on the planet will be African. So that’s a tremendous amount of potential. As an Administration we are deeply invested in this, and the task comes to us at USTR, to figure out how do we harness and deploy the tools of trade between the United States and the countries of Africa to help develop that potential for the US and Africa and for the world, I think this is something that I know Simon is also very focused on, is Africa’s own integration agenda, the agenda by the countries on the Continent to economically integrate with each other after centuries of colonization and the legacy of colonialism,
It turns out that the economies in Africa individually are better integrated with countries and economies outside of the Continent than they are with each other. And the ability of Africa to harness its potential really does lie in this ability to become more than the sum of its parts in terms of continental integration, and so that’s something that is informing our approach with respect to trade through programs like AGOA, which are between the United States and a large number of countries, but also informing our approach to individual negotiations like the Strategic Trade and Investment Partnership (STIP) that we are advancing with Kenya. We have been very, very thoughtful and intentional about how we build out that trade negotiation across all of our trade initiatives, trying to tailor our engagement and our negotiations to the particular partner, to the particular relationship, and in the context of the region and the partner and its regions, aspirations and challenges. And here, I wanted to note a couple of the elements of the STIPs and highlight how they really focus on how we are thinking about trade and development.
Cristina, to your point, the longer I am in this job, the more clearly it is to me that this desire to grow the middle class is not is not a uniquely American one, this “middle-out economics”, not just !middle-out”, but “bottom up”, it’s quite universal. It turns out that we are all trying to grow the middle class, to grow economic opportunity at home for our people and the question is: How can we do it together, instead of pitting our economies, our workers, our middle classes against each other, what is a program that we can advance that allows us to do this at the same time? We talk a lot about and the Biden/Harris administration as “middle out, bottom up economics”. President Ruto, the president of Kenya, also campaigned on a vision of !bottom-up” economics. And I think that you know that coincidence in terms of phrasing, really speaks volumes to the universality of the policy goal. So here we inherited what looks like a very traditional Free Trade Agreement program from the previous administration, and when we began our time in this Administration, the question that we asked ourselves and our partners in Kenya was, what is it we’re trying to accomplish in this particular negotiation, in this particular relationship, and what we explored together was (1) the desire on the part all developing countries for more investment, to be viewed as a desirable destination for international investment, and (2) a trade agreement negotiation with the United States, as a signal of confidence to the market and market participants, confidence in the economy and its prospects. And (3) a desire to be building capacity to take advantage of new economic opportunities at the same time as you are negotiating an initiative.
We took those elements and a building blocks approach with all of our partners we are actively negotiating trade arrangements with. We started with anti corruption rules, knowing that corruption is an element that creates a drag on economic development, economic activity itself, good regulatory practices – transparency and predictability in terms of the regulatory process. Transparency is building confidence in an economic system. In addition to that, we know that strengthening the quality of life and the purchasing power of working people is an important pathway for development, and so we want to make sure that workers are protected against exploitation, climate change and environmental governance are particularly important for the African Continent, especially today, but also for us and for the planet. So we want to make sure that we are working together on environmental conservation and climate and then what is so beautifully articulated through the African Continental Free Trade Area principle is the focus on women and youth in Economic Development, Economic integration in Africa, and so we have also made an inclusive economy an important aspect of what we are negotiating with Kenya. So we wanted to reflect the importance of including populations that are very often overlooked in our trade negotiations, in these discussions that are so often dominated by large corporate actors in our economy, through the exclusion of smaller corporate actors, micro businesses, women, youth, civil society, work organizations, environmental workstations.
This is how we’re approaching our trade negotiations with Kenya. We are tailoring an old “one size fits all” Free Trade Agreement approach to this particular partner in a “building blocks” kind of way, so that we can ensure this partnership is hitting the marks in terms of creating more opportunities for more people in Kenya, but also here in the United States. And I’m really anxious to hear thoughts from Simon on this topic
Simon Johnson
A lot to unpack. And just to make sure everyone understands how difficult the job is for Katherine and her colleagues, we also have to mention China. China in Africa has had a really big impact, both in terms of the rise of Chinese manufacturing, which was ultra competitive because of the way they handled the exchange rate for a while, which took opportunities away from some parts of the United States, but also from developing countries in Africa. And then there’s the Chinese investment strategy, which has been very focused on mineral extraction. And there’s the lack of Chinese emphasis on transparency and anti corruption measures. Much of it is antithetical to the US approach, which is, let’s do rules based, let’s make it transparent, let’s widen it beyond the sectors that are currently trading. Traditional trade agreements focus on who’s already likely to export and so on. But we’ve learned that the broader structure of society and power matters a huge amount, including who can enter into that trading economy. I think the really big issue here is the lack of trade within Africa, a colonial legacy that’s been perpetuated. Africa is much more likely to succeed if they can adopt the kind of principles that Katherine was laying out. And you don’t expect this to happen overnight. There’s always going to be sensitivities about, “I’m going to gain this, but you’re going to gain more, or some of my industries might lose, I don’t feel good about that”. These things take decades. Took decades in Europe, took decades when things were going well in the world trading system. So you expect to take decades in Africa, China, I think, is a bit of a spoiler in this, and a complication, to be honest, particularly because again, the politics and where the where the money flows, and what the incentives are for the people who rule these countries.
But I’m very glad that the Biden-Harris administration has taken this on. It’s long overdue, and I think going beyond traditional “one size fits all” free trade agreements, “just make it free, and the companies will take care of it” is what got us into trouble. That’s what got us all this friction around worker rights, around environmental impact and around everything else we’ve been talking about today. So let’s do something different. And it’s more than the work of four years.
Cristina Caffarra Things are moving in a positive direction, but there is still a concern that things are moving in a more protectionist direction also, that the future is going to involve more trade barriers. “The US is saying things, but at the same time it’s becoming more protectionist” is a narrative we hear a lot.
Simon Johnson
There are many narratives out there, Cristina. If I can have the temerity to summarize the Biden/Harris broad policy on this (and Katherine can correct me), I really dispute that the policy they’ve proposed or followed, including as articulated through the Chips Act or even the Inflation Reduction Act, are essentially protectionist. I think putting a big amount of effort into developing your own science, your own technology, your own industry, and sharing that with the world on a equitable basis, that is exactly that’s the positive side of what happened after World War II. We neglected industrial strategy in this country. We invented a lot of industries and then handed over the good jobs to the rest of the world. Flat screen TVs: you can look that one up. We invented that industry twice, and most of those jobs are elsewhere in the world. On the contrary, we did the Human Genome Project and for various reasons, those jobs have stayed in the US. That was a big federal government investment, a lot of risk, if you like, it generated an industry that created 300,000 jobs and gave you things like an effective COVID vaccine.
So I think the US regaining its vision of technological leadership is not protectionist, particularly when accompanied by and emphasized by Katherine and her colleagues at USTR. I think agreeing to trade with people with a rules-based system, where you’re allowing opportunity and entry – is good. There’s your competition point. Cristina. Katherine said they want to get all these overlooked people into that system, because if they’re in that system on a rules basis they’re less likely to be exploited, they’re more likely to get improvement in the standard of living, and there’s less likely to be environmental damage than another negative spillovers. So I think that’s a very coherent vision. I don’t think that’s protectionist. I think that’s leading with your strengths and encouraging other people to trade with you on a win/win basis. That’s what we did successfully for three decades after World War II, and we stopped doing that after the 1970s and 80s. I’m very grateful to Katherine and her colleagues who bring us back into that direction.
Cristina Caffarra
Let me circle back to the competition point. I want to go into technology, and perhaps end the discussion in that space. Katherine I am thinking of digital trade in particular, where you have stated a position that I’ll let you articulate, but essentially was perceived by Big Tech as antagonistic and a barrier to trade. You were saying, and I’ll let you explain it, we need to align trade with antimonopoly values that are being pursued at home by the Administration. Will you elaborate on that?
Amb. Katherine Tai
I would be delighted to Cristina. In this area, when it comes to what we call digital trade, and the intersection of trade rules and where we are in technology and technology advancement today, so much of the conversation and so much of the position that we’ve taken in this administration at USTR has been mischaracterized and it’s been made quite a straw man argument.
We start with first principles, which is that we are all about growing our economy, the United States economy and our middle class. We are about working together with others, in the spirit of FDR and the Biden/Harris Administration in the US being back and engaged with the rest of the world affirmatively and positively, we are about negotiating trade rules that are rule based, this is very much our foundation. The challenge with existing rules is they are showing their age, especially in light of the emergence and the dominance of China as an economy, as a global monopolistic player in the world economy, but also in terms of looking at the changes that are happening and the struggle to articulate new goals. And I think that this is where we need to be extremely thoughtful about how we remain committed to be engaged with our trading partners in the various forums, whether bilateral and small groups at the WTO, which is the multilateral trading system, how do we stay engaged, what the implications are going to be.
And here is where I really wanted to press pause to say that in our digital trade negotiation, what I have encountered is a liberalization program in the technology area, especially with respect to the issue of data, which it turns out, is not just some kind of lubricant for allowing for traditional global goods transactions, but has become the game itself. If you look at the development of artificial intelligence, artificial intelligence is built on the aggregation of massive amounts of data that has been accumulated, cost free, freely by these very, very large, dominant players in our economy. And so this should cause us to really think through what it is we are negotiating, what we should be asking for, what we should be aiming for, what the positive implications should be and how to avoid negative implications. And I think on this one in particular, what I really want to emphasize is a value that really comes out in climate work, and is a large part of our conversation today, bringing it all back to the human being, to our people, and ensuring that the power to make choices as workers, as consumers, as people in a democracy is retained by our fellow citizen. In our society.
So I wanted to highlight just a couple elements in terms of the AI conversation. First, the relevance of the aggregation of data. Second, the impact on people, the impact on people as creatives and creators. I recently had a conversation with a coalition of creators and workers in the creative industry, really sounding the alarm that there are AI international conversations and arrangements that are being shaped right now, without due respect to copyrights and the rights of creators, and we just take a look around us in terms of the legal landscape here in the United States to some very famous actors, artists, even journalism organizations that are seeking compensation from the AI companies for the product of their intellect and creativity that have been cannibalized by these AI companies for massive profit. One other strand that I want to pull on here in terms of the impact of AI and the human experience is also this issue of algorithms and the bias, because algorithms are created by people, the bias that can be baked into these algorithms that can perpetuate discrimination, Inequality and prejudice. And I think this all goes back to the key point that as we navigate our way through the transformations that are happening in the global economy today, we have to just keep the central focal point of our values and our policy consciousness around the experience of our fellow human beings,
Cristina Caffarra
Simon: I know you’ve thought about AI a lot on the back of the the insights of your book, and so this is a perfect point for you to jump in.
Simon Johnson
I wholeheartedly agree with what Katherine said and the policy they’re pursuing. I think AI is incredibly dangerous if it stays in the hands of one or two companies or even one model or one way of thinking, and the CrowdStrike experience was a wake-up call to how this can become global and intensely wrong. At the same time, there is opportunity here. AI can be applied to deal with really fundamental, difficult problems, including in poorer countries, in Indonesia, in Brazil, in parts of Africa, for example. But who’s going to take the lead on that? Where’s the money, where’s the market? Who’s going to pay for that? There’s a lot of opportunities for American leadership here and and pushing people to properly protect and be compensated for their data is incredibly important as a foundational principle. In addition, how their data is used in the way in which their data either strengthens civil society or undermines it, that’s also going to be part of the conversation, but I think that the antitrust piece ties up with protection of property right, protection of creative rights.
And I think people are beginning to wake up to the fact these AI companies have taken too much and have paid too little and face too too few constraints from society, despite the fact that they’re using our data. So embedding this in digital trade now is very farsighted and absolutely should be supported. Of course, it’s an emergent field. We’ll we’ll see what happens, and I am sure that Big Tech is fighting you every inch of the way, Katherine, so I really hope that you and your colleagues prevail and make that progress, and that we all learn these lessons that back to the antitrust point. If anybody gets too powerful in our economy, it’s damaging us as consumers, that traditional antitrust as it played out past 400 years. It’s damaging for us as taxpayers, it turns out because they rip us off in various other ways. It’s damaging, it turns out for us as citizens, because a lot of these Big Tech guys are not so keen on the right to vote or the right to have proper choice. That would not be a shock to take Roosevelt, by the way, he saw the rubber barons for what they were. But again, antitrust drifted away from that. So it’s incredibly dangerous to let billionaires of any kind become too powerful.
Cristina Caffarra
What a wonderful note to finish on. I want to just tee up briefly that it is so salient and important that we have these conversations across areas of policy, because we are making progress as Katherine says but we need to make more progress integrating perspectives. The fight against power is not going to be won by antitrust alone. It needs to be fought through other instruments as well. And I plead with the people listening today, not to just silo into one discipline. I want to thank Katherine and Simon for the amazing conversation, we are so privileged to have you. Thanks again.
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