Michael Strain (American Enterprise Institute) presents Protectionism is Failing and Wrongheaded: An Evaluation of the Post-2017 Shift Toward Trade Wars and Industrial Policy at Georgetown as part of the Tax Law and Public Finance Workshop hosted by Brian Galle and Day Manoli. 

The Trump–Pence and Biden–Harris administrations enthusiastically embraced protectionism. Each administration explicitly argued for a break from the bipartisan consensus of recent decades that has been generally supportive of free trade and of allowing markets to shape US industrial and employment composition. But the protectionism of the Trump and Biden administrations has not succeeded and likely will not succeed at meeting its goals: they have caused manufacturing employment to decline, not to increase; they have not reduced the overall trade deficit; they have not led to a substantial decoupling of the US and Chinese economies. More fundamentally, the goals that have not been met are wrongheaded: policymakers should not pay inordinate attention to manufacturing employment, and the trade deficit is a poor guide to economic policy. Finally, these wrongheaded goals often rest on fundamental economic misperceptions: free trade is not a policy to create jobs; it is a policy to increase productivity, wages, and consumption. The balance of the evidence suggests that free trade, including trade with China, has not reduced employment. Of course, trade has been disruptive. But populist policies adopted in response will hurt workers, not help them.

Rebecca Kysar (Fordham; Google Scholar) delivers the annual Richard Crawford Pugh Lecture on Tax Law & Policy at San Diego today on The Stakes of the Global Tax Deal For International Economic Governance, 77 Tax L. Rev. ___ (2024) (reviewed by Adam Rosenzweig (Washington University) here):

The ethos of economic integration and trade liberation no longer reigns supreme. Instead of multilateral trade agreements, nations are turning towards protectionism and unilateralism. Yet in late 2021, nearly 140 countries agreed to a new global tax deal that is aimed at coordinating their tax systems to curtail tax competition and corporation profit shifting to tax havens, as well as constructing a new allocation of taxing rights among nations.

Although multilateral trade agreements now seem out of reach, tax multilateralism is ascendant. This is surprising given the deep tradition of national control over tax policy. It also perplexing since international tax does not exhibit the same theoretical harmony between national and worldwide welfare that international trade enjoys. The traditional account offered by economists is that trade liberalization is a rising tide that will lift all boats because countries will produce according to their competitive advantages and trade the rest, making trade suitable for international coordination. In contrast, tax is largely described as a zero-sum contest for a fixed pot of tax revenues, deeming it ill-suited for collective action.

If multilateralism in the economic sphere is dead, then how did this agreement come to be? And perhaps more puzzlingly, why did a global deal emerge in international tax, of all places? This Article attempts to explain the forces by which the global tax deal came to pass. It contends that we must look beyond traditional rationales for the explanation, instead examining the global tax deal within a broader foreign and domestic economic policy context. The Article concludes that the fall of multilateralism in the trade context and its rise in international tax can be explained by the same phenomenon—widespread dissatisfaction with the distribution of gains from globalization.

This account not only illuminates the stakes at issue in the debate over the implementation of the new global tax system, but also extends the rationales for each of its two parts, or “Pillars,” beyond those proffered (and indeed beyond those typically discussed in international tax policy). Further, this explanation provides evidence that an alternative international economic order is emerging rather than the old Washington Consensus simply dying —one where marshaling resources to reverse fiscal austerity and address distributional concerns is on the agenda. Finally, the story of the global tax deal helps to identify troubling aspects of the new industrial and trade strategies that nations are embracing and offers alternatives to them.

Previous Richard Crawford Pugh Lectures on Tax Law & Policy:

• Nina E. Olson (Center for Taxpayer Rights), Taxpayer Rights in the Digital Age (2024)
• Kimberly Clausing (UCLA), The Future of International Tax Cooperation (2023)
• Chief Judge Maurice B. Foley (San Diego), Mountains And Mentors: My Path To The Tax Court (2022)
• Anne Alstott (Yale), Child Care Reform After The Pandemic (2021)
• Rosanne Altshuler (Rutgers), The International Tax Landscape: Past, Present and Future (2020)
• Lily Batchelder (NYU), Optimal Tax Theory and Distributive Justice (2019)
• Deborah Schenk (NYU), Horizontal Equity Redux (2017)
• Michael Graetz (Columbia), Tax Reform Beyond the Headlines (2015)
• Edward Kleinbard (USC), Progressive Tax or Progressive Fiscal System? (2014)
• Stephen Shay (Harvard), Coherence in International Income Taxation (2013)
• M. Carr Ferguson (Davis Polk, New York), Simplifying the Corporate Income Tax (2011)
• Eric Solomon (Steptoe, Washington, D.C.), A Framework for Tax Reform (2010)

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