Capitalisn’t: Was Free Trade Ever Really Free?

Episode Transcript

Katherine: I think in many ways, what we are experiencing today with the Trump administration, with the backlash, with the techlash, can all be understood as chickens coming home to roost from all of the costs that have been failed to be taken into account during this era of free trade.

Luigi: When Paul Samuelson, a giant of 20th-century economics, was once dared to name a single idea in all the social sciences that was both true and not obvious, he didn't blink. He named David Ricardo's law of comparative advantage.

Bethany: David Ricardo's law of comparative advantage is a 200-year-old insight that if every country focuses on what it does best and trades for the rest, everyone will come out ahead.

Luigi: It's the closest thing economics has to a law of physics. For 30 years, it was the closest thing Washington had to a religion.

Bethany: That faith, in many ways, built the world we live in. It built NAFTA. It built the World Trade Organization. It sent the factories to Mexico and then to China on one simple promise, cheaper T-shirts and cheaper TVs would leave everyone better off.

Luigi: The cheap stuff did show up, but so did the bill. Here is the part most people missed. In 2004, Samuelson himself, the man who had blessed the whole project, argued that under the right conditions, free trade could leave a country like America as a loser. The high priest was questioning the gospel. The profession mostly shrugged, "He's old, he has lost it," but had he?

Bethany: Two decades later, Donald Trump turned that doubt into a wrecking ball and a movement. He didn't just torch his own party's free trade gospel. He set off a war inside the Democratic Party, too, a war that is still actually raging today.

Luigi: Our guest on this episode sits right on that fault line. As Joe Biden's trade chief, Katherine Tai broke with her party's old instinct and built a doctrine she called worker-centered trade. Today, she runs the Coalition for New Trade on a provocative bet that free trade was never really free, that it costs working people a fortune, and that even Trump got the diagnosis right.

Bethany: With the 2026 midterms closing in, Tai's own party still can't agree on what it learned. Some Democrats want to run against Trump's tariffs as a tax on families. Others say the party should simply reclaim free trade, the abundance pitch of cheaper goods, and faster growth.

Luigi: Tai gives them credit for finally healing the pain, but a sharper warning is that both moves repeat the very mistake that costs Democrats the working class. That's what we'll put to her. Not just what we build after the rapture, but whether her own side is about to blow it. Is her answer a real fix or just protectionists in a nicer suit?

Bethany: You have said that free trade isn't actually free. Could you elaborate on what you mean by that?

Katherine: This also is a great sales and marketing job. Who doesn't want to be free? Who doesn't want to advance freedom? This system, of course, has incurred a lot of costs, and there are numerous externalities that have not been accounted for that have created the kind of trap that we're in where we are addicted to cheap stuff that is actually artificially and impossibly cheap because it doesn't account for, for example, the carbon impacts. It doesn't account for the human impacts to workers who may be denied their fundamental rights, whether they are in the worst possible conditions of being forced to labor or where they are exploited with very few rights and very, very low wages. I think in many ways, what we are experiencing today with the Trump administration, with the backlash, with the techlash, can all be understood as chickens coming home to roost from all of the costs that have been failed to be taken into account during this era of free trade.

Luigi: As economists, we have been all trained with Ricardo's comparative advantage theory. I think that under some assumption, that theory is correct. What started to change my mind is I remember looking at the Transatlantic Trade and Investment Partnership that eventually was blocked, but was about to be approved in Europe. I realized that as part of this partnership, there wasn't really free trade. There was a lot of possibilities for companies to sue government in another country to enforce what they wanted under arbitration system that there are no pretense of any form of justice. If there is a pretense of justice, it was a justice for corporation, not certainly for people.

Calling it this free trade, this was a charade of capture trade. What is funny is you go in every economic class, and they will tell you that free trade is in the interest of consumers, and companies are lobbying against it. Then you go out in the world, and you say that companies are lobbying a lot for this stuff. There are two possibilities. Either economics is wrong, or this mapping is wrong. I'll go for the second. This mapping is wrong, is not free trade, is completely capture trade.

Katherine: I think that explanation does a really good job of distilling then, the trade is free for whom and free from what. The trade is free for the multinational corporations, from government intervention. This is something else that's interesting not just economists, but the foreign policy crowd. Virtually no one understands or knows what is inside of those free trade agreements. When you start looking through them, what you discover is they are disciplines on governments to stay out of the way of multinationals and their decision-making. I'll bring that back then to Reaganomics and trickle down and Milton Friedman, which is government in this era is seen as the problem. It needs to be pushed back. It needs to be shrunk, and these free trade agreements do just that.

Luigi, to your point about the arbitration system, that's what we call investor-state dispute settlement. Investors, large corporations, the largest corporations, have a private right of action under these state-to-state agreements that no other stakeholder in society or the economy has. The right not to sue other corporations, but the right to go and sue the government when they feel that governments have interfered with their investor rights. Your examples do a brilliant job of demonstrating exactly the fiction of free trade.

Bethany: One of the things I keep being told by people, I can't even count the number of times I've been told this, is that we can't really blame lost jobs and inequality on trade policy, that it is simply technology and innovation, and automation. It's been repeated to me so many times that I actually don't think I've ever thought to question it because it's become an article of faith in my brain too. Is that one of those articles of faith that has just been repeated over and over again in the hopes that it will be true?

Katherine: I've watched this argument happen as a staffer to members of Congress who will have these debates openly during markups, during hearings usually between a Midwestern Democrat and maybe even a Midwestern Republican. Yes, we know that these displacements have happened, but you found the wrong culprit. It's so easy to blame trade and to blame foreigners. Here's the thing. I think it's been both. Trade has done its share, and technology has done a share.

What I wish that we could do in terms of very smart people who are influential in policymaking circles is to stop having this debate that it is one or the other, to recognize that it has been both. Then, in today's reality, where AI is every day advancing in our society and in our world, to say, "Why does it matter which one it is?" We still don't have a solution for what to do when workers are displaced, when communities are hollowed out, and when industries disappear. Let's stop finger-pointing. Let's figure out what are we going to do about it because here in the United States, we don't have any solutions to offer.

Luigi: We did have an attempt to a different kind of trade that goes under the International Trade Organization that was inspired by Roosevelt and Churchill in 1941 that was refused by the US Congress. Can you tell us this alternative version of trade?

Katherine: We describe this as part of the New Deal era. You have the creation of the Bretton Woods system, the founding of the IMF, the World Bank, and the trade pillar was supposed to be the International Trade Organization, exactly, Luigi, as you say. What the founders of the system imagined and envisioned for the new trade order included disciplines on tariffs, it also included anti-monopoly disciplines, and it also had labor rules. It talked about the worthy objective of full employment and of sustainability.

You're right. The ITO was largely stopped in its tracks because the US Congress wouldn't or couldn't pass it. I think that you will not be surprised to know that it was the big business lobby that stepped in to say, "We don't like all of this other stuff." Ultimately, the only thing that survived in the ITO during that period of time was the general agreement on tariffs and trade. Those were the tariff cuts, but all of the other pieces that went to disciplining, power, and capture, that anti-monopoly piece is also left behind.

To your point about the history, then, that could start to, [unintelligible 00:11:18] I think, goes forward to 1947. It ends when the World Trade Organization is born. That's 1995, and the WTO, which has been built on top of the GATT and negotiated through the 1980s, is entirely a neoliberal product of pushing back on government regulatory space, on freeing up, then unfettering the power of capital to move around the world. This is the world that we are inheriting today in 2026.

Bethany: Something that always troubles or surprises, or interests me about this is that most corporations need a functional country in order to exist. In fact, the better off the country is, the better off people are, people who are consumers of their product, the better off they are. Why does the reasoning not seem to flow that way?

Katherine: When I was working on Capitol Hill, I spent a lot of time with Democratic Congress members from parts of the Midwest that had been really devastated by trade and maybe some technology, too. What they said was, "I wish that those really smart negotiators at USTR would take a break from going to places like Geneva and Brussels and Tokyo, and they would come and visit my district and see what their trade policies have done."

The job at USTR is to represent the interests of the United States in trade. If that's your job and you never leave Washington, DC, the only part of the US economy that you will ever be representing in trade negotiations around the world will be the interests of the multinational class. Who has ever heard of USTR? Who knows how to find USTR? Who knows the vocabulary and the language of USTR? It's the most well-resourced parts of our economy, and that's the corporations, the largest corporations we have.

In modern trade practice, the capture is almost complete. It was so hard for us to go against the grain, to reach out to the rest of America, to reach out to the small businesses, the medium businesses, the family farmers and the ranchers, the workers in the unions, to say that this trade policy should be yours as well. It was really hard because the system hasn't been built for that. Therefore, the system that we have really reflects that kind of distortion in the viewpoint and in the perspective of trade policy negotiators.

I'll say it's not unique to the United States either, because as we started to expand the lens of whose interests we were trying to represent in trade negotiations to say to other countries, let's really think about how we can do trade together, how we can cooperate economically, internationally, with the goal of building our middle classes together. There are so many blank stares that came back to me across negotiating tables. What I often encountered was the same talking points that our companies had used to lobby us coming back to me through my foreign counterparts, because those same companies were lobbying government officials on the other side of the table.

Luigi: Now, speaking of interests of multinationals, you are a fearless woman because you actually touch the TRIPS wire. When I say TRIPS, I mean, of course, the trade-related aspect of international property rights, which probably most of our listeners don't know what it is. I will let you explain why the TRIPS is so important and why you have the courage to touch it.

Katherine: It'll be like a therapy for me.

[laughter]

Katherine: If we rewind the clock to May of 2021, so that was almost exactly five years ago, five years plus a month, we were still deep in COVID. Even before the vaccine had actually been developed and approved, and put into use, there had been a group of developing countries at the World Trade Organization that put forward a proposal when there is a vaccine, that the intellectual property rights that would normally apply, whether they are patent rights or copyrights, should be waived for the COVID vaccine.

As we came in at the beginning of the Biden administration, I think that, yes, we did surprise the world. It was not just me as the trade representative, but my boss, Joe Biden, who wrapped our arms around the developing countries to say, "We embrace your waiver proposal, we embrace the reason you've put it forward, we embrace the need to raise this uncomfortable conversation at the WTO." The backlash was fierce, it was immediate, and it came from very obvious places, which was the big pharmaceutical companies, the ones that had just developed these vaccines.

Miraculously, the 164 countries of the WTO at that time came together in June of 2022 and agreed on modifications to the very stringent intellectual property rules that are enshrined at the WTO to increase the flexibilities and what's commonly described as compulsory licensing, but the ability of countries to access patents without the patent holder's agreement. One of the lessons I've taken from that particular episode is how hard it is in today's economy, with this kind of capture, to do something that is so clearly right from a moral standpoint to be guided by that very basic human instinct of right and wrong.

Bethany: I remember at the time that happened, pharmaceutical companies saying that the precedent was terrible and that this was going to change things forever after because now we had precedent. What impact did it actually have at the end of it all?

Katherine: I remember being questioned very sternly by a congressperson in one of my hearings to say, "What made you, Katherine Tai, think that you could do this because it's completely unprecedented?" The fact of the matter is it was precedented. The precedent was during the height of the AIDS epidemic, especially as it was running wild through the continent of Africa. At that time, the bad behavior of the American pharmaceutical companies to threaten countries in Africa that were reaching for the meager flexibilities in the rules ultimately led to some significant shaming and a shift in these WTO rules. When I mentioned that in the hearing, the member of Congress immediately ended that line of questioning and pivoted to something else.

I think that that's quite interesting. I regret that we weren't able to do more, but we were able to do something, which means that the next time, and it's really sad to think that there will be a next time, but there will be a next time, that I hope that both of these precedents are very much on people's minds, and they realize how necessary these changes are. In fact, I hope that before we have too many of these, it becomes clear to more and more people, a critical mass of people with power and influence, that really significant reforms are required in the way that we approach not just intellectual property, but these trade rules overall.

Luigi: To my understanding, the WTO rules, the TRIPS rule, foresee the possibility of compulsory license for pandemic reasons. In the United States itself, in 2001, when there was the anthrax scare, we needed Cipro potentially, there was a movement to say, "Cipro belong to a Canadian company, we will use compulsory license to do that." This is not a violation of international order rule, it's an application. The problem is that when they are in favor of companies, they apply rigorously, when they're against the company interest, they sue the hell out of people.

Katherine: That's right. Then there's also a lot of self-pressure. Every year, USTR is required under statute to issue a bunch of reports in the spring. By our fourth year in office, we had stopped listing compulsory licensing as a barrier or as something normatively to be, not just poo-poo, that makes it sound trivial. Compulsory licensing is available under the rules, and then all the soft and normative cultural aspects of power and influence in trade policy makes it impossible to actually use the compulsory licensing.

By our fourth year, that report that we issued eliminated complaining about compulsory licensing. I'll just say that we pay very close attention to what's in these reports that most people don't read when they come out in the spring. I was not surprised to see that complaints about compulsory licensing have found their way right back into those same reports in this administration.

Despite the fact that the Biden administration and the two Trump administrations have been on the same page about breaking out of the established neoliberal trade regime of the past, there are many many divergences, and this is one of them, where we stood up to the pharmaceutical companies, where we looked for places to stand up to the tech companies to say, "USTR can no longer just swallow the logic of the talking points that you are giving to us, that we have to insert a national interest filter into what you're asking us to do, we need to take a pause and think about this for ourselves," that those filters, those attempts to separate the interests of the public and the interests of these largest players has really collapsed in this last year and a half.

Bethany: Do you think the changes that you and the rest of the Biden administration tried to make would have been possible without Trump 1.0 laying some of the groundwork, if you will? Then I'd love for you to talk more about where the divergences are.

Katherine: I think that the election of Donald Trump the first time and again the second time in terms of the Biden administration policies, are all about recognizing that everything is changing in a way that neoliberalism has played itself out. The moment that we are in right now is about a competition of visions and values for what is going to come as the next political and economic order that replaces neoliberalism. Here's where I'll come to some of the distinctions.

If we look back on the Biden administration's many economic policies, you can see a direct line of inspiration back to the New Deal, back to the period following that first Gilded Age, government as part of the solution, and embracing of change that can be realized with regulation, through enforcement, through rules and laws, creating a new society by embracing inclusion. I would say that the more I see play out in this second Trump administration, the more I am intuiting that the competing vision is the embrace of an even more extreme version of what neoliberalism has wrought.

In that point in the Gilded Age, really embracing the robber barons instead of trying to discipline them, saying, "Let's fuse ourselves into each other and really egg each other on to new extremes and new heights of distortions." Bethany, I think that there's where I might circle back a little bit to the second part of the question that you asked earlier about why the private sector, why companies don't see the state as central to their success.

I think that some do, but I'll just raise for you a particular example that comes up in the trade policy world that is an example also of what the tech pros, the muskists-- I've been listening to your podcasts. I know you had that interview with Quinn Slobodian about muskism, about their vision for the future, because of the investor-state dispute settlement, investor protections in the Central American Free Trade Agreement with the United States. There is a company called Prospera that has established a city that is devoid of regulation, that is a little bit like a techno city-state that this company has completely taken over. It's enabled by our trade rules.

In fact, when Honduras made some moves to try to impose its own regulations, they were threatened with billion-dollar lawsuits made possible by the investor-state dispute settlement mechanism. I think that it is actually an example of part of this dark vision of what happens when you fuse this enormous market, economic, technological, infrastructural power with the state that is happening potentially before our very eyes here in the United States today.

Luigi: Speaking about the interaction between your policy and the Trump policy, I heard in one of your interview that you were able to plant in the USMCA agreement some labor protection clause that then you are able to exercise. Can you tell us what they were and why this represents like a symbol of a market trade that is poor worker, not necessarily only poor business?

Katherine: This is the type of thing that I would talk about all the time during my four years as trade representative and never really broke through, never landed. I actually had some pretty direct conversations with the trade beat reporters about why they didn't report more on this. One of the answers, if it's really honest, this is an example of something that is going well. People don't want to read about that, especially between the US and Mexico, something going well, that's not newsworthy. Nobody's going to click on that.

A little bit of history that, actually, even a lot of Democrats aren't aware of in the first Trump administration, his people were creative and responsible and really put a lot of effort into renegotiating the NAFTA between the US government, Trump administration at the time, and Canada and Mexico. Because of the statutory rubric that they had renegotiated NAFTA under, they needed the US Congress to ratify the updated agreement. That coincided with Democrats taking back the House majority in the 2018 midterm election. Speaker Pelosi, Chairman Neal convened a group of nine Democratic members of the House selected to represent all the different parts of the Democratic caucus to renegotiate select parts of the USMCA with the Trump administration.

That resulted in higher labor standards, improved environmental standards and mechanisms, improved enforcement mechanisms. This very special mechanism that we call, for short now the Rapid Response Labor Enforcement Mechanism or the Rapid Response Mechanism, it allows for anyone the right to petition the US government, USTR, and the Department of Labor to raise with the Mexican government, that would be Mexico's Economy Ministry and Mexico's Labor Department, a concern that freedom of association, collective bargaining rights, which are guaranteed not only under the treaty, but also under Mexican law, is being violated or denied to workers at a facility in Mexico.

There are very detailed procedures that result from that, but the upshot is that any company or companies in a family of companies that are found to have violated three times will have their right to export into the United States revoked. During the pendency of the investigations, basically, the accounting at the border will be left open. It's called the suspension of liquidation. When goods come across the border, when CBP is done, they'll basically close the account, you're free, everything is free and clear to move forward.

During the pendency of one of these investigations, that account is held open until some satisfactory resolution is achieved. It's a little bit of a sort of Damocles that is hanging over the company's heads. While I was in, we invoked this mechanism, sometimes of our own accord, sometimes in response to petitions by workers, labor unions, concerned citizens, members of Congress, anyone, we invoked it 30 times. We resolved about two dozen cases, all told, what those two dozen cases resulted in were new votes for workers at facilities that had been denied real, legitimate votes for labor unions, new, truly independent labor unions to represent those workers, sometimes the first wage increasers for workers at that facility in decades, improved benefits, back pay, wrongfully terminated employees being reinstated.

It was something we were tremendously proud of because it went to show, Luigi, to one of your earlier points, that trade policy doesn't have to be done in this one very brutalistic way. There is a way to do trade that can empower workers as opposed to disempowering them. In this new version of the USMCA, in this very unbelievable collaboration between congressional Democrats and the first Trump administration, we created a mechanism that is empowering workers, and it's only available inside of a trade agreement.

The reason why this is often the starting point to our conversation about what a worker-centered trade policy could look like is that we have proven the concept that there's nothing about trade innately that has to be hostile to the interests of workers. Trade doesn't have to preference capital over labor. We've just proven it because if we don't show that it's possible and that we have actually done it, then we let those who have been most preferenced in this economy, most preferenced in trade policy, continue to write the rules and to allow for a fiction that trade is an elite policy area that is done for, by, and of elites to be perpetuated. That is absolutely something that we have to break through, especially today, when that gap between the elites and the non-elites keeps getting bigger and bigger and bigger.

Bethany: Trump's signature trade policy, of course, has been tariffs. You've actually defended them as a legitimate tool that they shouldn't be a dirty word, but you also have attacked how they're being used today. Where exactly is the line between a good tariff and a bad tariff? Then how is it that a tariff can be presented as being pro-worker but can actually turn into leverage to protect a monopoly?

Katherine: You could use tariffs to reinforce a clean, new energy industrial policy, you could use tariffs to save an industry that is being undermined by unfair trade practices, dumping, unfair subsidies, or you could use tariffs as a means of economic coercion to threaten others to overcome their exercise of sovereignty. Part of the reason that President Trump filled the Rose Garden on April 2nd of 2025 for Liberation Day with blue-collar workers, and he called them out, the American steel worker, auto worker, farmer and rancher, skilled crafts person, these were the people, he said, for whom he was applying these tariffs.

When you look at what he's done with these tariffs, some of them have gone on, some of them have come off, some of them have been suspended, and then a bunch of them are being traded away for promises by other countries not to regulate our tech companies, not to tax our tech companies, and also to raise the price of pharmaceuticals inside of their jurisdictions. That's where I part company with the Trump administration, which is if you're going to champion the working class, and you'll notice that all the cabinet members, I think that they must've had to take not just a loyalty oath to Donald Trump himself, but a loyalty oath to tariffs because they're all singing from the same song sheet when it comes to tariffs, at least publicly.

That also involves invoking the desire to reinvigorate American manufacturing to make it magically appear once the tariffs are imposed, but also all of this rhetorical invocation of the working class as the beneficiary of their policies. I think that is also one of the most important and tragic cons that I am seeing play out through trade policy, which is people, Americans, workers who have legitimately been hurt by this era of free trade and free trade policies being sold a bill of goods that it turns out is a complete fiction, and that at the end of the day, their interests are once again being sold out for the same parts of the economy that they were sacrificed for over the last 45 to 50 years.

Luigi: I've not heard Kamala Harris campaign on the ideas of Lina Khan. I've not heard her campaign on your ideas. Where is the Democratic Party, and most importantly, where will it be in 2028? Will it be a Katherine Tai market, not jungle trade, or will it be a traditional neoliberal party?

Katherine: This is a really important question. I think it's a proxy for much larger forces that are tearing us apart. By us, I mean Americans, by us, I mean the Democratic Party and I even include in that the Republican Party. Over the course of the last 20 years, I've seen the diversification of views on trade grow in the Republican Party, where I think that it was much more a mainstay of the Democratic Party over time. We as a party have some pretty serious questions that we need to resolve for ourselves and for those Americans that we would like to vote for us.

Ultimately, that question is, who do Democrats stand for? Who do Democrats fight for? Is it the American people, is it our workers, or is it the oligarchs? Is it the people who already have power and who already have all of the goods that our society has produced? I think that that's the question. I'm very hopeful that over the course of these next two and a half years, our party and our party dynamics will recognize that the kind of struggle and suffering that is increasing in America and is consuming Americans, the levels of insecurity and the heightened levels of Americans feeling that nobody cares about them, not the corporations, not the oligarchs, and not even their own government, that that is the thing that Democrats have to offer, which is a faith in government and representatives of the people to actually care about and serve the interests of the people.

Bethany: Luigi, before we talk about what Katherine actually said, I wanted to go back to this idea of Paul Samuelson and David Ricardo's law of comparative advantage. Why did that become the closest thing that economics has to a law of physics? Why did so many people believe in it so wholeheartedly? Why was Samuelson dismissed when he began to question it?

Luigi: Number one, because by and large, it's true in a sense. It is true that in the original version of Ricardo, England was more productive than Portugal on every dimension, but was more efficient to have Portugal produce wine and England textile. This is fundamentally true. Now, is it true all the time? How does he factor in the fact that, over time, people learn? There are a lot of things on top that might change the result, but the fundamental intuition is correct.

Bethany: Isn't that law designed for a natural resource-based world where what people could do best or what a country could do best did depend to some degree on its natural resources? Does that rule still hold at all in a modern world where a country like Taiwan can make itself into the linchpin of the world's semiconductor organization simply by deciding that it was going to be that? I've heard an argument that it does depend on one form of natural resources, which is that people in Taiwan, very smart people in Taiwan, want to stay in Taiwan. I suppose that is a form of natural resource. It seems to me that in a world that isn't shaped by natural resources, that law loses a lot of its power, and force of will can take its place.

Luigi: I don't agree necessarily because, for example, a very precise and obedient labor force might be a social comparative advantage. Italians are never known to be particularly obedient and disciplined. They're more creative. It's not surprising that we were never very good at mass production, but we produce the best cars, the Ferrari, the best motorbikes, the Moto Guzzi, and you can keep going. We're very happy to let the Japanese produce for the masses, and we produce for the elite.

Bethany: All right. I still am not so sure that law makes a ton of sense in the modern world, but whatever, we'll let that part go. When Samuelson committed heresy and said that it could leave a country, even like the US, as a loser, did he predict what actually ended up happening, or did he think something else would end up happening?

Luigi: Actually, it's interesting because Ricardo never said that everybody in a country would be better off. He simply said that collectively that you can re-transfer resources so that on an aggregate level, all the Portuguese are better off if you transfer enough resources. If you don't, you're going to have the wine producers being filthy rich and the former textile producer on the street begging. Samuelson did something more clever than this, introduced the possibility of a change in the gains from trade, and that this change might go adversely against the United States.

As a result, the United States will be collectively worse off, which will violate the law of comparative advantages. You can argue that this has happened with China to some extent. I will argue that this is what is going to happen with China moving forward. Certainly, if you are Europe, you can see that China now has surpassed you in most dimensions, and so probably happened more to Europe than the United States. I think that the prediction was definitely right.

Bethany: Basically, what happened is that the economics professor or the powers that'd be in the creation of neoliberalism, the multifaceted powers that'd be decided to take Ricardo's law of comparative advantage and layer on top of that the trickle-down theory. The idea that not only should every country do what it does best and trade for the rest, but that somehow that would enrich everybody in a society because the riches that accrued to a society through that would trickle down to everybody in the society. Is that a simplistic journalistic way of thinking about it, or do you agree with me?

Luigi: I think you're giving even too much credit for the intellectual consensus. I'm not even sure they had such a coherent view. I think that the view was there is a law in economics that say that trade is good. I am going to push this law as a general law without exception, ignoring the obvious counterindications, basically, treating as an idiot everybody who disagrees with that, and say you're not an educated economist is exactly like the gold standard. You're not an educated economist if you don't believe in the gold standard.

Bethany: Interesting. Is there anything that Katherine Tai said that surprised you?

Luigi: I like very much what she said. I think she was going a little bit too fast for most people, at least too fast for most economists. It is true that economists regard free trade as the only religion they have. When you challenge religion, you need to challenge it one step at a time. You cannot show up a day and say, "All this story about the Immaculate Conception all BS." I don't think you'll go very far by saying that. On the other hand, if you say, yes, there are some things that don't make a lot of sense, and slowly.

I think it, to some extent, is a pity because I discovered myself this tension. I told you when I used to write for the Italian press. I was writing about this transatlantic trade pact that was in discussion. I actually took the time to read it. Unlike most people who comment on it, I took the time to read it. I discovered these clauses that were completely crazy. I wrote this, and I received an enormous amount of backlash that said, "Oh, I thought you were a free trade economist. You're not." I'm sorry to abuse this, but as if it's a matter of the religion of the Immaculate Conception, and either you believe it or not believe it, there is nothing in between.

I do believe that there are enormous gains for trade at the international level. However, not everything that is labeled as free trade is good. Most importantly, and I think this is where reading Katherine's work and et cetera has been very useful, is to what extent the entire process has been captured by multinationals. This is not free trade. This is basically American multinational trade regime. As a person who always believed that you should be pro-market but not necessarily pro-business, this is a pro-business trade, which is terrible in many dimensions.

Bethany: I had not realized how much of a bait-and-switch it can be, that what looks like on the surface as a free trade deal or sold as a free trade deal is actually underneath it very different from that. That I found totally and completely fascinating. I think now I'm interested in trade.

Luigi: If you're interested in trade, I strongly encourage you to read the trade-related aspects of international property rights, the so-called TRIPS. Speaking of free trade, it was the opposite of free trade because it was enforcing more strongly the monopoly on intellectual property rights. That created, I think, a huge divide between the more advanced countries, and particularly the United States, and the rest of the world. This was heavily lobbied by big pharmaceutical firms in the United States.

In fact, they created an intellectual property committee that was pushing that as their own agenda. What I heard Katherine say is, it's given for granted in the trade representative administration, the US should just be a lobbying organization for the large multinationals. Remember the old saying that whatever is good for GM is good for the country? Now they say whatever is good for the larger companies is good for not only the country, the world.

Bethany: That is pretty dramatic. I also thought her point about Trump's tariffs were really interesting. I would love to know if they were done cynically with this idea that they would then be a trade to confer advantages on the chosen ones, or if they were done with the best of intentions for workers and were somehow turned into this trading tool. I think it is yet another example of Trump's perhaps genius of sorts, which is that everybody is still screaming tariff, tariff, tariff, and the damage that tariffs do. Nobody is saying, "Wait, that may never have been the purpose in the first place, that tariffs are being traded." He does have this ability to get everybody to keep looking at the thing that he did the other day that has suddenly been turned into a tool for doing something very different.

Luigi: You got it absolutely right. I think, as the bit of a feature of the magicians, the magicians who do tricks are really, really good, pushing you to look in one direction when they do something in the other direction. Trump has that ability that focuses the attention of everybody, starting with the press, but everybody in the country on one thing, and then he pulls a rabbit out of the hat completely in the other direction, and so people get all confused.

Bethany: Then even people who should be fairly nuanced about tariffs and what they do and what they don't do become incredibly anti-tariff because they want to be anti-Trump. I was amazed just in that initial wave of coverage how very few people pointed out that actually Biden had kept all of Trump's tariffs and imposed some new ones, by the way, and that the story clearly wasn't this simple as tariff bad, but people have such a reaction to Trump that that's what it became.

Then it just leaves everybody completely confused and befuddled so that it leaves him an opening to do more than he would otherwise be able to do. It's just fascinating to think about how that's played out through trade and that it's left the Democrats-- We had said in our introduction, we had hoped to get some clarity on what Katherine thinks Democrats will do come 2026, and there really isn't any clarity.

Luigi: There is, in my view, a major realignment in place. The big question is where big money is. We saw that already a big chunk of big money, i.e., Silicon Valley, move into the Trump camp completely. People did not expect this, but now I think it's irreversible. The question is, where is the rest of big money? Some would like to go back to the previous world. I don't think it exists. My fear is that if the Democratic Party does not go back into being the party of workers, you're going to have the MAGA party, because we cannot talk about Republican Party, at this point it's a MAGA party, MAGA party being, at the same time, the party of workers and the party of billionaires, excluding only the managerial class.

Bethany: Speaking of depressing-

[Laughter]

Bethany: -unfortunately, I don't have any pushback on that. I do hope that we can at least get Democratic candidates who are not so reflexively anti-Trump that they fail to see some of what he tapped into and got right, but without then falling into the trap of becoming more Trumpian than Trump.

Luigi: Honestly, I think that some candidates don't want to see it. It's not that they were able to see, they don't want to see, because they do want to go back to the old neoliberal order. There is no way to convince them otherwise.