A war in Europe, with drastic economic consequences. A worsening climate crisis. A digital transformation that continues to accelerate and transform our world, creating economic opportunities, powerful industry giants, as well as threats and harms to democracy and humanity all at the same time.
And of course, fragile supply chains and an unsustainable version of globalization demanding reform and improvements. It is abundantly clear that these challenges have implications for competition policy, as well as trade policy. So, all of us working in these spaces must row in the same direction. In fact, we already are doing so—and I am delighted to be here with all of you today to begin connecting these conversations.
After the pain and fear of the supply chain disruptions we all experienced during the pandemic—including the panicked race to secure masks, hand sanitizer, ventilators, and semiconductors—Barry’s insight is no longer theoretical.
Today, labor leaders, CEOs, foreign leaders, and the President’s National Security Advisor all agree: our global supply chains, which have been created to maximize short-term efficiency and minimize costs, need to be redesigned for resilience.
Because resilient supply chains are vital for greater national and economic security.
By this, we mean production that can more easily and quickly adapt to and recover from crises and disruptions. It means having more options that run through different regions.
But getting there requires a fundamental shift. A shift in the way we incentivize decisions about what, where, and how we produce goods and supply services.
That shift, in trade as in antitrust, moves away from a narrow focus on benefits for consumers. Our trade policy places workers at its center to reflect the reality that the consumer who enjoys the low prices of imported goods is also a worker who must withstand the downward pressures that come from competing with workers in other parts of the world toiling under exploitative conditions.
Similarly, prioritizing and pursuing the consumer welfare standard in competition policy has led to consolidation and unchecked dominance in our domestic market, which has stifled competition and diminished economic liberty for our citizens and workers.
President Biden recognized this when he issued an executive order on promoting competition policy in the American economy, just six months into the Administration, in which he said:
“[T]he United States faces new challenges to its economic standing in the world, including unfair competitive pressures from foreign monopolies and firms that are state-owned or state-sponsored, or whose market power is directly supported by foreign governments. We must act now to reverse these dangerous trends, which constrain the growth and dynamism of our economy, impair the creation of high-quality jobs, and threaten America’s economic standing in the world.”
In trade, as Jake said so aptly in his speech last month, the pursuit of efficiency and low costs above all else has led to vulnerable and high-risk supply chains.
Let me take a moment to explain how designing a system around efficiency and low costs got us here.
Trusting markets to allocate capital efficiently, we designed trade rules to liberalize as much as possible, under the theory that we were facilitating the creation of a free global marketplace. We thought a rising tide would lift all boats, believing that this approach could lead to a gradual improvement in labor standards and environmental protection as countries grew wealthier from increased trade flows.
We did not include guardrails to ensure that it would be the case. The system itself, then, created an incentive for countries to compete by maintaining lower standards, or by lowering their standards even further, as companies sought to minimize costs in pursuit of maximizing efficiency. This is the race to the bottom, where exploitation is rewarded and high standards are abandoned in order to compete and survive.
When efficiency and low cost are the only motivators, production moves outside our borders. It becomes increasingly consolidated in one economy—such as the PRC—which manipulates cost structures, controls key industries, and became a dominant supplier for many important goods and technologies.