Former Trade Representative and Council on Foreign Relations President Michael Froman discusses what the world can expect from Kamala Harris or Donald Trump, and how Harris is breaking from Joe Biden. Hosted by Stephanie Flanders and Adrian Wooldridge.
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She certainly lays out a very different vision for the United States than former President Trump does.
Welcome back to voter Nomics, where politics and markets collide. This year, voters around the world have the ability to affect markets, countries, and economies like never before, so we created this series to help you make sense of it all. I'm Stephanie Flanders and I'm a Woodridge and our co host Alegra Stratton is not quite back in the saddles. She'll be back next week. Adrian, we are. It feels like the beginning of term. We're back together again, and just a few things have happened in the last month or so.
Absolutely, it is indeed the beginning of term. An extraordinary number of things have happened. I think, in particular, the American election has been turned on its head. When we left, it looked as though Donald Trump was almost as certain did to get into the White House. Now it looks as though he's the outside candidate. So extraordinary change, yes, and well we'll see.
I mean, he would probably not accept that he's an outside candidate, and even our own swing state poles suggest it's still very much in the balance, But you're right, everything has changed. I mean, what we're going to focus on today is the foreign policy side of the election, and we're going to be talking to a former senior official in both the Obama and Clinton administrations. So you just heard there, Mike Frohman, now head of the Council of Foreign Relations. I was struck Adrian in Chicago watching Kamala Harris's acceptance speech. There was probably more on foreign policy in her speech than any other one at the convention, but that wasn't a high bar. No one was talking about it very much. What is amazing is and a function of how quickly this campaign has changed, is a few lines on foreign policy in that convey and speech is probably going to be all that we get from her on foreign policy before next week's debate with Donald Trump on September tenth.
In one sense, it's an incredibly frustrating thing because the world is on fire and we're not hearing about these massively important issues. But on the other hand, America is a big country. It's an inwood looking country, and elections do not tend to turn on foreign policy. Foreign policy is an issue for wants, it's an issue for eccentrics, but it's not the issue that people vote on. People vote on pocket book issues. So she is doing the sensible thing in many ways. So we know a great deal about her cooking abilities, and we know almost nothing about what she thinks about NATO except that she's broadly in favor of it.
I should say, although we've all supposedly been on holiday, I can't help noticing that you have still written quite a few columns since we last spoke, particularly relating to Kastarmer's first few weeks as Prime Minister in this new Labor government. And one thing that has been a theme has been housing. And all these elections that we've covered on this podcast for you know, through this year and now looking to the US election, the cost of housing housing supply has just emerged as this major issue in almost every election we look at, and sort of related to that, as politicians grasp for ways to increase housing supply. There's been this kind of war declared on Nimbi's and both you know, Carla Harris and many Democrats in the Convention we're talking about raising housing supply. Also here in the UK, a war on Nimbi's being waged by labor and you have some reservations about it. You had a brilliant sort of tipbit in your which I hadn't noticed in your discussion around the nimbi's in your in your column way, so that although he said polent suggests that people are far less opposed to new housing developments if they're esthetically pleasing. Yet Angela Rayner last scene I should mention quite recently raving in Abitha, the Deputy Prime Minister and Secretary of State for Housing, has imperiously removed the requirement that new buildings should be beautiful on the grounds that beautiful means nothing. Really. That does seem quite controversial.
If you have a party that had, you know, was inspired by John Ruskin and William Morrison, people who thought that beauty should be democratized, that there was no reason why ordinary people shouldn't have access to beauty. It seems a pretty terrible thing to say, but she certainly redeemed herself by her raving this weekend.
We've gone from being fed up for experts with you know, not caring about beauty. I don't know, I don't know which is best. But we are thinking about foreign policy and we also we're supposed to on this podcast be recording any number of elections happening this year, and there has been breaking news from Germany this weekend. Two state elections that we the world probably wouldn't usually pay attention to, in Thringia and Saxony, but they have both shaken up Germany's establishment parties and the results have potentially also held some pretty significant warnings for Olave Schultz's federal elections next year. So let's get to our quick on the ground conversation with our senior editor in Berlin, Alan Crawford. Alan, thanks very much for joining us.
Hello, thank you Stephanie.
For those who haven't paid attention to the details, but perhaps don't want to hear all the details, could you just remind us why these two state elections were more significant, perhaps than usual, certainly for the rest of the world.
What grabbed the headlines was the fact that the far rate has won a stateu action for the first time since the Nazis in the Second World War, and that foil shocking is not all that surprising because the polls have been indicating this was the case, this would be the case for a long time. Also, this the far right party the alternative for Germany that a SDA to use the German acronym is it's anti immigration, it's largely pro putine, and it really seems to have tapped into a vein, particularly in the east of Germany. So it placed first in the state of Turin, which is actually a beautiful state, picture postcardtowns, and in Saxony, which is the center of the semiconductor industry, so you know there's a significance there in economic terms.
Potentially, you've just described two very different states in terms of where we can't put this all down to economic discontent. We often talk about foreign policy not determining elections, but foreign policy and specifically support for Ukraine has figured very prominently in both very much.
So there's an open goal, if you like, in attacking the coalition the federal government in Berlin. It's a three way coalition that deeply unpopular. It's led by the Social Democrats. Olaf Schultz is the chancellor, with the Greens party and also with the Free Democrats kind of liberal pro business party, and they all perform disaster disastrously in these state elections. But yes, they're flailing. As governments across Europe are over the issue of immigration and Germany, despite its slow start, it was also it's now also the largest contributor apart from the US, of military aid to Ukraine, and both those policies, in terms of open immigration policy and helping Ukraine are deeply unpopular in sections of society.
How does the pro puting side of this fit in? How can we explain that?
Well, it's actually not all that difficult to explain. Both those states are in the eastern part of Germany. Poles consistently show that Germans as a whole are in favor of helping Ukraine a slim majority, but a large number of this majority are in the east. Of this minority rather, who are against helping u train are in the East, And yeah, there's something of a dichotomy there for obvious reasons that you know, it was the Soviet dominated part of the country, but they're nevertheless, is also an allied distrust of NATO, distrust of the US, and frankly, many people I've spoken to people who feel very uncomfortable with the idea of supplying weapons into a war, which overturned a longstanding German policy, and they feel that that's fueling the conflict rather than resolving it.
But I would have thought if you'd lived under the hail of Soviet dictatorship, you'd be pretty wary of booting.
Yes, but that's very much a Western perception of how people in the East think, and and that gets to the nub of this protest that they don't feel represented by the establishment parties. That Another one of the headlines from yesterday's results was the fact that a party called the bs W it's named after a woman, Zarawagenconnecht, who is a former communist. That party placed third. It came from nowhere, it was only formed earlier this year, and it comes with a broadly left up sitting well, you know, pretty left wing economic stance, but it's also anti immigration and anti help for Ukraine. It did incredibly well and could well be in the state governments. So that's an indication of really the kind of the way that politics is being turned on its head, particularly in the East.
I mean, just on that point we tend to focus and of course the sort of the world is very sort of transfixed with the alternative at Deutschland and you know, obviously with the echoes of the of the Nazi past, but we shouldn't forget that. One of the striking things about these two elections was the strength of the new b W alliance of the far left, and they're going to play a kind of key role in, if you like, keeping the AfD out of power in these coalitions in the states. So tell us a bit about them.
They almost certainly will do, because of course, coalition building is extremely difficult when you have a party that scores something like thirty percent and above of the vote but is excluded by the very nature of the fact that the other parties refused to form a coalition. Yeah, the BSW Zara wagenconnect is. I mean, she's essentially a populist politician who she is constantly on television chat shows. Nothing wrong with that, of course, but she was found to have took part in very few votes in the Bundestag over the last session. She has really been very politically astute. It's very easy to categorize voters, you know, when they vote like this. But she saw that there was an opening for a party that was conservative in social positions but not necessarily economically. And I think that she's opened up the way both into government in these states but also potentially federally at the next election, which is too a year from now, September twenty twenty five.
So often the more extremist parties have tended to be on the right and not also on the left in response to recent economic and immigration trends. It's very interesting that we are actually seeing that in Germany. But the immediate just quickly, Alan is sort of the immediate follow up to this for Ola Schulz, does it change the way that he's trying to shore up his coalition going forward.
Not really no, because he I mean, apart from the fact he's bullheaded and stubborn. Then there's a third state election in the east in Brandenburg, which surrounds Berlin later on this month. The SPD, his party, is not looking so bad in that election. The AfD will do well, the BSW will do well, but SBD is not down and out there. And also, as I said, the a FD is not going to enter government in any of these states. So it's a lot of noise. But I think it's important to also look that the center right, the former party of mercle, the Christian Democrats, it kind of held pretty steady. They will probably form the government, the majority party in the States and Poles continually show that they're on course to win the next federal election. So this is not France.
I'm Crawford, thank you, thank you so much. He's reminded us that one of the things that has not changed since we last spoke is that there's still now French government formally speaking, or at least now new government after the legislative election. But maybe in the next few weeks we'll be able to talk about a new French government. Let's get to that conversation that Adrian and I had just a few moments ago with an extremely distinguished practitioner and thinker on foreign policy, Mike Frohman, now president of the American think tank the Council on Foreign Relations, but previously a senior official for both President Clinton and President Obama. He ended up as US Trade Representative for President Obama in his second administration. And I started by asking him whether we should care that Kamala Harris seems to have been talking about foreign policy as little as possible.
I don't think that's terribly surprising. I mean, first of all, elections rarely turn on foreign policy concerns. This election, foreign policy may play more of a role than traditionally. But I think to the degree that she needs to distinguish herself from both Trump and from Biden, she's seeking to do so, really in the area of economics and really in the area of domestic economic policy. Her plan to reduce inflation, price controls, et cetera, with certainly a stab at saying that she recognizes how important inflation is to the American public and she wants to take action against it.
And in general, there is where she's not talking about we should just sort of assume that she's going to be the same as Biden. Is that the general message?
I mean, we don't know yet. I mean, I think she has at least indicated she is willing to go further in certain areas, for example this price control and gouging price gouging area in foreign policy. Again, we haven't seen a lot of science that she's going to be a different place, some different emphasis, including perhaps on the Palestinian issue. But she has been part of the Biden administration. She is sent in innumerable situation room meetings with the President and the senior team working through these issues. Over the last four years, she's traveled on behalf of the administration several times to every continents, virtually every continent. She's met one hundred and fifty four meters. So she has been part of the Biden administration's foreign policy team for the last three and a half years, and you would expect there'd be a fair degree of continuity at least some perspective.
But if I'm a sort of undecided voter, if such a thing exists in the United States at the moment, it's very difficult for me to think of data points on which to make up my mind between her and Trump. In she's a bit of a blank slate. I mean, she's not quite Biden. I'm not voting. If I was voting for Biden, I'd be voting for somebody with an enormous amount of experience and with great clarity about what his foreign policy is. With her, I'm voting for somebody who's been in charge of the border, well that was a bit of a disaster. Who's come down on this side or that side of issues such as the Palestinian issue. Who's deliberately dealing in a world of vagueness and vibes at a time when the world is enormously dangerous.
I'm a bit worried it sounds like you as the undecided but highly policy oriented voter who may be a rare breed. There's certainly thousands of data points to distinguish her from former President Trump. I mean, she is and she has a long record, whether it's a senator, as Attorney General of California, as vice president, as part of the Biden administration. I think the harder one is to distinguish her from President Bia. But she certainly lays out a very different vision for the United States than former President Trump does.
If you look around the world today, it is on fire. You have two live conflicts on which it feels like these two candidates would have very different approaches. If you're sitting in the rest of the world, what should you expect from a Trump administration or a Harris administration when it comes specifically to Ukraine and the Middle East.
Well, I think the greatest difference is likely to be on Russia and Ukraine, where former President Trump has said he would end the war in twenty four hours. He hasn't said how he would do that, but most people interpret that as him signaling to the Ukrainians that support is is coming to an end and that they should come to the negotiating table and negotiate the best deal they can with President Putin, Whereas the Biden Harris administration, I imagine Vice President Harris, if she would be elected, would continue the policy of trying to provide very strong support for the Ukrainians, working very closely with NATO and other allies to support Ukraine's effort, and ultimately getting to a position where Ukraine can negotiate with the Russians, but hopefully from a position of strength, where they have something to trade, where they have a better situation on the ground. And so I think there there's likely to be quite a significant difference. And if you're sitting across the pond, you're a member of NATO, I think you worry quite a bit about what the differences between former President Trump and the Vice President Harris, because the commitment to the Alliance, the willingness to work with allies and partners, is I think one of their fundamental differences overall. When it comes to the Middle East. I think it may be more a matter of emphasis than substance. Both candidates are strongly in support of Israel's security and wants to support Israel in achieving that security both wanted this conflict in Gaza to be over as quickly as possible. Former President Trump hasn't laid out how we go about doing that differently than President Biden, but certainly this administration has been pushing hard to try and reach a ceasefire, has laid out a plan to do so. I think the matter of emphasis is that if there are some small indications that she has been more willing to say out loud what we know the Biden administration has said privately to the Israelis, which is that they've got to do more and better to avoid civilian casualties in Gaza, They've got to do more and better to provide humanitarian aid to the terrible situation facing the Palestinians, and that there needs to be a pathway towards the Palestinian self determination and state of it at some point. That has been the part of the Biden plan. She has said it a bit more outwardly than the than the Biden administration has, But there again, I think it's more a matter of emphasis than anything else.
Again, this issue of her the vagueness and the vibes. Has she said anything specific or detailed about her policy towards China, which seems to be quite an important issue.
If you're asking, as you said, anything in the last six weeks since she was elevated as the Democratic candidate, I don't think she has said anything more than what she has said for the last three and a half years, which has been very much part of the Biden administration, focused on investing domestically to build out industrial capacity and competitiveness and absolutely critical technologies, standing firm against China in terms of unfair trade practices, including using tariffs and other tools to keep out Chinese imports in critical sectors, and more broadly beyond economics, standing firm, whether it's on the self China see or on enhancing the terrens around Taiwan. She's been very much part of the Biden administration approach to that. She's gone to Asia four times, I'm correct, that she's met with leaders across the region. She's represented President Biden in various regional forums out there. So she has been engaged on the China issue directly as well as part of the broader policy process.
So we're saying that she's a continuity candidate, but she's a continuity candidate in the world in which has been a big rupture in policy towards China in the post Trump years. So this is very different from the old free trading world.
Well, I think that the day of big multilateral free trade agreements are is probably somewhat in the past, or it's not in the near future, that's for sure.
Says a former negotiator trade agreements.
Such agreements, And I think part of that is a recognition that the rules based system proved to be not sufficient to deal with the integration of an economy as big and as important as China's is as integrated into the global economy as China says, but that basically follows a different set of rules, and we haven't figured out yet how to address the rules basis and to take that into account.
Just to get a little bit will relate that to the sort of slightly more inside baseball crucial questions like who might get top jobs under either administration. But I think it goes to the Biden administration has been closely associated with Jake Sullivan and others such as I don't know, delete seeing an intellectual framework to the instincts that Donald Trump had when he came into to office. Quite a sort of new view of industrial policy, but also, as you just laid out, a new view of the global economy, which in some ways is a bit more kind of zero sum. But do you see that continuing under both for Paris administration and the Trump administration.
I think this administra, the Bide administration, has laid out the beginnings of a framework for both a go broader than industrial policy, really about the role of the government in the economy, including industrial policy, but also with regard to export controls, foreign investment restrictions inward and outward, and then trade and protectionism. I think any administration coming in is going to have to deal with a lot of the unanswered questions. For example, I think the Chips Act, I think is pretty popular. It's not broadly supported by partisan but it got some support. And the question is the Chips Act is popular, and that's.
About having increasing the US production of high, high quality semiconduct chips.
Yet and to date, I think it's working quite well. It's crowding in a lot of private investments, so in addition to the tens of billions of dollars of public funding, it is crowding in scores of billions of dollars of private funding, So that's I think seen as a positive. The Inflation Reduction Act, which also was engaged in industrial policy with regard to electric vehicles and other clean energy technologies, that has less bipartisan support. So a question will be for any administration going forward, is industrial policy a central part of our toolbox going forward? How much are we willing to spend on it at what cost? Of course, to state the obvious, every dollar spent on industrial policy is a dollar not spent on defense, on social programs, or it's another dollar going to the deficit and the debt, which may consider it to be an unsustainable trajectory. So they're going to have to make these kinds of trade offs. Same thing with the other tools. Protectionism is the most obvious one. We hate our dependence on China. We also hate inflation and rising cost of living, and the actions we take to reduce our dependence on China, whether it's retoring or putting tariffs on, it's going to exacerbate inflation and the high cost of living. That may be a perfectly legitimate trade off to make on strategic goods, it may be a less persuasive trade off to make on clothing and footwear and toys and things that low income Americans spend a disproportionate amount of their disposable income on. And so again, I think any future administration is going to have to wrestle with these questions. And the challenge I think has been that the Biden administration has been quite disciplined in the small yard high fans, the restrictions on exports being really quite limited to the most highly powered semi conductor chips and a few other critical technologies. Same thing on foreign investment. But now that the processes are in place or the precedent has been set, there's always the risk that the yard gets bigger and bigger, that the screen gets finer and finer, and it becomes more and more difficult across other areas of the economy that may not be as strategic.
And President Harris is she well connected with the European leaders.
She is.
I mean, first of all, she's been the lead American going just as a one example, to the Munich Security Conference. Over the last few years, she's led the US delegation there. She's invested in an enormous amount of time and talking with European leaders and engaging on European issues. Her primary national security advisor, Phil Gordon, is a European expert. He's the least expert. He's an expert on American foreign policy generally.
But there is lack which is good.
There you go all the better, and so.
There is a.
Certainly understanding of the European perspective. And I would just say more generally, and here I do think if Russia Ukraine is one point of contrast between Trump and Harris, I think another very important point of contrast is just the willingness to work with allies and partners. I think there's a much greater commitment you've seen by the Biden administration than the Trump administration, and I would assume that that would continue under the Harris administration.
The other thing I'm struck by internationally. We've spoken it a bit, spoken about it a bit on the podcast before, is there is still even with Kamala Harris having become candidate, there's quite a divide between this very very broad sense, the kind of business community or some of the sort of biggest players in the business community and broadly speaking, sort of diplomats around the world when it comes to Donald Trump. You know, the business community, again broadly generalizing, is surprisingly sort of sanguine, often particularly big American businesses and big investors and others, about Donald Trump and even maybe quietly wanting to see him come to office in terms of what it could do we could do for the stock market and for the US economy, And equally a lot of people circling the wagons, particularly in the G seven but maybe also in other capitals, really worried about what it would mean to have Donald Trump back in office for sort of global security. Do you think both sides are exaggerating.
Well, I think the business community does have concerns about the impact on whether it's on security or just the relations around the world, instability in relations around the world. But they've sort of made their peace with Donald Trump when we saw this back in twenty sixteen or twenty seventeen as well, where as long as he delivered on tax cuts and regulatory relief, they were willing to swallow policies that they didn't like, protectionist trade policies, restricted immigration policies, and more chaos around the world. Then I think that that view still holds largely true, and to be frank has been a fair amount of business uh uh, disappointment or concern about the Biden administration, which they view as whether it's on anti trust, on other issues, as making life quite difficult for them.
And so.
I think going into this election there is a view by the business community, and whether it's complacent or not, one can judge that we got through it the first time. He delivered on tax cuts, on regulatory relief, and that goes directly to our bottom line or the way we do business and the rest we can manage around it. Now that may be underplane, you know, the impact of protectionism right now.
I don't know if you, Mike, if you were in Chicago, I don't think I saw you there, But that you know, we've seen since the convention off swing state, Pole and a few others, not a big bounce for Kamala Harris, but certainly she's still doing markedly better than Biden was in many of those places. But when you talk to a lot of the strategists, they point you to the fact that the economy is still by overwhelmingly the number one issue, particularly in the swing state, and that a majority of voters still think that they favored Trump's policies on the economy rather than Kamala Harris, and those same strategies will tell you the only way really that she's going to win is by fixing that, and that means persuading voters that actually Trump's tariffs, for example, his promise of across the board tariffs on all imports are attacks and they would raise inflation, make the economic situation worse for people. And you've spent your life trying to persuade people about free trade and explain just those kind of arguments. Do you think it's a lost cause. Do you think they will ever persuade people that the tariffs against China are attacks and we'll make things worse.
I don't think it's a lost cause, but I think it's a case that you have to really make, and you know there's now analysis out there. I mean, when you impose tariffs, you actually run the risk of three categories of costs, and there's a direct cost, which is what people tend to focus on. How much more that Chinese good or the good coming from any other country that has a terrify I don't remember. Former President Trump is announced he's going to apply ten to twenty percent tariffs against goods coming in from all other countries outside of China, that the direct cost at a consumer or an importer is using that input, it's part of their manufacturing, has to pay for it. Then there's the cost of retaliation, which we really calculate, but when the other countries retaliate, that's a further cost, particularly on our exporting industries, agriculture and manufacturing and hurting jobs in those areas. And then is a third category, which is more amorphous, which is the cost of imitation, where other countries say, well, look if the US skin engage in this kind of policy, then so it can wait. We can be selective in our use of our commitment to free trade, we can be selective in our use of tariffs. And that sort of an open ended that's sort of an open ended envelope. And so you know, I think the Peterson Institute, among others, has been an analysis of the direct cause just that first category, and it's a thirty nine hundred dollars bill to the average American family of taking the Trump proposals seriously, that's leaving aside the other two categories of car So.
I thought you can persuade Stephanie of that case. But can Vice President Harris make that case. She seems to be averse to talking about policy. She doesn't seem to be very eloquent when she does talk about policy issues. She said, can she make that case? Have we seen any sign of her beginning to make that case, because it's actually quite a difficult case to make.
Yeah, we've seen some signs. I think there's been some comments about the broad based tariffs that Trump wants to pose on on the whole on the whole world. I think, frankly, she's decided that the better economic argument is to win against inflation, which people can more relate to, and they don't tie tariffs to inflation in quite the same way as you know, what's happening with the price of eggs or or or something, or the price of something else at the grocery store and so or pharmaceutical products or other areas where you can say people are price gouging. And so that's been her primary line of attack so far.
She's going for the bad economic argument role than the good one.
Well, yeah, sometimes that.
After the right issue. I think the question is I don't have a license to practice politics? Is one of my former flogues used to say, so I'll leave that to others, but just remember we have seventy five days. I believe again, campaigns don't turn completely on Paula See as much as we policy wongs would like to think that they do. I think is given how recent she became the nominee and the front runner is the fact they're beginning to lay out these ideas is good. But they also just wanted to get to know her as a person and hold that character up against the character of the of the alternative candidate and see who they're more most comfortable with. The president here, as you know, there's multiple roles not just serve policy leader in charge, but is head of state and represents the country. And I think that's a lot of what Americans think through. Do they feel comfortable with former President Trump's leader? Do they feel comfortable with Vice President Harris?
Is different?
And thank you very much, Mike. That was great.
Thank you.
Thanks for listening to this week's photon Nomics from Bloomberg. This episode was hosted by me, Stephanie Flanders, and Adrian Wildridge. It was produced by Summer Sadie, with production support from Isabella Ward and sound design by Moses and dam Brendan Francis Noonham is our executive producer, and Sage Bowman is the head of Bloomberg Podcasts. With special thanks to Michael Frohman and Alan Crawford. Please do subscribe and rate highly our podcast wherever you get it.