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Are Free Trade's Best Days Behind Us?

July 15, 2019 in Economics

By Simon Lester

Simon Lester

If you were a U.S. trade negotiator in the 1950s or 1960s, you
might be a little shocked by the aggressive trade rhetoric thrown
around today. China is an existential threat? Our European allies
are almost as bad? What exactly went wrong with U.S. leadership of
a rules-based trading system?

What exactly went wrong
with U.S. leadership of a rules-based trading system?

In truth, the state of American trade policy has been precarious
for a while now, and for understandable reasons: the industrial
development of a sizeable portion of the developing world; the
expansion of trade rules beyond traditional issues of
protectionism; and a more powerful international judicial system
with “teeth” that can have an impact on U.S. policies. We cannot
expect a return to the post-World War II era of bipartisan support
for trade agreements.

But thanks to President Donald Trump, the situation has gone
from precarious to falling off a cliff. Tariffs have proliferated,
as the Trump administration has expanded the use of some trade
statutes and dusted off other ones that had been all but forgotten.
To the surprise of very few people, U.S. trading partners have
retaliated with tariffs of their own.

The Chinese-American relationship may have soured for the
foreseeable future. People on both sides of the political spectrum
have reasons not to like China these days—human rights
violations, security threats—and that will make it difficult
to address the trade wreckage left by the Trump administration.

It’s tempting to look for relief from some of the many Democrats
running for president. But economic nationalism is alive and well
on the left. And while voters support trade openness more than they
ever have, they tend not to feel strongly about the issue.

Of course, all of the above relates only to U.S. trade policy.
The rest of the world is moving in a different direction. The
European Union and Japan have just implemented a new trade deal;
Canada, Mexico, Japan, and eight other countries are part of the
Trans-Pacific Partnership (from which Trump withdrew); China and
New Zealand are updating their trade agreement.

In the United States, some future administration will almost
certainly get the country back in the game, but it may not happen
until we fall far enough behind that the economic pain forces
people to take notice.

Simon Lester
is the associate director of Cato’s Herbert A. Stiefel Center for
Trade Policy Studies. …read more

Source: OP-EDS

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