Trump and Trade: Now for the Hard Part
By Nate Olson
THE CHALLENGE: President-elect Trump famously made trade a signature issue of his campaign. His populist refrains made for smart politics. Cross-border investment regimes, ownership structures, and production processes have grown so complex that sometimes no one — certainly no single government — can see more than a few select pieces of the larger whole. This has had two important effects. First, within communities where incomes are stagnant, it has fanned resentment toward other countries and a global economic elite. Second, it has narrowed policy options. The traditional model for regulation of the economy, and for a social compact with the public, was forged under very different circumstances. It’s fraying fast.
Particularly since the “Great Recession” of 2008–2009, policymakers have been increasingly concerned with reforms needed at the national and international levels to realign a robust global economy with the public interest agenda. But in the grand scheme, we still have a long way to go. Indeed, there is real potential that the U.S. and international reactions to today’s populist pressures will take us further away from that goal.
That brings us back to President-elect Trump. The concrete proposals he offered in recent months were few in number and almost entirely protectionist in substance. He committed to withdraw from the Trans-Pacific Partnership (TPP), serve notice on renegotiation of the North American Free Trade Agreement (NAFTA), and label China a currency manipulator. He underscored a willingness to impose punitive tariffs on countries that persisted in unfair trading practices, perhaps even if it meant running afoul of World Trade Organization rules.
On this side of the election, the challenge becomes combining smart politics with smart policy. The Trump administration must not only distance itself from the more extreme and counterproductive ideas it advocated in the campaign. It must identify a more substantive and positive agenda for how the U.S. can harness globalization, and engage with the rest of the world more generally. American competitiveness — and a whole lot more — hangs in the balance.
THE CONTEXT: Trade has long been about more than narrowly defined economic outcomes. The modern global economy is different. Its impact has a new breadth and depth. Much of that impact has been, and will continue to be, for the good. Trade and globalization have helped bring greater prosperity to billions of people, drive key technological innovations, and empower individuals worldwide to express themselves and communicate with one another.
But we must be equally clear-eyed in seeing the downsides. People have lost jobs. Entire towns have died out. The environment has suffered. These and other consequences — however far outpaced they might be by the benefits, on balance — have been far more focused and acutely felt.
Add to this mix a lackluster global macroeconomic record since 2008–2009, and we can start to better appreciate the anxieties that underlie much of the resistance to measures like TPP. Trade and globalization are under intense scrutiny. The perils of further economic dislocation, risks to consumer health and safety, potential “capture” of the public space by elite interests more generally — these are legitimate concerns that deserve not only to be met with earnest debate, but accommodated as part of a common path forward.
On both ends of the political spectrum, there are small but very vocal segments not interested in helping to shape that path. In some cases, they’re actively trying to block it. But standing in place is not a viable option, neither in the long-term nor in the short-term. Again, the traditional model is fraying fast. And the fundamental characteristics of globalization are here to stay. We must move forward.
PRAGMATIC STEPS: Moving forward means reframing the narrative on trade and globalization in a way that better reflects the different equities involved. It likewise means redoubling efforts to understand the sources of anxiety and opposition, without reinforcing tendencies to reflexively blame everyone but ourselves when legitimate grievances are identified. And it means working more, not less, with stakeholders at home and abroad — throughout government, industry, and civil society — on solutions that can endure.
Trade21 is Stimson’s long-term commitment to advancing these efforts. But don’t take my word for it. In the coming days Distinguished Fellow William A. Reinsch and Nonresident Fellow Eric Miller will provide new, forward-looking analysis that examines priorities the U.S. can pursue with partners in the North American neighborhood, Europe, and beyond. They will highlight how the interests of a wide range of constituencies can be brought into line. In short, they’re just the kind of pragmatic ideas the Trump administration must embrace if its success in governing is to approach that of its campaign.
Nate Olson is the Director of the Trade in the 21st Century initiative at Stimson.