Trump proposes a free-for-all on free trade
▶▶The GOP standard-bearer says he can sue for better deals ▶▶“Even medieval Europe found that trading in large merchant fairs required… legal institutions”
In the past few weeks, Donald Trump has set several decades of Republicanbacked U.S. trade policy on fire. Trump, the presumptive GOP presidential nominee, said that if elected, he’ll abandon talks on the 12-nation Trans-Pacific Partnership, a deal that GOP leaders in Congress support. He intends to renegotiate the 1993 North American Free Trade Agreement, hammered out by President George H.W. Bush and signed by President Bill Clinton. He would also sue China more often at the World Trade Organization.
These moves are necessary because existing U.S. trade policy causes “poverty and heartache,” Trump has said in his stump speeches. He insists he’s a free trader at heart, but he wants reform, to ensure American interests are protected. “I’m not against trade,” he explained at a June 30 town hall in Manchester, N.H. “I just want to make better deals.”
Democrats sometimes call this approach “fair trade.” Trump will find it as difficult to achieve as they have. “I’m going to direct the secretary of commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers,” Trump promised in a June 28 address on trade in Monessen, Pa.
Julia Gray, an assistant professor at the London School of Economics, watched on television. “I was like, Ooh, I want that data,” she says. She doesn’t have it because it doesn’t exist. Violations are subjective, difficult for even experts to pin down: “It’s really hard to figure out what’s one country’s subsidy and what’s another country’s closely guarded health and safety standard.”
Gray says her research shows that politicians seldom follow through on campaign threats to renegotiate or abandon trade agreements. She’s also found that many agreements end up as what she calls “zombies”—signed but meaningless, because they lack enforcement. So it might seem logical that a more litigious U.S. administration could succeed in improving the American position just by getting other countries to abide by the terms to which they’ve already agreed.
The trouble is that there isn’t good evidence that Trump’s approach will work. A 2016 paper in International Studies Quarterly by internationalrelations professors Stephen Chaudoin, Jeffrey Kucik, and Krzysztof Pelc looked at 15 years of WTO cases and failed to find a significant increase in trade after disputes were settled. That is, if China blocks widget imports, and the U.S. wins a challenge at the WTO, it’s not necessarily the case that China will start buying more American widgets. “The occurrence of a dispute does not increase the size of the total trade pie,” the authors wrote.
Trump has said that even though he wants to hold other countries to account, he’s wary of strong enforcement mechanisms built into trade deals that might interfere with what the U.S. wants to do. The Trans-Pacific Partnership, he says, “will undermine our independence.” In this way, he’s similar to those who campaigned for the United Kingdom to leave the European Union. They wanted free trade with Europe but not the regulations that went with being in the EU. “The European Court of Justice,” former London Mayor Boris Johnson said during the campaign, “is now taking decisions on absolutely every sphere of political life in this country.”
Fair trade requires both rules and enforcement, says Christina Davis, who teaches trade policy at the Woodrow Wilson School of Public and International Affairs at Princeton. You can have no trade and perfect sovereignty— see North Korea. You can have free trade, enforced through maximum sovereignty, which results in escalating protectionism and trade wars. Or you can accept certain constraints in exchange for open competition. “To be truly fair, one has to agree on fixed rules and delegate to a third party for interpretation,” Davis says.
One example of a free trading area with rules, bureaucrats, and a loss of sovereignty is the U.S., where the federal system helps facilitate commerce among states. Another is the European Union, which was born out of the move toward a common market after World War II. Some British leaders have indicated they’d prefer something like the relationship between the EU and Norway, which remains part of a free-trade bloc known as the European Economic Area—but without the free movement of people. The heads of government of the remaining EU states have taken a hard line. No “cherrypicking,” was how German Chancellor Angela Merkel put it. Britain, they say, can either accept both the burdens and the benefits of being part of Europe, or neither.
This is more than simple petulance. “Even medieval Europe found that trading in large merchant fairs required the development of legal institutions,” Princeton’s Davis says. “Simply making a good deal is not so easy without the accompanying rules and bureaucrats to manage the rules.” Trump may be right that free trade has been bad for some Americans. But if he wants both trade and trade reform, he’s going to need more than just a better deal.
The bottom line There’s little evidence that Trump’s promised trade wars will improve the position of U.S. workers or consumers.