Since immediately after the second world war, the United States has been at the forefront of an effort to remove trade barriers and open international trade. With the high tariffs of the 1930s seen as having encouraged international divisions and tensions that led to economic depression and then war, the new goal was to establish a legal order that would be a platform for creating a more open postwar economy.  In 1947, the first step was taken when the General Agreement on Tariffs and Trade was signed by 23 governments. Under its auspices, eight rounds of multilateral trade negotiations would take place, each one bringing more countries into a process of reducing tariffs and other barriers to trade. In 1994, 123 countries concluded the Uruguay Round and established the World Trade Organization. That round also significantly expanded the scope of trade agreements, including topics such as intellectual property, services, and dispute settlement. In 2001, the Doha Round was launched with 159 participants, and although it has not been concluded, it did continue the pattern of aiming for deeper tariff reductions, more countries, and broader scope, including labor and environmental policies.

Throughout this time, the US was a leader in the multilateral process. It of course pursued its own commercial interests in the negotiations, but the GATT, and now WTO, was also widely seen in the US foreign policy community as one of the foundations of the liberal international order. During the Cold War, these arrangements were the economic equivalent of the alliances that the US constructed around the world. Chinese and then Russian accession to the WTO in 2001 and 2012 was important not only for the economic implications but also because they indicated a willingness to join the “West.”

But as these multilateral rounds became more cumbersome and complex – a process that culminated in the stalled Doha Round, the United States also pursued plurilateral sectoral and regional accords. For example, the International Technology Agreement, signed in 1996 by 29 governments, aims to eliminate tariffs on IT products. There are now 82 signatories and the agreement covers 97 percent of world trade in these products. The most consequential of the regional accords was that establishing the European Economic Community (now the European Union).  For the United States, the most important regional accord was NAFTA, which came into force in 1994. It was among the first large scale agreement to include labor and environmental provisions. Along with recognizing the large economic relationship between these partners, NAFTA was a politically important agreement, bringing together the citizens and businesses of this entire region. Today there is much criticism of NAFTA, some of which is deserved. But as the multilateral process began grinding to a halt, such regional accords provided as way forward toward further trade liberalization. They also allowed certain countries who were ready and willing to move beyond the provisions of a multilateral accord into more ambitious territory.

Beyond NAFTA, the United States also pursued free trade agreements with specific countries or groups of countries. Even more so than the large regional agreements, these often were politically motivated, intended to strengthen a particular government or enhance ties between the US and that country. The US currently has twenty such accords, ranging from Australia to Bahrain to Morocco, to Israel and Peru, as well as the Central American FTA, CAFTA.  The EU has pursued an even more extensive set of FTAs, and there is considerable overlap. It can be argued that the EU agreements, which Include Korea and Japan, are more economically significant, but for the US, it is clear that the accords are more about politics than about a calculation of which country will be more economically significant.

Throughout this time, trade — and its role as the manifestation of globalization — was becoming a more politically fraught topic in American politics. The 1992 campaign of Ross Perot in which NAFTA was described as a “giant sucking sound,” and the 1999 Seattle protests at a meeting of the WTO intended to launch what would become the Doha round were perhaps most indicative. But these were largely outside the mainstream of US politics. Although there might be concerns about specific trade agreements, the US political and economic establishment remained firmly committed to the overall ambition of a liberal international trading order. One concrete indication of this is US adherence to WTO rulings. This has proceeded without major controversy. The US certainly uses the full extent of its legal remedies in the WTO process, but has, for example, rewritten elements of its corporate tax code, in order to comply with these rulings. These has been no large outcry in Congress, and indeed, the WTO has largely escaped the criticisms suffered by other international organizations, such as the United Nations, in the US political discussion.

Central to this US support for a multilateral trading system and for free trade agreements in general, was the idea that the reduction in barriers between countries was, in itself, a good thing. A more efficient global economy, with fewer barriers, would bring great prosperity, as well as political stability. Although most trade agreements do create some losers, either industries or individuals, on balance such trade agreements should be winners for all parties. And by knitting together economies and countries, free trade should create greater understanding and less conflict. To some ears, this might sound altruistic, but for the US foreign policy community, it seemed clear that an open international trading system was good for both global prosperity and the United States.

The Obama administration began a new phase of US trade policy with a focus on large strategically important regional trade agreements: the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). As a candidate, Obama was not a fierce advocate of free trade agreements. He was very critical of NAFTA, and even pledged to unilaterally reopen that agreement if he were elected. Instead, he launched two of the most ambitious regional agreements the US had ever sought to negotiate.

TPP was completed at the very end of his term and involved 12 countries bordering the Pacific, including most notably, Japan and the NAFTA signatories, but not China. It was expected to bring together economies representing about 40% of global GDP, and one third of global trade. Along with reductions on tariffs, it included measures related to trade facilitation, on-line commerce, treatment of foreign investors, intellectual property protection (especially important in some of the Asian signatories), labor codes, and state owned enterprises.

TPP can certainly be seen as a politically inspired agreement. While it is often viewed in Europe as a main element of the US “pivot to Asia” it clearly follows in the tradition of using trade agreements to bolster political allegiances and stability. Asia represents the most rapidly growing region in the global economy, yet includes few plurilateral arrangements that can help tie the region together beyond simple consultations. While no one is arguing that the US will launch an alliance a la NATO or facilitate construction of an Asian EU, but the TPP can certainly be seen as part of this larger tradition of using trade agreements to boost security, democracy, and stability. Of course, the Obama administration also believes that TPP is in US economic interests. One study demonstrates that TPP is most like previous agreements signed by the US than it is previous agreements signed by other parties.

TTIP was the other major negotiation launched by the Obama administration. This is an ambitious accord where market access is arguably much less important than other elements. Indeed, the value of a US – EU FTA was discounted for many years because the tariffs were already so low, an average of 2-3 percent. The US and EU together represent just under 40 percent of global GDP and, like TPP, a third of global trade. The two negotiators are each other’s largest trading partners when imports and exports are added together. But investment is the key to the relationship. Sixty percent of US investment abroad goes to the EU, only 16 percent to the Asia Pacific. Seventy percent of European investment abroad goes to the US. US affiliates in Europe earned more than $2.9 trillion in 2014, more than all US exports globally. About 15 million jobs on both sides of the Atlantic are provided by European companies in the US and US companies in Europe.

Given the low level of tariffs, the agreement was designed to focus on regulatory issues, as these were often the more effective barriers to trade. The negotiations have mostly been about testing and certification, not actually changing the regulatory requirements in the US and EU. TTIP included a horizontal regulatory chapter which sought to harmonize the process of creating trade affecting regulations, as well as specific chapters on food safety, chemicals, cosmetics, medical devices, pesticides, vehicles, and others. It also includes sections on sustainable development, energy, trade facilitation, small and medium enterprises, investor protection, IPR, geographical indicators, and competition policy. A successful TTIP is clearly in the economic interest of the US, but it is also seen as a geostrategic agreement, and sometimes described as an “economic NATO.” This aspect seems especially relevant in light of the growing tension between Russia and the US and Europe. It also seems a bit absurd not to have an FTA with our closest trading partner.

TTIP and TPP also could have laid the groundwork for another wave of trade liberalization, one that would not just reduce tariff barriers but that could also create more transparency and stability, and enhanced rule of law, in an age of globalization. If the EU and the US both have FTAs with Peru, Colombia, and a number of Central American countries, as well as Japan, Vietnam, and others, why shouldn’t those countries be allowed to adopt certain elements of TTIP, providing they can fulfill the obligations?  The might be called “TTIP Plus,” and could lead to a network of “trade” agreements focused on IP protections, data flows, and regulatory processes.

The British decision to leave the EU has, to use a British term, thrown a spanner into the works. But it has not upset the fundamentals of using trade to support a desirable global order. Indeed, President Obama’s comment that the U.K. would be at the “end of the queue” in terms of FTAs to be negotiated was totally in keeping with this, even if its impact might have been negative. If Hillary Clinton had been elected, we probably would have seen the U.K. discouraged from seeking an FTA until it had completed its divorce from the EU. Until Prime Minister May’s announcement last week that Britain would not remain in the EU Single Market, there was no basis for beginning such negotiations. One possibility would be to negotiate a US – UK trade deal in conjunction with TTIP, especially since Britain will remain an EU member for at least two more years. And because the Great Repeal Act will actually enshrine EU law in the U.K., it is possible that Britain, even though not part of the Single Market, takes a few years to review its regulations and decide which can be altered or not, depending on its TTIP obligations. Or, in another scenario, TTIP is completed just as Britain leaves the EU, and Britain, having been a partner to the negotiations as an EU member, becomes an associate member of TTIP, taking on most obligations but perhaps not all. Most likely, Britain would receive better terms from the US by being part of the US-EU negotiations rather than by negotiating on its own.

Also, there is nothing in how Prime Minister May describes her ambitions for “Global Britain” that is contrary to the liberal trading order. She refers to Britain being open for business, and seeks to escape some of the less open elements of the EU. She has set out a modest industrial policy, but not a protectionist one. The vision of Britain put out by the Brexiteers involves a network of FTAs reaching around the world, backed up by London’s role as a global financial hub.

The Trump Administration has been enthusiastic about a potential bilateral UK-US trade deal. But that enthusiasm is not derived from the same view of international trade and its value as held by the May government. The US government has privileged politics over economics, as seen by its willingness to pursue an agreement with Britain, with GDP of $2.89 trillion, compared to $15 trillion for the EU 27.  But, the question is: what political purpose? And here we begin to see how radically different the Trump administration will be.

The top three trade-related appointments offer some clues towards understanding likely policy directions in the Trump administration. Wilbur Ross, during his confirmation hearing as Secretary of Commerce, stated that the US market should be open to those who play by the rules. And as a billionaire investor (and a former supporter of TPP), he clearly understands the way the international economy works. Peter Navarro, who will head the National Trade Council in the White House, is a professor primarily known for his book, “Death by China”. It is unclear how the NTC will interact with the National Economic Council, or how someone with little government experience will fare in the tough environment of Washington. Robert Lighthizer, who will be the US Trade Representative, is a long-term trade professional, with experience on Capitol Hill and in USTR, and a track record as an aggressive litigator on anti-dumping cases.  These appointments indicate that the Trump Administration is likely to make full use of trade remedies against those that pursue unfair trade policies. This should cause concern in the Chinese government, for example, but it does not necessarily indicate a revolution in trade policy.

But the Administration’s early announcements that it would abandon TPP and renegotiate NAFTA, along with the proposal that a border tax might be assessed to pay for a border wall show how much further the Trump administration will go.  The key elements of this revolution are as follows:

  • An emphasis on mercantilism: Trump has not gone back to the 20th century but to the 18th century. No longer is the US, as a leader in the global economy, seen as benefitting from an open system, but rather, protectionist walls should be erected to ensure that each trading relationship has a positive balance for the US.
  • A preference for bilateral accords rather than multilateralism. Throughout the confirmation hearings, we have heard of a preference for bilateral rather than multilateral or plurilateral agreements. This in part explains the preference for a US – UK agreement over TTIP. Indeed, we have heard that after the U.K. agreement, the Trump administration may be interested in a bilateral FTA with Germany. Coupled with President Trump’s comment that he expects other EU member states to leave the Union, there is likely to be a rocky relationship with the EU. But this anti-multilateralism also points to a difficult relationship with the WTO. The tradition of routine acceptance of WTO rulings by the US government might be a thing of the past. This rejection of multilateralism allows the US to focus on each bilateral balance of trade.
  • No sense of reciprocity. Traditional free trade has always been based on reciprocity. But if the main criteria is to achieve a positive balance, reciprocity is much less relevant. Of course, negotiating an agreement without reciprocity will be a challenge. Even something like the proposed border adjustment tax, which taxes imports but not exports, could face retaliation (although right now it is far from clear how such a tax would be structured, let alone implemented).
  • A focus on merchandise trade. To date, there is little in the Trump administration’s statements about international trade that indicates an understanding of the role of services or digital trade, despite the fact that both of these are growing elements in the US economy. There is nothing in this vision that shows an awareness of global supply chains, in which a specific product can cross borders several times before it is completed.

It is not clear that this shift in trade policy will help the US economy or the workers it claims to support. Jobs have been lost to trade, but also to automation. Even if companies reopen factories in the US, they will have 200 workers, rather than 10,000. We should, of course, examine our trade pacts for their impacts and revisit them as the global economy changes. There is a good case for renegotiating NAFTA. And certainly there is a case for better support for workers displaced by trade — something the US has not generally done well.

This shift in trade policy also presents some challenges for all of us in the think tank world. Donald Trump’s rhetoric about trade contributed greatly to putting him in the White House. Those who voted for him, both displaced workers and those doing well economically, ae clearly not convinced about the benefits of an open global economy. This is not just an American phenomenon – Germany is a country with an economy based on exports, but where a significant portion of the public is opposed to TTIP. There is a fear that the agreement will require Germany to change its regulations and make them less safe, which is not the case. But this demonstrates the challenges that we face as trade agreements move into the regulatory sphere, which are seen as “domestic” issues.

To complicate this challenge, we should acknowledge that among certain elements of the public, there is a real mistrust of “experts.” Under these circumstances, we need to think of new ways to disseminate research, and perhaps even new research questions. We need a greater understanding of the pressures faced by regular people, and we need to avoid simply dismissing their views because they are not consistent with our facts and analysis. To do so is not only arrogant, but is also ineffective. If we are to rebuild a public consensus in favor of international trade, we must find language and arguments that will garner the support of those who have rejected the established and traditional consensus.