The death of free trade?

Robert Kutner has a paywalled article in The New York Review of Books about the history of free trade and the efforts since Trump’s first term to impose tariffs, particularly on China, beginning with the first Trump Administration.

“Free trade ideology once aligned with America’s economic and security interests. After World War II, open markets were good for domestic industry because the US had come out of the war economically preeminent. America had a huge trade surplus based on exports of a whole range of manufactured goods, as well as raw materials such as steel, aluminum, and farm products. This meant it could be generous about accepting offsetting imports. Openness to trade also helped anchor Washington’s cold war alliances, as its NATO allies earned dollars from exports that helped them rebuild after the war.

 

“Not surprisingly, free trade became an article of ideological and diplomatic faith. With America’s economic dominance, the US government could overlook the fact that in Japan and much of Western Europe, postwar reconstruction (some of it initiated by the US-sponsored Marshall Plan) was anything but laissez-faire. Even in America the Pentagon had become a kind of closet planning ministry. Many military investments (aircraft, computers) had commercial applications, and Pentagon funding helped incubate the Internet, as well as US prominence in tech.”

Thanks to Bretton Woods, the US became the world’s financial and economic hegemon and the dollar became the world’s reserve currency. But beginning in the ‘70s, Japan and Korea violated free trade norms through their use of subsidies, quotas, cartels, and close coordination among banks, governments, and industry. During the following decades, American jobs and businesses were lost to foreign competition. While an argument for free trade was that it improved the quality of life and economic opportunities for workers in the developing world, more often than not it simply meant sweatshop wages and pollution in those countries. Lose-lose for the workers.

It's certainly time for a re-set on the free trade ideology. Does that necessarily imply Trump tariffs? Hard to say, since they seem to be negotiated based on terms that benefit Trump and his family personally.

“This tug-of-war was further complicated by Trump’s own penchant for making corrupt deals that could benefit him or his family. As Rogin explains, Trump’s son-in-law Jared Kushner often sided with Mnuchin and Cohn because of side deals that Xi Jinping offered the Trump family. At Trump’s first summit meeting with Xi at Mar-a-Lago in April 2017, the threat of tariffs was put off, and Trump agreed not to formally brand China as a currency manipulator, breaking a campaign promise. “While Xi was at the resort,” Rogin writes, “the Chinese government approved three provisional trademarks for Ivanka’s company, allowing her to sell jewelry, handbags, and spa services in China.””

More grifting, not agreements that benefit the US economy and American workers, is what we can expect for Trump II. But in the longer term, the genial mask of “free trade” has been stripped away. The future of international trade looks to be more chaotic and uncertain.

“In the coming era, whether Trump’s successor is Republican or Democrat, the form of globalism that dominated the late century will be defunct. The international economy will be a far messier affair than the sublime set of universal free trade rules that US presidents once sought. It remains to be seen how the new course will serve the national and global interests.”

 https://www.nybooks.com/articles/2024/12/19/the-import-of-exports-no-trade-is-free-lighthizer/