Editor’s note: This analysis is part of 2017 Presidential Inbox — an ongoing Stimson Center series examining the major global challenges and opportunities the Trump administration faces during its first 100 days in office. Click here to read the full series.
By William Reinsch
THE CHALLENGE: Thanks to the presidential campaign, trade has become a toxic issue, and the first thing the new president should do is to begin to unwind the rhetoric, calm everybody down, and initiate a trade policy that addresses the concerns both candidates have raised. A good place to begin is an ambitious effort to jumpstart talks on the Transatlantic Trade and Investment Partnership (TTIP).
Most economists acknowledge globalization has sped up the pace of change in our economy, which in turn has created new victims. But most experts also believe the right medicine lies not so much in trade policy as in adjustment assistance, education, tax policy, and support for innovation — policies that will simultaneously stimulate jobs and growth while providing new avenues to prosperity for those left behind in the 21st century economy. The implication is that trade policy was not the main factor in causing the problems and therefore cannot be the main tool for fixing them.
At the same time, with 95 per cent of the world’s consumers outside the United States, it is obvious that economic growth will be through expanding trade rather than restricting it. The challenge for the incoming president, in addition to pursuing the domestic policies that will actually make a difference, is to “re-legitimize” trade and restore public confidence in it by pursuing a policy that both expands trade and speaks to the concerns of those that have been victims of it.
THE CONTEXT: Trade skeptics, particularly on the left, have pointed the way here by arguing that the issue is more about power than it is about trade. Trade, in theory, is good, they argue. It is when trade policy serves the interests of elites — large corporations and financial institutions — rather than working people that trade becomes bad. President-elect Trump has said he supports “good” trade agreements that would provide real benefits to workers and opposes those that would not. A trade policy that focuses on jobs for working people rather than corporate priorities has the double benefit of building public support for trade policy and providing tangible benefits that would improve peoples’ lives.
What would such a policy look like? It would begin with more enforcement of existing laws and rules, which both presidential candidates advocated. The Obama administration has taken some big steps there, but there is more that can be done, particularly on litigating more aggressively in multiple fora — U.S. courts and regulatory bodies, the WTO, and in the judicial systems of our trading partners.
One area to focus on is intellectual property (IP) protection, as IP is increasingly the basis for our global competitiveness and whose acquisition, both legal and otherwise, has been a major target of China and others. That is primarily a business concern, however, so stepped-up enforcement in other areas that are more politically salient, like currency manipulation, worker rights, and environment/health/safety regulations is also important. Critics argue that trade leads to a race to the bottom — ever-lower standards and wages in order to compete (and thereby accommodate the interests of large multinational companies). Enforcement of the provisions already in trade agreements or WTO rules will both address skeptics’ concerns and build support for a trade policy that would, among other things, seek to negotiate those same issues with other countries.
PRAGMATIC STEPS: The most obvious place to try out this policy is TTIP. Negotiations will not conclude in the current administration, and the next one will have to either pick up the ball or dig a hole and bury it.
TTIP is unraveling faster in Europe than it is here; both sides have been unwilling or politically unable to make the concessions necessary to produce a significant agreement; and in light of Brexit and looming European elections in 2017, the easy road would be to simply let it go onto life support and blame the EU (and, clearly, a trade agreement with the U.K. if and when it leaves the EU should be a priority for the new administration).
A positive trade policy, on the other hand, would recognize that workers and some NGOs view EU standards and regulations as higher than ours, opening the door to a race to the top rather than the bottom if we are prepared to accept some of the EU positions. Such a policy could jumpstart the TTIP negotiations through proposals that trade skeptics would welcome. That could change the domestic political calculation, producing more worker support for the agreement, while also undermining anti-TTIP sentiment in the EU, where opponents fear adoption of allegedly lower U.S. standards.
Even so, it would not be an easy negotiation. Despite close political ties and common cultural heritage, there are significant issues that divide us — including the precautionary principle, privacy, competition policy, and agriculture. But if the new president wants to make trade an element of U.S. international economic policy rather than a scapegoat for our problems, this is the most promising place to begin.
Beyond that, there are areas where cleanup is needed. TPP is likely dead, but that will not stop other TPP nations from pursuing alternatives that are not to our advantage. President-elect Trump will need to have an effective response if he doesn’t want China to supplant us in the region.
If anyone hopes trade will just go away as an issue, they are sadly mistaken. The best move for a new president is to get on top of the issue with an activist policy that resets the debate. Otherwise, we face the same campaign two and four years from now that we have just been through.
William Reinsch is a Distinguished Fellow with the Stimson Center, where he works principally with the Center’s Trade21 initiative.