Technology & Trade

Trade Follies

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By William Reinsch

I had mostly written this week’s column — a piece on President Trump’s first 100 days — and then last week’s multiple fiascos rolled out, so I decided to put the 100 days aside and focus on the fiascos instead. There are two issues here, the thing itself: our rapidly oscillating trade policy, and the way the policy was made, unmade, then remade — and what that says about this White House.    

First, the week ended pretty much as it began as far as NAFTA is concerned. That the president was prepared to pull out of it — along with his subsequent directive to Commerce Secretary Ross to look for inadequacies and imbalances in our trade agreements, including the WTO, not to mention his ad hominem attack on KORUS — is profoundly disturbing.

On NAFTA, the president, to his credit, eventually figured out that withdrawal before we have begun to negotiate is a profoundly stupid strategy. Think of it this way: I say I want to reach an agreement with you, and my first move is to punch you in the face. How does that lead to a successful negotiation? At best, withdrawal is something you threaten mid-way through the talks when you’re not getting your way. It is not an opening move, particularly when one is dealing with sovereign countries where standing up to the Americans is good domestic politics. 

While there was a relatively happy ending here, the process of getting there was traumatic. The fact that a profoundly bad idea that was opposed by many of his close advisors as well as many members of his own party in Congress, not to mention the other two affected governments, got as far as it did — and that it leaked out along the way — suggests a White House in chaos. Competent management makes sure these ideas get into a broad-based vetting process early on and then are killed quietly so no one ever finds out about them, and the president doesn’t have to explain his 360 degree turn from negotiation to withdrawal and then back to negotiation. By the end of the week there were probably a lot of people wishing for the return of the “no drama Obama” style of management. 

But, as they say in the late night TV commercials, that’s not all. The week ended with a new attack on trade agreements including the World Trade Organization (WTO). The underlying premise here seems to be that all trade agreements to which we are a party should work to our advantage at the expense of the other parties. This reflects the president’s view of negotiations as zero-sum — we win; you lose. Experienced negotiators, however, know that diplomacy, particularly trade negotiations, must be positive sum — win-win — if it is to succeed.

Indeed, the entire premise of trade liberalization, on which all these agreements are based, is that the results should be good for all parties, recognizing that inevitably gains will not be distributed evenly and some will gain more than others. The Trump approach seems to be that the U.S. should win and everybody else should lose, or at least win much less than us. This flies in the face of the last 70 years of post-war history, a history in which the United States not only emerged as the world’s leader but profited quite nicely from it, thank you very much. Our belief that trade liberalization is a rising tide that lifts all boats has been validated by history. 

Overall, these episodes — including his odd comments about Korea — are teaching the world that the United States is no longer dependable. Not only does it not stand for what it has long stood for, nobody knows from day to day what we do stand for or that we will be standing in the same place tomorrow. Aside from a good bit of grumbling, the world’s response to this, as we have seen with the other TPP countries, will be to move on without us. The result will be a United States increasingly irrelevant in the world as other nations look elsewhere for steady leadership. To use another playground analogy, the administration seems to have the idea that the U.S. has the only ball, and that if we take it home the game will be over. But in reality there are a lot of balls out there now — and if we go home, the game will assuredly go on without us.

William Reinsch is a Distinguished Fellow with the Stimson Center, where he works principally with the Center’s Trade21 initiative.

Photo credit: Presidencia de la República Mexicana via Flickr
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