Arguably the most powerful element of the campaign platform of Republican candidate (and now President-elect) Donald Trump in the recent US Presidential campaign was his argument that the outgoing Obama administration had pursued external trade policies that took American jobs abroad to foreign workers. Trump took aim at the regional free-trade organizations that the US had entered into and was in the process of joining.
Candidate Trump was emphatic about NAFTA (North American Free Trade Association), which is made up of the three North American countries, and TPP (Trans-Pacific Partnership), which has yet to become operational. The Donald was imprecise about what he would do with NAFTA, but he knew what he would do with TPP. One of the first actions he would take as President would be, he said, to take the US out of the Pacific-area organization.
This raises an existential question. Is the country with the world’s largest economy, after seven decades of advocacy of the idea of universal free trade—this began with its signing in 1947 of GATT (General Agreement on Tariffs and Trade), the forerunner of WTO (World Trade Organization)—about to turn its back on globalization? Is the world about to see the emergence of the economic equivalent of Fortress America?
The American-jobs-are-being-exported campaign rhetoric appears to have resonated with workers in states—mostly in north-central America—that had been considered safely blue (Democratic). The Electoral College votes of Ohio, Wisconsin and Michigan brought Trump to the 270-vote winning mark.
In recent days President-elect Trump has reiterated his desire to pull the US out of TPP, and, with a Republican-controlled Congress, he might very well try to do that. But the US’ turning its back on globalization completely is another, far more serious matter. I offer two reasons why there is likely to be no turning back, not even during the four years of the Trump administration.
The first reason is historical in character. In the modern era the US has been a staunch advocate and unwavering supporter of the concepts of free trade and globalization. The politicians in Washington D.C. always have one eye focused on America’s manufacturing industries and have always tried to strike a balance between the welfare of America’s working class and the need to achieve high levels of production efficiency and consumer welfare, which are attained by subjecting to foreign competition the products of the US’ factories, workshops and farms. Whenever the policymakers in Washington D.C. have perceived a real threat to America’s industries and workers, they have usually reacted not by disengagement from trade arrangements and prohibitions of foreign goods but by appropriate changes in the US Tariff and Customs Code.
As stated earlier, Donald Trump may move for the US’ disengagement from the not-yet-operational TPP. But disengagement from NAFTA would be a very serious and highly disruptive action. Not only has NAFTA been operating for nearly two decades but it involves US relations with Canada and Mexico, two of its closest allies.
My second reason for believing that the US is not about to turn its back on globalization relates to present geopolitical circumstances. China has become the world’s second largest economy and, some observers say, could before too long, overtake the US economically. And, although the US is still the only superpower, China is beginning to flex whatever military muscle it has. In no part of the globe is American-Chinese rivalry more intense than in the area encompassed by the ocean that the US and China share. Indeed, this growing rivalry is the explanation for the pivot to Asia effected by the administration of President Barack Obama. On China’s side, Asia-Pacific influence is demonstrated by its establishment of a development financing institution to rival ADB (Asian Development Bank), which is controlled by Japan and the US.
The American architects saw the 12-member TPP not only in terms of its economic benefit—chiefly the exchange of production efficiencies and employment opportunities—but also in terms of its strategic value, viz., its being a vehicle for the further projection of American power and leadership. To withdraw from TPP would be to offer China a strategic advantage on a silver platter.
Free trade has for a long time been the cornerstone of US trade policy and globalization has become entrenched as a part of America’s economic vocabulary. Was the US not one of the principal moving spirits behind WTO’s creation?
To be sure, American workers need relief from competition from foreign producers. But the answer lies not in a turning away from globalization. Mr. Trump’s administration should look in other directions for that.
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