Is Our Trade Policy a Feature or a Bug

Commentary by William Alan Reinsch

Published July 1, 2024

Two years ago, the cartoon strip Garfield had an episode where his human, Jon, looks at Garfield lying down and says, "All you do is eat and sleep." Garfield's response is "True. . . . That's a feature, not a bug." About the same time, I recall Ambassador Tai saying the same thing about an element of U.S. trade policy, and now the same issue is occupying the trade commentariat-is our current policy a feature or a bug? Essentially, is it a permanent shift or a temporary problem that will eventually be "solved?"

In recent weeks I have had the same conversation with a variety of foreign visitors. They ask me, rather plaintively, when will the United States return to its "normal" trade policy of promoting trade liberalization and improved market access. My answer has been sometime between four years and never. Four years is the minimum, because I don't see either presidential candidate returning to the postwar system. Trump may prove more willing than Biden to enter into trade agreement negotiations-after all, he sees himself as a dealmaker-but his deals would not be free trade agreements in the traditional sense. With Biden, we will get a continuation of the current policy, as I explained recently, since trade politics within the Democratic Party have not changed.

But the "new normal" question extends beyond the two presidential candidates and beyond the United States. In Congress, we are seeing growing demands for tariffs as the solution to all economic problems. Electric vehicles import threat? Tariffs. Chinese drone imports threatening our security? Tariffs. A domestic shipbuilding industry that has virtually disappeared? Tax Chinese ships entering U.S. ports. Low-priced Mexican tomato imports? Higher antidumping duties. You get the idea. Europe is beginning to go down the same road.

Before the Trump administration, there would have been substantial pushback on such proposals on the grounds that they violate our World Trade Organization (WTO) obligations. No more. The Biden administration, which claims to support multilateralism and gives lip service to the WTO, has in practice abandoned it by ignoring its decisions when it doesn't like them. The appellate part of the WTO dispute settlement process is dead, and it was the United States that struck the fatal blow by preventing the appointment of new Appellate Body members (although one can argue that it was more like Agatha Christie's Murder on the Orient Express).

The WTO has also not distinguished itself on the negotiating front, with only a modest outcome at its 2022 ministerial conference, and an even more modest result at the one this year. Multilateral institutions function best when countries are willing to take the long view and look beyond short-term domestic politics; when they understand that the world has global commons problems, like climate change, that cannot be tackled successfully by countries acting alone; and when they understand that supporting these institutions requires give as well as take. The United States for 70 years has supported multilateral trade institutions, in part by being willing to "take one for the team" -agreeing to results that are politically difficult in the larger interest of maintaining the system.

The United States did that because our government-both parties-believed multilateral institutions were the best way to promote Western values and goals and the best way to meet the challenge of the Soviet Union. That policy worked and produced enormous economic benefits for the United States in the process through a stable world more open to investment and trade.

That support has eroded in the United States and elsewhere, I think, for three reasons. First, emerging economies like China, India, Brazil, and South Africa view the WTO as an institution not of their making and one designed to perpetuate a trading system that benefits rich countries more than poor ones. Second, rich countries have gotten tired of paying an increased domestic political cost to keep the system afloat through trade concessions that are unpopular in their own economies. Third, China has upended the trading system by pursuing a brand of mercantilism that works well for it, by virtue of its size, but not so well for everyone else, and through its policy of economic coercion against countries near and far that don't toe its political line. (Remember Lithuania.)

These developments, particularly the last, have caused countries to pull away from multilateralism and focus on their short-term interests, including their national security, which has rapidly become conflated with trade policy. Recent U.S. actions or proposals, for example, on steel, aluminum, electric vehicles, semiconductors, shipbuilding, and drones have all been made in the name of security and have all been focused on the perceived threat China poses to the United States.

So, the new normal is beginning to look like the pre-World War II normal-the law of the jungle, where the biggest and strongest take care of themselves and push the others around. From that perspective, the past 75 years have not been a new normal; they have just been a bug rather than a feature. That is a profoundly depressing thought, made worse by the realization that neither of our two presidential candidates will do much to change it. It reminds me of the ending of "Won't Get Fooled Again" by the Who: "Meet the new boss. Same as the old boss."

The topic for next week's column (maybe): how we dig ourselves out of the hole.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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