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How Trump and Biden killed the free-trade consensus

The Hill | 25 September 2023

How Trump and Biden killed the free-trade consensus


The U.S. has turned sharply against free trade over the past two decades, shifting from an era in which members and presidents of both parties generally embraced one free-trade pact after another to one in which the forces of globalization are widely criticized, if not condemned.

Former President Trump’s recent campaign pledge to enact a general tariff of 10 percent on imported goods to the U.S. is only the latest arrow into the free-trade consensus, which has sputtered now under successive presidential administrations.

A dozen pieces of legislation implementing various trade deals were signed by U.S. presidents between 2001 and 2012, all following up on the Clinton-era North American Free Trade Agreement (NAFTA).

Congress also voted in 2000 to allow China to enter the World Trade Organization (WTO), a vote that opened up the U.S. further to Chinese imports.

But over the past decade, things have changed dramatically.

Only one trade deal has been approved by a recent U.S. Congress — in January 2020 under a bipartisan deal to approve the U.S.-Mexico-Canada Free Trade Agreement (USMCA) under Trump.

And that deal was seen by many as part of the new era since it made major pro-labor overhauls to NAFTA — which by that time had become almost a four-letter word for many globalization opponents in both parties.

Longtime critics of the U.S. era of free trade argue the political world finally caught up to the grassroots consensus that trade deals were damaging the country.

“What we’re seeing here to some degree is elite opinion and policymaking catching up to where the public’s lived experience of these policies already was,” said Lori Wallach, a longtime critic of globalization and director of trade at the American Economic Liberties Project.

“There was an elite consensus … and it was obviously bipartisan … and there were all these grandiose promises of things that everyone would want, but the deliverables did not come forward,” she said.

Free-trade advocates and their supporters in the business community are unhappy with the shift.

For much of the 2000s, Republicans in particular backed free-trade diplomacy, arguing that trade deals would lower prices for U.S. consumers while creating markets for exporters and paving the way for stronger diplomatic alliances.

They’re now coming up against populist forces after Trump’s takeover of the GOP.

After winning the 2016 election in part on the promise to unwind decades of free trade deals, Trump sidelined the GOP’s most ardent free traders while making common cause with anti-trade Democrats.

Liberal populism typified by Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.), also deeply skeptical of trade, is rising in the Democratic Party.

Bill Reinsch, who served as a Commerce Department undersecretary in the Clinton administration, said there’s “a lot of unhappiness in the business community on trade.”

At the same time, he acknowledged the old era is over, and it’s unlikely to come back anytime soon.

“Business people would like to go back and negotiate real agreements, where we lower tariffs and get more market access in return, and we all grow and make more money. But no — there’s not a consensus now on this, and there’s not going to be any time soon,” he said.

How the free-trade consensus changed

Criticisms of globalization lingered throughout the 1990s and early 2000s but were largely drowned out by the political free-trade consensus, particularly after the Sept. 11, 2001, terrorist attacks.

Over the next several years, a GOP-controlled Congress approved free-trade deals with Singapore, Chile, Australia, Morocco, several Central American countries, Bahrain, Oman, Peru, Panama, South Korea and Colombia.

But there were repeated rumblings of a breach.

One seminal moment came in the early 2000s, when the National Association of Manufacturers (NAM), a business lobby, nearly split in two over the normalization of trade relations with China, which big multinationals supported and smaller manufacturers opposed.

While the bigger companies were profiting off cheap Chinese assembly lines and access to the Chinese market, smaller and midsized manufacturers were getting creamed by competition with the country’s cheap imports.

“Our world is different now,” U.S. Trade Representative Katherine Tai said in June.

“The reality [is] that the consumer who enjoys the low prices of imported goods is also a worker who must withstand the downward pressures that come from competing with workers in other parts of the world toiling under exploitative conditions.”

Free-trade expansion slowed under the Obama administration, but the Democratic president toward the end of his second term was pressing for the Trans-Pacific Partnership, a deal intended to create a U.S.-friendly trade alliance in that region to counter the rise of China.

It became a fierce political fight as Trump ramped up his attacks, leading Hillary Clinton, who had backed the deal as Obama’s secretary of State, to turn against it.

“Hillary Clinton’s announcement that she did not favor ratification of the TPP was a huge moment,” said Daniel Sargent, a historian of public policy at the University of California.

Clinton at the time was taking heat on the deal not only from Trump, already leading GOP presidential polls, but from the surprisingly strong primary challenge from Sanders.

Sargent said Clinton’s turnabout was particularly significant given her support for trade deals during the Clinton and Obama administrations.

What her about-face “really indicated was that even the executive branch, which had been a champion of trade liberalization more or less since the days of the New Deal and Cordell Hull, could no longer be taken for granted,” he said.

“So I think that was really a defining moment.”

Trump’s rise as a populist anti-trade politician was also significant. His criticism of the relationship between the U.S. and China dates back well before his presidential campaign, which was marked by themes of economic nationalism.

In 2011, he described the country as “neither an ally nor a friend.”

“They want to beat us and our own country,” he said.

Trump’s shocking defeat of Clinton put in the Oval Office a critic of trade who had the credentials of a businessman but supported closing borders to people and products.

Trump’s renegotiated NAFTA included worker protection and environmental provisions that Democrats backed and touted.

“The USMCA has a mechanism that allows us to bring cases against specific facilities that do not respect the rights of workers to freedom of association and collective bargaining. Over the last two years, we have been securing wins for workers at several facilities,” Tai said.

USMCA also did away with a controversial arbitration rule, known as the investor-state dispute settlement, long thought to allow corporations to bulldoze labor regulations.

Its elimination incensed Republicans on the Congressional Ways and Means Committee but was cheered by many Republican lawmakers on the state level, uniting them with Democrats.

Trump’s defeat in 2020 by President Biden put in the Oval Office a more traditional kind of policymaker in the White House.

It represented a shift from the Trump “America First” policies on immigration and diplomacy, but not much for trade.

How Trump’s changes are sticking

One of the Biden administration’s signature pieces of legislation, the Inflation Reduction Act (IRA), includes “Buy American” provisions for renewable technologies that are not allowed under WTO rules.

“We are favoring domestic production over imports. That’s flatly prohibited in the rules of the WTO,” said Robert Lawrence, a professor of trade and investment at the Harvard Kennedy School, in an interview with The Hill.

“It’s illegal, what he’s doing. We are violating rules which American foreign policy and trade policy tried to persuade other countries to adhere to for 75 years.”

Biden has also imposed new export controls with China covering artificial intelligence and quantum information systems amid rising national and economic security concerns that China is closing a tech gap.

“When it comes to international trade, [Biden] has continued pretty much along the same protectionist line that Trump started and he’s maintained most of Trump’s policies,” Lawrence said.

Also like Trump, Biden has sought to reinvigorate U.S. manufacturing, which has declined as a source of employment since the early 1980s.

Increased trade has been blamed in part for the loss of U.S. manufacturing jobs and clout as well as stagnating U.S. wages, which haven’t moved much in real terms in 40 years.

One 2012 paper published by the National Bureau of Economic Research found a connection between a steep decline in U.S. manufacturing employment starting in 2001 and a change in U.S. trade policy toward China that nixed potential tariff hikes on imports.

The report found that “trade is directly and indirectly associated with the large and long-lasting decline in U.S. manufacturing employment after 2001.”

Tim Hutchings, a retired master sergeant in the Columbia County, N.Y., sheriff’s department and a 41-year veteran of the volunteer fire department, told The Hill he’s seen the vibrancy of his hometown of Hudson wither and fade in the days since it lost its manufacturing.

“After NAFTA came about, we lost WB McGuire, which was a loading dock manufacturer. Several years after that, we lost Cass, which was a humidifier-vaporizer-type manufacturer on the outskirts of town. L&B Products, which was a restaurant furniture manufacturer, they closed down probably in the late 1990s. We lost a ton of jobs here,” he said.

 source: The Hill