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◼ REMARKS Bloomberg Businessweek January 27, 2020isa farcryfromthefreeenterprisethatRepublican
presidents have typically advocated. It can also be unfair
to American allies, which could lose sales to China because
of preferences given to the U.S. That’s why managed trade
is frowned on by the WTO. During his visit to D.C., Hogan
said the EU will file a complaint with the WTO if it concludes
that the U.S.-China deal breaks the rules.
The WTO, though, has no enforcement powers of its
own.Thefree-tradegroup“onlyworksif peoplebelieve
init,”RobertKoopman,thebody’schiefeconomist,said
ona panelattheJan.3-5 annual meeting of the American
Economic Association in San Diego. The organization has lost
influence since the U.S. neutered its Appellate Body by block-
ing the appointment of new members. So Trump’s managed
trade could eventually become the norm. Writes Hufbauer:
“In the immediate aftermath, other countries may complain;
over a longer period, they are likely to emulate.”
It would be unfair to portray Trump as the lone rene-
gade in a world of dutiful free-traders. There are many that
flout the rules, chief among them China, which continues to
restrict access to its market despite its accession to the WTO
in 2001. “China critics” tend to argue that managed trade
“is the only way credibly to ensure improved access to the
Chinese market,” Stanford Law School professor Alan Sykes
said in a Q&A on the school’s website on Jan. 16.
It’s understandable why Trump got into a trade war with
China. It’s harder to see why he would do the same with
Europe, which is an ally of the U.S. and is far more open to
trade than China. But Europe seems to exasperate the U.S.
president, who broke off talks on a Transatlantic Trade and
Investment Partnership soon after taking office and then put
duties on European steel and aluminum on national secu-
rity grounds. He’s threatened 25% tariffs on European cars
and parts unless European automakers shift more produc-
tion to the U.S. According to the Washington Post, he has
made the same threat to get Britain, France, and Germany
to formally accuse Iran of breaking the 2015 nuclear deal.
France’s 3% digital services tax has inflamed the U.S. side
becauseit wouldslamU.S.techgiants,thoughit appliesto
allcountries.Undera trucereachedonthesidelinesofthe
WorldEconomicForuminDavos,Switzerland,onJan.22,
the French will postpone collecting the tax until the end of
2020 and the U.S. will refrain from retaliatory tariffs.
Food trade has long been a bone in the throat of both
the U.S. and the Europeans. France, for one, insists that its
chefs shall never make coq au vin with chlorinated chick-
ens from the U.S., nor mousse de saumon from America’s
genetically modified salmon. To the American side, that
smells like protectionism. But the U.S. has its own set of shel-
tered products, including peanuts, apricots, and Roquefort
cheese. In Davos, Trump said he aims to strike a trade deal
by November with the EU—but added that “they are frankly
more difficult to do business with than China.”
One reason trade agreements are so fraught is that they’re
asked to do too much. Conservatives seek deregulationTradeasshareofworldGDP60%50403020
1970 1980 1990 2000 2018through tradedeals (unless they’reseekingto export
Americanintellectual-property protections to benefit Big
Pharma). Liberals insist that trade deals must fix inequal-
ity and include labor and environmental standards. The
breadth of the agendas strikes some critics as mission creep,
or meddling in trading partners’ domestic affairs. For his part,
Trump wants trade agreements to shrink trade deficits, even
though the main reason for the overall trade deficit is that the
U.S. is consuming beyond its means.
Expecting one tool—a trade agreement—to achieve such
varied objectives violates what’s known as the Tinbergen rule,
named after Jan Tinbergen, the Dutch economist who shared
the first Nobel Prize in economics in 1969. The rule of thumb
holds that each economic target you’re trying to hit requires
an instrument of its own. Which is kind of common sense.
While getting trade policy right matters, “what happens
at home has and will have greater impact on workers than
what happens abroad,” Harvard economist Dani Rodrik, a
skeptic of free trade, said at the San Diego meeting. Kimberly
Clausing, a Reed College economist who likes free trade more
thanRodrikdoes,toldthesameconferencethattheideal
pairingforsocietyisfreermarketstobenefitconsumers
alongwitha strongersocialsafetynettoprotectworkers—“so,
the opposite of the policy we’ve been following the last few
years.” Trade adjustment assistance for workers who lose jobs
because of trade isn’t enough, Clausing said.
A strong social safety net undoubtedly would increase
the public’s and politicians’ support for free trade by reliev-
ing fears of job loss. James Green, a senior research fellow
at Georgetown University’s Initiative for U.S.-China Dialogue
on Global Issues, says, “This unrest about trade, in my view,
is an overhang of the 2008 financial crisis” and the job loss
it caused. Then again, insulating citizens from risk is hardly
a simple chore. “None of this is easy,” says Massachusetts
Institute of Technology economist Kristin Forbes. “If it was,
we’d be doing it.”
In a world of sovereign nation-states, it’s unrealistic to
believe that borders to trade will ever be thrown completely
open, Peter Chase, a senior fellow at the German Marshall
Fund, told the German broadcaster Deutsche Welle in 2018.
He added: “Ask not if ‘free’ trade is dead; ask if it ever lived.” <BW>DATA: WORLD BANK