The Next President’s Trade Agenda
During a divisive U.S. presidential election, there has been at least one issue the candidates largely agree on: neither Donald Trump nor Hillary Clinton is terribly happy with free trade agreements, and both have advocated for a more protectionist, defensive trade policy. While it remains unclear just how this heated rhetoric around trade will translate into actual policy for the next president, one thing seems certain: going forward, the United States is likely to put more emphasis on trade enforcement.
At the most general level, trade enforcement is about ensuring America’s trade partners abide by the terms of the bilateral and multilateral agreements they’ve signed. Trade enforcement can be pursued by formally filing legal complaints at the World Trade Organization (WTO), or by informally using diplomatic pressure and behind-the-scenes negotiations to coerce and cajole other nations into adopting trade policies more to America’s liking.
The U.S. also uses anti-dumping and countervailing duty penalties to levy duties on goods the U.S. believes are being subsidized and sold below market value. It is not always clear whether a specific trade enforcement measure is actually “leveling the playing field,” as their supporters tend to claim, or is instead simply an effort to shield domestic constituencies from foreign competition or get a leg up for American exporters trying to crack into foreign markets.
In their campaigns both Donald Trump and Hillary Clinton have emphasized the importance of trade enforcement, albeit in very different manners. Trump has promised punitive tariffs against any country that “cheats” on trade. Clinton, for her part, has offered specific policy proposals to create a new position of chief trade prosecutor and to triple the number of enforcement officers. Both candidates are eager to portray themselves as willing and able to stand up and fight for American companies and workers.
For international trade watchers, the big outstanding question is whether an increase in enforcement will be part of a renewed bargain underpinning an open global trade system, or instead another protectionist plank contributing to America turning inward. On the one hand, a greater insistence on abiding by the rules of international trade agreements could be a way to strengthen the legitimacy of the international trade system.
Political scientist Christina Davis argues persuasively that one reason countries file disputes at the WTO is to signal to domestic political interest groups that the government will defend their interests. Demonstrating that trade violations will be punished is a way to communicate that the rules work and will be followed, and could be a means to shore up support from both voters and lawmakers who have grown skeptical about trade. In this view, greater enforcement is a necessary complement (or perhaps precursor) to further trade liberalization, and a commitment to respecting the rules of international trade is, at its heart, also a commitment to the international trading system itself. Some politicians, including U.S. Rep. Denny Heck, a Democrat from Washington, have explicitly stated that the price for their support of the Trans-Pacific Partnership will be a more aggressive approach to trade enforcement.
Yet there is a risk in this approach. While more enforcement of trade agreements may produce real benefits for selected industries in certain individual disputes, it is probably naïve to assume that a greater focus on enforcement will produce dramatically different trade outcomes. For the most part, the American jobs that have been lost to foreign competition were not the result of other countries “cheating,” but rather the result of churn in the economy brought on by unleashing the forces of comparative advantage. While a commitment to upholding trade rules is welcome, politicians should be careful not to overpromise on how much greater enforcement will deliver.
On the other hand, increasing talk of trade enforcement may not be about strengthening the liberal trading system at all, but rather a means of further undermining it. Donald Trump can seamlessly shift from complaining that other countries aren’t following the rules of trade agreements, to arguing that in fact it is the rules of the agreements themselves that are stacked against the U.S. because of our weak trade negotiators, to threatening to withdraw from the WTO altogether. In this view trade enforcement isn’t a means to respect and legitimize the rules that allow for international cooperation in trade, but an aggressive move in a zero-sum conflict. Aggressive trade enforcement, particularly if pursued outside of the WTO dispute settlement system, could set off tit-for-tat retaliatory measures by our trading partners, threatening a protectionist spiral.
In brief, whatever happens in the election, more trade enforcement is likely coming. But whether this enforcement is a complement or replacement for America’s traditional liberal trade policy remains to be seen.
Geoffrey Gertz is a post-doctoral fellow in global economy and development at the Brookings Institution. The original article appeared here.