Last week President Donald Trump seemed to be on the cusp of a trade deal with China. A couple of threatening tweets later, the odds of ending the 16-month-old U.S.-China trade war have dropped dramatically.
Whether or not American and Chinese trade negotiators ultimately salvage a deal – the U.S. says China backpedaled on a commitment and intends to raise tariffs within days – the episode highlights drawbacks in Trump’s trade strategy, which tends to be protectionist, confrontational and negotiated one on one.
Unfortunately, Trump’s policies are only an acceleration of a trend in international trade that’s been going on for several decades. It’s a move away from multilateralism – in which many countries agree on certain trading principles – and toward bilateralism – which pits nation against nation, raising the stakes.
I am a specialist in the politics of trade. My observations lead me to believe that the increasing abandonment of multilateralism will have pernicious long-term consequences. Not only will trade become more costly for businesses and consumers, it may even make the planet a more dangerous place.
World trade – Trump style
Before we can understand what has changed, we need to revisit how trade deals have historically been done.
In the decades following World War II, the General Agreement on Tariffs and Trade was the center of gravity for trade negotiations. While that system wasn’t perfect, most of the world’s countries could at least participate, to one degree or another, in hammering out the rules of trade.
This multilateral trading order reached its heyday in 1995, with the creation of the World Trade Organization. But more recently, the system has weakened. Today, most of the world’s new agreements are struck between only two countries or within a single region.
Trump has shown little appetite for continuing the multilateral negotiations his predecessors were working on. He’s also hammered on regional accords, famously renegotiating the North American Free Trade Agreement and withdrawing from the Trans-Pacific Partnership.
Trump’s clear preference is for bilateral deals where the U.S. can use its market power to force concessions from its negotiating partners. But Trump has added a level of confrontation and antagonism to world trade not known in the postwar era.
For evidence, look no further than his threats to raise tariffs on hundreds of billions of dollars of Chinese goods if a deal falls through.
In essence, the United States under Trump has begun to see itself as the victim, rather than the guarantor, of the liberal trading order. This new perspective has made American negotiators more willing to extract temporary concessions from trading partners, even when these come at the cost of destabilizing the system as a whole.
AP Photo/Andy Wong
Rules upon rules
One pernicious consequence of abandoning multilateralism is the mounting complexity and discriminatory nature of global trading arrangements.
In international trade, the fewer rules there are the better. One real benefit of the WTO system is that the same rules, more or less, apply to everyone.