2. Contemporary US Trade Policy in Context
The US has been one of the driving forces behind the establishment of the global trade framework, institutions and rules. After 1945 the US administration, together with the British, led two initiatives to promote and govern trade globally: the General Agreement on Tariffs and Trade (GATT), which took effect from January 1948; and the International Trade Organization (ITO). However, efforts to establish the latter were met with strong opposition from the US Congress, and effectively came to an end in 1950 with the announcement by President Harry Truman that he would no longer seek congressional approval of the ITO charter.
GATT, while not a formal international organization, thus became the only multilateral mechanism that governed trade until it was succeeded by the WTO in 1995. The US again played a major role in the creation of this new institution at the heart of the world’s trade system. The GATT Uruguay Round of negotiations, which resulted in the establishment of the WTO, was launched by President Ronald Reagan in 1986 and concluded under President Bill Clinton in 1994. The WTO now spans 164 members. Average tariffs applied by WTO members have fallen from close to 12 per cent in 1996 to around 9 per cent in 2013, while the value of global trade in goods has nearly quadrupled over the same period, reaching $19 trillion in 2013.2
As participation in GATT and membership in the WTO has expanded, and the less contentious ‘wins’ for liberalizing trade have been achieved, it has become increasingly difficult to build consensus on new liberalization agendas, and each trade round has taken longer to complete. A final deal remains elusive in the current Doha Development Round – in progress since 2001 – with agriculture being a major sticking point.
In light of the stalled progress to liberalize trade multilaterally under the umbrella of the WTO, bilateral or regional free-trade agreements have proliferated. The US currently has 14 such agreements with 20 countries, 12 of which have entered into force since 2001.3 Negotiations for the TPP were completed under President Barack Obama, but in January 2017 the newly inaugurated President Trump signed an executive order withdrawing the US from the TPP. Negotiations for the Transatlantic Trade and Investment Partnership (TTIP) between the US and the European Union (EU) have been under way since 2013; and the US and the EU are also among the 23 members of the WTO currently negotiating the Trade in Services Agreement (TiSA). At present, however, the future of both TTIP and TiSA remains uncertain under the Trump administration.
Growth in global trade has latterly decelerated compared with its strong historical performance and with world economic growth. The volume of global trade in goods and services has increased by approximately 3 per cent annually since 2012 – less than half the average trade growth rate over the three decades before the global financial crisis hit in 2007.4 Whereas global trade grew on average twice as fast as world GDP in real terms between 1985 and 2007, trade growth has barely kept pace with GDP growth over the past five years. Some of the reasons for this trade growth slowdown are the general weakness in economic activity, the fading pace of trade liberalization, the declining growth of global value chains, and the recent rise in protectionism.5
Despite the G20’s repeated commitments to open markets in the wake of the 2007–09 global financial and economic crisis, there has been a steady pattern of introducing trade-restrictive measures by the world’s leading economies. According to the WTO, an average of six new trade-restrictive measures were rolled out by G20 countries each month between October 2016 and May 2017, including new or increased tariffs, customs regulations and rules-of-origin restrictions.6 In 2009–15 the average was seven new measures per month, and in 2016 on average five measures were introduced each month. Although the US is not one of the leading countries introducing trade-restrictive measures, it is one of the main initiators of trade-remedy investigations, which are not formally classified as restricting or facilitating trade, such as anti-dumping and countervailing measures. China has been by far the most frequent subject of these US investigations.7 Thus, given the global economic uncertainties and a surge in anti-trade rhetoric around the world, support for an open trade system will remain a key concern.
The benefits of trade for the US
While trade as a share of national GDP has risen markedly over the past 50 years, the US remains less reliant on trade as a contributor to economic activity than does much of the rest of the world. US exports and imports together contributed just 9 per cent of GDP in 1960 (compared with a global average in that year of 24 per cent), rising to 28 per cent of GDP in 2015 (as against a global average of 58 per cent).8
There are numerous ways in which the US benefits from global commerce. Trade, in particular exports, has a critical role in supporting a healthy economy and employment. American goods and services exports were valued at $2.2 trillion in 2016,9 and were calculated to support 10.7 million US jobs.10 Through trade agreements, American firms have benefited from access to foreign markets, helping them to grow and innovate. Export-intensive industries pay employees approximately 15 per cent more than other ones.11 Trade contributes to lower domestic prices and to more product variety for consumers. The benefits from international trade amounted to $13,600 per US household per year based on data from 2013.12
Trade has been, and continues to be, a key instrument of US foreign policy. By opening its market to imported goods, the US has helped to foster economic development abroad. Negotiating trade agreements has helped the US to establish close links with countries around the world, cementing existing alliances and supporting engagement with strategically important states and regions where the US does not always have a military presence. For the most part, the US’s free-trade agreements are with countries where US interests go beyond the purely economic into broader foreign policy areas. The US’s first free-trade agreement was negotiated with Israel – not an important trade partner in overall economic value but a very significant strategic ally in the Middle East. Today, only three of the countries with which the US has free-trade agreements rank among its top 15 merchandise trade partners.13
The end of the trade consensus
Opinion polling conducted in February 2017 showed that a record high of 72 per cent of Americans viewed trade as an economic opportunity.14 But support for trade in general does not equate to support for free-trade agreements, about which Americans have shown themselves to be increasingly sceptical. In April 2017 some 52 per cent of Americans surveyed said that free-trade agreements with other countries had been a good thing for the US, down from 59 per cent in 2014.15 In contrast, 40 per cent said that trade deals had been a bad thing, an increase of 10 percentage points over the same period.
Support for further liberalization has meanwhile weakened in Congress as the once bipartisan consensus on trade has broken down. While the earlier agreements that the US concluded saw significant bipartisan support for free trade, later ones have been more controversial and have resulted in far more partisan votes. The 11 free-trade agreements on which Congress voted between 2001 and 2015 received almost unanimous backing from Republicans in the House of Representatives, who supported ratification more than 91 per cent of the time, while Democrats in the House voted in favour 36.5 per cent of the time.16
Although the Republican Party has traditionally been more supportive of free trade, in October 2016 – i.e. just before the most recent elections – Republican voters viewed free-trade agreements less favourably (29 per cent had a positive view) than did Democratic voters (59 per cent).
Although the Republican Party has traditionally been more supportive of free trade, in October 2016 – i.e. just before the most recent elections – Republican voters viewed free-trade agreements less favourably (29 per cent had a positive view) than did Democratic voters (59 per cent).17 Republicans’ support for free-trade deals fell significantly during the presidential campaign, and in line with Trump’s consistent attacks on trade, but had already been declining since 2014. Thus, Trump’s tough rhetoric on the 2016 campaign trail was not necessarily at odds with the Republican outlook on trade. Democrats have expressed more favourable views of free-trade agreements than have Republicans since 2009.18 It is striking that during the 2016 presidential race Democrats’ support for free-trade agreements remained fairly stable, despite Hillary Clinton’s and Bernie Sanders’ criticism of trade deals in general and of the TPP in particular.
The partisan divide on trade is also evident in views on NAFTA, which was a central issue in Trump’s trade criticism during the campaign. In polling conducted in February–March 2017, 68 per cent of Democrats saw NAFTA as good for the US, as opposed to 30 per cent of Republicans.19 The partisan assessments of NAFTA also depend on demographic differences among the parties’ bases: women, the young and African Americans as well as Hispanics (historically Democratic voters) see NAFTA in a more positive light than do men, people over the age of 50 and non-Hispanic whites (generally Republican-leaning voters).20
2 World Trade Organization (2015), Trade and Tariffs: Trade Grows as Tariffs Decline, https://www.wto.org/english/thewto_e/20y_e/wto_20_brochure_e.pdf (accessed 16 Jun. 2017).
3 US Department of State (2017), ‘Existing U.S. Trade Agreements’, https://www.state.gov/e/eb/tpp/bta/fta/fta/index.htm (accessed 16 Jun. 2017).
4 International Monetary Fund (2016), ‘Global Trade: What’s behind the Slowdown?’, in World Economic Outlook: Subdued Demand – Symptoms and Remedies, Washington, DC: International Monetary Fund, https://www.imf.org/external/pubs/ft/weo/2016/02/pdf/c2.pdf (accessed 16 Jun. 2017).
5 Ibid.
6 World Trade Organization (2017), Report on G20 Trade Measures, 30 June 2017, Geneva: World Trade Organization, https://www.wto.org/english/news_e/news17_e/g20_wto_report_june17_e.pdf (accessed 18 Jul. 2017).
7 Ibid.
8 World Bank (2017), ‘World Development Indicators – Trade (% of GDP)’, http://databank.worldbank.org/data/reports.aspx?source=2&series=NE.TRD.GNFS.ZS&country= (accessed 16 Jun. 2017).
9 US Census Bureau (2017), ‘U.S. International Trade in Goods and Services’, https://www.census.gov/foreign-trade/Press-Release/current_press_release/exh1.pdf (accessed 29 Sept. 2017).
10 Rasmussen, C. (2017), Jobs Supported by Exports 2016: An Update, Washington, DC: US Department of Commerce, International Trade Administration, http://www.trade.gov/mas/ian/build/groups/public/@tg_ian/documents/webcontent/tg_ian_005543.pdf (accessed 29 Sept. 2017).
11 Riker, D. (2015), Export-Intensive Industries Pay More on Average: An Update, Washington, DC: US International Trade Commission, https://www.usitc.gov/publications/332/ec201504a.pdf (accessed 16 Jun. 2017).
12 Slaughter, M. J. (2014), How America is Made for Trade, Washington, DC: HSBC Bank USA, http://cmbinsight.hsbc.com/americamadefortrade (accessed 16 Jun. 2017).
13 These are Canada, Mexico and South Korea. US Census Bureau (2016), ‘Top Trading Partners – December 2016’, https://www.census.gov/foreign-trade/statistics/highlights/top/top1612yr.html (accessed 16 Jun. 2017).
14 Swift, A. (2017), ‘In US, Record-High 72% See Foreign Trade as Opportunity’, Gallup, 16 February 2017, http://www.gallup.com/poll/204044/record-high-foreign-trade-opportunity.aspx (accessed 16 Jun. 2017).
15 Jones, B. (2017), ‘Support for free trade agreements rebounds modestly, but wide partisan differences remain’, Pew Research Center, 25 April 2017, http://www.pewresearch.org/fact-tank/2017/04/25/support-for-free-trade-agreements-rebounds-modestly-but-wide-partisan-differences-remain/ (accessed 16 Jun. 2017).
16 DiSalvo, D. and Kucik, J. (2015), ‘Confused Coalitions: Republicans and Democrats on Free Trade’, National Interest, 5 November 2015, http://nationalinterest.org/feature/confused-coalitions-republicans-democrats-free-trade-14257 (accessed 16 Jun. 2017).
17 Jones (2017), ‘Support for free trade agreements rebounds modestly, but wide partisan differences remain’.
18 Ibid.
19 Stokes, B. (2017), ‘Views of NAFTA less positive – and more partisan – in U.S. than in Canada and Mexico’, Pew Research Center, 9 May 2017, http://www.pewresearch.org/fact-tank/2017/05/09/views-of-nafta-less-positive-and-more-partisan-in-u-s-than-in-canada-and-mexico/ (accessed 18 Jul. 2017).
20 Ibid.