Saturday, December 21, 2019

The End of the World Trade Organization?

Who cares, really?

The conflict between economic regionalism and global economic openness, embodied in the post-WWII multilateral trade regime, has been a longtime topic in international relations theory.

The Trump administration is accelerating the shift to regionalism.

Not to mention Brexit, which should go through on January 31st, thanks to the Conservative triumph in the general election.

All is not lost, as bilateral trade agreements will take the place of wider multilateral pacts.

In any case, at the Los Angeles Times, "House passage of USMCA marks major shift away from free-trade policies":
WASHINGTON —  The House of Representatives on Thursday overwhelmingly passed the new North American trade deal, voting in unusually bipartisan fashion just a day after impeaching President Trump strictly on party lines. 
Approval of the trade bill, which now goes to the Senate for almost certain ratification, did far more than help Trump notch a major achievement: It marked a significant change in U.S. economic strategy toward the rest of the world.

For much of the last 70 years, throughout the Cold War and down to more recent times, Washington used America’s vast wealth and economic power to build friendships and alliances that bolstered national security.

That strategy included a fundamental commitment to free trade — opening the large U.S. market to products from all over the world. For the most part, American companies and their workers had to compete against foreign businesses and labor with little or no protection from the federal government.

As Trump has long complained, that free-trade policy cost millions of American jobs. But leaders of both parties and economic experts considered it worth the price because it boosted American growth, generating many new jobs, and opened new opportunities for many U.S. companies to profit in a global economy. At the same time, it helped cement U.S. leadership in the world.

“In the post-World War II era, we were so much more powerful and so much richer than everybody else that we could improve the living standards at home and still give away the store on trade,” said Clyde Prestowitz, a former top trade negotiator in President Reagan’s administration.

“And we’re now culminated at a moment in which the cost of our old policy is really hard to bear, and so we’re de facto changing our policy,” he said.

The march toward free global markets with lower tariffs and other barriers always had exceptions. Beginning in the 1970s, U.S. companies began to complain about unfair competition: dumping of textiles and steel by foreign producers subsidized by their governments, for instance, or the sale of below-cost television sets, electronics and other consumer goods.

Reagan and his successors responded to these complaints with demands for import quotas and other measures. But overall, the United States remained committed to a broad strategy of free trade — relying on market forces and competition to determine outcomes.

While Republican business leaders complained about specific instances of what they saw as unfair tactics, such as currency manipulation and intellectual property theft, they largely remained committed to the overall free-trade strategy.

Democrats, responding to their union supporters, complained that American workers were paying a heavy price for a system that primarily benefited corporations and upper-income Americans.

The original North American Free Trade Agreement, which passed the House in 1993 by a margin of only 34 votes, highlighted the political unease about trade.

The agreement, however, fit squarely into that strategy of using trade in part for geopolitical reasons. It aimed to make Mexico more prosperous and hence make the United States more secure at a time when radical, leftist regimes seemed to be on the rise in Latin America. Economically, many saw it as a bulwark against rising competition from a unified Europe and Asian tiger economies.

NAFTA tore down tariffs and shaped North America into a powerful economic bloc — three-way trade in goods now reaches $1.3 trillion — but it was in many ways outdated in a global economy driven much more by technology and data.

Trump long attacked NAFTA, calling it one of the worst trade agreements ever and promising to renegotiate it. As president, he has attacked the whole system of free trade, undermining the World Trade Organization, which the U.S. helped create in the 1990s, and starting trade wars not only with China but with longtime U.S. allies such as Europe, Canada and Mexico.

He has enjoyed quiet but significant Democratic support on the issue. Witness the large bipartisan majority for the new version of NAFTA.

Renamed United States-Mexico-Canada Agreement, or USMCA, the measure won approval by the Democratic-majority House 385-41, a remarkable show of unity at a time of deep partisan acrimony.

Not that there wasn’t the usual jostling and one-upmanship which have characterized relations between congressional Democrats and Trump.

“Of course we’ll take credit for it, because what he proposed did not fill the bill of what he described,” House Speaker Nancy Pelosi said shortly before the vote, referring to Democrats’ successful pressure on the administration to amend the trade deal to strengthen enforcement of labor and environmental protections.

Earlier Wednesday night, at a rally in Battle Creek, Mich., Trump insisted that Pelosi and other Democrats had no choice but to pass USMCA.

“She had a lot of pressure, especially from manufacturing areas, farm areas, a lot of pressure to sign it.... I had a lot of union labor vote for me, tremendous amount of labor,” he said...