Toward a Bipolar Economic Order? U.S. Trade Strategy In The 21st Century

By Vinod K. Aggarwal

Presented at a conference titled “Japan’s Leadership in the Liberal International Order”

Divining the eventual direction of U.S. trade policy might best be left to sorcerers, particularly with the dramatic uncertainty that has been created by the COVID-19 crisis. President Trump has abandoned the Trans-Pacific Partnership (TPP), halted the Transatlantic Trade and Investment Partnership (TTIP) negotiations, and imposed unilateral tariffs on both friends and foes alike. At the same time, we have seen the morphing of the North American Free Trade Agreement (NAFTA) into the United States-Mexico-Canada Agreement (USMCA), a highly limited bilateral agreement with Japan at the end of 2019, and a phase one U.S.-China trade deal on January 15, 2020. Some argue that many of these policies are simply a lashing out by a protectionist president without any coherent long-term strategy. Yet the key question that remains unanswered is: If Trump loses the election, will a Democratic president revert to a global multilateral approach to trade and warmer relations with China? And if Trump is re-elected, will we see more unilateral protectionist threats to force countries to negotiate bilateral trade agreements?

This paper argues that the trend toward unilateralism and more aggressive trade policy toward China is not simply a passing phase tied to Trump’s presidency. I trace the post-World War II evolution of U.S. trade policy across three levels of analysis—systemic, domestic, and ideational. Specifically, I argue that the aggressive protectionist shift is likely to be sustained to a significant extent particularly with respect to China, whether Trump or a Democrat is elected in November 2020. As I argue, over the last 70 years, U.S. trade policy has systematically moved away from the early 1950s–1970s multilateral global approach focused on the General Agreement on Tariffs and Trade (GATT) to an increasing variety of bilateral and mini lateral trade accords. I show how these changes have been driven by key systemic shifts with the end of the Cold War, the increasing domestic pressures in the U.S. for protection, and a waning ideological consensus on the benefits of free trade—particularly with China. From my perspective, the COVID-19 crisis has provided further ammunition to China hawks who have raised concerns about the excessive dependence on China for critical medical equipment, which will accelerate the current pressures to decouple from China.

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