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The United States has been a long-time leader of promoting the international liberal order, a model characterized by a commitment to global free trade to the benefit of all nations involved. Free trade has been a defining principle of U.S. trade policy, hence its membership in the World Trade Organization (WTO) since its formation in 1995. The WTO is an international institution that outlines a global trade standard for its member nations, and provides a forum for trade negotiations and dispute resolution. The organization stands as a promoter of the multilateral and free trade system.
However, American trade policy has surely experienced a significant shift since the Trump administration took office in 2016. This shift has been one towards protectionism, a principle that aimed at protecting domestic industries from foreign competition through import tariffs and quotas, for example. Additionally, the shift has favoured unilateralism, or the process of a country taking action independently without cooperating with other nations.
The most significant shifts included imposing tariffs on several of the country’s trading partners, including over $30 billion of steel and aluminum imports. These tariffs were justified on national security grounds and supported by more heavy tariffs on Chinese imports worth $200 billion. Moreover, the U.S. stronghold position within the WTO was threatened by Trump’s threats to withdraw from it. Him undermining the WTO was coupled with his efforts to block appointments to the organization’s dispute settlement mechanism, the Appellate Body. This action has seriously compromised its ability to function as a free trade forum for negotiation and dispute resolution.
So what explains this shift in trade policy under the Trump administration, given that free trade has long worked to the advantage of the U.S.? We will consider three approaches to explaining this.
Absolute vs. Relative Interests
Firstly, this policy measure toward protectionism is explained by considering U.S. gains relative to China’s rising power. The U.S. has undoubtedly benefited from the liberal international order. As a member of the WTO and an active participant in free trade, the country has consistently been one of the largest trading nations, reaching a record of $2,528.5 billion worth of exports in 2021.
However, China has also reaped the benefits of such a system. Since joining the WTO in 2001 and engaging in multilateral free trade, the Chinese economy has grown from the sixth to the second largest globally. This trade policy has pushed China to significantly lower its tariff rates and open 120 sectors up to global trade.
With a growing economy, China’s gains relative to the U.S. have made a threat to its economic hegemony in the global market. The system that the U.S. has long championed has now worked to benefit their top competitor. Comparing these relative gains provides evidence that is likely reason for Trump’s criticism of China and ignition of the U.S.-China Trade War. This economic expansion of China and its threat relative to U.S. hegemony has also translated into a wider nationalist belief. It has, in turn, given way to the rise of such protectionist measures, having incited further apprehension and fear toward foreign competition.
In the face of an economically threatening power, the belief in nationalist, protectionist, and unilateral trade policy has served as a redemptive measure for preserving U.S. hegemony in the global market.
Moreover, cracking down on trade with partners through tariffs has been justified and leveraged by Trump as a negotiating tool for the U.S. In the wave of imposing tariffs on long-standing trading partners like Mexico and Canada, the Trump administration succeeded in getting their attention through pressures to negotiate new trade agreements. Despite protests from Congress, including Republicans, for jeopardizing relationships with established trade partners, Trump was able to override pushback and impose the increased tariffs through the Reciprocal Trade Agreement Act of 1934 (RTAA).
The RTAA allows the president to circumvent approval from a Congressional majority to adjust tariff rates and negotiate bilateral trade agreements. Initially, it was established to give more legitimacy to the president in negotiating trade agreements with different states and remove the chance that those agreements be overridden or amended by Congress.
The provision allowed to the president through this mechanism is an institutional measure that permitted and has served as a reason for this shift toward unilateralism without necessarily requiring Congressional support. While it did ultimately allow Trump to negotiate the U.S.-Mexico-Canada Agreement (USMCA) and the “Phase One” agreement with China, the pressures put on trade partners to renegotiate trade deals have not necessarily brought substantial gains to the U.S., nor has it proved favorable in giving the U.S. the upper hand in negotiations.
The Biden Administration – What Now?
Despite understanding the supposed reasons for the Trump administration’s protectionist shift in trade policy, it is vital to be clear that these trade policies costed almost 250,000 American jobs. This policy shift proved unsuccessful and harmful to the U.S. economy, ignoring how essential “maintaining market access to China is […] for U.S. businesses’ global success.”
As Joe Biden is well into his presidential term, many have been taken aback by his reluctance to reverse Trump’s policies. In the possibility that he will be running for his second presidential term in 2024, Biden’s dealing with the aftermath of the Trump administration is undoubtedly a relevant issue.
Thus far, Biden’s trade policies look not much different from Trump’s. Biden’s administration has not lifted any tariffs on Chinese imports. The tariffs on the European Union’s aluminum and steel imports have become voluntary export restraints and quotas, simply another form of trade restriction and protectionism. In fact, Biden has actually disputed the WTO ruling against the steel and aluminum tariffs put in place by Trump. And the legitimacy and relevance of the WTO is still in question as Biden has still not moved to fill the vacancies on its Appellate Body, meaning its dispute settlement mechanism remains at a standstill.
Ultimately, the Biden administration is in a turbulent time to restore the U.S. position within the global trade market. The possibility of the WTO falling into irrelevance is pending because its ruling body is eroding, and Biden’s continuation of Trump’s unilateral and protectionist measures threatens its principles. The undermining of the WTO jeopardizes the body that has thus long ruled global trade in the post-war era. This holds the potential of causing a significant setback in the global market and making way for a future of more regionally-based institutions and a lack of a central, international body.
Edited by Bethlehem Samson