Over the past four years, the fear-based American nationalism of the Trump administration has taken the trade conversation to a degree of protectionism rather than some sort of global engagement strategy. “Where should we put up barriers?” was the operating philosophy, a short-term, ill-informed approach that proved to be ineffective decades ago.
A “made in USA” requirement for goods and services when the world has spent the past 75 years developing an integrated and efficient global system is a fantasy. It is not based on need, value, or even fairness, but on fear and mistrust, fueled by the same forces that already deeply divide the United States.
Some attention needs to be paid to this fear, and President-elect Joe Biden has proposed a $ 400 billion Buy America initiative in connection with much-needed infrastructure investments. But the world system is progressing and “America first” is putting us in danger of instant loans.
Unilateral trade barriers are an explicit rejection of the cooperative system – a clear invitation to others to forgo the American partnership, let alone leadership.
An implicit assumption of American leadership in any global economy is built into this conversation, no matter how much protectionism we adopt. It’s delusional. American influence is already waning, especially given our abandonment of the global institutions that the United States helped establish: WTO, TPP, UNHCR, UNESCO, NATO (in part) and, of course, the Paris Climate Agreement. Unilateral trade barriers are an explicit rejection of the cooperative system – a clear invitation to others to forgo the American partnership, let alone leadership.
Unfortunately, the recent model of world trade shows not so much a fragmentation of the world system as it is the US withdrawal from it, at our great cost. The world is no longer made up of a bloc led by the United States and one or more blocs led by China or Russia, but rather a global bloc and a few non-global fragments (such as South Korea. North). These days not many countries want to exit the global system, but the United States has recently been determined to do so.
So what should the Biden administration do to change the situation in a lasting way? This is not an easy question, both because simply overturning disastrous decisions and re-engaging will not immediately restore confidence, and because the destructive forces that led to these shortsighted actions must also be addressed, lest they cause an irreparable relapse.
Repair and rebuild
Start by repairing the damage. Restoring our global commitments will be a critical start. It will be more difficult to fit them into our system so that they cannot simply be ditched by the next irresponsible leader. This means legislation to circumscribe executive authority – without which no US policy can now be considered permanent. It also means a re-commitment to interdependence among nations, being explicit about the benefits each derives from collaboration and the costs each entails for violating agreements.
The IRS carefully regulates expatriates. It’s time to do the same for business.
Second, work with international business leaders and countries to promote responsible tax practices. Global supply chains are important, if not inevitable. Global tax dodges are not. The IRS carefully regulates expatriates. It’s time to do the same for business. Preferential tax treatment today is often more important than the costs of labor or material in determining where products are made and financial flows transacted. It has to end – and a multilateral agreement could do it.
Third, connect with experts and leaders around the world to jumpstart the global trade arbitration mechanism. Biden’s choice for U.S. Trade Representative Katherine Tai, currently a senior adviser to the House Ways and Means Committee, has the knowledge and experience to do it – and to re-engage the WTO, which has been actively disabled. by the Trump administration. Exiting the WTO, as Trump wishes, would leave the rest of the world free to impose tariffs and sanctions on US goods and services, which would deal a potentially devastating blow to US exports – which totaled 2, $ 3 trillion last year.
Also consider the United States’ trade war against China (not with, but with), which cost American consumers and businesses some $ 46 billion in its first 21 months alone. Tai, who has experience in crafting trade deals (including with China) to protect workers and enforcing them, needs to know this is the way to go, rather than a trade war. There is no scenario in which an exit of the United States from the WTO will be beneficial in the long run for the American economy. Tai’s appointment suggests that the Biden administration will understand this and engage multilaterally and in all areas with experts and key trading partners to fix the system, not abandon it.
Tariffs hurt Americans, not our so-called enemies.
Being wary of your neighbors – across the street or on a continent – doesn’t mean you can ignore them. You are designing a rules-based system for living in peace together. The world system after the devastation of WWII was designed to do this and the United States led it. If the United States steps down, it will be a generation before the world trusts America again. The Biden administration must therefore re-engage, on the back of a bipartisan consensus – even if it is not strong at first. Early signals indicate that Biden wants to invest in U.S. infrastructure before focusing on the global system, but that he plans to get there in due course.
Nonetheless, I urge the new administration, while making the domestic conversation about our economic survival, to explain why global trade is essential. Explain how tariffs hurt Americans, not our supposed enemies. Finally, have an inclusive conversation, based on facts and expertise, to determine next steps. Only then will the United States have a chance to fully participate – let alone lead – in the world again.
Maury Peiperl is Dean of the School of Business at George Mason University.
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