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Global free trade is in crisis


  • Western leaders have failed to deal with economic dislocation and China’s cheating.

As diplomats prepare for December’s 110-government virtual Summit for Democracy, there is much hand-wringing over democracy’s global retreat. That democratic recession is real, but another fundamental element of the liberal world order is in even more trouble.

Free trade is as critical as democracy to the health of world order, but suspicion of free trade is an attitude that unites Biden Democrats and Trump populists. In its latest Trumpian trade move, last week the Biden administration doubled tariffs on Canadian lumber.

Meanwhile, Omicron-related Covid fears led the World Trade Organization to cancel its ministerial meeting in Geneva. With the WTO losing both efficacy and legitimacy, trade liberalization, next to American military power the single most important force binding the nations of the world into a liberal order, is facing its most significant challenge since the Great Depression.

Free trade matters. It has done vastly more than all the world’s foreign-aid bureaucrats to raise living standards and increase opportunities for people in emerging economies. And that is not all. By giving both rich and poor nations a common interest in the peace and stability of the global system, free trade does more than NGOs and activists to promote peace. Billions of people around the world have seen dramatic increases in their living standards thanks to America’s trade leadership. That prosperity is what makes so many people in so many places willing to accept a world system that gives America a privileged and unique role.

Like the crisis of democracy, the crisis of free trade is partly due to the failures of its friends and partly to the hostility of its enemies. Both the free-trade and democracy agendas that emerged in the heady years following the collapse of the Soviet Union were simplistically conceived and often poorly carried out. The WTO was useless in the face of systemic rule breaking and bending by China, which was admitted to the group in 2001. American policy makers did not think enough about the domestic consequences of the dislocations associated with burgeoning global trade, allowing antitrade politicians to make inroads in both parties. And an unwieldy 164-country negotiating process keeps the WTO moving slowly even as the need for international cooperation on trade grows.

Today the defenders of free trade face even more problems. The importance of maintaining or developing secure supply chains for goods critical to military or other sensitive systems has combined with rising political tensions with China. That has initiated a process of decoupling that over time will inevitably politicize trade. China has doubled down on efforts to develop its own information-technology industry for both national-security and economic reasons.

The global climate-change movement sees “green tariffs" as a tool to impose environmentalists’ policies on India, China and other countries. By limiting market access to goods produced by carbon-intensive methods, rich countries could force poor ones to adopt First World environmental regulations. That is a weapon many green activists are eager to wield, and uniting greens with traditional protectionist constituencies like labor unions would undercut support for free trade in the U.S. and beyond.

Meanwhile, many European Union officials see access to the bloc’s enormous internal market as its strongest asset in international relations. Whether by supporting green tariffs on agricultural products from the Amazon or by controlling the behavior of tech giants by threatening their access to Europe’s market, EU bureaucrats see trade restrictions as their one real tool to make Europe’s voice count in the world. Brexit removed one of the staunchest EU champions of free trade from the bloc; support for free trade in Brussels seems likely to diminish over time.

Although free trade has been a pillar of the American-led world order since the 1940s, the retreat from trade has gained ground across the American political spectrum. The Trump administration’s unfortunate decision, backed by many Democrats, to abandon the Trans-Pacific Partnership—a trade pact specifically designed to limit Chinese economic influence in Asia and to push China toward more honest and open trade policies—has been politically and economically costly for the U.S.

The cause of free trade is unfashionable today, and developing a trade agenda for the 21st century will be hard. The WTO needs deep reform. Issues like climate change and systemic cheating cannot be ignored. In a world of growing geopolitical competition, trade can’t be separated entirely from national security.

Nevertheless, world peace, global prosperity and American power remain dependent on free trade. The threats to the international trade system should worry us all.

This story has been published from a wire agency feed without modifications to the text

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