Want America first? Try free trade

If you bought yourself or someone you love medicine, a smartphone, new clothes or a child's toy today, your purchase was most likely made from a mix of components from many countries. The same was true for the meal you bought, the car you drove, the plane on which you recently flew and the carpet where your feet rest as you read these words.

Our everyday life is made possible by trade. Critics of trade agreements, led by US President-elect Donald Trump, want to change direction, renegotiating pacts like the North American Free Trade Agreement - which Mr Trump called "the worst trade deal in history" - and the agreement that brought China into the World Trade Organisation. He wants to tear up the pending Trans-Pacific Partnership (TPP) between the United States, Japan and 10 other Asia-Pacific countries. Mr Trump, as well as many liberal critics of trade pacts, claims that the best way to raise incomes for Americans and strengthen the power of citizens over corporations is to restrict international collaboration and reassert the US national autonomy.

This is an illusion. The only way to advance the interests of American workers and consumers is to negotiate better and stronger international arrangements. The TPP represents an important step forward, and whether or not that deal survives in some form or other, trade agreements still remain among the best ways to give governments greater power to protect their citizens and improve the living standards of workers.

We live in a world where fewer of the things we use come from any one place. More than half the goods and nearly three-quarters of the services traded globally are components from different countries - known as intermediates - that are later combined for final use. Multinational corporations are responsible for a majority of world trade and, by definition, transcend national boundaries. Nations compete vigorously for the investments of these companies, often by cutting corporate taxes and shelling out subsidies. One result is that no government on its own - even a powerful one like the US - can advance the interests of its citizens without the cooperation of other governments.

Consider the safety of the food we eat and the drugs we take. Opponents argue that trade agreements weaken the ability of the US to set and enforce its own high standards. But the US Food and Drug Administration (FDA) demonstrates the futility of a "fortress America" approach. FDA-regulated imports over the past 12 years have grown nearly sixfold, from six million to 35 million shipments involving more than 300,000 facilities in more than 150 different countries. It is simply impossible for the FDA to enforce its high health and safety standards without local regulators and industry in other countries doing the same.

Competition for investment is another example. Trade opponents hope that killing trade deals will stop corporations from outsourcing investments and bring jobs back to the US. Mr Trump favours corporate tax reform to lure companies home. But cutting corporate taxes will not work if other countries keep using beggar-thy-neighbour tax schemes to attract investment. The near-zero tax rate that Ireland offered to lure Apple is just the most egregious example. International cooperation is the only way to reduce such destructive competition, which dries up the revenues available for governments to spend on other priorities like infrastructure, a top Trump promise.

Mr Trump believes the US can reduce its dependency on other governments by imposing high trade barriers and ensuring that the goods that Americans consume are made at home. But that would require reconfiguring the auto, computer, pharmaceutical and many other industries that employ millions of Americans and are now deeply integrated in global supply chains. There would also be a staggering cost to American consumers, and other nations like China have warned they would retaliate in kind against American exports.

Trade agreements are not the only way for nations to collaborate, but they provide the economic incentives and high-level political commitment to help move cooperation forward and make it stick. Trade agreements can enable governments to reach consensus on investment rules, promote regulatory cooperation and transparency, and set more developing countries on the path of raising workplace and environmental standards.

 

The opposition to the current generation of trade deals is wrongheaded because these deals do more than any other arrangements to date to address these issues. The TPP includes fairly strong provisions to help national regulators do their jobs better. And for the first time, it has rules aimed at ensuring that state-owned enterprises do not enjoy special government subsidies. American trade negotiations with the European Union offer a chance to crack down on wasteful tax incentives and strengthen government leverage over corporations.

Mr Trump ran on a trade policy of economic nationalism and won. That mandate should be respected, but "America First" cannot be advanced by America alone. Total national sovereignty over global commerce is a mirage. The goal of economic nationalists like Mr Trump should be to bolster the ability of the government to act effectively and in the best interests of its citizens in expanding and managing global commerce. To do this, we need more, not less, cooperation in international trade.

NYTIMES


  • The writers are senior fellows at the Council on Foreign Relations.
A version of this article appeared in the print edition of The Straits Times on November 18, 2016, with the headline 'Want America first? Try free trade'. Print Edition | Subscribe