Economic nationalism is real, and while it will disappoint its backers, it presents a serious danger to Washington state.
Much of the media coverage of President Donald Trump’s Asia trip focused on whether he would make an embarrassing gaffe — and he mostly avoided the worst fears.
But the 12-dayjourney was nonetheless significant. Especially in his tough speech at the Asia-Pacific Economic Cooperation (APEC) summit, Trump signaled a decisive break with 70 years of American policy.
“We are not going to let the United States be taken advantage of anymore,” he said.
“I will make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and that will abide by the principles of fair and reciprocal trade. What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible.”
Take him seriously. Negotiations on a refreshed NAFTA are going badly, too, with the White House making impossible demands on Mexico and Canada. This is no doubt what his voters, to the extent they supported him for economic reasons, want to hear.
But the significance of this moment should not be ignored: It could bring peril to states such as Washington, which proudly claims to be the most trade-intensive state in the union.
From Trump forward — and there’s reason to believe he’s not a one-off — the policies and strategy that helped us and other export states prosper may be irretrievably in the rearview mirror. The most trade-intensive becomes the most trade-vulnerable.
It’s worth remembering the origins of the American policy that is now derided on both the left and the right as “neoliberalism.” The policymaking giants after World War II believed that the conflict and its roots were partly found in the beggar-thy-neighbor trade stances of nations after the First World War. The United States was not exempt: This country enacted the Smoot-Hawley Tariff of 1930, which deserves some blame for worsening the Great Depression.
After the deadliest war in history and facing the challenge of Soviet expansionism, America wanted a new order based on open trade, lowering tariffs and having nations play by established rules. This led to the second great era of globalization (the first being the decades before World War I).
This takeoff also helped boost the American middle class to unprecedented prosperity, with unions, progressive taxation and federal investment also giving an assist. Europe and Japan rebuilt from war, as well. In the words of the French economist Jean Fourasti, it was “thirty glorious years” after 1945.
Then came oil shocks and inflation, as well as the beginning of stagnant wages for many Americans. This was followed by hyperglobalization.
“Multinational corporations began building their international value chains across crazy quilts of countries,” University of California, Berkeley, economist Brad DeLong wrote in the Milken Review. “The Global South’s low wages gave it an opportunity to bid for the business of running the assembly lines for products designed and engineered in the Global North.”
This change makes sense from an economist’s perspective. But, as DeLong conceded, “The past 40 years have not been bad years, but they have been disappointing ones for the working and middle classes of … northwestern Europe, America north of the Rio Grande and Japan.”
Cometh the backlash. Trump wasn’t alone in 2016. Bernie Sanders crusaded against the Trans-Pacific Partnership (TPP), President Barack Obama’s main trade initiative, and this led Hillary Clinton to disavow it, too. Trump, in office, decisively killed American participation.
I always thought TPP (and I read most of the 30 chapters, plus appendices; its complexity was its enemy) would provide a modest trade boost for the country — more for Washington state than most — and actually ensure better labor and environmental protections than previous trade agreements. It was indeed the “high-standard, 21st century” deal that former Washington Gov. Gary Locke sold as Obama’s commerce secretary and ambassador to Beijing.
The more important role for TPP was strategic: Solidifying American leadership in Asia at a time of a rising and assertive China, which was not party to the deal. In other words, TPP would have continued the American policy of rule-based trade, while reassuring U.S. allies and partners (e.g. Vietnam), and, most important, perpetuating the liberal world order.
The 11 other TPP nations, including Japan, Canada and Australia, have vowed to go on with the pact. But the withdrawal of American leadership marks a tectonic shift in world history. We will regret this.
Some of Trump’s words at APEC sounded fairly sensible, sort of.
The idea that NAFTA or TPP surrendered “sovereignty” is a conspiracy-theory untruth. And the bilateral agreement with South Korea pushed up the trade deficit, one of his totems for trade failure.
Unfortunately, Trump isn’t prepared to push back against the most egregious violator of rules-based trade: China. And doing so would cause a global depression or worse. He is, however, prepared to abandon American leadership.
It’s still too early to know how this economic nationalism will play out. Is Trump really prepared to break up the global supply chains that enrich his billionaire backers? It’s not too early to predict it likely won’t help the white working class or anybody else, except for the very rich.
They are suffering more from insufficient federal investment in education, innovation and infrastructure, as well as industry consolidation and big finance’s grip. We have no indication Trump will tackle any of this. Tax cuts, budget reductions and deregulation will make them worse.
Globalization will continue under the leadership of China. And Americans — in their role as consumers — will keep buying cheap stuff from Asia.
Boeing, which has assiduously courted Trump, has enjoyed some big wins lately. And that’s good for trade here. But Washington’s exports are far more diverse than airplanes. For example, last year Washington farmers exported more than $10.2 billion in agricultural products to the world. Computer and electronic goods totaled $3.8 billion. Processed food totaled another $3.1 billion. And services exports such as software were enormous.
“America First” also threatens the openness that has made Seattle a magnet for international talent.
The best Washington can hope for is greater headwinds. The outcomes become more dismal from there.
But plenty of people believe Trump’s narrow vision of trade. And that’s why we may have crossed the Rubicon and can’t retrieve American leadership in another election.