What Is to Be Done

Commentary by William Alan Reinsch

Published January 2, 2024

Three weeks ago, I laid out challenges the trading system is facing and promised to provide some solutions. The following week I was distracted by the ongoing debate over the administration's retreat on digital trade policy and decided to do yet another rant on that. Now, belatedly, I want to return to the challenges and offer some answers. To recap, the issues I identified were the conflation of national security with trade policy, the search for resilience amid political and economic uncertainty, the climate crisis, and the rise of populism and, with it, protectionism and opposition to immigration.

The first point to make is obvious: there are no simple answers that will permanently solve these problems. If there were, we would have thought of them a long time ago. Instead, there is a menu-a list of actions or attitude adjustments that will make things better. Some start with government, like addressing climate change. Others focus on the private sector, as in the search for supply chain resilience. Still others, like the rise of populist demagogues, require us to rethink our values and adjust our priorities. Change, if there is any, will come slowly and will be incremental. Patience is an important part of the solution. So, here, in no particular order, are some things we can do to address these challenges.

• Patch up the crumbling foundation of multilateralism. The United States was instrumental in creating the rules-based trading system and has worked hard to sustain it over the past 75 years-until recently. While it has provided many tangible benefits for the United States in terms of rules that have helped U.S. companies access markets and dispute settlement cases we have won, its biggest impact has been the certainty it provides traders and investors. If you have rules and a capable dispute resolution system, then you can have confidence in going out into the world, which is necessary for U.S. companies if they want to grow. The rules have not worked to our advantage every time, but, overall, the United States has been a big winner. Currently, however, while the administration's lips say "yes," its actions say "relic of the past." It has abandoned its leadership at the World Trade Organization (WTO) and thumbed its nose at its dispute resolution system when we have lost cases (which we deserved to lose). The result has undercut the institution at a time we need it most.

• Build coalitions of the willing. This may seem to contradict the first suggestion, but I think it supplements it. Multilateral agreements were easier to reach when they were mostly about tariffs, there were relatively few participants, and the small countries tended to follow the lead of the big ones. Now, agreements intrude much more into how governments organize their societies, have many more participants (164 in the WTO), and include much more assertive developing countries. The current fisheries negotiations illustrate the difficulty of getting nations at very different levels of development to put aside self-interest in favor of the common good. One answer is plurilateralism-assembling coalitions of countries willing to agree to stronger rules. This is second best, but it is still promoting a rules-based system, which leaves at least the participants better off and provides an example to the others. The United States has been successful in building coalitions on security issues, as it did against Russia, but has produced very little so far on the trade front.

• Make trade easier. The Trade Facilitation Agreement (TFA) reached in 2015 is an underrated landmark. As formal trade barriers like tariffs decline, tackling bureaucratic problems at the border becomes more important. Getting goods out of a country and into another requires dealing with at least two governments and sets of custom authorities. The TFA aims to make that easier, and developed countries can do more to assist others in implementing it, including by providing financial support.

• Teach trade. Public opinion on trade is an example of cognitive dissonance. Most people support trade and trade agreements (interestingly, they are more popular with Democrats than Republicans), but they also think trade costs jobs and does not lower prices. Companies can do more to show their workers how their jobs are involved with trade. Someone making electric wire harnesses in Connecticut that are sold to Boeing in Washington doesn't think of himself as an exporter, but his product is an integral part of a major export. The government can also remind people that the United States is a mature economy whose future growth will depend on exporting. Education about trade begins with understanding why it is important.

• Fight populism. This is a much bigger issue than just trade, and I have neither space nor expertise to get into it in depth. With respect to trade, Trump made it a central issue in 2016 and 2020, and he will do it again in 2024. Trying to be more protectionist than this is a policy and political mistake, and I will have more to say about that as the election approaches. In the meantime, we could all use a lesson in demography, something the Scholl Chair will be working on in 2024. In brief, the U.S. birth rate is now below the replacement rate, the country grows through immigration, and we don't have enough workers at all levels of our economy. In the battle over the southern border, we have lost sight of where our long-term interests lie and have allowed the people who have forgotten Emma Lazarus and want to shut the door now that they are in to take over the debate. This has been a fraught issue for more than 200 years, but economics usually wins, and it is important that the economic argument not get lost in the demagoguery of the border.

This is probably not what you were expecting. Columns about trade usually focus on specific current issues, but long-term problems demand big-picture solutions, and the ones above represent a decent start. Of course, conception is one thing, implementation another. None of these actions will be easy, and the United States is already failing on most of them.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.    

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