trade policy vision emerges

trade policy vision emerges

# U.S. Trade Policy Reform: A Vision for Economic and Global Challenges (2024/05/20)

Summary:

This detailed policy analysis from the Carnegie Endowment for International Peace examines the current state of U.S. trade policy and proposes a strategic reset to address modern economic and geopolitical challenges. The paper, authored by Peter Harrell and published on May 20, 2024, analyzes why the pro-trade consensus that dominated from the 1990s to mid-2010s has broken down and offers a framework for revitalizing America's trade agenda.

Key Points:

1. Current Policy Landscape:

2. The Biden administration has articulated a "worker-centered" trade policy but lacks coherence on specific trade deals and tariff strategies

3. Former President Trump's alternative vision focuses on tariffs and protectionist measures to support U.S. industries

4. Congressional skepticism led to indefinite postponement of the Indo-Pacific Economic Framework (IPEF) trade pillar

5. Reasons for Declining Support for Trade Deals:

6. The "China shock" caused more significant disruption to U.S. manufacturing jobs than initially predicted

7. Shifting domestic political preferences regarding manufacturing and technology regulation

8. Diminishing economic benefits of traditional trade deals (TPP would have added only 0.15% to U.S. GDP after a decade)

9. Success of trade diversification without formal agreements (U.S. imports from countries like Vietnam, India, and Indonesia have increased substantially)

10. Proposed Strategy Shift:

11. Move from regional deals to sectoral agreements focusing on specific global challenges

12. Prioritize economic benefits alongside geopolitical concerns rather than pursuing deals purely for geopolitical reasons

13. Expand the toolkit beyond tariffs and regulations to include financial instruments, development assistance, and national security tools

14. Recommended Sectoral Focus Areas:

15. Climate and Energy: Coordinate with countries possessing green technology capabilities and critical materials

16. Economic Security: Align industrial policy measures and strengthen supply chains for critical products

17. AI and Digital Economy: Develop shared standards for AI development and digital governance

18. China Strategy:

19. Rebalance tariffs to prioritize derisking rather than generating leverage for a comprehensive deal

20. Focus on reducing Chinese content in imports from third countries through revised rules of origin

21. Address China's dominance in strategic construction industries like shipbuilding and port infrastructure

22. WTO Considerations:

23. Many U.S. policymakers view the WTO as outdated for current geopolitical realities

24. Most U.S. allies remain committed to the WTO framework

25. A potential "detente" approach where major powers operate outside WTO rules while maintaining the system for smaller countries

The analysis concludes that the strongest argument for rebooting U.S. trade policy is not geopolitics or economic gains alone, but rather trade's essential role in solving global challenges like climate change, supply chain resilience, and managing risks from AI and the digital economy.