American Protectionism

The United States, architect of the post-war trading system, has become its most visible rule-breaker. The US refuses to renew the mandate of judges on the World Trade Organization?s (WTO) Appellate Body, which means that WTO rules are no longer enforceable unless the US (or any other member) chooses to comply. The Biden Administration has shown no interest in new bilateral or regional trade deals. This paper adopts a historical perspective to examine the causes behind the turn in US trade policy and speculates about its future course. Even today, the US economy remains among the world?s most open, public opinion supports trade and advocates of withdrawal from world markets are hard to find. Accordingly, interpreting the change of US trade policy as an outright embrace of protectionism is overly simple, in fact misleading. A more accurate interpretation is that US trade policy has changed, impelled ? as it has been over two and a half centuries ? by underlying forces. In this episode, it is the rise of China and its challenge to a US-led world order, high income inequality (combined with inadequate social safety nets), and climate change that force an adaptation of US trade policy. Not surprisingly, these forces create opportunities for calls for protection among powerful constituencies that can profit from it. This helps us understand Biden?s policies, but it does not justify them: the present US trade policy is not the right response to these challenges. Past cycles of US trade policy suggest that another rethinking of US trade policy is possible and even likely, especially since there is no support for closing the US economy. Unfortunately, a return to US trade leadership is not in the cards any time soon, and when it comes, it may be too late to salvage the rules-based trading system.