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Reasons for optimism – trade

Summary:
Free trade had a good run with first GATT and then WTO, and has brought a very large part of humankind unparalleled prosperity, enabling people in poorer countries to sell their labour and its products on the world market. But there has recently been a return to a degree of protectionism, and some observers predict that economic nationalism will come to dominate, meaning that trade will be much less free than it has been, and that the prosperity that it brought might prove transient.President Trump in the US renegotiated the North American Free Trade Agreement so that its replacement incorporated fairly onerous rules of origin and minimum wage requirements. Some critics have described it as “government managed trade policy,” and Edward Alden of the Council on Foreign Relations said, “if a

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Free trade had a good run with first GATT and then WTO, and has brought a very large part of humankind unparalleled prosperity, enabling people in poorer countries to sell their labour and its products on the world market. But there has recently been a return to a degree of protectionism, and some observers predict that economic nationalism will come to dominate, meaning that trade will be much less free than it has been, and that the prosperity that it brought might prove transient.

President Trump in the US renegotiated the North American Free Trade Agreement so that its replacement incorporated fairly onerous rules of origin and minimum wage requirements. Some critics have described it as “government managed trade policy,” and Edward Alden of the Council on Foreign Relations said, “if a new hybrid of Trumpian nationalism and Democratic progressivism is what it now takes to do trade deals with the United States, there may be very few takers.” Trump also imposed tariffs on China as part of his ongoing trade dispute with them, and China responded in kind. The same happened between the US and the European Union.

The election of President Biden looks set to see the reversal of at least some of Trump’s protectionism, and it is quite likely that the US will apply to join the free trading Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that replaced the Trans Pacific Trade Partnership that Trump pulled out of. The UK has applied to join the CPTPP itself, now that it is no longer a member of the EU and is free to do so.

Although some within the European Union and some outside it have loosely called it a free trade area, in reality it bears more of the characteristics of a Zollverein, a protectionist customs union that uses external tariffs to give advantage to its domestic producers at the expense of outside producers and its own consumers.

Outside the EU, the UK has made agreements to continue trading with 60 countries that had EU trade arrangements with. It has also signed deals with Canada and Mexico, and has more trade deals still being negotiated. When the UK joins the CPTPP, it will enter the Pacific stage and become a global free trader in a way that the European Union is not, and will enjoy the benefits of lower import prices as well as access to more markets for its exports.

It is thus the case that the defeat of President Trump, and the UK’s departure from the EU, both herald a brighter future for international free trade and a retreat from the protectionism that threatened to replace it. Far from a pessimistic outlook that suggests an increase in nationalist and protectionist trade polices with tariffs and import barriers, the future looks set to offer more free trade agreements, wider free trade, and the increased trade that comes about when good can cross borders unimpeded. It offers grounds for optimism, rather than pessimism.

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