Trade liberalism always meant a lot for the (still) most important country in the world. One might even say that the US was born out of trade liberalism.
The Great Depression of the 1930s led to an obsessive and oppressive memory for many an American, and there could be no doubt as to what was to blame — trade protectionism.
Conscious of having emerged from the Second World War as the new economic, political and military power with both financial strength and export capacity, the US dictated General Agreement on Tariffs and Trade (GATT) opened perspectives for the removal of barriers to the free flow of international trade.
Promoting free trade
In a response to the worldwide economic recession of the 1970s-80s, the GATT-sponsored Uruguay Round of Multilateral Trade Negotiations turned a provisionally-applied agreement for actual and potential trade in goods into an expanded multilateral free trade promoting model, the World Trade Organisation (WTO).
But global markets, products, players and benefits mean that rising powers are reshaping the configuration of the global economy in a multilateral leadership direction.
A high degree of economic, financial and political inter-dependence has also come about by the cost of transportation having fallen.
Advances in communication made it possible to order goods and services in just seconds. But with the powerful forces of globalisation has come enhanced openness and vulnerability.
Economic, financial and political forces move rapidly across borders, influencing other markets and societies in a way not seen or experienced before.
Trade, government budget deficits and — temporarily — a shutdown of country’s administration can have an impact on its interest rate, which can push other countries into socioeconomic hardship.
Protectionist rhetoric
Stimulating trade via better trade deals requires attention to interrelated activities like monetary issues, investment flows, transportation, technology, etc.
Protectionist rhetoric alone will not do.
The conditions can be influenced by government behaviour, for economic inputs can be steered by governments through advancing infrastructure, for instance.
Trade liberalisation under the model as espoused by the US has often proven the best defence against protectionism.
But enhanced imports are an additional source of competition to domestic producers, who as a result of either fair (e.g., a better quality product) or unfair (subsidies and dumping) practices might experience a sharp decline in their sales.
An importing country will only impose restraints if it can be established these are hurting similar products in its domestic industry.
Economic rivalry
Economic rivalry and trade conflicts may eventually breed fertile ground for suspicion, bitterness and non-cooperation.
When economic transactions begin to cross borders in an unchecked manner, tensions and trade fights between governments or regional trading blocs occur.
US administrations were once at the helm of economic liberalism and free trade. President Donald Trump appears no longer to see it that way.
The writer is a specialist in trade policy and based in Brussels.
