The Case for Economic Arms Control
The idea of global free trade as an end in itself is obsolete in a multipolar world of several great powers and shifting coalitions, in which today’s friendly trading partner may be tomorrow’s enemy determined to cut off essential supplies.
If it is legitimate for the United States to protect its strategic industries, then it is also legitimate for other great powers to do. No rational great power will allow a trading partner—even an ally—to wipe out its own strategic industries in its own home market, however indifferent it may be to the location of less essential production. From this, it follows that every great power should be allowed by trade rules to protect the industries that its government designates as strategic, not only in emergencies, but as a matter of routine.
For non-strategic industries, free trade could be the default. But in the world after the Pax Americana, free trade in strategic sectors is not desirable either for the United States or other great powers, be they U.S. allies or rivals. What is needed in strategic sectors is managed trade.
Managed trade does not rule out a high degree of trade among non-hostile great powers. For example, instead of blanket protectionist tariffs barring all imports in a strategic sector, a country might set minimal local content requirements, allowing the rest of the content to be imported. Or it could negotiate market-sharing agreements with allies, stipulating that if the share of domestic producers fell below a certain minimum the government would intervene to boost domestic production. The Multifiber Textile Agreement, which limited the textiles that could be imported from developing countries to developed nations between 1974 and 1994, provides a model for that approach.
THE POINT is that the idea of global free trade as an end in itself is obsolete in a multipolar world of several great powers and shifting coalitions, in which today’s friendly trading partner may be tomorrow’s enemy determined to cut off essential supplies. Free trade should be rejected as a goal of global trade negotiations in favor of “mixed trade”—that is, a mixture of managed trade in strategic sectors and relatively free trade in less important sectors.
It goes without saying that free market fundamentalists, along with those who speak for special interests opposed to reform, will denounce even a relatively market-friendly mixed trade system as “protectionist.” Let them denounce it. The major industrial nations, which also happen to be the major military powers, are moving rapidly away from free trade toward greater economic nationalism and mixed trade—not because they are ignorant of economics or irrational, but because they are engaged in the economic equivalent of rearmament in anticipation of a future in which the United States will no longer serve as a provider of free security services and one-way access to the U.S. market. Free trade as a universal ideal might have made sense under U.S. global hegemony. In a post-hegemonic, multipolar world of never-ending great power rivalries, free trade is only one tool to be used by the government in the national interest, along with reciprocal trade and pure protectionism, on a case-by-case basis, depending on the circumstances.
The alternative to trade war is neither unilateral nor universal economic disarmament. It is economic arms control. The sooner that policymakers, politicians, and pundits accept that, the sooner the United States will be able to reform its institutions as well as its ideology to flourish in a world which it can no longer dominate but must share with other great powers.
Michael Lind is a professor at the Lyndon B. Johnson School of Public Affairs, a columnist for Tablet, and a fellow at New America. He is the author of The New Class War (2020) and The American Way of Strategy (2006).