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Trump and Globalization

Stiglitz, Joseph E.

For almost three quarters of a century, the US had led the world into a rules-based system of trade-globalization, culminating in the creation of the WTO in 1995 and a rash of subsequent bilateral and multilateral trade agreements. Trump thus proposed a major change to US international economic policy. This paper assesses the extent to which, more than one year on, he has fulfilled those promises, and describes the likely consequences of what has happened. The central thesis of the paper is that it is fortunate that Trump has largely failed to deliver on what he has promised; these failures are in part based on a flawed understanding of the determinants of trade deficits, including the role of trade agreements, and on the political economy of trade agreements themselves. The likelihood is that over time, Trump will continue to move the US towards a more protectionist stance. While the chances are small that he will succeed in any major revision of, say, NAFTA or the WTO—beyond an updating of these agreements, such as by making them more relevant for the 21st century by including provisions related to the digital economy—there are some chances of nightmare scenarios where Trump pulls the US out of NAFTA. In virtually all likely scenarios, the trade deficit will increase and American workers, including those who had been adversely affected by globalization and turned to Trump in desperation, will be worse off. Moreover, while he has by and large failed to deliver (so far) on his campaign promises, there are likely to be significant adverse effects of what he has already done, both to the global trade regime and to US geo-political interests. Section 1 explains the major “accomplishments” to date, including the state of play of some of the trade negotiations. Section 2 identifies flaws in understandings of international trade that underlay Trump’s failures. Section 3 explains why Trump is unlikely to succeed in meaningful renegotiations of US trade relations. Section 4 argues that Trump policies are likely to lead to increased trade deficits and shows that, more broadly, his policies, to the extent that they are successful, are likely to lead to decreased competitivity of the US and a lowering of standards of living. Section 5 discusses the global response to America’s new protectionism, the likely impact on US economic and geo-political interests, and the long-run impact of Trump’s policy on the global international economic order.

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Also Published In

Title
Journal of Policy Modeling
DOI
https://doi.org/10.1016/j.jpolmod.2018.03.006

More About This Work

Academic Units
Economics
Published Here
April 15, 2019

Notes

Paper presented at “TrumpEconomics: a First Year Evaluation,”American Economic Association Meetings, Philadelphia, Pennsylvania, January 5, 2018.

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