The Pandemic Depression
The Global Economy Will Never Be the Same
In response to the battering that the Trans-Pacific Partnership (TPP) has taken during the presidential campaign this year, U.S. President Barack Obama has made the geostrategic case for trade—calling it the “foundation of U.S. national security.” But some opponents of the deal, from Republican presidential nominee Donald Trump to organized labor, have countered that the security case is a last-minute ploy to secure congressional votes. They couldn’t be more wrong.
The idea of trade as national security dates back to the United States’ earliest days. The 200-year-old concept received a boost from a White House that saw trade-based security ties as an alternative to the military-first failures of the 2000s. But there’s a good reason this argument has not been the slam-dunk its originators had hoped; it relies on Cold War–era arguments when we are neither in a Cold War economy nor operating under a Cold War security framework.
It is time to reconsider the security argument for trade. A security lens could serve as a tool for evaluating and rebuilding consensus across U.S. stakeholders around what makes trade beneficial or detrimental. This begins by understanding the argument’s historical roots and updating the security case for trade so that it reflects modern concerns.
THE EVOLUTION OF THE DEBATE: FROM SECURITY TO THE ECONOMY
Throughout more than two centuries of tremendous swings in the United States’ global ambitions and position, an intellectual worldview linking trade with peace—and competitive trade barriers with war—has been a perennial presence. Benjamin Franklin in the eighteenth century, and John Hay in the nineteenth, saw nations’ equal access to trade as a fundamental check on the power of empires. In the twentieth century, Cordell Hull, the U.S. secretary of state who received the Nobel Peace Prize for his part in creating the United Nations, made the case this way:
When the war came in 1914, I was very soon impressed with two points. ... I saw that you could not separate the idea of commerce from the idea of war and peace. ... [and] that wars were often largely caused by economic rivalry conducted unfairly. ... to me, unhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war. Though realizing that many other factors were involved, I reasoned that, if we could get a freer flow of trade—freer in the sense of fewer discriminations and obstructions—so that one country would not be deadly jealous of another and the living standards of all countries might rise, thereby eliminating the economic dissatisfaction that breeds war, we might have a reasonable chance for lasting peace.
Hull believed, like many of his generation, that the war against tariffs in the 1930s (explicitly echoed by Donald Trump in his “America First” platform) had contributed to both the Great Depression and the success of fascism in Europe. Then as now, support for and opposition to trade crossed socio-economic lines. Roosevelt and Hay were a part of the U.S. aristocracy, Franklin was the prototypical self-made small businessman, and Hull was born in a log cabin in Tennessee.
After World War II, the national security case for trade was inextricably bound up with the Cold War—the Communist menace was the decisive factor in both how trade regimes were structured and how political support was secured. This concern led President Dwight D. Eisenhower to reject his party’s traditional opposition to trade liberalization and successfully build bipartisan support for two rounds of lowered import tariffs in the late 1950s. Almost unimaginable, at least to the contemporary observer, it led U.S.-Japan policy in the 1950s, which focused on lowering Japan’s trade deficit with the United States, while Marshall Plan aid to Europe aimed to reconstruct industries that could compete with the United States. As the Center for Strategic and International Studies’ C. Fred Bergsten wrote four decades ago, “The economic argument was never sufficient by itself, however, to support a liberal trade policy for the United States. It was the foreign policy case that provided the real impetus for liberal trade policies in the United States in the postwar period.”
In foreign policy terms, U.S. Cold War–era trade policies were spectacularly successful. This period also saw the growth of the European Coal and Steel Community, which was intended to buttress European political integration and prevent renewed continental warfare. For more than 50 years, the ECSC’s successor, the European Union, was the greatest economic and political union the world had ever seen, producing tremendous improvements in the material and political lives of European citizens, uniting a broad range of European states and, over time, shouldering a significant proportion of the cost of global development and conflict prevention. The relative openness of U.S. trade with Asia, although not reciprocated, is similarly viewed as a key factor in the subsequent blossoming of representative government in the region.
Thus, in the immediate period following the Cold War, the idea that trade could transform societies internally and anchor peace internationally became a central element of center-left national security thinking. The democratic peace theory argued that societies with representative governments would be less likely to fight wars against each other—a concept that the columnist Thomas Friedman popularized with the now-clichéd “Golden Arches Theory.” Essentially, he wrote, countries with a McDonalds never go to war against each other. (This was first proven false when NATO bombed Belgrade in 1999 and again when Russia attacked Ukraine in 2014.)
Clichéd or not, this idea heavily influenced elite Americans’ enthusiasm in the 1990s for the North American Free Trade Agreement (NAFTA) and the normalization of trade relations with China through the policy of permanent normal trade relations (PNTR). It also explains the efforts of successive administrations, Republican and Democrat, to open trade and build economic enterprise zones in Muslim-majority countries, such as Morocco and Jordan, and strengthen economic connections between Arab states and Israel.
The security success of NAFTA, and its later cousin CAFTA (Central American Free Trade Agreement), has been uneven. U.S. partnerships with other North American governments on transnational security concerns—crime, drug trafficking, and counterterrorism—is significantly more integrated and efficient than they were 25 years ago. Not a single terrorist attack inside the United States has been traced to someone crossing our southern border. Practitioners, such as former U.S. National Security Adviser Thomas Donilon and former Canadian Ambassador to the United States Michael Wilson, also point to the NAFTA framework as one element that has helped maintain U.S.-Canadian ties through challenging trade disputes and periods of intense political discord between the two countries’ leaders.
At the same time, however—with the rise of the drug trade in Latin America beginning in the 1980s—Mexico and CAFTA countries saw levels of violence that have matched or exceeded those in Afghanistan and Iraq. A collapse in the prices of agricultural crops fueled massive dislocation in the countryside, even as absolute poverty levels dropped. Economic and security cooperation with the United States failed to translate into transformational support for weak national institutions.
Trade critics and supporters alike disagree on whether and which of these consequences can be traced directly to trade liberalization (as opposed to broader global economic forces and political dynamics particular to each society). At a minimum, however, it is important to recognize that trade links did not provide buffers to governments facing these challenges. Our partner countries do not enjoy greater security than they did in the 1990s; their example may thus be alarming to civil society groups contemplating trade deals elsewhere.
The record for China is ambivalent in different ways. The PNTR was meant to incorporate Beijing into the rules-based global economic order and encourage it to accept those rules in both the security and economic spheres, thus lessening the likelihood of violent conflict. These changes were also supposed to empower China’s population to demand a greater say in governance. But the Chinese government has proven highly adept at diverting its citizens’ energies away from political change, particularly toward nationalism.
Economically, however, the trade strategy worked. Opening up to the West fueled growth in China that cut the country’s level of extreme poverty in half—an achievement unmatched in the post-World War II period. China has indeed integrated into global markets for goods and capital, as well as global economic institutions, with complex effects on American business, workers, and consumers. But the policymakers of the 1990s failed to anticipate how much Beijing would be able to shape the global commercial environment rather than be shaped by it. As my New America colleagues Sharon Burke and Barry Lynn point out, this has the ability to affect U.S. security in ways we are just beginning to consider, from supply chains to high-tech warfare to regional stability.
China’s economic rise contains one major plus for U.S. and global security—the country is not at risk of falling into the sort of humanitarian crises ravaging the Middle East and Africa. Over three decades ago, 85 percent of its people lived in extreme poverty—on less than $1.25 a day. Now 15 percent of its people do. But on the other hand, integration-driven growth has given China more resources with which to trouble U.S. security, such as in the South China Sea. It has also provided Beijing with more leverage over other regional economies.
The TPP and Transatlantic Trade and Investment Partnership (TTIP) with Europe grew out of policymakers’ perception that effort in the mid 2000s to secure U.S. interests through a military-first approach in the Middle East had been disastrous in human and economic terms; that in the wake of these failures, U.S. allies were questioning whether Washington was able or willing to sustain its partnerships; that security interests demanded continued integration with those allies, particularly in light of China’s rise; and that a new generation of leaders in Europe was unwilling to sustain the EU, an institution forged after the devastating world wars.
Security and economic analysts further agreed that the size and velocity of Asian economic growth meant the inevitable rise of China-centric alternatives to Western trade deals, such as the proposed pact between ASEAN members and associates (minus the United States) and China, the Regional Cooperative Economic Partnership, and China’s One Belt One Road initiative. They also agreed that such institutions would be disadvantageous to U.S. workers, corporations, and security interests alike, and so needed to be met with U.S.-led alternatives.
The TTP and TTIP thus emerged from a national security needrather than from an economic one. As early as his 2008 campaign, Obama had emphasized, while also pledging to renegotiate NAFTA, an economics-first approach to Asia. “It’s time to strengthen our partnerships with Japan, South Korea, Australia and the world's largest democracy—India,” he said, “to create a stable and prosperous Asia.” This vision became one foundation of his “pivot” away from militarily-led Middle East policy. As Secretary of State Hillary Clinton later explained in 2011, trade was needed to bring about “a more mature security and economic architecture that will promote security, prosperity, and universal values, resolve differences among nations, foster trust and accountability, and encourage effective cooperation on the scale that today’s challenges demand.”
It is no accident that Obama and Clinton both alluded to the Marshall Plan in their discussion of how TPP figured in their overall Asia policy. Yet then-Secretary of State George Marshall’s contemporaries, much less Franklin, Mill, and Hull, would hardly recognize the contents of the TPP as “trade”: patent protection, corporate dispute resolution, and the like. Nor do we live in an era where Americans regard our economy as strong, and our partners’ as relatively weak, a necessary asymmetry for making concessions to them with little cost to us. Instead, Americans see trade as a threat not just to job security, but also to democratic governance at home, as well as to labor rights and public and environmental health worldwide. Three generations of elites had learned about a 1950s and 60s geostrategic framework for trade; but few, it seems, anticipated how global supply chains, post-industrial economics, and resurgent populism would undercut core tenets of the framework.
UPDATING THE DEBATE
As the Obama administration prepares to bring the TPP agreement to Congress this fall, both Republicans and Democrats have splintered internally. Disagreements on the deal’s national security value also cross party lines, although the alignments differ from the splits created by the economic angle. But among Democrats and prominent deal opponents, there are some—such as presidential nominee Hilary Clinton and her running mate Tim Kaine—who oppose the trans-Pacific deal on economic terms, but agree that the deal’s aim of drawing Asian national closer together around “rules of the road” is a critical one for national security purposes. Another faction of progressive Democrats explicitly views the internal security struggles of Mexico and other CAFTA nations as a case for opposing future trade deals. On the right, some libertarian free trade voices have joined the trade skeptics, arguing that the TPP does not actually “free” trade and that U.S. security alliances do not need strengthening.
Rebuilding any kind of national consensus on trade policy will require a more explicit definition of how trade deals affect national security interests. We might begin from a consensus that economic security and national security are inextricably linked – whether one draws this lesson from the 50 years of stability that the European Union brought Europe, or the catastrophic violence that economic insecurity has brought to Central America.
This may sound painfully banal, but operationalizing such a concensus would require a change in how trade deals are negotiated. There are three questions to ask when planning for and assessing proposed trade arrangements. The first involves military security. How does a given agreement—or lack of an agreement—affect the United States’ ability to build and buy military technology and project power? The second is related to strengthening national and international institutions. Whether it is an agricultural tariff, dispute resolution mechanism, or the protection of intellectual property rights for pharmaceuticals, does the outcome improve or weaken the security, stability, and sovereignty of the United States and countries involved? The final question is whether a deal sustains social cohesion. This is an important one, since many of the chief predictors of insecurity and conflict within societies are heightened inequality, perceived vulnerability of subgroups, lowered status of women, and lack of economic opportunity for young men. Trade proposals for countries struggling with instability should bring stability and provide support for its vulnerable communities.
The fate of the TPP now hinges on Congress’ assessment of the political forces sweeping the country. It would be the height of naiveté to suggest that a new policy frame is likely to shift the outcome one way or another. But both Obama and his opponents should nonetheless take a serious look at the security case for trade—as should the thinkers and appointees who will oversee trade policy in 2017. Hard as it is to imagine, the lame-duck fight for the TPP will prove to be the first in a series of clashes over trade policy. In the future, trade debates may center on the shape of trade with Europe after Brexit, the recurring issue of currency manipulation, ever-sharpening supply chain worries, or the new demands for import tariffs—on top of whatever political mess the TPP vote leaves for the next president. A revamped national security case can be the foundation of an approach to trade that crosses party lines. Without it, there could be four or more years of wasted effort at home, and embarrassment or worse abroad.