Protectionist US: Trendsetter or Odd Man Out?

With the US taking a sharp protectionist turn, episode 16 of Altamar takes a close look at free trade, what it has brought the world (both the good and the bad), and whether this could be the beginning of the end of its reign.

To get a sense of the danger—and whether our fears are overblown—Peter and Muni spoke to former Chilean Finance Minster Andrés Velasco. Having helped steer Chile’s flagship open trade policies, Andrés lends his insight on why free trade becomes such a convenient boogeyman for populists, and how liberal centrists can fight back.

He says that while many of today’s free-trade poster children began their liberalization under authoritarian regimes, trade openness can endure, and retain broad support, in democracies. Chile and Northern European countries, for example, have found a sort of “set spot,” combining liberal foreign trade policies with robust domestic cushions for vulnerable industries and workers.

“It requires political will, it requires clarity of purpose, but it can be done under a democratic regime,” says Andrés.

But Peter worries that Trump is doing precisely the opposite. Instead of strengthening domestic safety nets for the “losers” of free trade and globalization, he’s seeking to settle scores based on an outdated way of looking at global commerce.

“Trump’s trade calculus seems to be based on the premise that the US itself is the ‘loser,’” he says. “Somehow, the issue of deficits has become the prism through which he’s looking at whether we’re doing well or not.”

Still, Muni reassures those fearing that Trump’s protectionist turn will cause a massive ripple effect around the world. Most of the international community still seems committed to the system of global commerce built over the last few decades.

“Everyone panicked in early 2017, fearing victories for nationalist, protectionist parties all throughout Europe,” she notes.

“Well, most of those fell flat. I wouldn’t say the protectionists are dead, but they certainly didn’t get the victories many people feared. And meanwhile, last year saw major new trade deals signed all over the world.”

And Andrés says there’s no reason to expect a slowdown in new trade deals over the next few years. In fact, conditions in the Global South—Latin America especially—seem riper than ever for ambitious new pacts, with or without the US.

“Why not have a free trade area of the Americas without the US?” he asks.

“If the US doesn’t want to go along, I’m sure the Canadians and the Mexicans would. Then you’ve got Brazil and Argentina, you’ve got the Pacific Alliance. There you have a good chunk of the GDP of the hemisphere. It’s a real possibility—it won’t happen tomorrow, but it could happen within the next five or ten years.” (Andrés explains in more detail how this might work here.)

And indeed, while we wait to see who will be exempted from these latest tariffs, and how countries will react, we can probably put doomsday scenarios aside for now. The real danger, it seems, is not that the world gives up on free trade, but that it simply gives up on the US.

The episode is available for streaming and download.