US Trade Representative Katherine Tai recently delivered a major speech on US trade policy at American University (AU) in Washington, DC, where nearly 60 years ago President John F. Kennedy gave a commencement address calling for world peace and for nations “to build a better life for their children.” She noted that Christian A. Herter, Kennedy’s top trade envoy after serving as secretary of state under President Dwight Eisenhower, linked trade to foreign policy, that trade negotiations would be carried out “in a way to bring together the nations of the free world so that they, in concert, may become a great force for freedom….” Trade was an important tool deployed by the US during the Cold War.
In the current era of rivalry with China, however, the US is in danger of failing the contest for lack of an international economic policy equal to the challenge.
The heart of the trade policy of the 1960s was fostering global economic integration. As PIIE president Adam S. Posen noted in the recent lead article in Foreign Policy magazine, US economic policy has become dangerously inward looking. A US return to global leadership and enhanced security must rest on deeper economic integration with like-minded countries.
The context of Kennedy’s remarks at AU is instructive. He had just signed into law the Trade Expansion Act of 1962, on October 11, 1962, five days before the beginning of the Cuban Missile Crisis. The statute created the Office of the Special Trade Representative for Trade Negotiations in the Executive Office of the President and provided the administration with sweeping authority to negotiate trade agreements. Kennedy praised the statute as “the most important international piece of legislation…affecting economics since the passage of the Marshall plan,” adding that “we cannot protect our economy by stagnating behind tariff walls, but the best protection possible is a mutual lowering of tariff barriers among friendly nations so that all may benefit from a free flow of goods.” Trade, he concluded, “can bring a dynamic new era of growth”—a stronger counter to communism.
The act that Kennedy signed into law gave special authority to eliminate tariffs completely in a negotiation with the European Common Market. In swearing in Herter, Kennedy said that expanding economic ties with the Common Market was “crucial to our economic progress in the sixties and also to our security.” Broad trade-liberalizing negotiations were launched at the General Agreement on Tariffs and Trade (GATT) and, after President Kennedy’s assassination, were named the “Kennedy Round” as a tribute to him.
American trade policy was remarkably successful in attaining the objectives it set for itself. The causes of war in Western Europe were completely removed, and the European Union is a major ally in the effort to preserve world peace. The same is true of Japan. Not only did Soviet communism not dominate the world but also the USSR disintegrated, not due to armed intervention but due to the triumph of Western nations because they chose to organize their economies based on democratic capitalism.
That era in American trade policy, fostering economic integration of market-economy countries, is not recognizable in current US trade policy. The rejection of the earlier policy is now characterized by Ambassador Tai as “old” and the current policy is “new.” Little is on offer to America’s allies other than policy coordination. Economic growth through the efficiencies generated by trade is shunned. And most shocking of all, China is applying to take America’s place in the Trans-Pacific Partnership, negotiated under President Barack Obama but repudiated by President Donald Trump, drawing China’s economy closer to that agreement’s participants.
Ambassador Tai cited President Joseph R. Biden Jr.’s 2023 State of the Union speech as a basis for US trade policy. However, that speech did not mention trade. It called for US sourcing: “We’re going to make sure the supply chain for America begins in America.” This policy will be poorer for the world and ultimately for American workers. Over 95 percent of the world’s customers live outside the US. The US is turning its back on benefitting from the world at large.
What should US trade policy be? It should prioritize rejoining the Trans-Pacific Partnership, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and negotiating closer economic relations with the European Union. Washington should take the lead in strengthening the World Trade Organization (WTO) by working with like-minded countries to craft global trade rules that ensure that market forces and not government decisions determine competitive outcomes and make industrial and agricultural trade and production ultimately less distorted by subsidies. The US should not fear to embark on any negotiation that holds the promise of making markets more open, with trade that is fairer and more sustainable.
The world needs concrete proposals from the US to improve world trade. Through its political-military policies, the US is back in the lead, working for a strong democratic world as a bulwark of freedom against autocracy. The essential economic component is, however, largely absent. That needs to be changed.
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