That is my latest Bloomberg column, here is one excerpt:
It seems we are bureaucratizing trade as much as liberating it. Perhaps that is no surprise. If you wish to induce numerous nations to sign on to a deal, you will have to offer exceptions, clauses and conditions for them. The eventual result is that a free-trade treaty morphs into a managed-trade treaty. I still believe that the various trade agreements that have been passed or drawn up are for the better, but I also can’t help being disappointed by them. Note also that progress through the World Trade Organization had ground to a halt even before the election of Trump.
We are now in a setting where the world’s No. 2 economy — China, on its way to being No. 1 — is strongly opposed to free-trade ideals and free flows of information, especially for its own home market.
Enter bilateralism. The smartest case for trade bilateralism is that trade in many goods is already fairly free, but some egregious examples of tariffs and trade barriers remain. Look at agriculture, European restrictions on beef hormones in beef, and the Chinese unwillingness to allow in foreign companies. Targeted strategic bargaining, backed by concrete threats emanating from a relatively powerful nation — in this case the U.S. — could demand removal of those restrictions. Furthermore, the negotiating process would be more directly transactional and less cartelized and bureaucratic.
My colleague John Nye, an economist at George Mason University, has argued that the free-trade revolution of the 19th century came about because of a major trade agreement between Britain and France in 1860. Other European nations were fearful of being locked out of subsequent deals, and they hurried to sign bilateral trade treaties with Britain and France. There was a competition to make deals rather than cartelization of the process.
That said, our current pursuit of this approach does not seem to have enough allies on our side, and thus I doubt if it will work. There is much more in the rest of the column.