Adieu to Laissez-Faire Trade

The Great Depression taught us that securing an economic foundation for all workers is a vital prophylactic against division and xenophobia. We must heed that lesson once again.

By Trevor Sutton Andy Green

Tagged COVID-19EconomicsGlobalizationInequalityPolicytrade

Whoever prevails in the presidential election this November will face a historically daunting set of challenges. In the immediate term, the United States will need to commit enormous resources to address the devastating economic and social harm wrought by COVID-19. In addition to containing the virus itself, the federal government will need to act swiftly to secure workers’ economic livelihoods, restart the economy, and initiate an overdue process of reshoring critical supply chains. But beyond the crisis of the pandemic, the next administration will also need to address a range of longstanding social inequities and failures of political leadership that have been festering for decades, such as deep and persistent racism, pervasive economic insecurity, excessive concentration in the private sector, and the exogenous shocks of climate change. Nor will things be any easier on the foreign policy front: Global confidence in the United States has dropped precipitously since 2016, especially among democratic allies, and the country’s dismal response to COVID-19 has only made the situation worse. If the next administration hopes to restore U.S. global leadership and strengthen democratic governance, they will have their work cut out for them.

Meeting these challenges will require reform and course correction across a broad swath of policy domains—from labor rights to small business to public investments to address the climate crisis and systemic racism. Less obviously, but no less urgently, however, it will require a reconception of how the United States approaches trade and the international economic environment more generally. While the debate around U.S. trade policy is often framed in terms of its effects on specific industries, its impact is in fact far broader with regards to its implications on the progressive political agenda. It will be impossible for the next administration to restore economic security to the working and middle classes, mitigate the devastation  of global warming, and curb  concentrations of undemocratic power at home and abroad if  international markets are driving in the other direction.

Unfortunately,  that’s exactly the direction the international economic environment has been moving since the end of the Cold War. If manufacturing continues to migrate to countries where workers are routinely exploited, if access to cheap agricultural products remains a justification for the razing of tropical forests, or if pharmaceutical firms do not stop prioritizing just-in-time inventory over stable access to critical medicines, then the United States and other democratic countries will struggle to provide for the prosperity, safety, and well-being of their citizens.

The decades-long movement toward a more integrated global economy that has privileged investor rights and narrow ideas of efficiency—what we call laissez-faire globalization. This has shifted economic activity, and with it global supply chains, to jurisdictions with weak environmental and labor standards, little to no democratic accountability, and in some cases geopolitical interests that diverge from those of a democratic United States and its partners. This reordering of the global economy has put downward pressure on worker wages and on opportunities in many advanced industrial nations, compounding domestic policy failures to protect the middle and working classes and leaving once upwardly mobile communities feeling left behind and angry. The decline in trust in government and the political process, and the weakening of social prophylactic organizations like unions has in turn enabled right wing, xenophobic populism to take root in places once thought immune to it.

Similarly, the broad-based laissez-faire approach to globalization that still dominates the global trade architecture has allowed autocratic governments to strengthen their geopolitical clout and cultivate new allies through export-driven economic growth and overseas lending, without binding them to labor or human rights, environmental safeguards, or democratic reforms. At the same time, it has allowed increasingly monopolistic corporations to use labor and environmental arbitrage, rent-seeking, and offshoring to avoid equitable tax contributions, aggravating inequality and undermining social cohesion in democratic societies, as well as impeding an effective global response to climate change. And together with powerful new technologies, it has given oligarchic and, increasingly, white supremacist networks (as both state and non-state actors) a powerful set of tools for corrupting democratic institutions, hoarding wealth, and securing impunity for elite malfeasance—often in alliance with illiberal populists.

These undesirable consequences of the laissez-faire model of globalization should not be interpreted as an indictment of economic openness or an argument for blanket protectionism. Rather, they make the case for the United State and its international partners to pursue a new model of globalization that affirmatively strengthens a middle class at home and abroad, distributes  economic power broadly, and prioritizes the tackling of shared challenges such as climate change, with attention to racial equity. Such a reorientation will not automatically reverse the many headwinds facing American workers, or the challenges facing the planet—progress which will depend critically on domestic policy choices—but it will reduce the power of the market forces working at cross purposes to the pursuit of progressive goals, importance of which has been so greatly highlighted by the ongoing pandemic.

Trade and U.S. interests: From an instrumental to an ideological approach

The goals and tools of U.S. trade policy have undergone several transformations over the course of American history. Although today most discussion of trade centers on its effect on U.S. businesses and workers, for much of early American history the principle function of trade regulation for U.S. leaders was to generate revenue for the federal government. With industrialization, trade policy shifted toward protecting domestic producers—and to some extent workers—by taxing imports.

Beginning in the 1930s, U.S. trade policy underwent another evolution in which the principal focus of successive U.S. administrations became obtaining reciprocal trade arrangements with other countries. The original motivation for this approach during the New Deal era was to counter the protectionist tariffs that were seen as securing the monopoly power of the large industrial conglomerates, while also lowering the costs of goods for workers and ending the beggar-thy-neighbor trade and currency policies that were aggravating the Great Depression. Advocates of a more liberal trade policy within the Franklin Roosevelt Administration, led by Secretary of State Corden Hull, strongly opposed to the Smoot-Hawley Tariff Act of 1930, which they saw as part of a broader pattern of protectionism in global affairs that was contributing to economic dissatisfaction among farmers and workers and fueling political instability in Europe.

This new prioritization of open and reciprocal trade was first enabled by the Reciprocal Trade Act (RTA), a landmark 1934 law that granted the President authority to proclaim adjustment to tariffs without first obtaining congressional consent in order to secure comparable reductions from other countries. This shifted the locus of trade policy from Congress to the executive. Subsequent laws expanded the executive authority to negotiate non-tariff barriers and limited congressional authority for approving trade agreements to a yes-or-no vote. These led to incremental relaxations of actual trade barriers, such as tariffs and quotas, with occasional returns to protectionism for certain industries only. The most important—but certainly not the only—mechanism for such liberalization was a decades-long series of negotiations known as the General Agreement on Tariffs and Trade (GATT), which ran from the late 1940s and culminated in the establishment of the World Trade Organization (WTO) in 1995.

The GATT, which began in the late 1940s, was only one part of a broader trade agenda conceived by the generation of U.S. policymakers that had presided over the New Deal and U.S. participation in WWII. Under a draft agreement spearheaded by the Truman Administration, and finalized at an international conference in Havana in 1948, fair labor standards and competition standards would have complemented the GATT’s gradual tariff reductions. Ultimately, the so-called Havana Charter stalled in the U.S. Congress in the face of intense opposition from business interests, which had the regrettable consequence of focusing international trade architecture narrowly on barriers to cross-border commerce, as distinguished from the New Dealers’ more holistic vision that sought to link trade to broader political and social aims.

Numerous factors contributed to the rise of global economic integration as the overriding theme of U.S. trade policy in the middle of the twentieth century. One of the most important considerations lay in the foreign policy realm: In the immediate postwar era, U.S. officials viewed trade as a means of fortifying fragile European states against a communist threat and as a bulwark against the trade wars of the interwar period that contributed to the rise of fascism. In addition, the surge in economic activity connected to the war effort and destruction of the manufacturing bases of Japan and Europe reduced U.S. domestic concerns about foreign competition. Finally, a realignmentof U.S. voting constituencies made trade less of a partisan issue than in previous decades.

As the century wore on, Asian and European manufacturing rebounded, creating significant competition for U.S. exports and contributing to a steady decline in U.S. manufacturing jobs. Meanwhile, the collapse of the Soviet Union ended the threat of communism. But despite these changes, U.S. leaders continued to promote trade liberalization and draw explicit links between trade and democracy into the 1990s. In fact, the end of the Cold War inaugurated an era of seemingly boundless optimism regarding globalization’s potential. In a speech on Chinese accession to the WTO, President Bill Clinton expressed the common view that “China is not simply agreeing to import more of our products; it is agreeing to import one of democracy’s most cherished values: economic freedom… And when individuals have the power, not just to dream but to realize their dreams, they will demand a greater say.” A year later, a newly elected President George W. Bush rationalized a proposed hemispheric trade agreement on the grounds that “[t]here is a vital link between freedom of people and freedom of commerce.”

Such bold proclamations were rooted in a genuine optimism about the inherently transformative power of markets—an idealism that reflected the post-Cold War international environment and the economic expansion of the period. Largely left out of the discussion, however, were weaknesses in markets’ ability to self-correct, and by extension the standards that would be needed to address those weaknesses in this new era of international competition. Against that backdrop, an accelerated trade liberalization program of the 1990s, which entailed the creation of the WTO and a host of bilateral and multilateral free trade agreements, starting with the North American Free Trade Agreement (NAFTA) in 1994, expanded the scope of trade negotiations beyond tariff reductions on tangible goods to matters such as intellectual property rights, foreign investment conditions, and trade in services. Despite long-standing efforts by outside civil society groups, measures to protect those who might suffer at the hands of global market pressures, such as labor rights, environmental protections, access to medicines, and others, were left out of this trade liberalization project.

This hardening of the consensus around a laissez-faire approach to globalization at the turn of the millennium was in part a reaction to inflationary pressures experienced at the close of the postwar economic boom in the 1970s and ’80s. Removing barriers to trade and cross-border investment was seen as a tool to inhibit U.S. wage and consumer price growth through low-cost imports. But an equally important (and related) factor was the rise of economists in the U.S. policymaking apparatus, and with them the mainstreaming of neoclassical perspectives on economics that viewed trade as intrinsically desirable, and, critically, largely rejected the social and institutional impacts of laissez-faire policy and its impacts on labor markets and market concentration—the decline of unions, the rise of monopoly, the growth of financial sector power, and ultimately the collapse of working class economic security. Milton Friedman, arguably the most influential economist of his generation, went so far as to advocate for preemptive, non-reciprocal tariff reductions. Although policymakers did not take Friedman up on this proposal, the laissez-faire globalization agenda that he preached found a receptive audience at the highest levels of U.S. government, academia, and media. Cast by the wayside was the Great Depression-era lesson that securing an economic foundation for all workers was a vital prophylactic against social division and xenophobic authoritarianism.

The dominance of laissez-faire economics also served to reorder the relationship between economic and national security interests that had prevailed for most of U.S. history. Past generations of U.S. leaders viewed trade as a tool of geopolitics as much as an economic lever. Well into the twentieth century, trade was a mechanism for cementing alliances, supporting geopolitical partners, punishing adversaries, and ensuring a well-resourced military, as well as securing domestic industrial strength. Starting in the 1970s, however, “policymakers began to see economics as a realm with an authority and logic all its own, no longer subjugated to state power,” in the words of a recent analysis. Put otherwise, sustaining or increasing levels of cross-border commerce and especially investment came to be seen as ends in their own right, rather than as means of advancing foreign policy objectives. Specific constituencies at home seeking protection from the forces of global economic integration were obstacles to be overcome.

The unmooring of trade economics from foreign policy considerations was accompanied by an important shift in the way U.S. officials conceived of the relationship between trade and democracy. Whereas during the Cold War trade was used as a mechanism for building solidarity among democratic states, in the post-Cold War era participation in a globalized economy became synonymous with democracy. If states weren’t democratic yet, trade would move them in that direction. If they were already democratic, it would reinforce political freedoms, or so the logic went.

This is not to say that national security considerations vanished completely from trade policy: Presidents from Reagan through Obama have sought to shore up U.S. geopolitical alliances when identifying candidates for free trade agreements (FTAs). These considerations became especially relevant in the twenty-first century, when frustrations with WTO gridlock  led the United States to champion a “spaghetti bowl” of global FTAs rather than a single institutional arbiter of trade relations. But the strategic logic justifying these FTAs had changed: On aggregate, trade liberalization was assumed to be a net good for the United States, and thus the policymakers’ responsibility was to identify which partners deserved trade agreements for geopolitical reasons—often with the guidance of cost-benefit models that in retrospect appear to have been overly optimistic about actual trade outcomes. The overarching aim of U.S. trade policy remained the relaxation of restraints on the international movement of goods and capital.

Laissez-faire globalization and its discontents: Economic and security implications  

From a neoliberal perspective—under which increased trade and capital flows and the opening of previously restricted markets are inherently desirable policy goals—the trade liberalization project that has defined U.S. international economic policy since the 1980s has been an enormous success. The total value of global trade in real dollars increased by more than 250 percent between 1994 and 2010. Putting aside President Trump’s sporadic tariff threats, goods and capital today move more easily between countries than at any point since WWI. Over 160 countries have joined the WTO, whose membership now accounts for around 96 percent of both global trade and global GDP. And since 1990, the number of people living in extreme poverty has declined by more than half, as hundreds of millions of formerly poor citizens in emerging economies—principally those of East and South Asia—have entered the global middle class. Meanwhile, deflation has been a greater threat than inflation in recent years.

Viewed through a broader lens, however, reduced trade and investment barriers on a global scale, unbalanced by appropriate worker or other social protections, has coincided with a number of concerning trends for workers, the environment, and the health of democratic societies. Economic inequality has increased significantly both within countries and as a function of the global population (even as inequality between countries has decreased), including in advanced industrial economies with strong social safety nets. Confronted with the more than doubling of the labor market between the early 1990s and mid-2000s in which U.S. workers compete, real wages have stagnated for the large majority of Americans—and for residents of many other high- and middle-income countries—with Black households hit particularly hard. Financial crises have returned with a vengeance, culminating in the 2008 crash. Economic concentration has grown and multinational firms have substantially increased offshoring, becoming dependent on concentrated supply chains in jurisdictions with weak labor standards and poor environmental and human rights records. Finally, carbon-intensive industrial activities have migrated to low- and middle-income countries that are either less inclined or less capable of regulating emissions, impairing an effective global response to climate change.

Meanwhile, the powerful have become increasingly adept at avoiding accountability. Enhanced mobility of economic activity, capital, and intellectual property, combined with advances in information technology, have allowed some of the wealthiest and most profitable private sector actors to avoid equitable tax obligations through sophisticated arbitrage. Although accurate figures can be difficult to obtain, tax evasion has also become prevalent among the very wealthy, abetted by offshore financial centers. In a related development, the digitalization of global finance and the emergence of professional intermediaries specializing in complex multijurisdictional corporate structures and transactions have created new vectors for money laundering and corruption, effectively creating slush funds for kleptocratic networks, white supremacist threats, and transnational criminal organizations. These practices have fueled the rise of oligarchic elites in both autocratic and nominally democratic states—including, according to some critics, the United States—and widened the gulf between ordinary citizens and well-connected economic actors, who increasingly play by their own set of rules.

At a geopolitical level, laissez-faire globalization has, contrary to what was once believed, strengthened the positions of illiberal and authoritarian states, many of which have benefitted from export-driven growth made possible through entry into the WTO system. This has permitted low-tariffs with guaranteed market access and cross-border capital flows, but without a sufficient counterbalance of reforms to create a solid middle class with widespread worker power.

Globalization has also made it easier for authoritarian governments and other predatory actors to influence democratic institutions and societies to their own advantage by using the mobility and opacity of the international financial system to create clientelistic networks and cultivate political proxies. Alongside more traditional tools of influence, many governments have become adept at exploiting opaque and weakly regulated markets to advance foreign policy goals. This has been particularly true in Eastern Europe, where Chinese and Russian “corrosive capital”—i.e., state-directed investment in sensitive sectors, some of which is invariably hived off into kickbacks—has served as a powerful tool to shape and subvert local politics.
Finally, interdependence among the economies of democratic and undemocratic states has allowed the stewards of authoritarian capitalist regimes to use trade as a geopolitical weapon in what scholars have described as “reverse entanglement” and “weaponized interdependence.” This last trend has become troublingly clear in the wake of the COVID-19 crisis, which has revealed U.S. dependence on supply chains from geopolitical competitors such as China.

The precise causal relationship between laissez-faire global integration and these developments is in some cases contested, and there is little doubt that policy choices outside the trade and cross-border investment realms have played an equal or more important role in producing many of these outcomes. But the economic and, increasingly, security consensus on the impacts of the current model of trade policy has shifted dramatically in just the last few years, with COVID-19 adding additional urgency to the need for a rethink. Even among those highly committed to classical views on trade, it is increasingly hard to argue that the United States’s current approach to international economics has proven adequate at meeting the major challenges confronting democratic societies in the twenty-first century. As Heather Hurlburt and others have documented, the policy space in which trade operates now looks very different than in the past.

Trade architecture’s missed opportunities and incremental progress

What features of laissez-faire globalization contributed to these trends? More importantly, how can they be reversed? There are many culprits, but one of the most important is the absence of meaningful mechanisms to place limits on corporate power, promote labor rights and full employment, and protect the environment and public health in post-Cold War FTAs and in the WTO charter. By contrast, numerous provisions in the modern FTA and WTO architecture protect the profit interests of multinational companies—from drug company intellectual property monopoly rights to special investor clauses that can allow companies to challenge domestic environmental regulations to limits on countries’ domestic consumer protections standards. The resulting trade regime has allowed capital to level a credible threat against workers and governments to accept investor-friendly standards or risk job losses.

Progressive voices such as Jared Bernstein and Lori Wallach have been pressing to counter this unbalanced bargain for years. In the postwar era, the Truman Administration sought to pair the GATT with enforceable labor and fair competition standards, but was ultimately defeated by business interests. More recently, labor advocates have lobbied to incorporate labor standards and meaningful enforcement in U.S. FTAs signed after NAFTA, typically in the form of a requirement that member states enforce their own labor laws or as a commitment to respecting core labor rights under the 1998 International Labour Organization Declaration. Some FTAs have also included certain environmental standards and provisions designed to rein in state-owned enterprises, although both remain incomplete or off-base. But the practical effect of these labor and environmental provisions for improving conditions in member states has been limited, in part because enforcement tools are often unclear, discretionary, or in some cases practically unavailable. In addition no U.S. trade agreement, to date, has sought to address directly the climate-related implications of trade actions. The U.S.-Mexico-Canada agreement (USMCA), which replaced NAFTA in July, represents perhaps the best attempt yet by U.S. policymakers to rebalance cross-border trade in favor of American workers. But it is a mixed bag at best. On the positive side, it clawed back some of the most investor-friendly features of NAFTA and, thanks to the insistence of the Democratic House leadership, imposed an innovative factory inspection and labor enforcement mechanism to ensure compliance with standards under the agreement. In addition, it eliminated a pernicious requirement in NAFTA that labor and environmental violations need to have a nexus with trade in order to be subject to the enforcement provisions of the treaty.

Yet even with these improvements, USMCA represents at best an incomplete answer to the adverse effects of laissez-faire globalization. Of note, it conspicuously lacks sufficient environmental standards. And, in key areas, it actually goes beyond NAFTA in privileging corporate interests, for example by limiting the evolution of antitrust standards and technology regulation. On a broader level, the USMCA is just one link in a far vaster network of trade deals and international rules, most of which will require serious overhaul if workers, democracy, and the planet are to flourish.

Towards Sustainable Globalization and A Fairer, Stronger Economy for All

As trade practitioner Beth Baltzan and others have highlighted, the current model of international trade was not inevitable, nor is it the only one ever contemplated by or promoted by the United States. In the years following the end of WWII, the New Dealers who fought the Great Depression and global fascism recognized that the fate of the free world rested in large part on the prosperity of working families, and that the economic squeeze of the interwar years and, ultimately, the depression that fueled right-wing fascism needed to be avoided at all costs. U.S. officials accordingly lobbied, in the late 1940s, for an international trade architecture that would have emphasized full employment, labor standards, and fair competition. The cornerstone of this architecture, an International Trade Organization proposed in a draft charter signed in Havana in 1948, failed in the face of intense opposition from the U.S. business lobby, but it carries lessons for the current moment.

Even before COVID-19 upended the global economy, the consensus surrounding laissez-faire globalization was beginning to fray. But with the election of Donald Trump, trade skepticism found a home in the White House for the first time in nearly a century. And while the current Administration’s policies can hardly be called worker-friendly, given a domestic economic agenda that has favored the wealthy and powerful, its rhetoric and protectionist measures—such as unilateral tariffs and efforts to hamstring the WTO—have ignited a conversation about the purpose and value of trade in a way not seen in decades. Trump’s trade wars will not remedy the problems created by laissez-faire globalization, but they may pave the way for a discussion about a reformed approach to trade that does.

At its core, such a reformed approach to trade should turn away from a government-limiting model of economic integration. While it must recognize the reality of the global economy, it also must utilize governmental rule-settling—at the domestic and international level—to share the benefits of the global economy more equitably and to affirmatively counter concentrations of unaccountable economic power. Such an approach should champion policies that limit the global reach of authoritarianism, oligarchy, and corruption, counter monopoly and corporate tax evasion, and give ordinary people in the United States, and around the world, more control over the conditions in which they work and live. Finally, it should account for extraordinary events like pandemics, financial crises, and climate change.

Taking these factors into consideration shifts the efficiency calculus regarding the maximalist removal of trade restrictions—the laissez-faire approach—and points toward a balanced system of openness, anti-monopoly tools to drive resiliency and redundancy, and common-sense minimum standards for worker, environmental, and democratic health. Todd Tucker of the Roosevelt Institute has called such an approach a “sustainable equitable trade doctrine.” In order to achieve this balanced system—one that is vital to enabling the domestic policies that will allow American to rebuild post-COVID—U.S. policymakers should shift their approach to a trade policy that sets standards that first and foremost strengthen labor rights, limit monopolies, and ensure supply chain redundancy and resiliency. A starting point for these efforts could be an initiative in a new Administration that prioritizes rewriting FTAs to advance these goals—a strategy that will be vital to supporting the immediate, COVID-related priorities to on-shore critical supply chains.

Alongside this shift, policymakers should also revisit the relationship between trade and democracy and seek to revitalize the mid-century vision of trade as a buttress of democratic relationships, rather than a catalyst for democratic reforms. In practical terms, this would mean privileging democratic states when considering candidates for future FTAs, strengthening trade relationships with existing democratic partners, and affirmatively structuring trade deals—in particular, labor and fair competition chapters—to further secure robustly middle-class economies among democratic partners.

Despite the obstacles there, genuine efforts must be made to reform the WTO, both because of its importance in the global trade architecture and because of an abiding faith that multilateral, rules-based cooperation is superior to unilateral exertions of power. The Trump Administration’s campaign to hamstring the WTO’s Appellate Body, the powerful organ responsible for resolving disputes between countries, provides an unusual opportunity for an administration interested in a fairer trade architecture to push for significant reforms to the body. A future administration should agree to restore the WTO’s dispute settlement functionality, but only in conjunction with changes to the WTO’s structure that strengthen labor and environmental rights, limit tax arbitrage, and promote deconcentration and supply chain redundancy and resiliency. The incorporation of labor, environmental, and certain other fair competition standards into anti-dumping calculations represents a simple and targeted fix. So too would the creation of a new “non-sustainable economies” designation that would penalize failure to maintain with certain standards for labor and the environment. And instead of limits on governments’ ability to set size or activity limits, the WTO could facilitate national or regional sourcing diversification requirements, so as to prevent overreliance on any single country or region for supply chains.

Beyond a new approach to FTAs and the WTO, the United States should pursue complementary policies in the coordinated domestic and international realms aimed at producing a more equitable global economic order. These policies should have three broad aims. First, they should be anticoncentration, that is aimed at preventing the accumulation of so much economic power that pools of private interest are able to manipulate governments and markets to their own advantage and undermine fair and economic decision-making. Second, they should be anti-impunity, that is curbing the extent to which malign actors can use cross-border financial flows to flout laws, subvert institutions, and insulate themselves from the rule of law. Finally, they should be anti-arbitrage, that is limiting the opportunities for commercial entities operating at a transnational scale to avoid basic environmental, labor, and tax responsibilities in the jurisdictions where they operate.

Reforms pursued under these three aims could include: a new approach to antitrust enforcement that focuses on competitive returns, structural separations, and supply chain deconcentration; domestic reforms and support to the ILO to enable sectoral bargaining in domestic and cross-border industries and realize the goals of the ILO Centennary Declaration, including for workers in the informal economy; reforms to public procurement practices and U.S. export promotion programs to promote both onshoring of critical industries and compliance with global labor rights standards in global supply chains (for example requiring the incorporation of provisions modeled on the Lesotho Brand Agreement as a condition for support); better and more robust enforcement of the restrictions on the import of goods made with slave and forced labor and other illicit forms of trade; reforms to agriculture policy to reinforce anti-monopoly principles and so better secure rural economic vitality and address the climate crisis; and imposing real costs on tax havens—something no administration has ever seriously attempted—and reforming transfer pricing and other international tax rules to reduce opportunities for tax avoidance. The cumulative effect of these reforms would be to move the global economy toward a system in which the benefits of cross-border commerce are not captured by a powerful few, but rather distributed broadly across society. In addition, investment would not inexorably flow toward jurisdictions with the greatest propensity for exploitation of laborers and the environment.

In pursuing such reforms, the United States has a natural ally in the European Union, with which Washington should pursue a new special economic relationship that drives coordinated domestic and international economic reform. One obvious area for cooperation is in strengthening transparency measures that make it harder for foreign actors to use U.S. and EU financial institutions, companies, and real estate to evade taxes and launder the proceeds of illicit activities. Another is expanding corporate disclosure and stakeholder accountability regarding environmental, social, and governance (ESG) matters up and down supply chains—which the EU is already leading on and is adding to through its sustainable finance action plan and mandatory supply chain human rights due diligence.

The U.S. national security community can assist in these efforts by ensuring that the management of foreign policy relationships does not come at the expense of economic fairness, but, instead, that it strengthens it. This would mean, for example, elevating labor issues in U.S. diplomacy to balance the current focus on advancing business interests abroad, or otherwise ensuring it does not become subordinated to a wide range of more traditional security priorities. It could also conceivably entail placing anti-monopoly analysis into the framework of foreign policy and human rights considerations. At a more general level, the national security community would do well to recognize that building worker power and countering concentration around the world are foundational to the liberal democratic order, and as such to the long-term viability of U.S. freedom and democracy. As one national security expert recently assessed, “If sustaining and restoring the institutions of liberal democracy is a security goal, we are going to need economics to do the job.”


The laissez-faire system that has dominated the international trade architecture since the end of the Cold War has contributed to a less equal, less free, and less sustainable world. There was nothing inevitable about this outcome. The United States has sought, in the past, to use international trade as a tool for building inclusive and prosperous societies; it can do so again in the future. By advocating for trade policies that fight concentration and impunity, empower workers, and promote environmental responsibility, the United States can build a stronger and fairer economic and societal system both at home and abroad.

Read more about COVID-19EconomicsGlobalizationInequalityPolicytrade

Trevor Sutton is a senior fellow for National Security and International Policy at the Center for American Progress.

Andy Green is managing director of Economic Policy at the Center for American Progress.

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