Restoring Trade’s Social Contract

Abstract

As we write this, U.S. trade policy is falling into deeper and deeper disarray. The United States, Canada, and Mexico are holding frenzied meetings to renegotiate the North American Free Trade Agreement (NAFTA). As recently as October 11, 2017, President Donald Trump warned that he will withdraw the United States from NAFTA if he does not get a deal that is “fair” to American workers. Indeed, the Trump Administration has already pulled the United States out of the Trans-Pacific Partnership (TPP), threatened to withdraw from the United States-Korea Free Trade Agreement (KORUS), and is holding the World Trade Organization (WTO)’s vaunted dispute resolution process hostage to its demands for change. When modern U.S. trade policy was born in 1962, President Kennedy’s new trade-negotiation authority was explicitly linked to innovative domestic measures addressing harmed workers.[12] And during the original NAFTA negotiations, Mexico and the United States created and committed to funding the North American Development Bank to invest in projects along the Mexico-U.S. border—a precedent for coupling free trade agreements with international cooperation to ameliorate the costs of such agreements. It is time to build on that history and seize this opportunity to not only get NAFTA back on track, but put NAFTA at the forefront of addressing social inequalities through trade agreements. We begin in Part I by explaining the social contract of trade—a bargain whereby trade liberalization occurs in a way that ensures the least well off among us are, at a minimum, not harmed. Parts II and III explain how contemporary trade policy can reclaim that vision.