The Revival of Economic Nationalism and the Global Trading System

Abstract

The election of Donald J. Trump to the US Presidency coincided with the US adoption of an “America First” policy in trade. This policy reflects an underlying theory of economic nationalism that is fundamentally at odds with the current approach of the multilateral trading system established by the GATT/WTO. The current multilateral system is based on a “positive sum game” theory, i.e. the view that cooperative trade concessions can increase the volume of trade for all nations involved and result in reciprocal and mutual benefits. A large body of theoretical and empirical work, discussed and analyzed in this Article, supports the conclusion that the GATT/WTO system has historically achieved significantly increased trade volumes on both a multilateral and national scale since its creation at the end of the Second World War. By contrast, President Trump’s economic nationalism holds that trade is a “zero sum game” in which a gain in trade by one nation must be accompanied by a corresponding trade loss by another nation. Under the view of the current Administration, the US has often been the loser in the global trade deals of the GATT/WTO. The current Administration now seeks to dictate the terms of any future trade agreements so that the US wins at the expense of its trading partners, if necessary, in a zero sum game. The economic nationalism espoused by the current Administration, if unconstrained, could result in the dismantling of the current multilateral trading system leading to long-term negative, if not catastrophic, consequences for the world economy.