1“The return of isolationism”, “the demise of multilateralism”, “the end of globalization”… these alarmist headlines have dominated analyses of America’s place in the world since the election of Donald Trump. This applies to the trade policy sphere, where Donald Trump’s nationalist and protectionist discourse has strongly departed from the dominant free trade narrative of his predecessors. Yet, if America’s retreat from multilateral and regional institutions is clear in many policy spheres – climate action, arms proliferation or foreign aid – the significance of the current diplomatic revolution is subject to great speculation in the trade policy sphere. This article analyzes the underlying logic, extent and possible repercussions of current transformations of US trade diplomacy, by assessing this strategy through the lens of the USMCA (U.S.-Mexico-Canada agreement) or NAFTA (North American Free Trade Agreement) negotiations.

The logic of retrenchment

2While the dramatic decline in trade and investment in the aftermath of the financial crisis of 2008-2009 raised fears of a sustained period of “deglobalization,” the second decade of the twenty-first saw the blossoming of a new generation of preferential trade agreements of unprecedented geographic and regulatory scope like the Transatlantic Trade and Investment Partnership (TTIP or TAFTA) and the Transpacific Partnership (TPP). Although inherently weakened by their democratic shortcomings, these new international economic regimes were deployed as an ambitious geopolitical strategy aimed at shaping global economic governance for the near future.

3Today, the contrast between the strategic ambitions of the new generation of “mega” trade deals designed under the Obama presidency and the “renegotiating agenda” of the Trump administration with allies and rivals alike could hardly be sharper. Admittedly, the trade wars between the world’s two largest economies could have potential economic effects far beyond the conclusion of TTIP or TPP. Yet, despite its economic significance, the US economic showdown with China incarnates a transactional approach akin to the renegotiation of NAFTA or the Korea-US FTA, that is more concerned with targeted sector gains than a broader geostrategic vision of global economic governance. What accounts for this downsizing of American ambitions? What is the legacy of these first two years and what are the perspectives for the second half of the Trump presidency?

4To assess Donald Trump’s trade diplomacy, one must first examine the logic behind the current political revolt against the free trade narrative. Is his criticism against America’s “bad [trade] deals” merely a rhetoric tool aimed at manipulating his electoral base or is there any substantive evidence that America has granted overly generous concessions to its trading partners to preserve the benefits of the multilateral trade system?

5To begin with, what might seem like a Trumpian revolution in foreign economic policy is, from a broader historical perspective, anything but new. In one form or another, Washington’s emphasis on reciprocal trade has been a recurrent feature of American trade history from the first diplomatic steps of the early Republic to the ratification of the 1934 Reciprocal Trade Agreements Act, the 1980s trade conflicts with Japan and the debates surrounding China’s WTO membership. Bearing in mind these historical precedents, this section considers two explanations for Donald Trump’s anti-trade posture.

6The first hypothesis puts the logic behind Trump’s mercantilist approach to the test of trade economics by assessing whether the United States might indeed have granted unilateral market access to its trading partners to the detriment of its working class. This scenario echoes the notion of the “benevolent hegemon” according to which American foreign economic policy was subservient to its economic interests during the Cold War (as Senator Paul Tsongas (D, MA) famously said: “The Cold War is over; Japan won.”). One way to assess the level of reciprocity between the US and its trading partners consists of comparing the US average tariff level with the rest of the world. Figures and 2 show average tariff levels in comparative perspective and reveals that the US is indeed one of the countries with the lowest tariff levels. Among the world’s top four trading powers, the US has the lowest tariff average (Most-Favored Nation or MFN) for all products as well as for agricultural goods, and the lowest share of duties above 15% in both categories. This means that when it comes to MFN tariff barriers, the US economy provides greater access to other WTO members than the European Union, Japan and China – the latter having the high tariff levels among all for all categories.

Carte 1: World map of average MFN tariff levels

Source: WTO, 2018

Figure 1: US tariff levels in comparative perspective

Top 4 trading powers

Source: WTO, 2018

	ALL PRODUCTS		AGRICULTURE
	Simple average*	Duties > 15*	Simple average*	Duties > 15*
USA	3.4	2.8	5.3	5.9
EU	5.1	4.2	10.8	21.4
China	9.8	15.1	15.6	37.2
Japan	4	3.4	13.3	20.8

Figure 2: US use of non-tariff measures in comparative perspective

Top 4 trading powers

Source: WTO, 2018

	ANTI-DUMPING MEASURES: final measures in effect in Dec. 2017		COUNTERVAILING MEASURES: final measures in effect in Dec. 2017
	As importer	As exporter	As importer	As exporter
USA	324	74	93	5
EU	117	38	16	3
China	87	603	5	80
Japan	7	59	n/a	n/a

8Thus, while the American market has been relatively more open to its WTO trading partners, it has also been much more aggressive in its use of trade defense instruments, a mixed picture that contrast with Donald Trump’s rationale that the United States has been taken advantage of (or “raped” in his own words). Moreover, this brief picture of reciprocity in international trade only focuses on tariff and non-tariff indicators. With regard to other provisions of trade agreements – from investment protection to intellectual property rules – there is strong evidence that Washington has had tremendous influence on the nature of the international trading system, giving a competitive edge to many of its high-tech firms, especially in the services sector where America remains by far the world’s top exporter.

Figure 3: Trade-dislocated workers strongly supported Donald Trump

Source: Brookings, Metropolitan Policy Program, 2017

From theory to practice

11These interpretations of Trumpian retrenchment raise two sets of questions for a first assessment of Trump’s record: 1) Has the doctrine of America First helped rebalance the world economy to America’s favor? 2) Has it started to address working class anxiety or merely stoked racial resentment? The NAFTA renegotiations constitute an important case study to address these questions and evaluate the practice of Donald Trump’s trade diplomacy.

12Before focusing on the content of US trade policy, it is important to draw the lessons from the atypical process under which these renegotiations took place, which culminated with the signature of the rebranded “U.S.-Canada-Mexico Agreement” on September 30^th, 2018. When President Trump vowed to use a take-no-prisoner approach to renegotiate the “worst trade deal ever,” he apparently meant it, as illustrated by the long series of threats, poisoned pills, insults and the divide-and-conquer tactics that led to the temporary exclusion of Canada from trade negotiations. The first impression of one lobbyist best summarizes America’s new “trade undiplomacy.” According to him, US Trade Representative and chief NAFTA negotiator Robert Lighthizer began the negotiations “by putting the gun and the knife on the table,” a posture that would characterize the negotiating style of the US administration until the conclusion of the talks.

15The third lesson of the USMCA – an apt acronym for political staging and theatrics – is that there is no coopting political extremism. This is a lesson that French President Macron has long learned after failing to rally Donald Trump behind the Paris Agreement or the Iran nuclear deal. In the case of NAFTA, neither Mexican President Nieto’s pragmatic abnegation, nor Prime Minister Trudeau’s clever outreach strategy to American states and business interests did anything to alter the course of negotiations. Perhaps the greatest victim of the USMCA was Canada’s “progressive trade strategy” that sought to make trade policymaking more inclusive and accountable through the addition of chapters on indigenous rights and trade and gender, all of which were jettisoned under the dictates of American First. Thus, according to the new Gresham’s law of international trade politics, Donald Trump’s nationalist undiplomacy has not only replaced Barack Obama’s ambitious geostrategic agenda but also aborted Justin Trudeau’s inclusive trade policy framework. This should be a wake-up call for all partners considering a bilateral trade agreement with Washington, whether Japan, the EU or the United Kingdom. Despite the enthusiasm around the renewed transatlantic dialogue, the EU’s “Trade for All Strategy” could be the next victim of US nationalist retrenchment and obliterate all the Commission’s efforts to shore up support for a more sustainable form of trade liberalization. The USMCA shows that accommodation serves little purpose. This is a lesson that China has already drawn.