ARI SHAPIRO, HOST:
The global trading system, as we have known it, is dead. Those are the words of former U.S. trade representative Michael Froman. He is now president of the Council on Foreign Relations. So if the era of global free trade is over, the question is, what comes next? Froman tries to answer that question in a new piece for Foreign Affairs called "After The Trade War." Welcome.
MICHAEL FROMAN: Well, thanks for having me.
SHAPIRO: Let's establish what exactly it is that you are declaring dead. Briefly, what was the global trading system, as we have known it?
FROMAN: Well, for 80 years, really, after the second world war, the major economies of the world built up a system of rules and procedures that led to more integration of economies, more opening, but very importantly just more predictability and stability because there were well-established rules that every country agreed to. And over the years, more and more countries joined the global trading system. Russia did, China did. And it led to this era of globalization, and the era of globalization had a lot of pros and cons. It has certainly been the most powerful force for poverty alleviation in human history.
SHAPIRO: But at least for a couple decades now, it's been not universally popular. I mean, even before Trump took office and started raising tariffs on allies and enemies alike, Democrats and Republicans had started to turn against free trade. So what were some of its major failings?
FROMAN: You know, I think the challenge is is that in a system of global integration, there is further competition, and that competition has effects on the domestic economy. So workers in the United States, as it became more subject to competition from low-wage countries abroad, found pressure on their own wages, found that certain industries could be done more cheaply, more effectively in other countries. And that led to the closing of factories or the moving of factories from certain communities.
SHAPIRO: You argue that it is not realistic or even a good idea to try to return to the system of a few decades ago. So what do you think the new global trade system should look like?
FROMAN: Well, the challenge we have now is is the U.S. is playing by its own set of rules, and frankly, China has been playing by its own set of rules. And so you have the two largest economies in the world who aren't really following the rules-based system, and that's why I think the system is basically dead.
And so the question is, can we come together, coalitions of the willing, coalitions of the ambitious, countries that come together with common interests and define a new set of rules around issues that they can agree on? For some countries, that might mean opening their economy - free-trade agreements. That's probably not the United States right now. For other countries like the United States, we have a lot of interest in trying to bring other countries together around our view of competition with China, our view on technology, our view on the digital economy. Can we play a leadership role in setting the rules of the road for those issues and begin to create rules, even in the absence of a fully multilateral rules-based system?
SHAPIRO: You've used the word rules quite a few times.
FROMAN: Yes.
SHAPIRO: And rules require predictability. And in the last six months, tariff rates and deadlines have jumped up and down, and it's anything but predictable. How can any trading partners depend on a system of rules to follow under those chaotic conditions?
FROMAN: That's exactly the issue, is that it's because of the chaotic conditions that we currently have that I worry that other countries will start to imitate the United States and basically set new rules themselves day by day, whatever they're feeling like, and introduce a lot of instability into global trade. And, you know, companies and workers and farmers and ranchers - they need stability. They want to understand what is the price they're going to get for the product they're growing.
And so it's precisely because there's a risk of this becoming chaotic, an anarchy, that we need to say, OK, let's take a step back. We're not going to go back to the way things were before. Nostalgia is not a strategy. Neither is hope. But we can agree on a certain set of rules on areas that we can agree to to help reestablish predictability and stability in the global trading system.
SHAPIRO: You've described what you think should happen. When you look at the state of the world right now, what do you think is actually likely to happen?
FROMAN: Well, I think for some period of time, we're likely to see this chaos or this, you know, unpredictability, I should say, where tariff rates are changing week by week or month by month. Now, as the Trump administration puts in place trade agreements, and to the degree that they hold - and by the way, there's just a lot of detail still to negotiate on virtually all of these trade agreements - hopefully, some of that instability will begin to recede.
I think the question is, after that period is over, after countries adjust to what the Trump administration has done, where do they want to take the global system next? So it may not happen for the next three years, or, you know, somewhere down the road, the U.S. may well say, well, we have an interest in bringing a group of countries together. Perhaps there's room for that kind of leadership going forward.
SHAPIRO: That's Michael Froman, president of the Council on Foreign Relations and former U.S. trade representative. His article "After The Trade War" is in the new issue of Foreign Affairs. Thanks so much.
FROMAN: Thank you. Transcript provided by NPR, Copyright NPR.
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