After decades of American support for the free movement of goods, services and capital around the world, the tables appear to have turned. Nowhere has public backing for free trade been shrinking as rapidly as in the United States. According to this year’s Pew Global Attitudes survey, only 53 percent of Americans agree that trade is good for their country, down from 78 percent in 2002. Contrast those numbers to the ones from Europe, where support for trade runs at 87 percent among Germans, 77 percent among Britons and 82 percent among the French. In countries like India, Korea and Nigeria, support for trade is even higher. Among the 24 countries surveyed, Americans lag behind everyone else in their support for continued free trade.
Fears that international trade could be the next casualty of the economic crisis have some of America’s closest allies seriously worried. Already, canceled orders have sunk shipping rates to 21-year lows, and World Bank head Robert Zoellick says trade will contract next year for the first time since 1982. Now leaders are especially nervous over incoming U.S. President Barack Obama’s campaign suggestions that he would review the North American Free Trade Agreement and put America’s other trade deals back on the negotiating table. In November, Britain’s Gordon Brown warned Obama that he must reject a “beggar-thy-neighbor protectionism that has been a feature in transforming past crises into deep recessions.” Germany’s Angela Merkel, whose country depends on exports for more than one third of its economy, has repeatedly cautioned that a backlash against trade is the last thing anyone needs in a global downturn.
It might come as a surprise that Europe, with its long socialist and mercantilist traditions, is now championing free trade, while free-market America faces a clamor for new barriers. In part, that’s because Europe has much more to lose from shrinking exports, especially now that the crisis is hitting more and more parts of the global economy. Foreign trade accounts for an average of 51 percent of GDP in European Union countries, compared with 13 percent in the United States. What’s more, while Europe has rapidly globalized, the share of the U.S. economy derived from trade has risen only slightly since 1992. European labor unions—and the politicians they help elect—find it harder to campaign against trade because their members’ livelihoods so obviously depend on it. American workers may also worry more about trade because they have fewer protections and get less help if they lose their jobs.
On both continents, however, positive attitudes toward trade are unlikely to increase in economically harder times. “The last thing struggling workers and producers want is more intense world competition,” says Joe Guinan, a trade economist at the German Marshall Fund. Yet Brown and Merkel, along with Brazil’s Luiz Inácio Lula da Silva and India’s Manmohan Singh, are all stepping up pressure to complete the Doha round of trade talks, which collapsed in Geneva in July. Most countries today place far fewer restrictions on trade than they are technically allowed under international agreements. Average tariffs, for example, can triple around the world without a single treaty violation or recourse by trading partners. That alone—which is not even close to the 1930s-style trade war Brown alluded to when he warned Obama—would shrink global trade by $1.8 trillion and slash global GDP by $448 billion, or 0.8 percent, according to a soon-to-be-published study by the International Food Policy Research Institute. Those numbers dwarf the estimated $79 billion in estimated GDP gains from the Doha round. It’s an “insurance policy” to bring certainty to markets and prevent “systemic risk” from a backlash against trade, says Jennifer Hillman, a World Trade Organization appeals adjudicator.
While still unlikely, the risk of a global crackdown on trade is growing. Earlier this year, more than 30 countries slapped taxes on food exports or banned them outright in response to rising prices. More recently—notwithstanding Lula’s declamations on Doha—Brazil, along with Argentina, has been working on plans to raise tariffs on industrial goods. These developments seem to have helped push leaders of the G20 group of nations, meeting in Washington in November, to commit to holding off on any new trade restrictions for the next 12 months, though it’s unclear if Obama and the incoming U.S. Congress will feel bound by that agreement. Despite the added risks to the global economy, they might just prefer to listen to worried American workers instead of worried American allies.