Free Trade’s New Champions

By Desmond Lachman

Desmond Lachman is a resident fellow at the American Enterprise Institute. He was formerly a Deputy Director in the International Monetary Fund's Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.

The recently agreed framework for a Europe-Japan free trade agreement could not provide a clearer indication as to the changing of the guard in terms of free trade leadership. At a time when the United States is following an America-First trade policy, it is Germany and Japan that are now promoting free trade. By doing so, they appear to be taking over the free trade mantle from globalization’s erstwhile American champion. This shift is likely to benefit both the European and Japanese economies with at least part of that benefit coming at the expense of the U.S. economy.

Throughout the post-war period, the U.S. has been recognized as the undisputed champion of globalization and free markets. However, this has all changed with the November 2016 election of Donald Trump as president on an America First platform. Since Trump’s election, not only has the U.S. withdrawn from the Trans-Pacific Partnership (TPP) and demanded a fundamental renegotiation of the North American Free Trade Agreement (NAFTA), it also refused to sign onto the G-20’s anti-protectionist pledge and is considering new steel import tariffs.

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