Populism, Trade, and Trump’s Path to Victory

This chapter traces US populism back to President Andrew Jackson (1828–1836), providing early characteristics of a US populist leader. Major US populist issues have included immigration, the banking sector, and more recently, foreign trade. While Franklin D. Roosevelt’s populist-inspired New Deal reforms included trade liberalizing measures, postwar populists linked advancing globalization in the late twentieth century to elitist trade policy, inspiring new populist movements. Anti-trade populists were unsuccessful third-party presidential candidates until Donald Trump exploited this issue, capturing the Republican Party nomination and developing particularly provocative anti-trade rhetoric. He successfully integrated an anti-trade platform with a host of other populist issues, and vowed to alter US trade policy to “make America great again.”

The Future Belongs to Globalized Societies

The concluding chapter summarizes the major findings of the book. Populism has inflicted the greatest damage to global trade and the trading system through the policies of Donald Trump and the UK Brexit vote. Trump’s populist manifesto presents globalism as the opposite of patriotism, but globalized societies increase their national welfare through trade, serving patriotic goals. In order to rebuff the populist temptation it will be necessary to improve adjustment policies, so that workers will have better chances of moving to new jobs when globalization disrupts markets. National trade policy should prevent the concentration of power in one individual’s discretion. The WTO needs to be revitalized through updating its rule book, introducing more effective safeguard measures, and finding new methods of reaching consensus. Maintaining democratic institutions will also be necessary, along with global efforts to defuse refugee crises, and national efforts to integrate and assimilate immigrants.

Assessing the Cost of Populism to Global Trade

This chapter assesses the cost of populist protectionism, beginning with the traditional measures of welfare cost from trade restrictions, as well as the institutional disruption it often entails, which amplifies these costs. One distinctive impact of Trump’s trade policies as well as from Brexit, for example, is the uncertainty it creates in the business environment, which itself tends to diminish business investment and trade. Populist protectionism, by flouting established rules, also tends to provoke retaliation, further compounding its cost. The systemic cost of eroding long-standing trade practices and norms also diminishes trust between populist governments and other countries, which may move global trade toward discriminatory, defensive trade blocs. Reduced trust may spill over into nontrade issues in which cooperation is required to solve cross-border or global problems, such as with the coronavirus crisis. Populist restrictions on immigration also have negative trade effects in terms of inefficient labor allocation, reduced output, and diminished trade opportunities.

Emotional Flashpoints of Populism and Trade

This chapter discusses populist movements and how they typically depend on the emotional appeal of their platforms in order to achieve electoral success. Populist leaders therefore tend to identify flashpoint issues that resonate with their constituents in terms of the conflict with the discredited elite. Conceptual flashpoints include national sovereignty, which the elite have allegedly compromised; and trade balances, whereby the deficit country is the loser; and tariffs, presented as weapons to punish foreign countries. Institutional flashpoints include the World Trade Organization, regional trade agreements, and the European Union as a special case in the Brexit referendum. Identifiable countries and groups serve to personalize the focus of populist resentment, and represent the third type of flashpoint. Mexico and China have served this function for Trump especially, while immigrants and terrorists play this role in the United States, the European Union, and elsewhere.

Brexit and the Crisis of European Integration

This chapter discusses the role Europe’s long history of conflict over geography, religion, and national identity, as well as its aristocratic traditions, on modern European populism. The Brexit referendum gave direct electoral voice to the accumulated resentments of populist forces in the United Kingdom against EU rules administered by what its supporters regarded as an elite bureaucracy in Brussels. Their concerns, mainly over budgetary and regulatory issues, overrode the prospect of losing trade benefits from the EU single market. Elsewhere in the European Union populist parties continue to be active, and many of them are Euroskeptic, based largely on immigration and monetary issues. Many right-wing and left-wing populist parties in particular tend to favor protectionism, but will not be in a position to challenge centralized EU trade policy until they gain power in large EU countries. The UK exit from the European Union will weaken a prominent pro-trade voice in the EU Council of Ministers.

Populism and Trade Around the World

This chapter uses a regression study to attempt to identify the link between populist governments and the country’s degree of trade openness, based on data from 1995 to 2018. The degree of protectionism associated with populism depends in part on its left-wing, right-wing, or anti-establishment orientation. Left-wing populist regimes tend to be more protectionist, and anti-establishment regimes more favorable to open trade, for example, but the results are often inconsistent and insignificant. Trade policy in populist regimes appears to depend in large part on the national context, export profile, and populist leader. A review of trade policy in several recent populist regimes reveals that Latin American populist governments tend to be the most protectionist. Smaller open economies, or those either participating in or seeking integration trade agreements with larger countries, tend to have more open trade policies.

Trade and the Roots of Disaffection

This chapter introduces the issue of populism and trade. Populism is defined as a political movement based on social, economic, and political discontents, based on conflict between a ruling elite and the genuine people. It discusses the sources of populist anger, including disruptions of import competition, changes in technology, cultural influences, governmental corruption, and immigration. It proposes an assessment of populist regimes based on their impact on economic welfare and democratic processes. The chapter briefly reviews current trends in populist regimes and provides a historical review of populist movements, concluding with a brief overview of the book’s chapters.

Trade as a Source of Populist Conflict

This chapter discusses attitudes toward trade as the result of the balance between the desire to truck and barter and the desire to seek safety and identity in a social group. External threats, or a loss of status due to the presence or influence of foreigners, tend to tilt the balance in favor of protection from outsiders. Domestically, political tension arises between insiders and outsiders in the society. Populism transforms such fears into larger collective issues such as the loss of sovereignty, or the deprivation of status in society due to foreign incursions, including immigration and imports, and a confrontation between the elite and the people. Voting behavior becomes subject to emotional impulses when populist leaders present such issues as existential threats. Voters may also vote in solidarity to redress negative impacts on their broader community, even if the disruption, such as import-induced job loss, does not affect them directly. Populist movements and parties include left-wing, right-wing, and anti-establishment varieties.

Trump’s Assault on the Global Trading System

This chapter addresses Trump’s trade policy goal, which was to overturn the rules-based global system favoring trade liberalization. He did this with the help of his trade representative, Robert Lighthizer, a lawyer familiar with the legal and institutional aspects of trade. His assault on WTO rules began with unilateral tariffs on steel and aluminum, declaring that imports from all countries, including close allies, endangered national security. He bypassed WTO dispute settlement provisions to launch a trade war against China, with escalating tariffs, and finally forced the WTO dispute settlement system to shut down with repeated vetoes of appellate body appointments. His so-called trade war truce with China also violated WTO provisions on nondiscrimination. He repeatedly imposed tariffs on countries he deemed to be currency manipulators, despite evidence to the contrary, and threatened tariffs on Mexico in order to force the country to change its immigration policy. As the former leader of the global trading system, Trump’s actions undermined the foundations of the global trading system.