There is a subtle yet important change occurring in how political leaders think about international trade, including how to remedy long-standing problems. It results from a key distinction between the “what” of trade (where there is relatively broad-based agreement among countries) and the “how” (where differences have tended to undermine important relationships, whether transatlantic or between China and the world’s advanced countries). As a result, there is some room for greater optimism than is suggested by talk of damaging trade wars, stifling investment restrictions, technological conflicts, and multiplying great-power tensions.
The relatively wide agreement in the international trade area tends to focus on four main hypotheses that are supported by a body of research and evidence:
First, free and fair trade is in the interest of most people in most countries, but it is not sufficient for inclusive prosperity. Specific segments of society can be displaced, marginalized, and alienated. As such, trade is not just an economic issue. It also entails important institutional, political, and social dimensions.
Second, trade is inherently underpinned by a mutually beneficial set of voluntary interactions that are best conducted, to use the language of game theory, as a cooperative game.Third, an accumulation of legitimate grievances undermines both the ideal and reality of free and fair trade. These grievances relate mostly to what economists call non-tariff barriers, including issues such as intellectual property theft, the weaponization of economic and development tools, forced technology transfer, insufficiently effective and credible multilateral institutions, and a less-than-stable global economic and financial order.