Shattering the myths about U.S. trade policy

Abstract

“As they say on my own Cape Cod, a rising tide lifts all the boats,” declared U.S. President John F. Kennedy several times during the 1960s. That picturesque metaphor encapsulates the assumptions underlying America’s trade policy since the Marshall Plan in 1948, and it has served as the linchpin of U.S. competitiveness strategy ever since. However, the skeptics about free trade have been gaining influence over the past decade. The longest post-War expansion in America, from 1991 to 2000, ended when the dot-com bust led to a recession in which the U.S. manufacturing sector shed almost 3 million jobs. A sluggish economy (GDP growth averaged 2.3% from 2000 to 2007) and the rapid development of emerging markets shrank America’s share of global GDP by about 10%. The United States experienced large trade deficits and rapid increases in imports from developing countries, particularly China.