February 28, 2025
Dear Friends,
These are, indeed, unprecedented, chaotic times. Each day, breaking news reveals disruption by the Trump administration of established government programs and services. This newsletter is focused on an element of the economic system I’ve studied for decades – trade and tariffs.
In the first month of his second term, President Donald Trump brought tariffs back onto the public agenda. The current debate about tariffs simplifies the issues in ways that ignore the reality that tariffs are not inherently either good or bad. Rather their effect depends on how they are applied and for what purpose. Yes, they can raise prices and can be used as a weapon to advance the interest of one nation over another. They can also be used as an instrument of international cooperation to raise wages and worker benefits while advancing equality and environmental protection.
We need a much deeper and more nuanced debate.
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Tariff Policy Choices
For Corporate Profits? National Competition? Or the Wellbeing of Life?
Photo by Daniel Sheehan/Liaison Agency/Newsmakers via Getty Images
David Korten | February 28, 2025
Donald Trump won the 2024 presidential election by playing to the anger of working-class Americans who have suffered from the effects of the global economy. Since taking office, he has made tariffs a major foreign policy weapon, especially in relation to Canada, Mexico, and China.
Corporate interests that profit from the exploitation of workers and the environment quickly rallied to warn that tariffs would bring higher consumer prices. While the concern about price increases is valid, especially in the short-term, the debate opens an opportunity to explore how tariffs can serve as tools to support workers and reduce environmental harm.
During the mid-1990s, my primary public engagement with economic policy issues was through the International Forum on Globalization (IFG), an influential group of non-governmental organization (NGO) leaders dedicated to confronting systemic abuses of corporate power. We recognized that the corporate-driven free trade agenda of that time sought to maximize corporate profits at the expense of people and planet.
At the same time, both U.S. Republican and Democratic parties aligned behind the corporate promoted “free trade” agenda. The North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) were both created by corporate interests with bipartisan support to advance corporate interests. Republican President George H.W. Bush initiated both. He was followed in the presidency by Democratic President Bill Clinton, who finalized both agreements in a bipartisan assault on working people and environmental health.
Together Presidents Bush and Clinton handed control of the global economy to transnational corporations, which in turn outsourced production to countries offering the cheapest labor and weakest environmental regulations. This accelerated global inequality, undermined local businesses, and contributed to global ecological collapse. A boost for transnational corporations and a loss for people and planet everywhere.
Nothing revealed the unabashed corporate bias built into NAFTA more clearly than its Investor-State Dispute Settlement (ISDS) provision originally approved by a Republican-Democratic Party consensus. Under this provision, if a government enacted a regulation to benefit workers or protect the environment at the expense of a corporation’s profits, that corporation was invited to sue that government to compensate itself for its loss. The corporation’s claim of lost profits was adjudicated by a tribunal of three corporate lawyers, thus assuring a pro-corporate bias. This NAFTA provision undermined national sovereignty, constrained government’s ability to implement environmental, worker, and public health protections and prioritized corporate profits over public wellbeing.
Back when they were first being negotiated, many civil society groups and advocates from around the world recognized that NAFTA and the WTO prioritized the interests of corporations and their billionaire owners over labor, environment, and democracy. Long and fragile supply chains, trade deficits, desperate workers, and environmental degradation have since become hallmarks of the global economy, thus affirming the position of those who took exception to these agreements.
In 1999, the WTO held a major international meeting in Seattle to further advance the corporate agenda. The civil society groups mobilized some 50,000 people to occupy the streets with peaceful public protest. Labor unions and environmental organizations had a major presence, with environmentalists symbolized by endangered Sea Turtles, and unions symbolized by Teamsters. A violent police response effectively blocked the streets and shut down the meeting.
Between 1994 and 2017, the U.S. trade deficit with Mexico and Canada surged by 576%. More than 950,000 U.S. jobs were officially certified as lost to NAFTA outsourcing—a significant undercount. Lost jobs, stagnant wages and eroding benefits contributed to the anger of workers. During his first term, President Donald Trump called NAFTA “one of the worst trade deals ever made.” On November 30, 2018, he signed a revision of NAFTA, renaming it the United States-Mexico-Canada Agreement (USMCA). The new agreement eliminated the ISDS provision and included previously excluded protections for labor and the environment. The revision brought jobs back to the United States and reduced the U.S. trade deficit with Mexico and Canada—thus helping to get Trump reelected in 2024.
Now back in office, Trump is reneging on the 2018 improvements with his swashbuckling imposition of tariffs on both friends and foes. On the positive side, he has placed trade rules back on the global agenda as a defining issue of our time.
A truly transformative approach to trade requires abandoning both the free-trade agenda AND the use of tariffs as a weapon of competition between nations seeking to maximize their GDP growth. The appropriate goal for trade policy is to advance cooperation between the world’s people and nations in support of a global fair-trade agenda dedicated to equity, ecological stewardship, local self-reliance, and worker wellbeing.
Ecological tariffs (border taxes) can discourage products with high carbon footprints or those produced under exploitative conditions. They can prioritize local production and bioregional self-reliance, thus shortening supply lines except for essential goods that cannot be efficiently or sustainably produced locally.
Regional trade agreements, such as the East African Community Customs Union (EACCU), demonstrate the potential for cooperative trade blocks among smaller nations to strengthen local economies. By reducing tariffs within the region and imposing them on external imports, these agreements can foster resilient local supply chains and regional self-reliance.
Tariffs based on carbon footprints can incentivize sustainable practices abroad while protecting industries that uphold higher standards at home. Funding for community-supported agriculture and local food networks can further strengthen short supply chains, reducing dependency on fragile global systems.
Life depends on managed borders, both ecological and economic. Just as skin acts as a border to protect the body’s internal organs while facilitating vital exchanges, human communities need managed borders to safeguard their integrity and ensure healthy interactions with neighbors. The challenge of our time is to replace free-trade policies with a fair-trade agenda that supports local resilience, worker wellbeing, and environmental health.
Now, as Donald Trump has brought tariff policies back into national focus, we must seize the opportunity to advocate for policies that genuinely benefit people and the planet.
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Noteworthy…
Free Trade, Fair Trade, and Trump’s Tariffs (Oct 23, 2024)
In this article for The European Conservative, Sven R. Larson addresses criticisms of Trump’s trade/tariff policies and suggests how tariffs could actually make traditional trade more “fair” for the United States.
Resistance Is Not Enough. The Left Must Address the Grievances of the Working Class, by Anthony Flaccavento for The Nation (Feb 27, 2025)
While not specifically on the subject of trade, this piece speaks to the bigger picture.
“We have to do more than just fight the firehose of bad stuff. Instead, we must put forward a positive vision of what we are for, especially in terms of kitchen table issues for the tens of millions of Americans struggling to make ends meet.”
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From the Book Shelf…
“The struggle over global rules is in essence a struggle between corporate power and people power, between capitalism and democracy, to determine who will rule. To tip the balance in favor of democracy, international trade agreements will need to be rewritten and global institutions like the World Trade Organization, the World Bank, and the International Monetary Fund, which are organized to advance the old economy, will need to be dismantled and replaced by institutions to serve the new.”
Agenda for a New Economy (Second Edition, 2010, Berrett-Koehler Publishers), page 184.
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