US would be insane to go it alone on trade and industry

The paradigm shift in US economic policy began during the 2016 presidential election campaign. It was in that campaign that the candidates of both parties agreed on scrapping the Trans-Pacific Partnership (TPP).

The TPP was a proposed free trade deal between the US and a bunch of friendly Asian countries that was intended to create a regional trade bloc as a counterweight to China.

Both Donald Trump and Bernie Sanders came out against the TPP early on, and Hillary Clinton was eventually pressured into rejecting it as well. When Trump won the election, canceling the TPP was one of the very first things he did, and Bernie Sanders praised him for it wholeheartedly.

That was a pivotal moment in US economic history. Although some opponents pointed to specific problems with the TPP — for example, its intellectual property provisions — neither Trump nor Sanders was thinking much about those specific issues. Instead, as both Trump and Sanders made clear, the cancelation of the TPP was due to the idea that free trade hurts American workers.

Which is not entirely wrong. As we discovered in the 2000s with the China Shock, free trade can hurt American workers, quite badly. Without the China Shock and the devastation of the US manufacturing workforce in the 2000s, I doubt that the groundswell of anger against the TPP would have been so powerful, or so bipartisan.

The China Shock is pretty clearly what killed theeliteconsensus in favor of free trade, at least within the economics profession.

As I wrote many times back when I was at Bloomberg, the TPP was absolutely the wrong target for the backlash. The intellectual property provisions were bad, but these provisions could have been removed from the deal — and indeed, they wereremoved