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The Year Ahead 2019

The Future of Free Trade

In the second year of his presidency, Donald Trump started to fulfill his promised “America First” agenda by launching trade wars with allies and adversaries alike. In the absence of leadership from governments, the responsibility of responding to the populist disruption now falls to the business community.

NEW YORK – In 2018, trade, more than any other policy area, was “disrupted.” What used to be an archaic, technical, and – let’s face it – boring array of issues now dominates front-page headlines, magazine covers, and even John Oliver’s comedic documentaries on HBO’s “Last Week Tonight.” Constituencies that have traditionally opposed free-trade agreements (FTAs) are now extolling their virtues, and countries not known for their free-trade sensibilities – including China, Russia, and France – are nominating themselves as the defenders of the global trade system.

Still, it is worth asking how much has actually been disrupted. President Donald Trump did pull the United States out of the 12-country Trans-Pacific Partnership (TPP), but the remaining 11 signatories have implemented the bulk of the agreement on their own, while leaving the door open for the US to rejoin in the future. And more countries have shown an interest in joining, suggesting that the TPP could eventually extend well beyond what was originally envisioned. Moreover, the updated North American Free Trade Agreement – now to be called the United States-Mexico-Canada Agreement – is largely based on the TPP template, which already included Canada and Mexico, with some noteworthy additions.

Meanwhile, the European Union is implementing FTAs with Canada, Singapore, Vietnam, and Japan, and pursuing deals with Australia, Mexico, New Zealand, the Association of Southeast Asian Nations, Mercosur, and others. The Pacific Alliance continues to expand trade and other partnerships in Latin America. The Regional Comprehensive Economic Partnership (RCEP) is proceeding apace in the Asia-Pacific region. And the African Union has made more progress toward implementing the Continental Free Trade Agreement (CFTA).

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