The architects of the neoliberal economic order promised that it would usher in a new age of global wealth, economic security, and democracy. Yet over the past 30 years, the system established by the World Trade Organization (WTO) and free-trade agreements has led to the opposite. Economic inequality and insecurity have worsened in most countries, with dangerous effects on democratic rule. Monopolistic and multinational megacorporations have concentrated the production of key goods and services in too few locations, creating vulnerabilities in the world’s most important supply chains.

Now, two forces are colliding to finish off this trade system entirely. China’s $1 trillion-plus annual trade surpluses, built on mercantilist policies unaddressed by the neoliberal regime, are forcing deindustrialization and creating political shocks in both developed and developing countries. And U.S. President Donald Trump’s chaotic and often misdirected tariffs have neither delivered the promised American manufacturing renaissance nor coalesced into an effective new model for trade other countries might adopt.

Neither the neoliberal order nor Trump’s second-term pandemonium offers a way forward. But a new approach could yet capture the considerable benefits of trade—if the rules were designed explicitly to promote balanced trade, fair and competitive markets, and a floor of labor and environmental standards. It will not happen under the current administration. But the U.S. global trade deficit will outlast Trump’s presidency, and so will Washington’s leverage over countries reliant on access to the U.S. market. The next administration should use this leverage to build a fairer and more flexible trade paradigm, one that will unshackle countries and better enable them to address the most pressing economic, social, and climate challenges of the twenty-first century.

THE PURPOSE OF A SYSTEM IS WHAT IT DOES

The trade regime that began in the early 1990s was designed for (and often by) large retailers, low-wage-seeking manufacturers, and the world’s largest pharmaceutical, financial, and agribusiness companies. Although branded by its proponents as “free trade,” the regime implemented by the WTO and free-trade agreements such as the North American Free Trade Agreement in fact represented a radical departure from earlier pacts. Whereas postwar agreements such as the global General Agreement on Tariffs and Trade were limited to setting tariff and quota levels for trade in goods and forbidding discriminatory treatment based on a good’s national origin, the WTO, NAFTA, and other agreements of the late twentieth and early twenty-first century were far more expansive, requiring signatory countries to conform their domestic policies to one-size-fits-all rules governing service-sector regulation, intellectual property, government procurement, food and product safety, and other policies unrelated to trade.

They also required countries to adopt pro-monopoly policies. The WTO’s General Agreement on Trade in Services, along with the rules of many free-trade agreements, forbids signatory countries from regulating companies based on firm size or the number of services any one firm is allowed to offer. The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights requires what many economists dub classic rent-seeking monopoly licensing by mandating that countries provide 20-year monopoly patents on medicines. Intellectual property chapters in free-trade agreements include yet more protections that empower pharmaceutical corporations to charge higher prices. The WTO’s Sanitary and Phytosanitary Measures and Technical Barriers to Trade chapters cap countries’ ability to enact or maintain strong environmental and food safety standards. Most recently, pacts including the Trans-Pacific Partnership and the U.S.-Mexico-Canada Agreement have added “digital trade” rules that undercut the ability of countries to enforce their own laws regulating Big Tech competition, data privacy and security, and AI oversight.

The WTO and free-trade agreements also ban most capital controls and other forms of financial regulation that could help counter financialization and rebalance trade. Procurement chapters forbid preferential treatment for domestically-made goods, an industrial policy used in many countries to reinvest tax dollars locally and spur demand to expand domestic production capacity. By contrast, most free-trade agreements include extraordinary privileges and rights for foreign investors and establish extrajudicial investor-state tribunals that can order governments to compensate investors if changes in domestic policies conflict with their expectations. In effect, countries are punished for seeking to raise wages or standards and rewarded for lowering their standards........

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