America Needs a New Approach to Trade and Globalization; ITIF Proposes a “Globalization 2.0” Framework for Advanced-Industry Leadership and National Power

WASHINGTON—The model of globalization that U.S. policymakers have advanced throughout the postwar era has failed, but the current push toward the opposite extreme of protectionist autarky cannot be its long-term replacement, according to a new report by the Information Technology and Innovation Foundation (ITIF). The report outlines a strategic framework for “Globalization 2.0” that prioritizes U.S. interests in key advanced-technology industries to prevent China from becoming the dominant techno-economic power while maintaining strategic alliances, enforcing trade rules, and improving support for affected workers and communities.

ITIF is hosting an expert briefing event that is open to the press on April 3 to discuss the report and the path forward for the administration and Congress.

“For too long, many pundits, analysts, and policymakers have either defended Globalization 1.0 or reacted to its failures by simply rejecting it outright rather than considering how to reform our approach to it,” said ITIF President Robert D. Atkinson. “While it’s clear we cannot resurrect the old model, we can and should restructure trade and economic policy to focus on securing global markets for U.S. advanced industries, preventing predatory foreign trade practices, and fostering economic alliances that enhance American competitiveness. The sooner defenders of Globalization 1.0 recognize that it is irretrievably broken, the faster we can build a movement to replace what is fast becoming Autarky 1.0 with a better alternative.”

ITIF’s new report analyzes the original appeal and subsequent shortcomings of Globalization 1.0, along with the dead-end nature of overcorrecting toward domestic autarky, protectionism, and a policy that effectively amounts to “America alone.” It then outlines 12 principles to guide “Globalization 2.0” and details a policy agenda for Congress and the Trump administration to operationalize the new approach.

In reviewing the shortcomings of Globalization 1.0, the report catalogues ways U.S. trade policy has gone wrong—from globalists’ rejection of industrial policy to their misplaced faith in the World Trade Organization’s ability to police infractions. More broadly, ITIF argues U.S. trade policy is woefully out of step with today’s global competition for techno-economic superiority due to its lack of strategic direction. ITIF asserts that the goal must be for the United States to maintain advanced-industry leadership and bolster its national power so that it can prevail over China. To that end, Globalization 2.0 should entail the following:

• America should embrace global integration only where and when it is in immediate and direct U.S. interests at present and for the foreseeable future.
• Policy should recognize that potato chips are not equal to computer chips, and therefore the focus should be on market expansion for key U.S. industries that must have global scale to thrive.
• America should embrace integration with allies and nations that largely play by the rules, but treat China and other adversaries fundamentally differently.
• Trade policy should focus on more than just opening markets; it also should entail robust enforcement, coupled with a national advanced-industry strategy to help American companies gain global market share.
• Policymakers should accept that some workers and communities will be hurt by the creative destruction that can come from globalization, and they should work to cushion those blows through more effective regional development coupled with supportive worker-transition policies.

ITIF outlines the 12 core principles to serve as the foundation for Globalization 2.0:

1. China changes everything
2. Embrace a national advanced-industry strategy to bolster U.S. competitiveness
3. Trade should be a component of that national advanced-industry strategy
4. America first, but not alone
5. Engage in free trade with allies, pragmatic trade with others, and strategic trade with our adversaries
6. Pressure allies to align with the United States against Chinese innovation mercantilism
7. Establish a process to adjudicate disputes among free-trading nations
8. Don’t decouple from China
9. Insist on floatable currencies, especially the U.S. dollar
10. Fight back against advanced-industry mercantilism
11. Expand trade rules to cover more behind-the-border issues
12. Provide better support to places and workers hurt by trade disruption

“Globalization 2.0 cannot be a rebranded version of Globalization 1.0 with token adjustments. It has to be global trade and integration, but of a different kind,” said Stephen Ezell, ITIF’s vice president for global innovation policy. “To operationalize this new framework, Congress and the Trump administration need to enact reforms in organizational strategy, market opening, trade enforcement, and export promotion.”

The report details a 29-step policy agenda for implementing Globalization 2.0 in each of those areas. While acknowledging opposition is inevitable, ITIF argues that economic autarkists are reacting emotionally to past failures rather than engaging in a rational assessment of what should come next.

“The challenge is to persuade policymakers to reject both Globalization 1.0 and Autarky 1.0 in favor of a stronger, more strategic trade framework,” said Atkinson. “Globalization 2.0 must be built by patriotic pragmatists: those who put America first, but not alone. If defenders of Globalization 1.0 refuse to acknowledge reality, Autarky 1.0 will dominate for the foreseeable future—until its failures become undeniable.”

Contact: Sydney Mack, [email protected]