UNITED-STATES-TRADE-POLICY AT A CROSSROAD

U.S. trade policy since the end of World War II has rested on two pillars: a multilateral approach to trade agreements and a commitment to rules rather than results. Support for each principle is rapidly eroding because of, among other things, record trade deficits and pessimism about the effects of exchange rate movements on trade flows. In fact, however, U.S. trade deficits are largely "homemade," and trade flows are responsive to changes in exchange rates. The U.S. has played a leadership role in promoting freer trade on a multilateral basis. Adoption of any one of a number of recently proposed alternative trade policy frameworks would be counter to that role.