Image Source: PexelsThe GATT, formally known as the General Agreement on Tariffs and Trade but informally known as the Gentleman’s Agreement to Talk and Talk, was first signed by 23 countrie back in 1947. Over the decades, all that talking led to a substantial decrease in tariffs all around the world. By 1994, the GATT morphed into the World Trade Organization. At that time, it has about 125 countries, accounting for about 90% of world trade. From a free trade perspective, it was a considerable success.Here’s my hypothetical question: Would the GATT have been able to expand the parameters of free trade around most of the world if it had also included the USSR?Of couse, this did not actually happen. The old Soviet Union perceived GATT as a club of geopolitical and capitalist opponents. In 1949, it started COMECON, the Council for Mutual Economic Assistance, as its counterbalance to the GATT. The original members were in eastern Europe: along with the Soviet Union, it included Bulgaria, Czechoslovakia, Hungary, Poland, Romania and later expanded to include Albania, East Germany, Mongolia, Cuba, and Vietnam. The Soviet Union had its own notion of “comparative advantage” and “gains from trade,” which was that it would organize global trade with non-Soviet countries having only a few major export industries, thus making it harder for those countries to become independent.Back in the day, the US had a fairly small amount of trade in a fairly small number of goods with the old Soviet Union: for example, we bought Soviet oil and sold them grain. But even though some prominent economists argued back in the 1960s and 1970s that the Soviet economy would outgrow the US economy, I don’t know of a time when American manufacturing workers felt as if their jobs were endangered by a flood of lower-cost imported cars or appliances or steel from Russia. The US worries of the 1970s and 1980s were about trade with Japan, or maybe Korea, but not the Soviet Union.Nonetheless, imagine an alternative global economy in which the USSR was part of the GATT during the Cold War: say, after Russia invaded Hungary in 1956, or after the Sputnik launch in 1957, or after the Cuban missile crisis in 1961. Would it have been politically possible to sustain a global free trade movement with a growing global membership, like GATT, with the US and the Soviet Union both as members?I suspect not.Now make the leap to the current day. The US and China have not yet had the equivalent of the old Soviet invasion of Hungary, nor a Sputnik moment (although the recent DeepSeek AI from China may come close), nor a direct confrontation like the Cuban missile crisis. But s the the level geopolitical confrontation rises, the pressures on international trade are rising as well.Indeed, there’s evidence that for many Americans, worries about international trade in general are actually worries about conflict with China in particular. Germany has had enormous trade surpluses for decades, and Japan has continued to have substantial trade surpluses as well, but it is China’s trade surpluses that have gotten the attention.In survey data on feelings about trade, Americans are something of a muddle. The answers we give depend on the questions that are asked. For example, a national survey last summer found that a strong majority of 63% favor increasing global trade, and a similarly strong majority of 58% believes that Americans favor having US firms “manufacture and make everything that we need within this country.” However, Americans don’t want to pay substantially higher prices for US products, if imports are cheaper. A majority of Americans are worried about the trade deficit, but if told that the trade deficit represents money invested in the United States, they are OK with it.In particular, Americans are likely to report that trade with China is “unfair.”In her own surveys, Laura Alfaro at Harvard Business School has also found that when trade with China is mentioned, any other positive attitudes about trade more-or-less vanish, because all people think about is loss of jobs.Back in the early 1990s, when Vice-President Al Gore was defending the propossed North American Free Trade Agreement in a prime-time televised debate with Ross Perot, one of the arguments was that Mexico’s economy was just so much smaller than that of the United State, so that fears of trade with Mexico were overblown. Back in 1980, when China began its economic reforms, the US economy was 15 times as large as that of China; by 2001, when Cina became as a member of the World Trade Organization, the US economy was about 8 times as large as that of China; in 2023, the US economy is now less than twice as large as China’s–about 60% larger (measured by current US dollars).On per capita basis, the US per capita GDP is still about six times as large as per capita GDP in China. But China’s population if of course much larger, and in global affairs, size matters. At least some of the official pronouncements from China suggest that it would like to jolt its economy out of the doldrums with a renewed surge of exporting. But a rate of Chinese export growth that was possible back in 1980 or 2001, given the relatively small size of China’s economy at that time, would be wildly disruptive to the rest of the global economy today. Moreover, the size of China’s economy is correlated with its military spending and defense posture.I’m in general a big supporter of free trade, as readers of this blog know. But economics happens against a backdrop of politics. I don’t think the GATT could have survived back in the 1950s and 1960s and 1970s if it had included both the US and the USSR. Perhaps if China took steps toward emphasizing domestic-driven economic growth, took steps to enforce intellectual property agreements, and backed off on threatening sounds about the China Sea, then trade agreemement including the US and China could be sustained. But that feels unlikely.Looking ahead, it seems like advances for free trade will be driven by technology, both ongoing reductions in transportation costs and in particular how the internet has both connected buyers and sellers around the world and made it possible to buy and sell services across national borders. When it comes to trade agreements, China’s presence in the World Trade Organization is one more difficulty for an organization that already was hobbled. Thus, trade agrements seem likely to be regional and bilateral, instead–and the agreements may be as full of rules and restrictions as they are attempts to reduce barriers to trade.More By This Author:Hayek On Decentralized Information In Markets Levels Of Industrial Policy Protectionism Fails To Achieve Its Stated Goals