Donald Trump and Bernie Sanders have something in common. Both are hostile to the free trade deals that Barack Obama has been negotiating, and both have been campaigning on a platform of putting American workers first.



One thing is certain: if either of these two political insurgents makes it to the White House, there will be no great rush to provide easier access to the world’s biggest market. The agreement that Obama has been seeking with the European Union, the Transatlantic Trade and Investment Partnership (TTIP), will be dead in the water.

Hillary Clinton has been more supportive of trade deals in the past but has grown noticeably less enthusiastic as it has become clear that the tougher line adopted by Sanders resonates with many Democrats.

Trade has turned into a political issue in the US. Presidential hopefuls are expected to have a view on the transpacific partnership, imposing sanctions on China for currency manipulation and whether the US should have signed the North American Free Trade Agreement with Mexico and Canada in the early 1990s.

The same applies in the UK, where the Brexit debate has forced both sides to develop an instant expertise in the different sort of trade regimes that exist between the EU and the rest of the world. There are intense debates about the merits – or otherwise – of the Norwegian model, the Swiss model and the World Trade Organisation (WTO) model, and detailed forecasts about the economic costs and benefits of each.



An early sign that trade policy was no longer merely the preserve of political nerds came with the groundswell of opposition in Europe to TTIP. This was billed originally as something largely apolitical: an attempt to harmonise rules and regulations in the US and the EU so there were fewer barriers to trade.

Yet the TTIP is deeply contentious. Opponents say “harmonisation” is not some boring, technocratic exercise, but rather a race to the bottom that will dilute quality controls and safety standards. But it has been the idea of an investor state dispute settlement (ISDS) system, under which corporations could challenge decisions made by governments, that has proven particularly toxic.

It was not that long ago that freer trade was thought to be a good thing. The WTO was set up at the end of the Uruguay round of trade liberalisation talks, which ended in late 1993. At that point, it was assumed that there would soon be further global agreements to cover unfinished business in areas such as agriculture and services.

Few imagined that it would take until 2001 to begin another round of talks and that these would drag on for 14 years before being abandoned. The assumption in the early 1990s was that the world was entering a new era of globalisation, to match that of the late 19th century, in which there would be free movement of capital, people and goods.

The first world war put paid to what has been dubbed one era of globalisation. Brexit, rows over TTIP, Europe’s attempts to halt the flow of migrants and the “America first” approach adopted by Trump and Sanders all send out the same message: the retreat is underway from another period of globalisation.

This process has had a number of phases. It was always obvious that there would be winners and losers from globalisation, since it involved companies moving production from high cost to low-cost parts of the world. Factories in the west closed, but consumers benefited from cheaper goods. Initially, the winners easily outnumbered the losers, although the losses suffered by the losers were bigger than the gains for the winners.

But the last period of globalisation was a lot more fragile than it looked. It was built on the availability of easy credit, as became painfully apparent in 2007, when the financial markets froze up and trade collapsed on a scale not seen since the Great Depression of the 1930s.

There has been no return to pre-crisis days. Recovery has been much more modest than in previous economic cycles and world trade is barely growing. Unemployment has remained high in the eurozone and even in those developed countries where it has come down – the US and the UK – wages have remained under pressure.

The recession and its aftermath have meant an increase in the number of people who think that the economic system may be working for the owners of multinational corporations and the global super rich, but is not working for them.

The sense of unhappiness has been fanned by two other factors. First, the recovery has been skewed in favour of the haves rather than the have nots, largely because while earnings have been depressed, asset prices have been going up fast. Second, the traditional parties of the centre appear to have nothing to offer other than a return to the debt-sodden, finance-driven world that led to the crisis in the first place.

As in the retreat from the globalisation era that ended the first world war, voters are turning their backs on mainstream politicians and looking instead to those that can articulate their sense of being ignored or left behind. Hence the support for Trump, Sanders, Jeremy Corbyn, and Marine Le Pen in France, all of whom come from outside the mainstream.

Politics is grappling with what the economist Dani Rodrik has called an “inescapable trilemma”: the ability to have any two of democracy, global integration and the nation state, but not all three simultaneously.

One solution, according to Rodrik, would be global federalism, an attempt to align the scope of politics to that of global markets. The EU could be considered an attempt to test out the viability of this approach. Europe’s current difficulties suggest that a global polity remains some way off.

Another answer, he suggests, would be to put global economic integration ahead of domestic objectives. This would mean a return to the pre-1914 world of the gold standard, unfettered capital flows and unchecked migration. Incompatible with mass democracy and the growth of welfare states, it risks intensifying the backlash against globalisation.

Finally, Rodrik says there could be a recognition that there can only be so much global integration, with controls on the free movement of capital, people and goods. This was pretty much the settlement that was brokered after the second world war, but unpicked from the mid-1970s onwards.

If history is any guide, this process has further to run. It took more than three decades, which included two world wars and the Great Depression, for a new economic order to emerge. Efforts to turn the clock back failed, old solutions to economic problems no longer seemed to work, banks failed, deflation set in, and free trade was replaced by protectionism and economic nationalism. This all seems worryingly familiar from the perspective of 2016.