Dear Friends and Colleagues,

Socialism means something different in different countries and at different times.

In the Soviet Union, various forms of economic socialism meant that the government directed (and largely owned) all production infrastructure; and that price mechanisms had been disabled in many important respects (at least officially).

In the Scandinavian countries, there is a so-called social-democratic model, which is mostly characterized by economic redistribution through high taxes that enable universal health care, free education, as well as comprehensive social security protections.

In the US, socialism is mostly a word used by the right of the political spectrum to raise suspicion that something is really wrong about left-wing policies. For example, President Obama’s policies were often called socialist by right wing commentators. But it is less clear what is really meant by socialism in the US debate, although it clearly describes something nefarious.

The irony is that President Trump’s policies on trade contain elements of economic socialism. Some of the mechanisms involved hark back to an era of “managed trade” (instead of “free trade”) and are at times more akin to the system that was used in Eastern Europe when it was part of the Soviet sphere of influence in the 1960-1990 period.

For example, the new trade deal with Mexico has stipulations on minimum wages in the rules of origin provision (as a requirement on the automotive sector to be eligible for free trade). The rules of origin further include demands on increased sourcing of steel and aluminum from within the block to avoid tariffs, and these products are themselves currently the subject to “national security” tariffs.