Trump vs the World

We can start with looking at the forecast for the global economy, which is expected to grow by 3.25 percent in 2017, but international trade is not expected to keep pace, only increasing by 1.75 percent. We need to remember that between 1985 and 2007, real world trade grew on average twice as fast as global GDP, whereas over the past four years it has barely kept pace. Pascal Lamy, a former director-general of the World Trade Organisation (WTO), argued that the recent slowdown in global trade was only to be expected after years of rapid growth.

The world has become more globalised. However, the current form of globalisation, neoliberalism, free trade and open markets are coming under much criticism. The interests of powerful nations and corporations are determining the terms of world trade. In democratic countries, they are determining and affecting the ability of elected leaders to make decisions in the interest of their people. Elsewhere they are encouraging narrow political discourse and even supporting dictatorships and the “stability” that it brings for their interest. This is to the disadvantage of most people in the world, while increasingly fewer people in proportion are prospering. Free trade advocates knew from the outset that globalisation creates losers as well as winners, but have done little or nothing to ensure that the benefits of greater liberalisation have been equitably shared. In recent years, the losers have increased in number – and become more vocal. We have seen debt-driven growth lose its lustre and the search for a new and sustainable model for economic expansion in industrialized countries pick up pace. While this is happening, the problem of globalization has continued to produce immense wealth, yet seems unable to distribute that wealth fairly.

This has given rise to protest movements that threaten globalisation.

The western mainstream media barely makes available ample debate, allowing economic liberalism to be mixed up with the term political liberalism. We remember Margaret Thatcher’s slogan, “there is no alternative to globalisation, but what about a more equitable and sustainable development for all?” There is limited discussion that globalisation, coupled with the fourth industrial revolution, has resulted in a form of capitalism, driven by firms in competition with each other for lower wages and for machines to replace humans. This has led to a compression of the middle class, massive inequity, and increased numbers of losers in the developed world.

The question then arises: how President Trump would, if he could, reverse the effects of globalisation. This is not altogether clear. It would appear that those voters who voted for him were most concerned about the economy, trade, and what trade policy has done to blue-collar jobs. Is he intent on unraveling globalisation? The simple response is if President Trump were serious about a departure from globalisation he would have concurrently spoken against many other trade deals – Trade in Services Agreement (TISA) and the US-China Bilateral Investment Treaty. But he did not. Nor did he get rid of the 500 US trade advisers who represent corporate interests in the framing of such trade agreements. It does not look like he has any intent to shake the globalisation boat, maybe not yet.

Surely, he must know that foreign direct investment supports US jobs, reduces trade deficits, and announces foreigners’ confidence in the power of the US economy. Outside of protecting against foreign ownership of industries that are crucial to national security, opposing globalisation could hurt more workers than it helps.

Unscrambling the intricate web of international links set up since the end of 1980s would be a protracted process.

Roberto Azevedo, the current WTO boss, believed that the tit-for-tat protectionism used during the Great Depression would lead to world trade dwindling by twothirds in three years. “That would be a catastrophe of unimaginable proportions, now.” Christine Lagarde, the Managing Director of the International Monetary Fund, argues that Trump’s “trade agenda” would undo all the growth benefits from his tax cuts and infrastructure spending. Does higher consumer prices and retaliation, two downsides to putting a 45% tariff on Chinese goods, make sense? To be honest the threat of trade wars and of force, as well as sanctions, are not solutions to the dynamic that dislodges humans from the production process.

The solution suggested by Trump appears to be demagoguery, not a thoughtful response to the problem at hand. We in this country need to interpret these events carefully. Next week we will look at the historical evolution of globalisation and how we should position ourselves.