Is Trump the remedy for global trade?
The actions of the US administration has made it clear other countries need to look to their own interests first
President Trump: The doom or remedy for global trade? That was the moot point at a law firm debate I took part in earlier in the week. Unsurprisingly, given that former National Trade Minister Todd McClay and former Agriculture trade envoy Malcolm Bailey formed one of the debating teams, they were the doomsayers.
It fell to me and Chapman Tripp’s Daniel Kalderimis, an international trade lawyer, to argue that Trump was the remedy for global trade.
Given that the international headlines are already focused on how Trump’s words are, in reality, being taken as spruiking a global trade war, this was obviously the short straw.
But if you cast about (deeply), a case can be argued that Trump is the necessary disruptive force who is ensuring a shift in a global trade paradigm which in the past has led to the loss of far too many skilled jobs in “first-world” countries as they offshored their manufacturing base to China.
This is at the heart of the “America First” sloganising that swept Trump into the presidency.
It is important that New Zealanders understand where Trump is coming from.
Trump is seductive (go watch his hour-long media conference in Singapore after the Kim Jong Un summit for a master-class in stroking the press). He is a narcissist (evidenced by his tweets). And he is dangerous.
His voting base laps up his simplistic arguments. He is happy to go to war with the media.
While there is method to his actions — he remains a deal-maker at heart.
As one observer put it “he is a deal maker the way lions are carnivores and water is wet”. The crucial factor is that Trump is focused on US interests.
Nothing has changed from the principles he employed in his earlier real estate career as set out in The Art of the Deal.
I won’t reprise here the entire book (which I have pored over). The chapter headings will suffice. In essence his “Guidelines for Success” boiled down to eleven points:
First, employ high theatre and gamesmanship. But focus on your own interests. This Trump does in spades as he prosecutes America’s commercial interests particularly with China.
Second, deploy confrontation when appropriate. Again Trump will up the ante with foreign players like China. But he played only soft ball when he hosted President Xi Jinping at his Florida home.
There’s a raft of other guidelines that Trump deploys: Sometimes by losing a battle you will find another way to win a war; Aim high and just keep pushing and pushing and pushing until you get what you want; Think Big: Protect the downside and the upside will look after itself; Maximise your options; Know your market; Use your leverage; Enhance your location; Get the word out; Fight back; Have fun.
Trade junkies frequently celebrate gains on tariffs reductions for instance. But in practice that can come down mere border skirmishing. What Trump gets is the real theatre of action is behind the border — something which took our own bureaucracy a long time to wake up to when it finally forged a new trade agenda that focuses as much on dismantling country barriers as forging new deals.
At the global level the World Trade Organisation soldiers on. The Doha Round was still born in 2001. WTO director-generals have come and gone. The WTO is yet to reform itself to become more effective.
Trump has also angered established partners like Mexico and Canada.
But his major beef has been with China where Trump, like much of US business, is concerned at the impact of China’s ambition to be the world’s greatest high-tech hub.
On top of the tit-for-tat tariffs, Trump is also looking at restricting Chinese investment in American businesses and blocking the ability of US businesses to sell some high-tech products to China.
The upshot of Trump’s positioning is that Beijing is now playing down its “Made in China 2025” industrial modernisation programme. As the South China Morning Post reported this week the Chinese Government has instructed Chinese state media agencies to avoid mentioning “Made in China 2025” in their reports.
Arguably without the crisis Trump provoked when he took the US out of TPP on assuming the presidency, New Zealand and other signatories would still be arguing with the US over the changes he would have wanted before moving to ratify the agreement.
The upshot also was TPP opponent, Labour Trade Minister David Parker came off the fence.
The “awfulness” of the situation would have reinforced to Parker the importance of having bilateral and plurilateral trade relationships where New Zealand can’t be pushed about.
Arguably the standoff could also assist NZ make headway with China on the upgrade of the bilateral FTA.
Particularly as President Xi is promoting himself as in the vanguard of trade liberalisation.
The upshot of the Trump era is that other players — including New Zealand — need to look to their own interests first.
As for the debate it was a draw.