Watch­ing and wait­ing for Trump’s pro­tec­tion­ism

Amer­ica’s trad­ing part­ners would do well to pick their bat­tles

Financial Times Middle East - - Letters -

Over the weekend, the world’s lead­ing economies dropped a pledge to es­chew pro­tec­tion­ist poli­cies they had first made back in 2008. On the face of it, this change, pushed through at the in­sis­tence of Don­ald Trump’s ad­min­is­tra­tion, is very wor­ry­ing. The US has pro­vided lead­er­ship to the world trad­ing sys­tem for decades: in its ab­sence, things could fall apart.

In re­al­ity, though, the pledge it­self ap­pears to have played lit­tle role in en­sur­ing that the pe­riod fol­low­ing the global fi­nan­cial cri­sis has avoided the tit-for-tat trade pro­tec­tion­ism of the Great De­pres­sion. As for the US, it re­mains to be seen whether the cur­rent civil war over trade pol­icy within the ad­min­is­tra­tion will re­sult in any­thing more sub­stan­tive than frothy rhetoric and sym­bolic ac­tions.

The pro­tec­tion­ism pledge it­self is hardly one of the most vi­tal planks in the in­ter­na­tional pol­icy ar­chi­tec­ture. In­sti­tuted at a rushed Group of 20 meet­ing in Novem­ber 2008, as the global fi­nan­cial cri­sis was rag­ing, it lasted all of 36 hours be­fore Rus­sia broke it by rais­ing car tar­iffs. When pro­tec­tion­ist pres­sures later arose — such as calls to im­ple­ment “Buy Amer­ica” that would have re­stricted US pub­lic pro­cure­ment to do­mes­tic com­pa­nies — it was the rules of the World Trade Or­ga­ni­za­tion and the North Amer­i­can Free Trade Agree­ment that kept them in check.

More con­cern­ing is the pos­si­bil­ity that the US is clear­ing the decks for a vol­ley of pro­tec­tion­ist poli­cies, ei­ther by us­ing the White House’s con­sid­er­able pow­ers to put emer­gency blocks on trade, or sim­ply by ab­ro­gat­ing ex­ist­ing prom­ises. Yet to what ex­tent this will ac­tu­ally hap­pen de­pends on the out­come of a bat­tle for dom­i­nance within the ad­min­is­tra­tion.

The more pro­tec­tion­ist Amer­ica First group­ing, in­clud­ing the trade ad­viser Peter Navarro and se­nior Trump ad­viser Steve Ban­non, are pit­ted against a fac­tion led by Gary Cohn, the for­mer Gold­man Sachs ex­ec­u­tive who heads the White House Na­tional Eco­nomic Coun­cil. Mean­while, the new US trade rep­re­sen­ta­tive, Robert Lighthizer, was deputy USTR un­der Ron­ald Rea­gan, an ad­min­is­tra­tion that ne­go­ti­ated vol­un­tary re­straint s of Ja­panese car ex­ports to the US: restric­tive, but not mind­lessly de­struc­tive.

Sev­eral of the US’s trad­ing part­ners, in­clud­ing China, have been cir­cum­spect about sharply crit­i­cis­ing Mr Trump’s ad­min­is­tra­tion over trade. That seems wise. What emerges from this mael­strom of de­bate in the White House may sim­ply be lit­tle more than at­tempts to bully trad­ing part­ners and their com­pa­nies to in­vest more in the US. That would be mis­guided, given the com­plex na­ture of global sup­ply chains, but not dis­as­trous. For for­eign gov­ern­ments to weigh in heav­ily on the do­mes­tic US de­bate risks arous­ing re­sent­ment.

Given that, it was per­haps pru­dent for the rest of the G20 to ac­cede to the US de­mand this weekend to re­move the pro­tec­tion­ism pledge from the com­mu­niqué. Amer­ica’s trad­ing part­ners can re­act to each ac­tual pol­icy as and when it emerges rather than get­ting in­volved in gen­eral pub­lic fights over prin­ci­ple. The plan for a bor­der ad­just­ment tax on US im­ports, for ex­am­ple, which has alarmed for­eign gov­ern­ments, is al­ready snarled up amid dis­agree­ments within and be­tween the White House and Congress with­out out­side in­ter­fer­ence.

In­ci­dents like the G20 com­mu­niqué change should keep other coun­tries on high alert. Yet they would do well to pick their bat­tles and see ex­actly what emerges from the Trump ad­min­is­tra­tion be­fore they en­gage in what may well be a long and fraught cam­paign to keep the world trad­ing sys­tem open.

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