The rantings of a misinformed debate
The push for trade protectionism is unlikely to spread its influence beyond the US
Threatening tariffs on imports from China, President Donald Trump has provoked swift vows of retaliation from Beijing, shaken financial markets, and generated great uncertainty and confusion. Long before China started to run huge trade surpluses against the US, he ranted against American trade partners. Other countries, he claimed in 1999, “can’t believe how easy it is to deal with the US. We are known as a bunch of saps.”
Elevated to the White House, Trump has turned into a reckless trade warrior. His recent tweets on Syria and Russia confirm that he thinks too lightly of even real wars.
But it is too easy to blame the present outbreak of beggar-thy-partner protectionism on a volatile American president.
For one, sentiment against free trade has been strong in the US since the 1990s — the heyday of globalisation. All major candidates in the presidential election of 2016 railed against the Trans-Pacific Partnership trade pact. Trump may seem wholly unreasonable today in threatening to tear up the North American Free Trade Agreement (Nafta). But it’s worth remembering that both Barack Obama and Hillary Clinton denounced Nafta in 2008 and threatened to withdraw the US if Mexico and Canada refused to renegotiate the treaty.
Ross Perot was no eccentric outlier in 1992 when he spoke of the “great sucking sound” of jobs disappearing to Mexico. Nor was Patrick Buchanan, another hopelessly unrepresentative politician, when he called for social and economic justice for white American workers.
In a November 1993 Gallup poll, a majority of Americans opposed Nafta. A majority of Americans polled by Pew in January 1999 opposed President Bill Clinton’s granting of most-favoured-nation trading status to China — the prelude to the latter’s accession to the World Trade Organisation.
Plenty of critics on both the left and right pointed to problems in the America’s wholehearted embrace of economic globalisation. In claiming to make America great again, Trump is echoing Perot, who argued in 1992, “We need jobs here and we must manufacture here if we wish to remain a superpower. We must stop shipping manufacturing jobs overseas and once again make the words ‘Made in the USA’ the world’s standard of excellence.”
As it happened, business interests — especially those of industries seeking to concentrate production and expand regional supply networks — trumped public scepticism about free trade. Their extensive lobbying networks in Washington, including pro-business think tanks and policy groups, pushed for the removal of tariff barriers to US exports and the easing of overseas investment.
Representatives of labour-intensive manufacturing and agriculture had their own lobbies; they worked against freetrade deals, arguing that the latter would result in a calamitous loss of jobs. But, in almost all instances, the more effectively organised and funded interests prevailed. The lobbyists in Congress and the thinktankers managed to shape government policy on trade in defiance of public opinion and informed criticism.
The long-term and tragic outcome of their triumph is Trump — a figure far more volatile than Perot or Buchanan, who threatens to tear apart the delicate fabric of the international economy.
Broad pain
Of course, Trump is foolish to try to reduce trade deficits and recreate jobs in America by imposing tariffs on imports from China. American pressure in the recent past on another neo-mercantilist economy, Japan, achieved very little while inflicting broad pain. Chinese exports will find other markets while US producers dependent on them will pay a steep price.
Not surprisingly, no major country supports Trump’s trade war. It is also true that free trade doesn’t provoke the same strong opposition outside the US. As a political issue, it remains relatively uncontroversial in Europe, even in countries with strong far-right movements, because most of the continent has many more welfare provisions for the weak, the struggling and the left behind. Indeed, many far-right movements, such as Marine Le Pen’s National Front, pose as stout defenders of the national welfare state.
The US, on the other hand, weakened its social protection policies even as big business eagerly promoted globalisation. Judging by the tax cuts bonanza, large corporates remain a powerful force in Washington, notwithstanding Trump’s loud claims to fight for ordinary Americans.
Offering protectionism rather than social protection to ordinary Americans, Trump is another symptom of a deep political dysfunction.
It is clear that he is unable to address the structural problems of the US economy. There should be no doubt, however, that he represents a broad and enduring opposition to free trade that, ignored for too long, has turned into geopolitical dynamite.