Leaders tell Trump not to hurt trade

Davos, Jan. 20: Globalisation is good. That’s the message leaders of developing countries want to send from the Davos forum to US President-elect Donald Trump, who takes office on Friday.

Any return to protectionism, they fear, could bring the sky down on decades of trade-based economic growth that has lifted countless millions out of poverty. And for all the problems of blue-collar workers, globalization has helped to achieve low inflation and low unemployment for Americans too, they argue.

Elected on an anti-immigration, protectionist platform, Trump has already caused ructions on the financial markets of many developing countries with threats to scrap trade agreements and impose "a very big border tax" on some imports.

That message has resonated especially in Mexico due to fears that U.S. companies producing goods there for export will face pressure to withdraw, potentially costing hundreds of thousands of jobs and billions of dollars in export revenue.

Mexican policymakers were not in evidence at Davos this year, perhaps kept at home as they battle to steady the peso which has fallen to record lows amid the Trump threats.

But there were plenty of others at hand to sound the alarm.

“The African continent’s position is: don’t damage trade,” South African finance minister Pravin Gordhan said during a panel discussion. “Don't damage the growth potential in developing countries which is crucial to inclusivity. These are the expectations the new administration needs to hear.”

Many emerging economies have been transformed by a threedecade long global trade boom, unleashed by China's ascent and "offshoring", as Western companies flocked to produce goods for export in lowerwage countries.

Some of that impulse has ebbed. Sluggish economies have created protectionist pressures in the West while automation has eroded the wage competitiveness of poorer countries. World trade volumes grew last year by 1.2 per cent, the third slowest rate in 30 years, UN data showed this week.

Trump’s policies could reverse some long-standing trends. Globalisation — as the explosion in cross-border investment, trade and labor movement is termed — pushed capital into the developing world, creating growth and jobs.

But since the 2008 global financial crisis, cross-border capital flows are down 60 percent from their peaks, coinciding with an ebbing of globalization, according to UBS estimates. “My greatest fear is that the policies the US may put in place will push emerging markets into recession,” Kenyan central bank governor Patrick Njoroge said. “That would be like the sky falling on our heads.”

Mr Njoroge quoted from a 17th century work by English poet John Donne to make his point — that Trump needs to realise the US economy does not function in isolation, and would suffer if emerging economies were seriously damaged.

Don’t damage the growth potential in developing countries which is crucial to inclusivity. These are the expectations the new administration needs to hear. — PRAVIN GORDHAN, FINANCE MINISTER, SOUTH AFRICA