Trump’s trade “cure” is worse than the disease
China President Xi Jinping being lectured by US President Donald Trump in a cartoon. Reniutami | Dreamstime.com |
Financial markets often appear to be much smarter than the
wonks observing them: On the very same day US and Chinese trade officials
signed Donald Trump’s “Phase One” agreement with much fanfare in the White
House, equities traders all around the world just shrugged their shoulders.
In Asia, stock markets lost a little bit, while in Frankfurt
Germany’s blue-chip DAX index gained a negligible 0.1% – relief about the
much-anticipated end to the US-China trade war looks certainly different.
Progress in name only
One reason for the lack of enthusiasm may be a growing realization
that the trade deal is more appearance than substance. Admittedly, Trump has
won assurances from Beijing that China will buy more US goods, to the tune of
an extra $100 billion, including a significant volume of US-made agricultural
products. And Chinese President Xi Jinping has pledged to honour US copyrights
more and soften China’s policy of forced technology transfer.
As if it were an excuse for the meagre concessions, Beijing,
in turn, has wielded its latest trade data saying Chinese exports to the US had
actually slumped recently on the back of slower growth and citing the sacrifice
it is making by accepting less growth and subsequently less political
stability.
But declaring “mission accomplished” would be all too easy.
As a matter of fact, the world in general, as well as China
and the US in particular, are far from out of the woods on trade. The US
president is certainly not in the mood to drop his erratic behavior and Chinese
leaders still appear hell-bent on keeping all the aces up their sleeves. After
all, it is their priority to defend China’s political and economic system, as
it strives for dominance in the new digital world.
Instead, the feted trade agreement signed on Wednesday just
drags into broad daylight all the problems it wanted to resolve.
Sledgehammer approach
Trump’s cure amounts to little more than the blatant
disregard for multilateral agreements and global institutional frameworks such
as the World Trade Organization (WTO). He wants to call the shots and dictate
the terms of trade, for which unilateral sanctions against those who disagree
have become his weapon of choice.
There’s no better way to rephrase Trump’s Phase One deal
than with the words used by German economist Gabriel Felbermayr: “This is
bilateral nonsense in a multilateral world.” And the head of the European
Chambers of Commerce in China, Jorg Wuttke, added sadly that the pact would
pave the way toward “steered trade” between the worlds’s biggest economies.
New times are dawning, in which the White House is
increasingly hijacking regulations governing global trade. Over are the days
when the arbitration panel of the WTO was the widely accepted place for
resolving trade disputes. Trump’s sledgehammer approach has ruined the house, which,
admittedly, was no longer in perfect shape.
But gone with it are the benefits for all those countries
that held up the WTO rules book and abided by it. Economists have calculated
that the 180 WTO member countries were able to add a combined $855 billion to
their economies annually, thanks to the trade body’s regulatory efforts. An
average of 4.51% of those countries’ growth came from trade regulated by the organization.
Dampening collaboration
But such global achievements are now under threat, no matter
what kind of individual trade deals Washington may be able to strike in the
future. Moreover, Trump’s methods limit the scope for multilateral conflict
resolution also outside the realm of China’s massive trade surplus – the
conflicts in Iran and Iraq, public unrest in South America or populist
governments in Hungary and Poland are waiting in the wings.
Without doubt, “America first” could be killing off much of
the progress mankind has made in resolving its conflicts peacefully and stands
in the way towards overcoming the future problems it faces. What has been won
is an extra $40 billion in revenue for US farmers — and possibly, Donald
Trump’s re-election. Perhaps that is all Phase One has been about from the
beginning.
Trump’s trade “cure” is worse than the disease
Reviewed by Editor PH
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1:33 PM
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