Viet Nam Human Rights
Trump America pushes the world against free trade
8/1/17
The risk
of protectionism is taking center stage in the IMF’s
latest global economic outlook as a surge
in trade barriers and antitrade
rhetoric risks tilting the global economy into a deeper long-term rut.
“The
presumed recovery in 2017 and beyond could be derailed by several, possibly
interacting developments: a bumpy transition in China, a sharp further fall in
commodity prices, a tightening in global financial conditions, or a sharp hike
in trade barriers,” says IMF chief economist Maurice Obstfeld.
On July
19th, the European Union launched its third legal challenge to China’s unfair
export restrictions on 11 key metals and minerals. Chinese export restrictions
on raw materials have been a major trade obstacle in previous years. China
imposes a set of export restrictions—export quotas, export duties, and
additional requirements that limit access to rare earths for companies outside
China. Chinese export
restrictions create serious disadvantages for foreign industries by
artificially increasing China’s export prices and driving up world prices. Such
restrictions also artificially lower China’s domestic prices for raw materials,
as they increase domestic supplies. This gives China’s local industries a
competitive advantage and puts pressure on foreign producers to move their
operations and technologies to China. Foreign companies are incentivized to
move production to China for cheaper manufacturing costs. China has argued that
its export restrictions on rare earths are part of its conservation policy.
On Monday
China followed through a warning to "take further measures"
against WTO members which continue to impose tariffs on its
goods 15 years after Beijing's accession to the organization. The
Chinese Commerce Ministry said that China has launched a dispute resolution case
at the WTO, demanding that all WTO members, particularly the US and EU,
stop using the "surrogate country approach" to impose higher
tariffs against Chinese goods, which they claim to be exported
at artificially low prices. The Commerce Minister called the "market
economy" concept a hangover from the Cold War era, and a domestic
legal conception which should not apply to the WTO.
Sunday
December 11 marked the 15th anniversary of China's WTO accession, and
China expects governments which have not already done so, to lift
anti-dumping tariffs against its exports and treat Beijing like a
fully-fledged member of the organization. The WTO and China agreed an
accession protocol when Beijing joined the organization in 2001. Article
15 of this protocol dictates the terms which importing WTO members can use
to compare their prices with those of Chinese producers,
to determine if that producer is competing fairly with the domestic
producers in the importing country. Some WTO members including the US and
EU want to reserve the right to restrict Chinese imports
with higher tariffs, in order to protect their manufacturers
against "dumping," the process by which a manufacturer exports a
product to another country at a price below that charged
in its home market, or at a price lower than the cost
of production.
Japan
followed the United States and the European Union on Thursday in announcing a
policy of not treating China as a market economy under World Trade Organization
standards.
It’s not all.
In
America, after a long and bitter campaign for the US presidency, Donald Trump
has triumphed over Hillary Clinton and the world’s
financial markets have been rocked. Tapping into economic discontent Trump
has argued for protectionism and asserted that decades of free-trade policies
were responsible for the collapse of the American manufacturing industry. He
has been feeding on the perception
among many Americans that globalization has brought more pain than gain,
for example, by bringing cheap consumer goods into the country, costing
domestic jobs and depressing wages. Outsourcing of jobs to cheaper markets has
also been a concern. Against that backdrop, Trump’s stance on trade is perhaps
the clearest of his economic policies.
The
billionaire Republican wants to renegotiate, or possibly even scrap, the North
American Free Trade Agreement. Nafta lowers trade barriers between the US,
Canada and Mexico and was negotiated by George HW Bush and enacted in the 1990s
by Bill Clinton. The incoming president wants Nafta to offer a better deal for
Americans and has rejected claims by his opponents that the deal has helped the
US economy by opening up export markets.
Other
global trade deals are also now very much in doubt, notably the Trans Pacific
Partnership (TPP), between 12 countries around the Pacific rim, excluding
China, and the agreement being negotiated between the US and Europe, known as
the Transatlantic Trade and Investment Partnership (TTIP). A Trump presidency
could fuel anti-globalization momentum and spark a wave of protectionist
policies around the globe. In terms of trade deals, both TTIP and the TPP now
look dead in the water.
The U.S.
and President-elect Donald Trump have more to lose taking a protectionist
path than the emerging economies that would be affected by a renewed
anti-globalization policy, the chairman of Societe Generale told CNBC.
For
Trump’s supporters he represents a chance to shake up a system that many
Americans feel has increased inequality and squeezed living standards. For less
complacent investors, there are worries Trump’s anti-globalization mantra will
spread protectionism around the world, put up trade barriers and curb global
economic growth. Furthermore, markets do not like unknowns and with Trump going
to the White House they are dealing with a complete newcomer to politics. His
administration is widely expected to mark a departure from the policies of his
own Republican party as well as the outgoing Democrats.
Trump
seems to think he can start a trade war and leaders in other countries will
unilaterally disarm. The reality is that if the U.S. retreats from its
leadership position on global trade, other countries will follow suit and give
in to protectionist impulses too. We have seen this before in history, and the
results have been tragic. There would be job losses in the U.S. and elsewhere,
not job gains, and U.S. consumers would be forced to pay much more for the
products they buy. Protectionism hits the poorest households the hardest because
they are least able to handle the price increases that follow for food, clothing,
and other essential goods.
For two
centuries, there has been no real dispute among economists about the advantages
of free trade, which are based on the theory of comparative advantage. When
trade is free, capital in a country naturally moves toward industries in which
that country has an advantage relative to other countries and other industries.
When capital is allowed to move in this way, global production rises, firms
become more efficient, and trade among nations allows everyone to be better
off. The theory of comparative advantage is observable in the gains seen
in economic well-being all over the world from more liberalized trade.
Of course, free trade does not benefit every
industry in every country. Industries that do not enjoy a comparative advantage
in the global marketplace contract, and employment in those industries
declines. But the solution to that problem is not to impose higher costs on all
consumers, which is what would happen with a return to protectionism. The
federal government should provide extended income-support benefits, job
retraining, educational opportunities, and relocation assistance to workers
dislocated by international trade. Not all job losses are due to global trade,
either. The reduction in manufacturing jobs in the U.S. is tied mainly to
technological advances, not trade. No matter how high tariffs are raised, jobs
lost to automation will not be resurrected. Trump is raising false hopes among
millions of people who somehow think the clock on technology can be turned back
to the 1960s, and the world would become enemy of free trade once again./.
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All comments [ 11 ]
The U.S. and President-elect Donald Trump have more to lose taking a protectionist path than the emerging economies that would be affected by a renewed anti-globalization policy.
There are widespread concerns that Trump's promises to rip up trade agreements, including the Trans-Pacific Partnership, will affect the economic potential of emerging markets.
With Trump, unstable future is waiting American.
There’s no doubt that many Trump supporters are hurting, and want desperately to gain a foothold in an economy they feel has passed them by.
That would all change with Donald Trump, he would be the first fully protectionist president since just before the Great Depression.
Unfortunately, what Trump is offering is an anti-growth plan. Attempts to wall off U.S. industries from international competition would backfire.
The tragic and ironic result would be even more populist resentment toward Washington.
His administration is widely expected to mark a departure from the policies of his own Republican party as well as the outgoing Democrats.
Furthermore, markets do not like unknowns and with Trump going to the White House they are dealing with a complete newcomer to politics.
Trump has also made his anger with China over trade well known, arguing that since China joined the World Trade Organisation, Americans have witnessed the closure of more than 50,000 factories and the loss of tens of millions of jobs.
The most high-profile Trump plan on immigration is for a wall along the Mexican border. He also said he would deport 11 million undocumented migrants, something opponents say is physically impossible. He wants immigrants to be selected on the basis of “their likelihood of success in the US and their ability to be financially self-sufficient”.
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