The new US President has been on a tear with executive orders to make good the promises he made on the campaign trail. Some of the orders are more indicative than final for they would require new laws to be passed by Congress for the change to take place. As signals some are confusing such as the ones on immigration. Yet, the ones in the areas of trade and the economy are relatively clear.
The presidentwants to ‘Make America Great Again’ by ‘protecting’ the economy. Several of you, I’m sure, would struggle to understand why the world’s largest economy with a GDP of $18 trillion needs protection. How Trump sees this situation is evocative. He sees ‘carnage’ and charges other countries with ‘ravaging’ the US by “making our products, stealing our companies and destroying our jobs”.
Trump prefers bilateral to multilateral trade agreements. He has rejected the recently completed and ready to be signed Trans Pacific Partnership involving 12 countries and has announced that the three-nation Nafta will be re-negotiated. At the same time he seemed to warm-up to a bilateral deal with the UK during the British Prime Minister’s visit.
Trump has stated that foreign industry was enriched at the expense of American industry, and going forward, the stress will be to ‘buy American.’ Pressure on companies to step up manufacturing activity within the country has already begun with the automobile companies as the first target. There is talk of a border tax to make it expensive for companies to make elsewhere and import the goods to serve the domestic market.
With the US wanting to vacate its global leadership, a replacement is waiting in the wings. At about the same time that Trump was describing his insular vision Chinese President Xi Jinping was at Davos attending the World Economic Forum. In his speech, Xi decried protectionism and praised globalisation, offering a contrasting world view and help from China.
If you are now even more confused, you have every right to be. While the US might spout protectionism, there are enough stakeholders with enough voices and a system with enough checks and balances to ensure it remains open and decisions are transparent. On the other hand, China is mouthing globalisation with a track record full of protection for its economy and its companies.
In this era which includes confused behaviour in the EU you would hope for but cannot expect much clarity about where the global economy is headed either from the IMF or the World Bank. After all, their heads are appointed by the EU and US respectively. What is clear is we cannot expect countries to make sacrifices for the larger good, and the first test will be the implementation of the Paris climate agreement.
China is probably following up on Mr. Xi’s hopeful initiative for I received a free copy of China Daily along with my copy of the Wall Street Journal over the weekend. The nice thing about reading Chinese newspapers is that there is no bad news and all is well with the world. While countries will continue to trade and deal with each other the stage is set for self-interest to more strongly dominate the conversation.
The writer is a professor at Suffolk University, Boston