Trump and Trade

ONE OF THE first decisions taken by US President Donald Trump was to withdraw from the Trans-Pacific Partnership (TPP), an ambitious trade grouping of 12 countries, albeit one that was yet to take off. It is a sign of our times that the world’s top champion of free trade is now backing away from it.

One way to look at this distrust of trade would be through the lens of claims that America has lost its manufacturing mojo, costing millions of jobs in the US, and that the political consequences are being felt now. Trump’s opponents argue that trade results in wider gains for all and it is under-educated, mostly White, voters who harbour negative sentiments. This is a rather short-sighted view of a ‘problem’ that has been brewing since the end of World War II. From 1945 to 1947, when a new national security consensus was forged in the US, it was agreed that free trade and open markets were an integral part of ensuring freedom against communist encroachment across the globe. As the superpower of the West, the US opened its markets to the world’s exporters. In the first wave of the emerging trade pattern, Germany and Japan gained the most from this access. The German wirtschaftswunder was in no small measure due to American generosity. In the second wave, at the height of the Cold War, the East Asian ‘Tigers’—Indonesia, Malaysia and Taiwan—reaped the same benefits. In the last wave that gained force after 1991, China joined this bandwagon, gaining perhaps the most ever from free trade.

It is not a stretch to say that as a ‘buyer of last resort’, the US ensured the global economy always recovered from any temporary recessions. But finally, this broke its back. With high spends, a credit binge and low savings of its own, even as a glut of Asian savings went into US bonds, the American economy suffered distortions it still hasn’t recovered from. What was essential during the Cold War is now a liability. Trump is merely echoing that reality.

The elitist sentiment in the US now is that Trump’s ‘inward’ looking ideas signal a retreat from global leadership. This is disingenuous. In Barack Obama’s second term, precious little was done to address festering global problems from Syria to the South China Sea. To blame a new president for doing what he thinks is rational only heightens the charge of elitism against those opposed to him.

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