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Monday, June 11, 2018

The Incredible Shrinking Global Order



Friends, having already pushed Russia out of their exclusive club (turning the G8 into the G7), now the global elite wants to give the U.S. the boot as well -- all because Trump has the unmitigated gall to stand up for the American worker and demand fairer trade terms.  Well!  I say Trump's attitude is a breath of fresh air, and my latest article explains why.

Read on!

Trump is Right: The G7 Needs a Wake-Up Call on Trade

The recent meeting of the “G7” leaders in La Malbaie, Quebec ended dramatically, with the Canadian Prime Minister Justin Trudeau harshly criticizing U.S. tariffs on steel and aluminum and threatening to retaliate. President Trump then instructed U.S. negotiators not to sign the communique that was issued at the conclusion of the summit.

Predictably, global elitists have reacted with the usual horror, and with customary disdain for Trump. According to the New York Times, we are witnessing a “slow-rolling collapse” of our “fragile alliances”. Trump is frivolously up-ending the global order, we are told, and alienating countries that have traditionally been our closest friends and partners. The talking heads may have backed off on their threats of apocalyptic “trade wars” (perhaps because strong economic growth rates and the ongoing buoyancy of the stock market make their predictions of doom seem laughable), but they are still clutching at the idea that we are witnessing a “fundamental” shift in the prestige and influence of the United States, and a steady worsening of our relationships with almost all civilized countries. There is even talk that the G7 has become the “G6+1” as the U.S. goes it alone.

The problem with these arguments is that, first, they are entirely self-serving, insofar as the global elite always chafes at the effrontery of populists like President Trump, and it invariably seeks to defend its own privileges and prerogatives by labeling all criticism of the established international economic order “protectionist” or “isolationist”. In fact, seldom do the elitists even bother to address the substantive complaints made by Trump (and others like him) about the unfairness of existing trade deals – they simply wag their collective finger at anyone boorish enough to question the present regime of “free trade”. 

Trading relationships ought to be susceptible to criticism and revision, however, and, when the people of a sovereign state vote to empower a new leader who embodies such criticism and reformist zeal, his election should have consequences. The elite talks as if the vicissitudes of something as shabby as democracy should not be allowed to affect our sacred trade agreements. Nonsense! 

To add insult to injury, G7 members are actually targeting their retaliatory tariffs against the United States on industries and enterprises concentrated in states that voted for Donald Trump. In other words, they seek to manipulate democracy itself and foster political headaches for those who dare to question the world order. This is simply outrageous, and it ought to raise the hackles of any American patriot.

Second, the idea that President Trump is doing permanent damage to our relations with our traditional allies flies in the face of a mountain of evidence that Trump has formed productive, respectful working relationships with numerous world leaders, from President Macron of France to Prime Minister Abe of Japan. Moreover, we should keep in mind that our ties with other powerful, wealthy nations are always troubled by tensions and disagreements, and, in the post-WWII era as a whole, many of these differences of opinion have been far more serious and dangerous than the current spat over trade barriers. Lest we forget, Messieurs Trump and Trudeau are currently duking it out largely over the price of milk. It seems unlikely that U.S.-Canada relations will be permanently scarred by so trivial a dispute.

Lastly, the critique of Trump's performance at the G7 summit is misplaced because Trump is actually doing both the American people and the citizens of all the G7 nations a great service: he is drawing attention to the deficiencies of past trade agreements – deficiencies that have in many cases cost jobs, shuttered factories, and abetted many a populist backlash against elitist economic manipulation. Trump does so not because he wishes to curtail trade, but in order to build it up on a sounder basis. Trump has made it abundantly clear that he supports free trade, but not biased trade deals that require openness on the part of some and allow tariff and non-tariff barriers for others. 

The truth is that the leaders of the international economic order have long lived a lie: they pantomime unfailing devotion to “free trade,” while at the same time overtly and covertly carving out exceptions for their preferred industries. The result is a half-hearted form of free trade that rewards sly negotiation and punishes naive idealism. As Trump suggests, all too often it is the United States that has been the most naive, accepting a trading regime that institutionalizes massive trade deficits and millions of lost jobs. 

In 2014, the U.S. had a $142 billion trade deficit with the countries of the European Union, and a $35 billion deficit with Canada. Essentially no one believes that this is because American companies can't compete with their overseas rivals – it is instead manipulative, predatory trade practices that explain the imbalance. Why, then, should the U.S. not try to re-balance this equation in its own interests? 

More broadly, though, will it not benefit all the nations concerned if we find a new formula for trade that limits job losses and de-industrialization, and that finds favor with voters anxious about their economic futures? To achieve such a trading rapprochement, the U.S. should even be willing to make concessions of its own. After all, we too are sometimes guilty of using subsidies and non-tariff barriers to insulate our industries from foreign competition. If G7 countries believe their own rhetoric about free trade, surely they will be willing to meet us halfway and cooperate in the elimination of surviving trade barriers...unless, that is, they prefer to thumb their noses at Donald Trump on principle.

In the end, for seeking the amelioration of a broken trading system, Trump should not be seen as an enemy of the established order, but rather as its would-be savior. His suggestion to his fellow leaders in Quebec that he would ideally like to see the elimination of all tariffs throughout the G7 economies is a testament to his dedication to the principle of free trade, and his belief in the transformative power of capitalist competition and development. The fact that Trump is clear-eyed about the pressing need for reform in our trading relationships makes him a realist, yes, but not the protectionist boogeyman that the mainstream media, and its international fellow-travelers, portray.

The truth is that the global economic elite faces a choice: take Trump (and the tens of millions of voters he represents) seriously, and repair and refit the damaged infrastructure of “free trade,” or mock and ignore him, insuring that the wave of economic resentment and protectionist sentiment that has seemingly been cresting for years now will build into a true tsunami. 

In that case, the global bigwigs may someday look back and say, “Donald Trump? He was the least of our problems.”

Dr. Nicholas L. Waddy is an Associate Professor of History at SUNY Alfred and blogs at: www.waddyisright.com.

And here is the American Greatness version:

https://amgreatness.com/2018/06/12/trump-is-right-g7-needs-a-wake-up-call-on-trade/

8 comments:

  1. You write: "To add insult to injury, G7 members are actually targeting their retaliatory tariffs against the United States on industries and enterprises concentrated in states that voted for Donald Trump. In other words, they seek to manipulate democracy itself and foster political headaches for those who dare to question the world order. This is simply outrageous, and it ought to raise the hackles of any American patriot."

    Seriously? Trump is doing exactly the same thing. The United States has an $8 billion trade surplus with Canada. He keeps on lying and saying that we have a trade deficit with Canada. Who is manipulating the democratic process? Give me a break!

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  2. Dr. Waddy: It was not President Trump's intention in his trade stance to put me to school but he has and your construction of it has pretty well convinced me: Gads, being from a union family I hate to say this but ever since the '70's I've thought that trade deficits were due in large part to shoddy and presumptuous American workmanship and business practices (eg. American vs.Japanese cars). I don't believe it anymore and I think the President is representing us well.

    Having grown up in Buffalo, I love and respect Canada and Canadians. They had their troubles with us over Vietnam I guess but we are still ok.Although Canadians are great fighters, its historical fact that we prevented them from becoming the Canadian SSR, so I don't think they will part ways with us.

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  3. Thanks, Kenny!

    Rod, I'm not sure where you're getting your figures, but mine are accurate for 2014. I seriously doubt we've developed a trade surplus in the meantime. Anyway, the wider point is the fairness (or lack thereof) in our trading relationships. The numbers are secondary.

    Jack, I agree -- Canada is our closest friend (literally and figuratively), and we will NOT become estranged in any meaningful sense. As to our trade deficits being explainable by our inefficiency or lack of competitiveness, I just don't buy it. There are vast inefficiencies in Europe and Japan, for instance, and some very high costs, not to mention high taxes. As far as I know, the American worker is among the most efficient in the world. Given a fair shake, the products of his labors ought to sell well globally. My sense is that it's those pesky "non-tariff barriers," which can be very subtle and sophisticated, that are holding us back. I would admit, though, that international trade and economics are not exactly my cup of tea. If anyone can chime in with more expertise, I'd be grateful.

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  4. Dr. Waddy: I misspoke when I said it was "historical fact . . . Canadian SSR". Russia could have been a threat but I forgot about Great Britain; surely it would have confronted the Bear. I can't be of help on international trade or economics.

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  5. Oh, I'm not so sure you misspoke, Jack. Or rather...it seems to me that only the U.S. was capable of containing the Soviets during the Cold War. Having said that, if there was one NATO member well-placed (literally) to survive an epoch of Soviet domination, it was Canada. Those oceans come in handy!

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  6. Dr. Waddy: This is frivolous speculation but I hope you don't mind my having some fun with it. Supposing the South won the Civil War and North America disintegrated into any number of quarreling nations. Suppose Russia retained Alaska; it would have been very close to Canada. But in the same situation I don't see Russia ever going Communist. That's because a Southern win would have made it impossible for the New World to come to Great Britain's aid and Wilhelmine Germany would have won WWI, kept its scientists and have had both nuclear weapons and ICBMs in the 1940's. It could easily have suppressed a Marxist insurrection in Russia. Would Imperial Russia or a successor republic have tried to take Canada? Germany might well by then have inherited the British Empire and they would have dealt with that I'd guess.

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  7. Jack, I adore such speculation! I agree that, with America out of the picture, Germany would be very likely to dominate Europe in the first part of the 20th century. Russia would have given her a run for her money as time passed, though, and minus the Bolshevik Revolution I don't think there's any limit to what the Russians might have achieved. On the other hand, German domination of the Continent wouldn't negate the strength (and survival) of the British Empire. I suspect Canada would have been safe.

    BTW, the bifurcation of the U.S. in the 1860s would have been a big setback, but it wouldn't necessarily have been permanent...

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