WRITER: Tim Harcourt
PHOTOGRAPHY: David Solm
In the past six years I think I’ve visited about 60 countries, traversing the globe and racking up the frequent flyer points (thanks One World!) in the course of filming The Airport Economist and writing the book series of the same name.
Yet whether I’m in Colombia or Kazakhstan, when I’m asked about international trade the questions have often been the same: What do you think about China? How will the shift in the world economy be managed? What happens if China has a slump? It seemed that all roads lead to (and many were actually financed by) Beijing.
Today, things have taken a distinct turn, directly focusing on the US. Now the question always is: What do you think about Trump? Well, it’s no surprise given the shock waves that President Trump sent through the US electoral system in 2016, with his audacious win in the primaries and the national election, over seemingly more fancied and experienced (although flawed) opponents.
The response to Trump has partly been about his style as much as his substance: his reality TV star background, the brash talk, the manic use of twitter and his full shirt-front of the media with accusations of bias and ‘fake news’. Trump has made the world nervous, particularly given the United States’ place as the globe’s pre-eminent economic super power, and the institutional importance of the Office of the President to the United States and to the world.
But it’s now about substance as well as style, particularly in terms of trade. After all, Trump did come to power on an economic populist platform criticising the US’s past free trade deals including Trans Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA).
He did this to appeal to blue collar voters in Ohio, Michigan, Pennsylvania and Wisconsin – the states he won from Democrat Hilary Clinton. In fact, he was not alone, as left wing candidate Bernie Sanders also ran an anti-free trade message, forcing Clinton to reverse her decision on the TPP.
At first, many pundits thought Trump was bluff with his ‘trade policy by twitter’ but he said what he meant and meant what he said. He withdrew the US from the TPP. He took on the G7, especially the European Union. He lifted tariffs on steel and aluminium. And now he is punishing Canada as he re-negotiates NAFTA, seemingly between just Mexico and the US. And that’s even before the implications of the trade war he’s picked with China.
Is Trump a traditional protectionist? He says he’s not. He just thinks past administrations made ‘bad deals’ and as an experienced business man (and author of The Art of the Deal) he could do a better job with the US’s trade deals, just as he can make allies ‘pay their share’ of NATO’s costs and other institutions of the international economy where he feels America has been given short shrift.
But the rise of Trump is more than just trade policy. Globally, we’ve seen a rise in both right- and left-wing populism as a response to the inequalities that have occurred because of globalisation.
The tensions have been caused by a range of factors including trade, technology, immigration, the erosion of safety nets and labour market institutions, but also capital mobility and the behaviour of banks and financial services companies during the GFC and its aftermath.
In the US, free trade has caused issues, in the UK – with Brexit – it was immigration and open borders, while in Asia and Latin America it’s been about corruption and governance. In Australia, a country that has done well from open trade and ties with Asia, tension has arisen as trade economists failed to appreciate the importance of labour markets and social safety nets. Hence the political prominence of labour market issues in Australia with slow wages growth and a lack of job security in the context of an expensive housing market and cost of living pressures.
So, what next for Trump? While it’s going to be a nervous time for the world trading system, China could take advantage of the chaos in the White House and grow its influence in the global economy. Similarly, countries like Australia could show support for the world trading system, forming strong partnerships in Asia, Latin America, Europe and emerging markets, to position themselves as a reliable and stable trading partners in Asia, not one hell bent on tariffs and trade wars.
But for Australia, support for an open economy is necessary but not sufficient, as support for an open trading system also requires support for labour market protection – not trade protection – and social insurance and safety nets, as our global ties strengthen. That is the very essence of the Australian model of open trade, and of strong labour market institutions as an alternative to the trade policies of Trump.
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