EconomyGlobal trade without common values

Global trade without common values

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Trade is on my mind these days, in part because I’ll be discussing the topic this coming Saturday May 7 at the first-ever FT Weekend Festival in Washington DC. For those who don’t already know, this will be a must-attend event (Swamp Notes readers can buy tickets here to get 50 per cent off). The Weekend Festival, which has been going for years in London, is a place to hear big thinkers discussing the most important ideas of the day — in politics, economics, society and culture.

This year, for the first time, we are bringing it to the Beltway, with guests such as Henry Kissinger, Tina Brown, Chimamanda Ngozi Adichie, Simon Schama, Elizabeth Strout and of course many of the top FT folks (including you, Ed!). I’ll be doing a couple of sessions, including one entitled “The Great Decoupling,” on the US-China relationship and deglobalisation, with my colleague Martin Wolf and the former US trade representative Robert Lighthizer, who rarely does these sorts of things.

Lighthizer is, to my mind, one of the only bright spots in the Trump presidency. While I don’t agree with everything he did, I think his reset of US trade policy from wilfully blind neoliberalism to a more realistic view of the political economy, and in particular the “One World, Two Systems” conflict between liberal market economies and state-run systems like China, was long overdue.

As we’ve covered in these Notes before, the architects of neoliberalism believed that if capital markets and global trade were connected via a series of institutions that floated over the laws of any given nation-state, the world would be less likely to descend into anarchy. For a long time, this idea worked, in part because the balance between national interests and the global economy didn’t get too far out of whack. Even during the Reagan years, despite the anti-government rhetoric, there was a sense that global trade needed to serve the national interest rather than merely itself (or, more particularly, the interests of the large multinational companies).

Consider the way that the United States fought back when Japan tried to dominate the entire physical infrastructure of the computer. It was the Reagan administration response — which included putting tariffs and quotas on Japanese exports and subsidising the development of next-generation computer technology — that kept America in the game. The United States also pushed a lot of manufacturing away from Japan and toward South Korea, Taiwan, Singapore and Malaysia, which was ultimately a good thing, because it reduced the concentration of power and created both lower prices and more resiliency. That sounds a lot less like “government is the problem” and more like smart industrial policy.

“While the Reagan administration embraced free trade, it opposed mercantilism,” notes Clyde Prestowitz, a labour economist who worked in the Commerce Department during the Reagan years. The administration strove to maintain American technological leadership by creating an industry-government partnership around research and development. It’s worth noting that the deputy trade representative during the second Reagan term was none other than the architect of Trump’s trade strategy with China: Robert Lighthizer.

The sense that trade should be a handmaid to domestic job creation and industrial interests began to change quite rapidly during the Clinton administration, when a series of trade deals, culminating with the entry of China into the WTO, took the guardrails off the global economy. While Adam Smith, the father of modern capitalism, held that in order for free markets to function properly, participants needed to have a shared moral framework, the United States and many other liberal democracies were suddenly enmeshed in major trade relationships with countries that had entirely different moral frameworks, not to mention economic ones — from Russia and any number of other petrostates in the Middle East, to numerous Latin American dictatorships, to the biggest and most problematic trading partner of all, China.

It’s worth noting — as journalist and activist Barry Lynn did in a prescient Harper’s Magazine piece in 2002 that eventually became a book on the fragility of global supply chains entitled End of the Line — that “many of our new partners are not democracies, and their internal workers, long-term goals, and ability to live peacefully in the world we imagine ourselves to be making remain obscure at best.” This statement, so crisply true then, is only more so today. While the European nations that came together after the second world war to craft trade agreements (like the European Coal and Steel Community, which became the basis for the European Union) had similar cultures and values, the same cannot be said for the WTO nations as a whole today. Liberal democracies, autocracies, surveillance states and any other number of political and economic systems, transparent and not, have become tied together in deals that were more often than not crafted and approved by global technocrats rather than elected officials.

We can see this all too clearly right now, as the WTO struggles unsuccessfully to mediate issues like the Trips vaccine waiver (which I’ll be writing about soon). Poor countries, rich countries, liberal democracies and state autocracies all have different horses in this race, which is going straight to the bottom. My questions to you, Ed, are complicated but important ones. Where do we go from here? Can the WTO be fixed? Do we need an entirely new set of institutions for global trade? And what are you most eager to discuss at the FT Weekend Festival?

Edward Luce responds

Rana, let me start by answering your easier question about the FT Weekend festival on Saturday. I also strongly commend this event to Swampians. As an honourary Washingtonian, I can say without fear of contradiction that DC will not have seen an event quite like this.

Washington is an austere place that likes to eat its vegetables for breakfast, lunch and dinner. In keeping with that, this festival offers plenty of vitamins. I’m particularly looking forward to my sessions in conversation with Henry Kissinger about the new geopolitical era and then with Bill Burns, director of the CIA, on the Russian war in Ukraine and the China challenge. But you can get your sugar rush with the novelists Jennifer Egan and Chimamanda Ngozi Adichie, Jancis Robinson on wine, the National Symphony Orchestra, and Tina Brown with Simon Schama on the future of the Windsors. Also do watch my colleagues Martin Wolf, Gideon Rachman, Gillian Tett and Courtney Weaver in a live editorial conference chaired by the FT’s editor Roula Khalaf. 

As regards the future of the WTO, Rana, you will know well that we have a profound philosophical difference on globalisation. I don’t wish to rehash those yet again — we need to find something else to argue about! But I think the unravelling is overstated. Our colleague Alan Beattie, whose Trade Secrets is also an excellent newsletter, wrote last week about the fact that most of the developing world, including China, India (yes, India!), Brazil and Turkey, are ploughing ahead with trade deals. As, to some extent, is the European Union.

We risk generalising America’s political aversion to trade deals to others, when in fact it’s mostly peculiar to America. US politics has quite wrongly scapegoated trade for its own deficiencies in looking after its left-behinds. But that isn’t true of most of the rest of the world. The WTO is largely broken because successive US administrations have blocked a quorum on the appellate court. I think this is hugely unwise. You must ask Lighthizer about this. The US is a massive beneficiary as well as architect of an open global trading system. It only has itself to blame for its horribly skewed domestic income distribution. 

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