In the coming months, it is likely that the way in which governments think about international trade and their fundamental values will evolve rapidly, as the promises and threats that President Trump made on the campaign trail become US policy.
To understand the likely nature of what happens next, contrast the sophisticated and measured remarks made by China’s President Xi Jinping at the World Economic Forum in Switzerland, with President’s Trump’s blunt generalities about ‘America First’.
In Davos, President Xi made clear that he believes in interdependence in trade, a view more in tune with global thinking than that of his new counterpart in Washington.
At the World Economic Forum, the Chinese leader delivered a speech of a kind that in the recent past would more likely to have been regarded as the prerogative of the US President, suggesting that China intends taking the high ground on globalisation, economic growth, stability, and some would say rationality.
This is not to make a political point, but to observe that it is almost as if the US and China have switched sides in terms of their commitment to supporting global growth, with Beijing clearly aspiring to take a position of international leadership when it comes to multilateralism and economic and environmental issues.
In his January 17 speech, the Chinese President made clear that many of the problems troubling the world are not caused by economic globalisation.
“Just blaming economic globalisation for the world’s problems is inconsistent with reality, and it will not help solve the problems”, President Xi said. “Rather, we should adapt to and guide economic globalisation, cushion its negative impact, and deliver its benefits to all countries and all nations”.
President Xi went on to argue that any attempt to cut off the flow of capital, technologies, products, industries and people between economies is simply not possible, and runs counter to the historical trend.
While his eight-page speech deserves a full reading, the Chinese President made clear that he believed that a fundamental structural reform in the global economy has begun; that new technologies will be the drivers of growth; there is a need for more fair global economic governance; and the benefits of development need to be more equitable.
To address this, he said, there needed to be an innovation-driven growth model that recognises that the fourth industrial revolution is unfolding at an exponential rather than linear pace; a new development philosophy should emerge that creates employment and restores confidence; and it needs to be recognised when it comes to decision making that countries are mutually dependent, and all nations should be considered equal.
In language almost certainly directed at the US, he said that China remained committed to developing global free trade and investment. “Pursuing protectionism is like locking oneself in a dark
room. While wind and rain may be kept outside, that dark room will also block light and air. No one will emerge as a winner in a trade war”, he observed.
President Xi’s comments stand in stark contrast to the executive actions, remarks and interviews given by the new US President in his first week in office. Mr Trump, it appears, sees trade as a zerosum game that must only bring benefit to the US, appearing to relish the opportunity for a trade war.
In his first few days as President, he has made clear that he would proceed with his uncompromising ‘America First’ approach; has withdrawn the US from the proposed Trans-Pacific Partnership agreement; said that he will renegotiate the North America Free Trade Agreement with Canada and Mexico; threatened the Mexican government by tweet; confirmed his intention to introduce swingeing tariffs on certain imports; and said that he intends to develop policies that will re-shore US manufacturing, employment and capital.
It is an isolationist policy that seems set to alienate Washington’s friends; consolidate China’s economic role not just in its own region but globally; and drain America of the soft power advantages it has enjoyed for decades. It is an approach that fails to recognise the economic interdependence that the US has created globally to buttress its own security, not least in relation to much of Latin America and the Caribbean.
Moreover, the new US approach ignores the way in which modern supply chains work, and if US companies are forced to re-shore to a high labour cost environment, seems likely to cause a leap to robotics; an approach that will result in jobless growth, and continuing income inequality for those US workers with low or no skills.
At the heart of what is now happening is a growing tension between national and universal values, trade as a proxy, and the unstoppable impact of globalisation.
It is having the effect of causing allies to think carefully about how to relate their thinking to each other.
For example, Britain’s Prime Minister, Theresa May, speaking in Philadelphia to members of the Republican Party, while seeking to retain a ‘special relationship’, made clear, that like President Xi, she has an inclusive vision when it comes to economic globalisation and values.
In the context of Brexit, she spoke about a future that at times seemed significantly at odds with the approach being taken by President Trump. Britain, she said would “step up with confidence to a new, even more internationalist role, where we meet our responsibilities to our friends and allies, champion the international cooperation and partnerships that project our values around the world, and continue to act as one of the strongest and most forceful advocates for business, free markets and free trade anywhere around the globe”.
Although the dark transactional picture of relationships that President Trump wants to evince may be ameliorated by wiser minds in the US Congress, these are all developments that the nations of the region cannot escape from.
The implication is that the time has come for the countries of the Caribbean, as fragmented as they are, to consider jointly and individually, how, in what way, and on what issues they, like President Xi and Mrs May, make clear their values and principles.
David Jessop is a consultant to the Caribbean Council and can be contacted at firstname.lastname@example.org Previous columns can be found at www.stagingcaribbean.wpengage.uk January 29th, 2017