II Trade wars, economic cooperation, and social justice

The crisis of international trade and its cultural and political implications: is the EU’s approach contributing to a renewal of multilateralism?

Mario Teld#

Introduction: a dramatic change in global trade

For many decades, trade was the main driver of global economic growth, but that is no longer the case. The Trump administration in the US reacted to novel circumstances, including especially the emergence of trading powers such as China and the EU, by disrupting the global multilateral trading system (e.g., by boycotting the World Trade Organization [WTO] and starting trade wars). According to some US scholars, including Ikenberry and Deudney (2018), the country’s that approach ran counter to American traditional commitments to multilateralism and free trade. In the US, trade liberalization has enjoyed bipartisan support since 1919. Subsequently, after World War II the US supported the creation of the General Agreement on Tariffs and Trade (GATT, 1947), an international body charged with encouraging freer trade. The GATT managed to reduce trade barriers during many successful rounds of negotiation. Eventually it was transformed into the WTO at the Marrakesh Conference of 1994.

Is the current American hostility to free trade just a temporary aberration? In spite of current talks designed to resolve trade disputes, the agency Allianz Outlook predicts that trade wars will be permanent. Even when negotiators come to partial agreement (as with the temporary truce of December 2019), inevitably such accords are followed by new trade wars, thus sowing distrust and strategic suspicion among the US, China, the EU, and most other trading partners. Despite Joseph Biden’s victory in the 2020 presidential election, we should not rule out the possibility - even the likelihood - that a kind of “Trumpism without Trump” may continue to exert an influence on US foreign policy. That would be a factor strengthening hardliners in every country.

President Trump was not the exclusive cause of the current anti-trade mood in the US. He was merely an accelerant and one who weaponized trade issues for domestic political gain. He played on certain negative emotions and perceptions among the public, such as its fear of China. Furthermore, the frustrated US middle class feels that it has been the loser, because trade liberalization certainly has had some negative domestic impacts as have (or so they believe) the current WTO rules. In contrast to the Obama strategy, the Trump administration:

  • • Raised tariff's against Chinese and EU imports and justifying the consequent trade wars by (implausibly) citing “security concerns.”
  • • Boycotted the WTO panel system, a mechanism for resolving conflicts that lies at the heart of the organizations ability to function, as a “threat to US national sovereignty.”
  • • Withdrew from the Trans-Pacific Partnership (TPP) - a deal signed in 2015 with 12 Asia-Pacific countries - and instead opted for a new kind of bilateral transactional and hierarchical trade arrangement exemplified by the US-Mexico- Canada Agreement (USMCA), an agreement with Mexico and Canada that will replace the North American Free Trade Agreement (NAFTA). (Notice that even the acronym FTA, standing for free-trade agreement, was deleted!)

The aims of this chapter are twofold: to gauge the magnitude and scope of the current upheaval in the system of world trade and identify its historical roots, and to focus on the EU’s new trade policy as a possible contribution to an alternative mode of global trade governance.

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