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  Opinion   Columnists  15 Feb 2017  World risks trade wars as Trump turns US inwards

World risks trade wars as Trump turns US inwards

Published : Feb 15, 2017, 12:19 am IST
Updated : Feb 15, 2017, 2:47 am IST

Donald Trump tapped into this anger by demonising globalisation as being against US interests.

US President Donald Trump (Photo: AP)
 US President Donald Trump (Photo: AP)

Karachi: Donald Trump says virtually every state takes advantage of the US and he will put America first in global deals. This sounds like an elephant cribbing about smaller beings throwing their weight at it. Has the US truly lost in the globalisation process that it had itself unleashed in 1980?

Globalisation means increased flows of goods, services, money, people, ideas and ecology among states leading to global economic, political and social convergence. Globalisation was unleashed by Ronald Reagan to increase US corporate profits. But only those flows were encouraged which increased such profits, i.e. those of goods, services and investments. Even here, weaker states had to open their industries to competition, but key US sectors, like agriculture, were protected.


Other US trade policies hurt poor states too, e.g. higher tariffs on goods from developing than rich states, and restrictions on textiles and clothing imports. Global intellectual rights, trade in services and investment agreements were also designed to benefit rich states. Flows benefiting poor states were discouraged, e.g. of people to the US and of aid to poor states.

Thus, instead of encouraging all types of flows in all directions, the US introduced neoliberal globalisation, which only encouraged those flows which benefited corporate America most.

Neoliberal globalisation has produced winners and losers. The rich in the US have won big, as shown by the exploding number of its billionaires and the trillions hidden in offshore havens. Middle classes in some developing states have benefited too, e.g. India and East Asia have some labour segments there. But millions have been incorporated into globalisation in sweatshops in Bangladesh and Indonesia while millions of others have lost their livelihoods.


Even American middle and working class fortunes have stagnated. In fact, the most vocal reaction to such globalisation has come not from poor states that are bigger losers but from working classes in rich states.

Trump tapped into this anger by demonising globalisation as being against US interests. The global order rests on a delicate balance. As the global hegemon, the US derives maximum benefits from it but must also not squeeze other states too much. This requires it to maintain large trade and fiscal deficits. Large trade deficits have emerged as US companies have moved abroad to avail themselves of lower labour and regulatory costs. But large US trade deficits help run the global system. In the absence of a global currency, the dollar serves this role. So, the deficits help supply the world with dollars. However, those dollars soon return via the profits repatriated by US companies.


Since the global hegemon also usually runs fiscal deficits, partially due to the costs of global policing, they also return via the US public debt purchased by states like Japan and China with excess dollars earned from their trade surpluses. Without safe investment options for these states, the US incurs this debt at low interest rates. This cheap debt fuels the US public and private consumption frenzies which again cause US trade deficits.

This is the merry-go-round nature of the unfair and volatile global capitalist system run by the US which perpetuates global inequality and economic volatility. Hence, it should be replaced by a more just globalisation system based on leftist, progressive policies. Trump plans to move the system even further rightward to make it serve the interests of all Americans. But in trying to reduce US trade deficits and bring factory jobs back to the US, he threatens to unravel this delicate balance and unleash global trade wars and possible global recession.


While it is still the most powerful nation globally, it lacks the power to force the world to submit easily to its desires further on economic issues. Mere raving and ranting by Trump will not bring the world to heel.

My little daughter often watches this story about a bad wolf which goes around destroying the hay and wood houses of little pigs by merely huffing and puffing. But he ultimately comes across a pig who constructed a brick house given the experiences of his sibling pigs. The wolf fails to bring down the house.

Much the same is true in global politics today. Learning from past dealings with the US, more and more states have built brick houses which bad wolf Trump cannot destroy merely by huffing and puffing.


The solution to the ills faced by US working classes and billions globally lies in building a fair economic system which taxes the rich fairly. But such a system will not emerge under a US ruled by its extreme right. Unfortunately, the most powerful state in the world is better at creating global problems than solving them. Until this hegemony ends, the world will lurch from one political and economic crisis to the next under US leadership.

By arrangement with Dawn

Tags: donald trump, globalisation, agriculture