international trade

How Trump’s disregard for rules-based trade agreements could make the world poorer

International trade policy requires needs to reduce uncertainty, ease long-term decision-making and be legal and credible to be mutually beneficial.

Nations sell goods and services to each other because this exchange is generally mutually beneficial.

It’s easy to understand that Iceland should not be growing its own oranges, given its climate. Instead, Iceland should buy oranges from Spain, which can grow them more cheaply, and sell Spaniards fish, which are abundant in its waters.

That’s why the explosion in free trade since the first bilateral deal was penned between Britain and France in the mid-1800s has generated unprecedented wealth and prosperity for the vast majority of the world’s population. Hundreds of trade agreements later, the US and several other countries established an international rules-based trading system after World War II.

But now the US, which has played an integral role in bolstering this system, is actively trying to subvert it. At the recent G-7 summit in Quebec, for example, the Trump administration objected to even referring to a “rules-based international order” in the official communique – and the president ultimately refused to sign it.

My research in international economics tells me that trade policy – because it is inherently forward-looking and global – requires three interrelated attributes to be successful: It needs to reduce uncertainty, ease long-term decision-making, and be legal and credible.

President Donald Trump’s recent trade policy fails all three tests.

Birth of modern free trade

Britain and France signed the first post-Industrial Revolution trade agreement, dubbed the Cobden-Chevalier treaty, on January 23, 1860.

In it, both countries agreed to either reduce or eliminate import barriers and grant the other most favored nation status, which means any trade concessions offered to another nation would automatically apply to them as well.

Within just 15 years, various countries inked 56 more bilateral treaties. Thus began the first wave of globalisation, which lasted from 1870 until 1914, the beginning of two destructive world wars.

From those ruins emerged a rules-based international trading system, known as the General Agreement on Tariffs and Trade, or GATT, which came into force in 1948. Its goal was to eliminate the kind of harmful trade protectionism that had sharply reduced global trade during the Great Depression with the aim of quickly restoring the global economy’s health after so much devastation.

Almost a half century of negotiations to improve the agreement culminated in the creation of the World Trade Organisation in 1995. The lynchpin of the modern rules-based international trading system, the WTO now includes 164 nations that together conduct more than 96 percent of the world’s trade.

Three key attributes

This system has worked so well for so long because the WTO and its biggest champions, such as the US, made three interrelated attributes integral to their trade policies. That is, its members:

  1. Reduced uncertainty by creating predictable trade policies
  2. Created an environment that facilitates decision-making – particularly in the long term – by consumers and producers and
  3. Placed credible and legal directives that are clearly understood by allies and by those who are not.

Even though the US played a salient role in the creation of both the GATT and the WTO, Trump’s trade policy has not followed these guidelines. To me he seems more interested in wreaking havoc with the current global trading system than with ensuring its continued viability. And he’s frequently – and very recently – intimated that he might even withdraw the US from the WTO.

Trump seems to think that by issuing tariff threats, being unpredictable, and viewing foreign countries – even allies – as rival businesses, he can extract concessions from trading partners. Instead, such tactics are proving to be counterproductive.

Sowing uncertainty

Perhaps more than anything else, Trump’s policies have created a lot of uncertainty among US trade partners.

His steel and aluminum tariffs are a case in point. In March, the administration announced across-the-board tariffs on imports of the metals of up to 25% to punish nations – particularly China – for subsidising their own industries and dumping their production on US shores.

After key allies including Canada, the European Union and Mexico complained, the administration granted some countries temporary exemptions to the tariffs. But just a few months later, on May 31, it reversed course and began to impose the tariffs on those countries as well, leaving heads spinning. Only a week later, at the G-7, Trump was threatening to cut off all trade with his counterparts one minute, suggesting that everyone eliminate all tariffs the next.

Another recent example of fostering uncertainty is the curious case of the Chinese phone manufacturer ZTE. In March 2017, Trump’s Commerce Department fined ZTE $1.19 billion for violating US sanctions law by selling technology containing US components to Iran and North Korea. This past April, the agency said ZTE was still violating US law and barred American companies – most importantly chip-maker Qualcomm – from selling anything to ZTE, which led to an announcement that it was shutting down less than a month later.

Within days, however, Trump appeared to have an abrupt change of heart and tweeted that he and Chinese President Xi Jinping were working getting ZTE “back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”

Flip-flops like these make it hard for trade partners to predict what the US government is going to do, breeding enormous uncertainty.

Decision-making

Consider the situation faced by an American businessman who produces high-level industrial equipment that is exported to many countries around the world.

His company’s equipment is made using aluminum and steel and, as a result of Trump’s new tariffs, this businessman will have difficulty predicting what the cost of the metals will be in the future. This will have clear implications for the pricing of his products. In addition, if the US gets into a trade war, this businessman will also not know whether some or all foreign buyers might look elsewhere for similar but cheaper alternatives.

Such thinking affects not just individual business people but also companies.

Far from hypothetical, companies are already warning about this. Ford and Toyota North America have both complained about the negative impacts of Trump’s metals tariffs on costs and on the ability to make sound investment decisions.

Act credibly and legally

Trump’s steel and aluminum tariffs have also raised questions about their legality and credibility.

German Chancellor Angela Merkel and French President Emmanuel Macron have both asserted that these tariffs are illegal. As such, the European Union has filed a suit against the US at the WTO. It’s unclear whether the American national security justification will sway the WTO judges.

Prime Minister Justin Trudeau, who was the target of a post-G-7 Trump tweetstorm, has wondered how Canada could possibly be a national security threat to the US. Even Defense Secretary James Mattis is reported to have pointed out the implausibility of the national security argument for the tariffs.

This gloomy state of affairs shows that even some of our long-standing friends believe that the Trump administration’s recent actions are illegal and, more generally, that these same allies cannot make head nor tail of the administration’s trade initiatives.

A key lesson

The US is the world’s richest and most powerful nation, in part because of its embrace of a rules-based international order that includes the present treaty-based global trading system.

Rather than build on that success, President Trump’s trade actions thus far have created chaos, which has not led to any noteworthy success either in terms of extracting concessions from trade partners or creating the “great” agreements he touts in his book The Art of the Deal.

In negotiating deals, trade or otherwise, Trump seems to like to break all the rules. He needs to learn: That’s not what made America great.

Amitrajeet A. Batabyal, Arthur J. Gosnell Professor of Economics, Rochester Institute of Technology.

This article first appeared on The Conversation.

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Swara Bhasker: Sharp objects has to be on the radar of every woman who is tired of being “nice”

The actress weighs in on what she loves about the show.

This article has been written by award-winning actor Swara Bhasker.

All women growing up in India, South Asia, or anywhere in the world frankly; will remember in some form or the other that gentle girlhood admonishing, “Nice girls don’t do that.” I kept recalling that gently reasoned reproach as I watched Sharp Objects (you can catch it on Hotstar Premium). Adapted from the author of Gone Girl, Gillian Flynn’s debut novel Sharp Objects has been directed by Jean-Marc Vallée, who has my heart since he gave us Big Little Lies. It stars the multiple-Oscar nominee Amy Adams, who delivers a searing performance as Camille Preaker; and Patricia Clarkson, who is magnetic as the dominating and dark Adora Crellin. As an actress myself, it felt great to watch a show driven by its female performers.

The series is woven around a troubled, alcohol-dependent, self-harming, female journalist Camille (single and in her thirties incidentally) who returns to the small town of her birth and childhood, Wind Gap, Missouri, to report on two similarly gruesome murders of teenage girls. While the series is a murder mystery, it equally delves into the psychology, not just of the principal characters, but also of the town, and thus a culture as a whole.

There is a lot that impresses in Sharp Objects — the manner in which the storytelling gently unwraps a plot that is dark, disturbing and shocking, the stellar and crafty control that Jean-Marc Vallée exercises on his narrative, the cinematography that is fluid and still manages to suggest that something sinister lurks within Wind Gap, the editing which keeps this narrative languid yet sharp and consistently evokes a haunting sensation.

Sharp Objects is also liberating (apart from its positive performance on Bechdel parameters) as content — for female actors and for audiences in giving us female centric and female driven shows that do not bear the burden of providing either role-models or even uplifting messages. 

Instead, it presents a world where women are dangerous and dysfunctional but very real — a world where women are neither pure victims, nor pure aggressors. A world where they occupy the grey areas, complex and contradictory as agents in a power play, in which they control some reigns too.

But to me personally, and perhaps to many young women viewers across the world, what makes Sharp Objects particularly impactful, perhaps almost poignant, is the manner in which it unravels the whole idea, the culture, the entire psychology of that childhood admonishment “Nice girls don’t do that.” Sharp Objects explores the sinister and dark possibilities of what the corollary of that thinking could be.

“Nice girls don’t do that.”

“Who does?”

“Bad girls.”

“So I’m a bad girl.”

“You shouldn’t be a bad girl.”

“Why not?”

“Bad girls get in trouble.”

“What trouble? What happens to bad girls?”

“Bad things.”

“What bad things?”

“Very bad things.”

“How bad?”

“Terrible!!!”

“Like what?”

“Like….”

A point the show makes early on is that both the victims of the introductory brutal murders were not your typically nice girly-girls. Camille, the traumatised protagonist carrying a burden from her past was herself not a nice girl. Amma, her deceptive half-sister manipulates the nice girl act to defy her controlling mother. But perhaps the most incisive critique on the whole ‘Be a nice girl’ culture, in fact the whole ‘nice’ culture — nice folks, nice manners, nice homes, nice towns — comes in the form of Adora’s character and the manner in which beneath the whole veneer of nice, a whole town is complicit in damning secrets and not-so-nice acts. At one point early on in the show, Adora tells her firstborn Camille, with whom she has a strained relationship (to put it mildly), “I just want things to be nice with us but maybe I don’t know how..” Interestingly it is this very notion of ‘nice’ that becomes the most oppressive and deceptive experience of young Camille, and later Amma’s growing years.

This ‘Culture of Nice’ is in fact the pervasive ‘Culture of Silence’ that women all over the world, particularly in India, are all too familiar with. 

It takes different forms, but always towards the same goal — to silence the not-so-nice details of what the experiences; sometimes intimate experiences of women might be. This Culture of Silence is propagated from the child’s earliest experience of being parented by society in general. Amongst the values that girls receive in our early years — apart from those of being obedient, dutiful, respectful, homely — we also receive the twin headed Chimera in the form of shame and guilt.

“Have some shame!”

“Oh for shame!”

“Shameless!”

“Shameful!”

“Ashamed.”

“Do not bring shame upon…”

Different phrases in different languages, but always with the same implication. Shameful things happen to girls who are not nice and that brings ‘shame’ on the family or everyone associated with the girl. And nice folks do not talk about these things. Nice folks go on as if nothing has happened.

It is this culture of silence that women across the world today, are calling out in many different ways. Whether it is the #MeToo movement or a show like Sharp Objects; or on a lighter and happier note, even a film like Veere Di Wedding punctures this culture of silence, quite simply by refusing to be silenced and saying the not-nice things, or depicting the so called ‘unspeakable’ things that could happen to girls. By talking about the unspeakable, you rob it of the power to shame you; you disallow the ‘Culture of Nice’ to erase your experience. You stand up for yourself and you build your own identity.

And this to me is the most liberating aspect of being an actor, and even just a girl at a time when shows like Sharp Objects and Big Little Lies (another great show on Hotstar Premium), and films like Veere Di Wedding and Anaarkali Of Aarah are being made.

The next time I hear someone say, “Nice girls don’t do that!”, I know what I’m going to say — I don’t give a shit about nice. I’m just a girl! And that’s okay!

Swara is a an award winning actor of the Hindi film industry. Her last few films, including Veere Di Wedding, Anaarkali of Aaraah and Nil Battey Sannata have earned her both critical and commercial success. Swara is an occasional writer of articles and opinion pieces. The occasions are frequent :).

Watch the trailer of Sharp Objects here:

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This article was published by the Scroll marketing team with Swara Bhasker on behalf of Hotstar Premium and not by the Scroll editorial team.