Even then the Cold War’s military and diplomatic urgencies turned the United States into an unlikely protector of Japan’s manufacturing industries as they were rebuilt into world-beaters. Trade practices of the kind deemed unfair by Trump today — ranging from loans and subsidies to national conglomerates and restriction of imports — were key to the rise of not only Japan but also such East Asian “tigers” as South Korea and Taiwan.
Trying, albeit much less successfully, to build a manufacturing economy, India imposed some of the world’s highest tariffs. After a short-lived experiment with trade liberalization, which resulted in a $53 billion trade deficit with China, India today has retreated into its old protectionist crouch.
It is hard to see what else it can do. The rise of China as a manufacturing powerhouse has made even the United States renounce the posture of international co-operation it assumed after the Second World War.
The multilateral institutions such as the World Trade Organization that the U.S. helped set up no longer seem to serve its purposes. Moreover, the argument, first widely heard in the U.S. during the debate over NAFTA in the 1990s, that free trade enriches the wealthy at the expense of the poor and the middle class, not to mention the environment, has become politically much more potent.
It is clear today that the advocates of free trade ignored for too long the volatile political problems rising from wage stagnation and income inequality. Upholding the economic law of “comparative advantage,” they also managed to downplay the higher law that governs international economic relations: might is right.
Following the British “imperialism of free trade,” powerful countries have consistently practiced what they denounce in others. For instance, the United States, while insisting that other countries reduce state intervention, has nurtured high-tech industries in ways that violate WTO agreements (and which are shielded from sanction only by the fig leaf of defense requirements).
The bluff of free trade, first called in the 19th century by an industrializing America against Britain, lies exposed yet again as China aspires to be the 21st century’s new hegemon. Free trade turns out to be something that helps a rising great power, until it doesn’t, and which most countries claim to practice while trying to subvert its principles as much as possible.
Trump’s trade wars are, of course, dangerously reckless in a world more interconnected than ever before. But they have served to clarify the challenge ahead: to devise multilateral institutions that acknowledge protectionism rather than free trade as the deeper and more enduring reality of global economic history.
This opinion piece was provided by Bloomberg News.