The 75th anniversary of the allied invasion of Normandy is a moment to take stock of the state of the postwar world order, and the precarious position in which it finds itself.
The United States almost single-handedly shaped that order and its multilateral institutions, as an insurance policy against a repetition of the destructive cycle of economic nationalism that had led to rising protectionism during the Great Depression and, inevitably, to war.
That the U.S. President now constitutes the main threat to the postwar era of peace and prosperity for which his predecessors served as guarantors sends chills down the spine. Donald Trump’s presence at the D-Day commemoration ceremonies, alongside veterans who fought for principles he cares little about, mars what should be a solemn event.
The world trading system is breaking down before our very eyes, and Mr. Trump is the reason. The U.S. President has weaponized tariffs and threatens to impose them on any country whose policies he doesn’t like, rules be damned. He no longer even bothers to invoke the flimsy pretenses of unfair trading practices or national security to justify slapping tariffs on foreign imports. By threatening to levy tariffs on Mexican goods until the country’s government stops the flow of migrants across the U.S. border, Mr. Trump has crossed a dangerous line.
By acting unilaterally, and outside of the framework of the international trading rule book, Mr. Trump is effectively giving a free pass to any other country who seeks to do the same. And by ratcheting up a trade war with China, he is forcing other countries to pick sides, in a manner reminiscent of the competing trade blocs formed by Britain and Germany in the 1930s.
Mr. Trump is not wrong to take China to task over its systematic failure to abide by the very rules to which it has paid lip service to win entry into the World Trade Organization. Previous U.S. administrations had been too complacent in the face of China’s illegal subsidization of its own industries, intellectual property theft and discrimination against foreign companies. But Mr. Trump’s method of holding China to account will do more harm than good if, as he appears to want, it leads to a reduction in global trade flows.
Such a result would not only make everyone poorer. It would undermine the basis of the postwar peace and prosperity that, despite its choppy periods, has made us all better off. Trade has bound countries with seemingly little in common in a virtuous circle of rising incomes, longer and healthier lives and a mutual desire to avoid flushing all their progress down the toilet.
Sadly, a U.S. President who has never read a book he didn’t have ghostwritten for him, doesn’t care. This week, Mr. Trump promised a “phenomenal” U.S.-Britain trade deal if Britain leaves the European Union, which he hopes it does. He once again showed his preference for bilateral over multilateral agreements. As long as bilateral deals complement multilateral ones, as in the case of the North American Free Trade Agreement, they are no threat to the global trade order. It is when they become exclusive clubs, and prevent partners from extending their trade relations with countries outside of the agreement, that they endanger peace and prosperity.
Yet, the world is headed down this path as a U.S.-China trade war grows into a superpower showdown. U.S. pressure on its intelligence partners, including Canada, to block Chinese telecom giant Huawei from participating in their 5G networks – while a legitimate national security imperative – risks leading to China’s isolation. There is no easy way around this problem, as long as China requires its companies to spy on its behalf. But a U.S. President sensitive to the mistakes of history would not seem so casual about repeating them.
“At the moment, we have not witnessed a wholesale collapse of the modern trading system. This is partially for the fact that policymakers seem to have learned some of the lessons of interwar history by not responding in a general fashion to unilateral moves toward protectionism,” economists David Jacks of Simon Fraser University and Dennis Novy of the University of Warwick wrote in a new National Bureau of Economic Research paper.
“This does, however, raise the prospect that the trade wars of the present day may serve the same purpose of those in the 1930s, that is, the intensification of existing and nascent trade blocs. Thus, it requires no great imagination to see a future in which consumers’ preferences, firms’ perceptions of uncertainty, and states’ apprehensions of one another endogenously lead to a reorientation of world trade around China- and US-centric trade blocs.”
Three-quarters of a century after D-Day, is this where we want to be?
Konrad Yakabuski