To engage in exchanging goods and services is one of the oldest human activities, some even say – the oldest. In the last three or so years, trade has acquired an additional feature becoming a hot topic of global politics. Populists especially, maintain that the positive or negative balance of a nation’s trade reflect that nation’s strength – a hotly debated topic (without much support) in science, and an even hotter issue in politics.
After President Trump’s victory in the US (and even before), trade was one of those topics that served as a rallying cry for political agitators and angry people. Allegedly, trans-border trade was (also) responsible for the loss of millions of manufacturing jobs. As a result, TPP and TTIP were trashed by the US government after TTIP also fell prey to liberal and leftist suspicions while NAFTA is to be re-negotiated. All this is supposed to ‘bring our jobs back’, where the tricky issue is what ‘our’ stands for.
Following some of the most respected economists, like David Ricardo, there are not many more useful activities a nation can do other than trade. This leads to an equilibrium between strengths and weaknesses of national capabilities, and, on balance, increases wealth across the board. Things have been getting more complicated by the increasing effects of transnationalization of trade where it has become quite difficult to attribute certain features of a product to one country. Most specialists agree that while globalisation, liberalisation and technological developments have contributed to significant losses of (no longer competitive) jobs, they have also added millions of new jobs.
So how should responsible governments react to the current debate and rising expectations from ‘below’? Keep trading and foster innovation, no matter where? Or limit and control transborder trade?
– Klaus Segbers
As expected, the first two weeks of the new US government were erratic. While governance by Twitter (and intermittently by judges) is something of a new political science concept, these first economic, social and cultural decisions are quite consistent with pre-election statements.
There is an ongoing debate in western and Asian capitals on how to respond. Wait and see? Making bold statements to indicate limits of the accessible? Trying to be friendly? What is your take?
– Prof. Klaus Segbers
Under the radar of the big news items, fueled by the migration and Russia crises, populism and the threat of Brexit, terrorism and (once again) the Eurocrisis, another issue is emerging: trade. Now while this seems pretty boring, tens of thousand ds of people assemble on squares in Europe to protest against the TTIP, the planned trade agreement between the USA and the EU, and its sibling, the TPP, the related treaty between the U.S. and ASEAN countries, also suffers from a mixed reputation. All current U.S. presidential candidates have positioned themselves more or less against these trade agreements.
And indeed, there is data that suggests previous trade agreements have cost industrial workers in America jobs. On the other hand, David Ricardo would argue even today that nothing better may happen to a country then healthy trade relations. As well, these deals have geopolitical benefits, serving as a way of tightening links between the US and EU in the case of the TTIP, and the US and its ASEAN partners with the TPP. Nonetheless, there are two major issues turning people against these negotiations: first, that there are useful or ‘just’ standards that would have to be reduced for assuring consensus among signatories; and second, that there is an inbuilt trend away from national legislation, towards arbitration in the case of conflicts.
Now how do we, the experts, assess these two treaties? Should they be finalized soon, before there will be a new U.S. administration, or does it pay off to let the talk linger indefinitely?
– Prof. Dr. Klaus Segbers