Since David Ricardo and other economists outlined the advantages of free trade about 200 years ago, it seems like recently, many of his lessons remain unlearned. In a time period where we see the advancement of populist movements on several fronts, “unfair trade” has become an easy scapegoat for right-wing grievances.
The suggested recipe – most recently proposed by the current U.S. President – is introducing higher import tariffs, which are protectionist tools against free competition. The effects of these measures are debated among economists, but the majority is skeptical that the potentially ensuing trade wars can lead to anything positive. On the contrary, sometimes they have led to real wars.
So now, at the threshold of a possible new trade war, what is the outlook? Will and should China and the EU react in kind to the introduction of new customs fees for steel and aluminium? Is it plausible that trade deficits are an issue of “national security”, as the U.S. president claims? Should concerned countries accept trade imbalances and customs fees, or should they risk further escalation by implementing further tariffs in response?
– 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
Exceptional events require exceptions. So let’s continue last week’s debate, after we discovered who won (at least the elections, if not the popular vote). But our focus now, will be on how to react to the new situation.
There is a puzzling variety of Western reactions following the election results in the United States. Some leaders (like the Japanese Prime Minister) seem to have bowed deeply. Others (Russia), expressed their (probably wee-founded) hopes to improve relations. But again, others like Chancellor Merkel, appear to be cooperative, based on some conditional expectations. The EU, all of a sudden, has decided to improve its cooperation in the external and defense fields, and even promises to spend more.
What is a viable strategy for handling a committed populist? Bandwagoning? Accommodation? Conditional cooperation? Kow-towing? Pragmatic restraint?
– Prof. Klaus Segbers
The end of the presidential election in the United States is fast approaching. Following it, are an abundance of domestic issues which need sorting – along with a few international ones as well. Let’s focus on the second group of challenges here.
What can the world expect from a new American administration? Externally, what are the fundamental new features of either a Clinton or Trump government? The interventions in failing or failed states, and for fighting ISIS and related threats – what effects will the new administration have on these? Will there be more isolationism, or more interventionism? What about the pivot towards Asia? Will NATO be strengthened, or will it lose credibility? What will the trade, immigration and climate policies be? Will there be new ideas for transatlantic relations?
Let’s compose a list of first assessments.
– Prof. Klaus Segbers
Interesting and troubling things are happening.
In Austria, the two classical people’s parties have been pulverized, from a solid absolute majority to 22% in the recent presidential elections. In Germany, a similar trend is materializing, though more slowly, and not (yet) as dramatically. But chances are that here, the (formerly) two big parties, the social democrats and conservatives, will also lose their majority. In France, the Front National may make it next year into the second round of the presidential elections, and even may win (an outcome narrowly avoided last weekend in Austria where the FPÖ almost made it). In the USA, two out of the remaining three presidential candidates are outspoken and successful populists. A Trump or Sanders presidency would change the country. In Hungary and Poland, this is already a reality, to the puzzlement and horror of the EU. Also in Denmark, Sweden and the Netherlands, populists are gaining in influence. The recent referendum on accepting an association agreement with Ukraine was instructive.
The question this week is not an easy one. Let’s assume for a moment that in one of the major EU countries, and/or in the US, an outspoken simplifier would make it into the presidency, and start changing the independence of the legal institutions, the media, or the educational sector – how would we react? Let’s take as one extreme Houellebecq’s ‘Submission’, where a clear majority of professors are bribed into converting to Islam. And, as another option on the opposite side, a mass defection from political pressure. What would be the likely outcome in the case that radical populists take over the executive power in a major Western country as the result of a relatively normal election? What would we do?
– Prof. Dr. Klaus Segbers