The election of Donald Trump as the next president of the United States of America (USA) has enhanced the uncertainties in the global trading environment. And, just when the World Trade Organization (WTO) was indicating a modest uptick in trade during the fourth quarter of this calendar year.
During the campaign trail, Trump blamed trade agreements for job losses in his country. He threatened to tear up the North American Free Trade Agreement between USA, Canada and Mexico, calling it the worst deal ever. He promised to walk out of the Trans Pacific Partnership his predecessor had negotiated.
He labelled China a currency manipulator and swore to impose import tariffs of 45 per cent on goods originating there. He would, he added, bring back jobs that had gone to Mexico by imposing import tariffs of 35 per cent on goods from that country.
When told such measures would not comply with the multilateral trade agreements the USA had signed with other WTO members, his response was to suggest withdrawing from WTO. He has also held outsourcing of information technology-enabled services, such as call centres and software development, to India and Philippines responsible for destruction of jobs in his country. And, talked of setting a higher minimum pay for firms before giving away H1-B visas to Indians.
Whether all the campaign rhetoric will translate into tangible policy steps during Trump’s tenure is something that time will tell. Yet, the fact that many sections of the electorate voted for him confirms their anger at the loss of jobs due to globalisation and policies promoting freer trade.
Similar anger in Europe might see the emergence of protectionist forces in Germany, France and their neighbours. As it is, the decision of Britain to exit the European Union, only five months before, had raised serious questions regarding the future of globalisation and international co-operation on the economic and environmental issues that confront the world.
To say that all this will take us to the inter-war years in the 1930s, when every country tried to erect protectionist walls to keep out the goods of other countries, might be too pessimistic and simplistic a view. The hope is that wiser counsels will prevail and the focus will shift from steering away from globalisation to better management of its adverse impact on vulnerable sections of society.
However, Trump and his ilk in other countries do not seem very sensitive to the subtleties and nuances that policy making entails. They seem more comfortable with bombastic rhetoric and could well end as prisoners of their own words. Trade wars of sorts, especially between China and USA, which weaken the WTO and other global institutions cannot be ruled out. Such conflicts might also take effect by way of more non-tariff barriers.
For India, just coming out of a sluggish growth of exports, the portents are ominous. America alone accounts for a fifth of our merchandise exports. A little over two-thirds of our exports from the information technology sector go to USA. The situation calls for subtle and quiet but aggressive trade diplomacy to ensure market access for goods and services and an easier visa regime for Indian professionals.
E-mail: tncrajagopalan@gmail.com
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