The Trump administration's trade war on China looks past certain chapters of American history. Image: YouTube

Globalization is nothing new, though it has evolved and transformed over the years because of economic, political and technological changes. It began thousands of years ago when merchants traveled to different regions to trade in goods that they produced and those they could not. The trade relationship proved immensely profitable. For example, wealthy Europeans craved Chinese silk, for which they were willing to pay very high prices, culminating in the Silk Road.

The world has not looked back since then because international trade has not only played an important role in promoting economic growth, it has also brought technological changes because they generated more profits. For example, inventions such as the wheel allowed the carrying of more products and traveling longer distances. But trade also brought out the worst of human endeavor, leading to stronger nations conquering and enslaving weaker nations and peoples.

European colonization of Africa, Asia and the Americas, for example, was largely motivated by lust for power and wealth. Maritime European powers – the Netherlands, Britain, France, Portugal and Spain – mastered the art of ship-building and navigation, enabling them to travel around the globe to expand their empires after the Ottoman Empire closed the land route (Silk Road) and China banned seafaring adventures in the 14th century. With the blessing of the Christian Church, they conquered less advanced regions, killed or enslaved the local populations, culminating in their domination of world rule for more than 500 years.

European (and later Japanese) imperialism culminated in “might is right” commercial and foreign policies, the powerful nations introducing trade rules that benefited them but at the expense of underdeveloped nations. For example, negotiations under the US-inspired General Agreement on Tariffs and Trade (GATT) on reducing import duties were dictated by the Group of Seven, the rich club of developed nations made up of the US, Japan, Germany, France, the UK, Italy and Canada.

To enhance their benefits, the G7 club reduced tariffs on goods in which they had a comparative advantage (such as automobiles) but increased duties or imposed quota restrictions on those where they had a comparative disadvantage, such as garments. Emerging markets such as China and India, in fact, were not even invited to participate in writing the world’s trade and investment rules until the Uruguay Round of negotiations from which the World Trade Organization was established.

The emergence of large developing countries such as China and India changed the calculus of global trade and investment. For example, developing nations refused to allow free or freer non-agricultural market access to their markets without the G7 nations agreeing to reduce or dismantle their heavily subsidized farming sector. That “Mexican standoff” remains to this day because neither side is willing to compromise on the issue, for internal economic and political reasons. The European Union could not budge on farm subsidies because its farmers could not compete, while India heightened tariffs on manufactured goods to protect its backward and inefficient manufacturing sectors.

Perhaps equally if not more important was the fact that developed economies did not sufficiently address the side-effects of globalization. Focusing largely on short-term returns on investment, factories in the West and Japan relocated to developing economies (especially China) where labor standards and environmental-protection laws were much more lax, hollowing out their manufacturing sectors. Coupled with automation, significant numbers of high-paying manufacturing jobs were lost and have yet to return.

The single-minded pursuit of profits also created other adverse effects – climate change, widening wealth inequality, etc – that further distorted the global economy. Climate change, for example, has largely been blamed for flooding, forest fires and warming of the ocean waters that have caused huge economic dislocations and deaths in many parts of the globe. Rising wealth inequality undermined economic growth because overall consumption faltered in that increasing numbers of people could not afford to buy the goods and services needed to sustain economic and social stability.

Instead of addressing the consequences of globalization (which by the way was pushed by the West and Japan), the developed countries continued blaming emerging markets (read: China) for the economic, political and social woes they had fomented in the first place

Instead of addressing the consequences of globalization (which by the way was pushed by the West and Japan), the developed countries continued blaming emerging markets (read: China) for the economic, political and social woes they had fomented in the first place. In the US, for example, politicians from both major parties, Democrat and Republican, accused China of stealing American jobs instead of pointing out the real culprits: relocation of manufacturing and job automation. Instead of spending money on job training and other remedial programs to cushion the negative impact of globalization, the US government spent hugely on defense against “manufactured enemies.”

Globalization was blamed for a host of problems when, in fact, it had played an important role in promoting global economic growth, technological advancements and security. For example, taking advantage of China’s manufacturing comparative advantage reduced prices, which in turn kept inflation under control, promoting consumption and investment. Advances in transportation and telecommunication technologies increased interaction among people in all corners of the world, increasing understanding among nations and, by extension, enhancing geopolitical stability.

Globalization is needed now more than ever because governments have failed to require international cooperation, particularly among the major nations such as China, the US and India. Being major emitters of greenhouse gases, the biggest contributor to climate change, their working together is crucial in tackling climate change.

Thus instead of holding back or trying to stop globalization, nations must promote it. A good start would be revamping how globalization is managed or putting the pros and cons of globalization in proper perspective.

As the 18th-century British economist David Ricardo correctly observed, while unfettered international trade benefits all nations, it also incurs costs such as inefficient industries whose employees would be unable to survive. So to acquire the potential benefits of globalization, policymakers should introduce remedial policies such as job-retraining programs to help misplaced workers find alternative employment opportunities. Because of automation and innovation, future job markets will encounter frequent changes, requiring political and business elites to invest in education and other socio-economic policies.

Turning back the clock for short-term economic and political gains could be disastrous for the global economy and polity. The recent emergence of protectionism and populism eroded economic growth and made the world a more dangerous place. For example, US President Donald Trump’s “Make America Great Again” stance led to trade wars that in turn damaged the global economy. According to the latest US Federal Reserve report, Trump’s trade war has backfired, reducing employment at factories and hiking prices. Meanwhile bombing or sanctioning nations that refused to toe the line on the US-imposed world system worsened the refugee problem, while fueling instead of absolving terrorism.

Furthermore, Trump’s “big power competition” strategy, designed to counter China and Russia, will likely worsen the socio-economic woes and security for the US and its allies. China and Russia are too big to contain or destroy unless the US and its allies are willing to make the ultimate sacrifice. Taking the argument to its logical conclusion, those countries should cooperate with China, Russia and the rest of world to promote globalization.

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