Trump is Wrong About Trade. So Is Everyone Else.
by Adam Tooze – July 23, 2018
The New York Times
When President Trump described the European Union as “a foe” last week, he sent shock waves through the European establishment. European Council President Donald Tusk promptly tweeted that Europe and America were “best of friends” and that anyone suggesting otherwise was spreading “fake news.”
In fairness to Mr. Trump, one should add that he made clear that calling the Europeans a foe did not mean to imply that the Europeans were “bad.” What was on his mind was, he said, “what they do to us in trade.”
On July 25, Jean-Claude Juncker, the European Commission’s president, will be in Washington to discuss just this topic with Mr. Trump. Mr. Juncker is likely to repeat the familiar European line: When it comes to trade, the United States and Europe are not competitors but partners.
To think, as Mr. Trump appears to do, of nations locked in mortal economic rivalry shows a grave misunderstanding of how competition actually works in the global economy. Competition is, of course, an ordering principle. If neoliberalism is about anything, it has been about creating the largest possible economic space for competition. But the protagonists aren’t supposed to be states (or at least not members of the Atlantic club) but businesses, investors and workers.
It is the job of trade and investment treaties to regulate what preference can be shown to national firms, what rights will be extended to foreign investors. The European Union boasts of particularly tough internal regulations in this regard. National preference is outlawed as far as possible.
Over recent decades, these principles of international organization have come to be entrenched in transnational production systems that make nonsense of economic nationalism. Owning a Ford truck is an instantly recognizable statement of Americanism, but barely half of its componentsare sourced in North America. Buy an icon of Americana, and your money ends up all over the world.
This interconnection cuts both ways. We hang together in sickness as well as in health. It is not just manufacturing but finance too that is integrated across borders. When the real estate bubble burst in 2008, European as well as American banks imploded. To keep them alive, the U.S. Federal Reserve provided liquidity running into the trillions of dollars both to their branches on Wall Street and by way of the liquidity swap lines extended to the Bank of England, the European Central Bank, the Bank of Japan and the Swiss National Bank. The Fed took this extraordinary step because previous decades had built a system of integration so close that it would have been lethal for the United States not to act. Saving the American financial system meant saving Europe’s banks, too.
But for all this integration, globalization has been haunted by a cognitive dissonance, to which Mr. Trump gives crude expression. In the popular imagination and in the words of politicians, the world economy continues to be thought of like the World Cup: cosmopolitan and transnational, yet made up of discrete national teams competing for a single prize. The lingua franca of policy talk is “national competitiveness.”
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