Free trade and globalisation had a bad 2016, but it looks
like 2017 could be even worse.
For decades there has been a consensus that
global is action brought more jobs, higher wages
and lower prices - not just for richer countries but
also for developing and poorer nations.
But there is now a growing movement of anger as people
see jobs being taken by machines, old industries
disappearing and waves of migration disturbing the established order.
Global trade flows are falling and trade deals are being
ripped up.
The new US President Donald Trump has threatened to imposed tariffs of up to 45% on Chinese goods, accusing
the country of economically "raping" the US.
One of China's fiercest critics, Peter Navarro, has been appointed as a top trade advisor.
An executive order pulling out of the 12-nation Trans-
Pacific Partnership (the Transatlantic Trade and
Investment Partnership) aimed at deepening economic
ties between the US and Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru, was one of Mr Trump's first acts on moving into the White House.
The future of free trade is looking very gloomy.
But what's behind the anger that threatens decades of
relatives global consensus on globalisation?
US manufacturing's decline
The sense of grievance in the US is clear: the
manufactured sector in the country has seen six million
jobs disappear between1999 and 2011, according to the Bureau of Labor Statistics.
Studies have shown that the decline in the US has been by gains in China.
But Chinese imports only explain 44% of the decline
in employment in manufacturing in the US between 1990
and 2007, according to a report by the Institute for the
Study of Labor in Bonn.
Part of the decline has been down to the outsourcing of
jobs to other countries but automation and more efficient processes have also taken their toll.
"All countries end up with losers from technological development - whether it is telephone operators or
bank tellers," says Girl Hufbauer, a trade expert from
the Peterson Institute for International Economics.
"The problem in the US is that we don't do much to help
those people who lose out through social security support
or job retraining," says Mr Hufbauer.
The anger that flows from this has found a home in
the protectionist rhetoric of politicians like Mr Trump.
"There has been no growth in household income during
the last decade in Europe, the US and Japan. People are
not happy and if you have to blame someone, it is easy to blame foreigners,"' says Mr Hufbauer.
The rise of political opposition to globalisation has
coincided with - and contributed to - a period of
declining world trade growth since the financial crisis of
2008.
Between 1986 and 2008 world trade grew at an average
of 6.5%, according to the World Trade Organization.
Between 2012 and 2015 that rate has slowed to an average
of 3.2% and is predicted to expand by just 1.7% in 2016.
That slowdown would make it the longest period of
relative trade stagnation since the Second World War.
Since the financial crisis the slowing of the Chinese
economy and political and economic stagnation in the eurozone have contributed to this flat-lining of world trade.
At the same time, in an attempt to insulate companies
and industries at home, politicians have turned to tariffs
and restrictions on imports from other countries.
"Governments worldwide have almost doubled their resort
to trade distortions in the last two years," says Prof Simon Evenett, a trade expert at St Gallen University.
"The recent surge in 'beggar-thy-neighbour' activity
prepared Trump and Brexit, suggesting that populist pressures are likely to exacerbate protectionism," he says.
The flat lining of economic growth has increased pressure
on politicians.
"Governments across the world are enacting protectionist policies often masquerading as 'industrial policy," according
to Profile Evenett.
He says this often involves offering government subsidies
to local
companies, introducing import barriers and new '"local" standards for products from abroad.
Yet while protectionism may seem appealing to politicians
assailed by angry workers, they often only end up raising price for consumers.
For example, there was an outcry in 2012 when cheap Chinese tyres flooded into the US market, putting the
viability of the domestic producers in question.
President Obama responded with punitive tariffs to get
China "to play by the rules".
The protectionist measures were well received in the US,
but a study by the Peterson Institute established that
the tariffs meant US consumers paid $1.1bn more for
their tyres in 2011.
Each job that was saved effectively cost $900,000 with
very little of that reaching the pockets of the workers.
Free trade fightback?
With the economic and social benefits of free trade
coming increasingly under attack, proponents of
globalisation have tried to launch a counterattack.
For example, The World Bank recently published a study
of developing countries showing that average incomes for people living in the bottom 40% increased between 2008
and 2013, despite the impact of the financial crisis.
"There is a realisation in rich countries and among rich
elites that there are problems with globalisation," says Branko
Milanovic, an economist whose work on income inequality has driven much of the debate.
"They realise that for their own political self-preservation
they have to tackle them."
But the solutions are not obvious, nor easy to implement.
"Most of the benefits of globalisation have been enjoyed by
a relatively small group within each country.
"The question is not whether there are benefits to globalisation - there clearly are. But the question is about
who is enjoying those benefits," says Andrew Lang from the London School of Economics.
Part of the anger might dissipate if economic growth was
to stop its stubborn flat-lining trajectory, lifting incomes around the world.
"To help solve these problems you need to get the
world economy revved up. Governments need to
commit to final stimulus to get their economies going
again," says Girl Hufbauer.
Branko Milanovic points to the success of previous
politicians in turning round seemingly intractably weak economies.
"It's not impossible for politicians to address these issues.
"Thatcher and Reagan managed to effect change in
relatives short periods of time - a presidential term of
four years should be enough to start making a difference,
" he says.
But Prof Evenett is pessimistic: "I expect the global plateau
in world trade to continue in 2017 and that is before
Donald Trump enacts any of the protectionist measures he has threatened."
like 2017 could be even worse.
For decades there has been a consensus that
global is action brought more jobs, higher wages
and lower prices - not just for richer countries but
also for developing and poorer nations.
But there is now a growing movement of anger as people
see jobs being taken by machines, old industries
disappearing and waves of migration disturbing the established order.
Global trade flows are falling and trade deals are being
ripped up.
The new US President Donald Trump has threatened to imposed tariffs of up to 45% on Chinese goods, accusing
the country of economically "raping" the US.
One of China's fiercest critics, Peter Navarro, has been appointed as a top trade advisor.
An executive order pulling out of the 12-nation Trans-
Pacific Partnership (the Transatlantic Trade and
Investment Partnership) aimed at deepening economic
ties between the US and Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru, was one of Mr Trump's first acts on moving into the White House.
The future of free trade is looking very gloomy.
But what's behind the anger that threatens decades of
relatives global consensus on globalisation?
US manufacturing's decline
The sense of grievance in the US is clear: the
manufactured sector in the country has seen six million
jobs disappear between1999 and 2011, according to the Bureau of Labor Statistics.
Studies have shown that the decline in the US has been by gains in China.
But Chinese imports only explain 44% of the decline
in employment in manufacturing in the US between 1990
and 2007, according to a report by the Institute for the
Study of Labor in Bonn.
Part of the decline has been down to the outsourcing of
jobs to other countries but automation and more efficient processes have also taken their toll.
"All countries end up with losers from technological development - whether it is telephone operators or
bank tellers," says Girl Hufbauer, a trade expert from
the Peterson Institute for International Economics.
"The problem in the US is that we don't do much to help
those people who lose out through social security support
or job retraining," says Mr Hufbauer.
The anger that flows from this has found a home in
the protectionist rhetoric of politicians like Mr Trump.
"There has been no growth in household income during
the last decade in Europe, the US and Japan. People are
not happy and if you have to blame someone, it is easy to blame foreigners,"' says Mr Hufbauer.
The rise of political opposition to globalisation has
coincided with - and contributed to - a period of
declining world trade growth since the financial crisis of
2008.
Between 1986 and 2008 world trade grew at an average
of 6.5%, according to the World Trade Organization.
Between 2012 and 2015 that rate has slowed to an average
of 3.2% and is predicted to expand by just 1.7% in 2016.
That slowdown would make it the longest period of
relative trade stagnation since the Second World War.
Since the financial crisis the slowing of the Chinese
economy and political and economic stagnation in the eurozone have contributed to this flat-lining of world trade.
At the same time, in an attempt to insulate companies
and industries at home, politicians have turned to tariffs
and restrictions on imports from other countries.
"Governments worldwide have almost doubled their resort
to trade distortions in the last two years," says Prof Simon Evenett, a trade expert at St Gallen University.
"The recent surge in 'beggar-thy-neighbour' activity
prepared Trump and Brexit, suggesting that populist pressures are likely to exacerbate protectionism," he says.
The flat lining of economic growth has increased pressure
on politicians.
"Governments across the world are enacting protectionist policies often masquerading as 'industrial policy," according
to Profile Evenett.
He says this often involves offering government subsidies
to local
companies, introducing import barriers and new '"local" standards for products from abroad.
Yet while protectionism may seem appealing to politicians
assailed by angry workers, they often only end up raising price for consumers.
For example, there was an outcry in 2012 when cheap Chinese tyres flooded into the US market, putting the
viability of the domestic producers in question.
President Obama responded with punitive tariffs to get
China "to play by the rules".
The protectionist measures were well received in the US,
but a study by the Peterson Institute established that
the tariffs meant US consumers paid $1.1bn more for
their tyres in 2011.
Each job that was saved effectively cost $900,000 with
very little of that reaching the pockets of the workers.
Free trade fightback?
With the economic and social benefits of free trade
coming increasingly under attack, proponents of
globalisation have tried to launch a counterattack.
For example, The World Bank recently published a study
of developing countries showing that average incomes for people living in the bottom 40% increased between 2008
and 2013, despite the impact of the financial crisis.
"There is a realisation in rich countries and among rich
elites that there are problems with globalisation," says Branko
Milanovic, an economist whose work on income inequality has driven much of the debate.
"They realise that for their own political self-preservation
they have to tackle them."
But the solutions are not obvious, nor easy to implement.
"Most of the benefits of globalisation have been enjoyed by
a relatively small group within each country.
"The question is not whether there are benefits to globalisation - there clearly are. But the question is about
who is enjoying those benefits," says Andrew Lang from the London School of Economics.
Part of the anger might dissipate if economic growth was
to stop its stubborn flat-lining trajectory, lifting incomes around the world.
"To help solve these problems you need to get the
world economy revved up. Governments need to
commit to final stimulus to get their economies going
again," says Girl Hufbauer.
Branko Milanovic points to the success of previous
politicians in turning round seemingly intractably weak economies.
"It's not impossible for politicians to address these issues.
"Thatcher and Reagan managed to effect change in
relatives short periods of time - a presidential term of
four years should be enough to start making a difference,
" he says.
But Prof Evenett is pessimistic: "I expect the global plateau
in world trade to continue in 2017 and that is before
Donald Trump enacts any of the protectionist measures he has threatened."
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