My fascination with international trade has always been both intriguing and unsurprising. As a scholar of the contemporary global political economy, my focus was naturally predisposed to the political thought underpinning respective national policies – especially in the milieu of international relations after World War II. And rarely (if ever) did I consider the interconnectivity of the post-war world in the context of interdependence. Yet gradually, the machinations of correlative trade as a bedrock to prevent further conflict and catastrophe dawned on me. Soon I realized that the globalized economic order, which I am accustomed to, was a deliberate structure forged to ensure lasting peace while mutual prosperity followed as a by-product.
Now, this well-conceived model is being threatened by one of its own architects – leading the world into the abyss of the unknown.
In the aftermath of the war, Europe was early to realize that constitutional limits and demilitarization of extremist elements were not enough to prevent another fascist uprising. It might not be the dismembered Nazi Germany or an emaciated imperialist Japan. But soon, another Hitler was bound to seek to establish hegemony through decimation and genocide. This fear led to the collective quest for a lasting remedy: Political, economic, and social interdependence. Thus came into being the original blueprint of the European Union – initially envisaged on the foundation of the Coal and Steel Community – but predominantly aimed to etch mutual reliance in Europe on such a scale that turns war disadvantageous to both the victim and the tyrant nation.
The genesis of this interdependence was not only limited to Europe. In 1947, a revolutionary trading system materialized after stemming from the echelons of the US government of President Franklin Roosevelt. Historically known as the General Agreement of Tariffs and Trade (GATT), the mechanism set forth ground rules to guide trade among market economies to boost economic recovery in the post-war era. Despite the tumult and tribulations of the Cold War, the system not only survived but flourished. And in 1994, GATT was folded into the rules of the World Trade Organisation (WTO) – an intergovernmental organization responsible for regulating and facilitating a multilateral trading system. By virtue of cogent logic, we could assume that much of the Western order would abide by the charter of the WTO. After all, it is the modern-day rendition of the covenants of free trade prescribed under the GATT framework. But this is precisely the fault line that highlights the complexities and contradictions of the escalating power competition in a globalized world of the 21st century – designed through decades to establish mutual interdependence.
Most of us would recall the turbulent presidential tenure of Mr. Donald Trump. The jabber of the far-right induced QAnon movement and the advocacy for the ‘Make America Great Again’ rhetoric – infamously known as the MAGA campaign. Since the switch of the US Presidency, many political and trade policies have been reversed. But apparently, China is the notable exception.
The Trump administration began enacting the process of American economic decoupling from an emergent China. The US Department of Commerce imposed Section 301 tariffs on China – barring billions of dollars of imports – in the context of national security concerns. Now I could have just discounted this as a typical Trumpist witch-hunt. Evidently, he also used Section 232 to levy tariffs on steel and aluminum products imported from almost every country – including US allies – to de-stress American industries. Yet, while most of such mercantilist policies have been rescinded since, the Biden administration has not only maintained tariffs on Chinese imports but also expanded controls on exports to Beijing.
A recent manifestation of the regressive American trade posturing is the enactment of the CHIPS Act: legislation that authorizes billions of dollars in subsidies to companies propagating the American domestic chip industry and extricating US supply chains from China. The US government has further imposed restrictions on technology exports to China. The official narrative is to restrict the flow of sensitive technology to the communist regime of China – to mitigate the risks of espionage and cyber warfare. But the self-evident reality is the growing protectionist sentiment in the United States, driven to undercut the meteoric economic rise of China and hobble its technological capacity.
I am acutely aware that many pseudo-patriots would now criticize my purview, paint me as a communist sycophant, and justify American policies by emphasizing the Chinese threat to the Taiwanese economy – primarily its mainstay semiconductor industry. And thus, before I proceed any further, let me make it abundantly clear: Critiquing unilateral American policies is by no means an endorsement of the draconian practices of China. My opposition to trade protectionism in a globalized order, established on the premise of free markets and trade, is bereft of my political disposition.
About a week ago, the WTO – the same trade body that enshrines the GATT framework in governing global commerce – termed the American tariffs on Chinese imports as “illegitimate.” The WTO categorically rejected the notion of US national security reservations. And how exactly did the rule-abiding American administration respond? Well, it simply spelled out what we already knew: The WTO has no jurisdiction over this matter. In other words, China could file a complaint, but it would be redundant. Because it is up to America to determine if its trade actions are necessary for national security, and no international organization has any right to second-guess that judgment. Umm, really? I mean, to me, it is pretty ironic and self-righteous! Apparently, it is the American prerogative to decide its economic policies, impose tariffs in sheer violation of the WTO rules, and conjure export restrictions – all in the name of sovereign policymaking. Then why exactly was the decision of Saudi Arabia to cut its oil supply so contentious? Why was it sensationalized as a betrayal of American trust? Was it not the sovereign prerogative of Saudi Arabia to ensure economic profitability in line with global demand projections? But because it was against American interests, it was deemed controversial, threatened with “consequences,” and termed ‘siding with Russia.’
Are other countries not entitled to chart independent policies that suit their own national security, economic, and strategic agenda? Or is it just a privilege enjoyed by almighty America?
Such protectionist tendencies of the United States are unfortunately not limited to political rivals and economic adversaries. The flagship policy of the Biden administration to fight climate change extends this anti-competitive gesture to allies all the way across the Atlantic. The Inflation Reduction Act (IRA) has an acerbic nationalistic element under the guise of environmental protection. Under the Act, the US government would offer tax credits on buying electric vehicles assembled in North America – an unwarranted advantage to domestic automobile manufacturers over European and Asian counterparts. The clean energy subsidies under the massive state aid schemes of the IRA would make it cheaper to produce low-carbon fuels, such as hydrogen and ammonia, in the United States than in the Eurasia region. While it would bring back manufacturing to America, it holds the potential to destabilize industrial prospects around the globe.
Mr. Leo Varadkar – the Irish Trade Minister – recently lamented: “What the US has done really isn’t consistent with the principles of free trade and fair competition.” While I absolutely do not detest the American vision of investing in clean energy practices, I loathe the duplicity of American policies. On one front, American analysts rail about the erroneous European reliance on Russian energy leading to its unraveling economic misery. But on the other front, they somehow overlook how these unilateral climate laws could spark a wave of deindustrialization in an already battered Europe.
Admittedly, I acknowledge the economic supremacy of the United States. And with the war of attrition playing out on the periphery of Europe and the unprecedented economic slowdown of China, I reckon that supremacy is not under any immediate duress. Nonetheless, the global outlook might have changed since the 40s; the political and economic dynamics have not changed much. Economic interdependence is not just a precaution anymore; it is a prerequisite to maintain regional clout and global political relevance. While the Chinese economy battles the throes of a resurgent pandemic, Chinese diplomacy is rapidly courting allies – from the Pacific islands to the African Union to the estranged Gulf states. America would remain an economic powerhouse, but it might soon lose its position to garner leverage with larger-than-life linguistics and lofty dictions of alliance and cooperation. This stage of the power competition necessitates a close-knit network of partners worldwide to gain strategic depth, not self-erecting protectionist barriers to isolate in an exceedingly fickle global landscape.