The world, Asia and China in the post-Trump era

CROSSROADS TOWARD PHILIPPINE ECONOMIC AND SOCIAL PROGRESS - Gerardo P. Sicat (The Philippine Star) - November 4, 2020 - 12:00am

The US presidential election should be over by the time Filipinos wake up today in our shores. In a day or two, if not more quickly, we will know if Donald Trump will return for a second term.

Joseph Biden, his Democratic Party challenger, has a good chance to become the next US president based on poll surveys. But the surge in late campaign activity has narrowed Biden’s lead. Still, a close election could relegate Trump into a one-term president.

Trump’s presidency: turbulent for US and the world. When Donald Trump assumed the US presidency on the Republican Party ticket, his signature policy was “America First.”

The policies that were adopted to implement this objective was to look inward, to reduce US commitments to global issues, like “climate change” and regional wars to help police the world. In general, he withdrew from multilateral approaches and preferred a characteristic bilateral and transactional approach to issues.

With respect to global efforts to arrest the deterioration of the world’s environmental ecosystem, he withdrew US membership from the Paris Accord of 2015 on climate change. This agreement was fostered by the United Nations system in which the US government had taken a leadership role in its conclusion.

Shortly after Trump’s election, he also withdrew from the TransPacific Partnership (TPP) Agreement, which his predecessor diligently fostered and promoted to form it along with trading nations in Asia and the Pacific area, along the path of multilateralism.

Another signature moment was Trump’s withdrawal of US membership from the World Health Organization (WHO) this year, blaming it for mishandling of the COVID-19 pandemic.

With respect to involvements in regional wars, he signaled withdrawal from commitments to support alliances that kept US troops in regional wars, promising to effect withdrawal from Middle East wars that had engulfed the US to protect or advance American long term interests.

In addition, he shook up defensive commitments with long-standing allies and prodded them to increase their financial contributions to defensive treaties, or face reduced US support. He broke up a seven-nation agreement with Iran to deal with that country’s nuclear threat, preferring to deal with Iran unilaterally.

On the economic front, he zeroed in on measures that were designed to extract direct concessions from foreign countries that enjoyed large trade surpluses with the US to redress the imbalance. He initiated unilateral trade wars with allies and foes alike, along specific industries, a deviation from international trade rules.

First, tariffs on steel imports on significant exporters to the US to protect the domestic steel industry. He threatened to renegotiate the NAFTA (North American Free Trade Agreement) with Canada and Mexico, or else withdraw from it, if he could not improve some arrangements.

Then, he imposed unilateral tariffs on a wide range of Chinese exports to the US. Such moves were only the opening gambit in a trade war with China. He threatened to broaden and deepen the range of exports at higher rates of tariffs to demand trade concessions from China.

To this, China made counter-moves directed at harming American interests. In particular, China redirected its purchase of large supplies of American agricultural products by transferring their purchases to other countries, thereby hurting American farmers.

A side-effect of the US-China trade war was to put the world’s trading pattern under more uncertainty. For instance, although China’s manufacturing capacity is highly based on its domestic industries, it also has a huge network of supply chains stretched across East Asia and Southeast Asia. China substantially has huge two-way trading relationships with the countries in the region, the Philippines included.

The trade war has, therefore, affected the trade of other countries within the supply loop. This is especially the case with computers and telecommunications equipment. In addition, the trade war also induced a further rethinking of the plant locations of these supply-chain relationships.

Higher risks arising out of the US-China relations put companies heavily invested in China to look for alternative investment sites. This problem was also assisted by structural changes because of rising labor costs in Chinese industry.

Some American foreign investments in China have intricate supply chain arrangements with other companies located in that country. At the same time, they enjoyed access to the huge domestic market to sell their production and services, thereby producing profits arising from China’s growth and prosperity. This included major American technological companies.

Another major consequence of the trade war is the acceleration of rising Chinese technological capacity. China’s rapid rise as a technological power is tainted by US accusation of stealing American technology through inappropriate practices. This is an additional reason that the US has used in initiating the trade war.

All the above measures undertaken by the Trump administration have contributed to the four years of turbulent period in global economic affairs. They also contributed to the lessened scope for multilateral cooperation to solve many of the world’s pressing problems.

In the US national political scene, they have gained for Trump a loyal constituency in support of a protectionist and isolationist world view.

If the COVID-19 pandemic had not reached the United States and caused a devastating impact because of a negligent approach to the public health measures required to meet it, Trump would have danced into his own reelection.

The government’s failure to address the pandemic properly has become the major issue in this presidential election and almost assures that he would fail to get a second term as president.

What could follow the post-Trump era? The following would likely ensue in the post-election era involving a Biden presidency. The US will move back toward more multilateral approaches to big problems.

This will cover, in general, the big issues, including climate change and environment.

Along these solutions will come a rebirth of new industries that will thrust the world’s major countries to compete in the development of renewable energy sources to power industry.

Among the big problems of the future will be a continuation of the US-China trade, economic and security relations. The Trump administration opened big fissures in these relationships. These fissures will need to find solutions through a continuous, perhaps a more contentious, engagement with China. On this point, many observers are generally agreed.



For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

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