G20 Finance ministers meeting in Baden Baden last weekend agreed, on America’s insistence, to drop the long-standing commitment to free trade from the final communiqué.
It is hard to know to what extent America’s position is driven by her autarkic view on world trade, or to what extent it is an acknowledgement of the fruitlessness of paying lip-service to an ideal which is never delivered. Doubtless, it’s a bit of both.
It is certainly true that finance ministers in the advanced nations have always shown a protectionist attitude towards international trade, protectionism that has intensified through attacks on American international corporations, which to a large extent can choose where to pay their taxes. The thrust of research by international NGOs, particularly the Paris-based OECD, has been to decry tax competition; however, even though it has bullied tax-havens to supply tax-related information to revenue-hungry states, it has failed to stop multinationals, armed with teams of tax lawyers, from complying with their statist demands.
Therefore, the reasons for anti-globalisation in high-spending governments so far have been based on job protection and maximising taxes. But with President Trump, it’s different. He wants to tilt the odds firmly in favour of American business, and he appears to believe that the World Trade Organisation is little more than an obstructive repository for anti-business bureaucrats. This view is misinformed, because over the years WTO officials have successfully managed to get their members to reduce tariffs to historically low levels.
The threat to this progress is not new. America has in the past often ignored WTO rules, banning or imposing tariffs on imports on overtly protectionist grounds. As always, vested interests and protectionism prove difficult for politicians to resist. However, Trump is different in one respect: he appears to be an old-fashioned mercantilist, seeing America as one gigantic commercial enterprise needing direction.
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