By: Jürgen Maier
There is hardly an area of the multilateral system where conflict and confrontation have replaced cooperation so thoroughly as in matters of trade. Are the United States and China on the brink of a »trade war« or are they already in it? The Japanese government urges Japanese companies to »re-shore« production from China back to the homeland. The EU and the US are putting punitive tariffs on products from the other side. Trade sanctions are discussed or imposed in many political conflicts around the world.
Apart from political confrontation, the corona crisis is a key factor for a substantial tendency towards »de-globalization«. Hyper-globalization of supply chains has made economies extremely vulnerable to shocks. Supply chains around the world have become ever more global and complex, in the name of efficiency and cutting costs, before being abruptly cut off by the various degrees of lockdown imposed in large parts of the world. It is no surprise that the cheap labor in the sweatshops of the world are suffering most. Take the example of Bangladesh, a country hugely dependent on textile exports. Orders worth more than $3 billion have been canceled by global brands, affecting 2.26 million workers who were fired or furloughed. At a time when the buyers are canceling, paying late and asking for discounts even from their existing big suppliers, millions of families plunge into poverty.
But for workers like these, the much-praised »multilateral trading system« has always been the law of the jungle. Corporations are moving production freely from one place to another, constantly looking for a place where wages and environmental standards are even lower, where worker’s rights are even more curtailed. When Chinese workers become too expensive, production moves to Cambodia or Vietnam. When Bangladeshi workers become too assertive, production moves to Ethiopia. In the World Bank’s »Doing Business« reports, a country moves ahead as a better place to do business if wages or standards go down. Globalization as we know it. Globalization with few winners and many losers.
In Europe, governments and business leaders still dream that after Trump and Corona, they can return to the neoliberal dream of global free trade, enshrined in global, regional and bilateral free trade agreements. After they failed to secure any new such deal in the WTO, their mantra has been free trade agreements between the EU and pretty much everybody else. These agreements make regulation in the public interest, for people or the environment, increasingly difficult, because this is labeled a »trade barrier« and has to be justified to business interests. Investor protection clauses even enable corporations to sue governments if such regulation reduces their profits. Nobody has benefited from such free trade agreements more than a handful of excessively export-oriented economies in the EU and East Asia, in particular Germany.
However, the export surplus in one country is inevitably the trade deficit in another place, since the global trade balance is always zero. The G20 has addressed »imbalances« in the world economy for years, vaguely worded because they have to agree unanimously. These imbalances, however, are no accident, they are the consequence of hyperglobalization and the destruction of regional markets by ever more free trade agreements. Without addressing the underlying causes of these imbalances, lamenting about them is merely lip service.
The political responses to the Coronavirus have sent the world into the worst recession in modern history. While rich countries can essentially print unlimited amounts of money to rescue their economies, poor countries with weak currencies face disaster. Exports have collapsed, raw material prices have collapsed, their currencies and stock markets have collapsed, remittances from migrants overseas have collapsed, foreign investments have collapsed, debts are going through the roof. It is right to cancel some of their debts, but let’s face it: the future does not lie in a return to the neoliberal dream of a global free market. As long as these countries are dependent on the fluctuations of a global market, their future looks bleak.
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