Reading the headlines, I can see why it’s easy to feel naïve or alone in remaining optimistic about the prospects for global trade and cooperation. Two of the world’s greatest economic and military powers, the US and China, have recently introduced tariffs on a total of over 1400 products between them – which economists predict will add at least $50bn to prices on both sides. This is no doubt troubling. But much of the media is not only exacerbating this trade war with speculation, they are also, in my opinion, wrongly projecting a dispute between two men onto the global free trade stage.
I’m not saying this particular situation isn’t bleak. One of the more worrisome developments is that China’s retribution appears to be aimed at precisely those quarters of the US that voted strongest for President Trump. Economic feuds can no doubt quickly spiral into political, and arguably, personal ones. The possible scenarios in this trade war do feel endless, and far too many of them lead to disaster.
And yet, throughout all of the Presidential statements and media bombardment, I have retained an unusual confidence in the ability of the world economy to continue its remarkable, long-running trend of growing interdependence. To me, this quarrel feels like a US set-back. And a Chinese set-back. But not a global set-back. The actions of both Washington and Beijing are, I believe, quite understandable and arguably rational. Most trade experts agreed that the American trade deficit has been damaging and unnecessary, and few international relations experts could suggest an alternatively appropriate Chinese response to Trump’s tariffs that would not significantly weaken or obviously embarrass Mr. Xi in the long-term.
Ultimately, both governments have done what they needed to, and will suffer the consequences of that correction. But these are two leaders and administrations that are determined to win, and to maintain their global standing. They will not allow mutual devastation. So I predict a reversion from action, to rhetoric, fairly soon in this trade war. But even more telling than a retreat is the fact that this issue is contained.
It’s especially reassuring to me as a Venezuelan that the political wrangling on either side of the Pacific is not endorsed by Latin America, nor much of the world. The South American trading bloc, Mercosur, and the EU have been making serious headway in their negotiations. Rightly termed the “Beef for Cars deal”, the EU Commission refers to the future agreement as “a win-win for both the EU and Mercosur, creating opportunities for growth and jobs for both sides.” Just last week during a joint press conference between Argentina and Spain, Argentinian President Mauricio Macri stated that: “We [have] never [been] so close to an agreement, and this time we have to make it a reality”.
This proposed agreement sits alongside many other examples of a renewed focus on free trade and the principles which guide it across the globe. Despite Trump’s withdrawal from the TPP, the agreement proved it could survive when the 11 remaining countries committed to a revised pact (almost verbatim the original contents of the TPP – but now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, CPTPP) last month. And while this was obviously an important moment for Canada – it’s actually only one of two trade agreements in their focus. Canada is now also looking to Latin America. After announcing that his team would “pivot to the next free trade opportunity: the Mercosur bloc of nations” Canadian Minister of International Trade François-Phillippe Champagne flew to Paraguay in March to meet with the Mercosur nations. This was just days after having signed the CPTPP agreement – the speed of this succession, Champagne said, was to “send a message to the world” about free trade.
Even if this message isn’t landing with Trump and Xi, or with the media that feels obsessed with their feud, it appears that many other leaders are on board with it. My desire for optimism in this regard is perhaps linked to having witnessed the consequences of increased protectionism in Venezuela. In general I believe that, like in business, politics doesn’t always have to be zero sum. The Commission is right to refer to the EU-Mercosur deal as win-win, that’s what free trade is about. The deals themselves are admittedly very complex. It takes time to identify how and where we can find that sweet spot for a “win-win” agreement – but it’s reassuring to see that countries around the world aren’t turning away from the challenge.