OPINION:
Skeptics are criticizing western sanctions on Russia and COVID-19-inspired hardening of supply chains, as nails in the coffin of globalization, but don’t count on it. The only question is who leads.
Connecting civilizations through commerce and finance is an ancient and unyielding process. The International Monetary Fund (IMF), World Bank and World Trade Organization (WTO) haven’t evolved effectively with big power competition and they will eventually be replaced by an Asian-centered order.
After World War II, the IMF was established to maintain fixed exchange rates to enable commerce and short-circuit a repeat of the competitive currency devaluations of the 1930s. Since the advent of market-determined exchange rates, it has proven useless to resolve the complaints about governments suppressing currency values to gain competitive advantages.
China’s Belt and Road and European and American responses are weaponizing development finance, and the World Bank can do little about it.
President Donald Trump’s bilateralism with China was hardly novel. President Bill Clinton extracted concessions from Japan with 100% tariffs on luxury sedans, and complimentary regional deals parallel the entire history of the WTO.
The General Agreement on Tariffs and Trade (GATT) was created to reduce tariffs to encourage market-driven trade and international democratic order. As tariffs came down, it took on product standards, subsidies, the protection of intellectual property and other issues. Rechristened the WTO in 1995, it formalized a dispute settlement process that had evolved ad hoc.
In the early 1950s, Germany and Japan were only admitted after democracy and market economies were reestablished. Western governments had issues with the Japanese industrial policies until its breakneck growth hit the wall in the 1990s, but it was never perceived as a threat to the western democratic order.
In contrast, Russia and China were admitted into the WTO after the Cold War under the false premise that trade would help establish democracy, and these rogue states have exploited the bounty to attack democracy.
Moscow found vast markets for oil, natural gas, nonferrous metals and agricultural products. Russian President Vladimir Putin jailed dissenters, enriched oligarchs and invested in a large army and military technology and cyber tools to undermine western elections, and subverted U.S. efforts to stabilize the Middle East.
Former iron curtain states of Eastern Europe enjoying political and economic freedom and prospering within the EU pose a threat by example to Putin’s repressive kleptocracy. His response is to oppose further expansion of the EU and NATO and invade Georgia, the Crimea and now Ukraine.
China has exploited the letter and spirit of WTO rules with huge state subsidies, technology theft and opaque market-access barriers and the deft subversion of the WTO dispute settlement mechanism. It aspires to global dominance in semiconductors, 5G wireless, electric vehicles and artificial intelligence.
Meanwhile, Beijing underinvests in public health and rural development, squanders wealth with an internal security system and to persecute Muslims in Xinjiang. It is building the world’s largest Navy to intimidate neighbors in the Western Pacific, project power globally and take Taiwan by force.
China offers its autocratic market-socialism as an alternative to democracy and has no more place in the WTO than Russia or North Korea, which thankfully is not a member.
Especially in semiconductors and electric vehicles, the United States and EU are fashioning counter initiatives to Chinese industrial policy-aggression, but this hardly means the end of globalization. The economies of scale required in these and other high-tech industries require large markets and exports for domestic industrial policies to succeed.
President Barack Obama championed the Trans-Pacific Partnership (TPP) to foster trade among like-minded nations, but Mr. Trump—and now President Joe Biden, want no part in it.
Unfortunately, Mr. Biden’s policies are hostage to progressive intellectuals and organized labor who see free-markets and free trade as the devil’s workshop. They fashion those as harmful to the interests of minorities, women and whatever other oppressed groups the executive class of the progressive left can dupe to secure political leverage and sinecures in academia, non-profits and government.
Mr. Biden initiated an Indo-Pacific Economic Framework, which permits countries to individually op into arrangements on trade, supply chains, the green transition and anti-corruption. Details are limited and U. S. offers little in the way of additional market access.
Treasury Secretary Janet Yellen touts friend shoring among likeminded nations to secure supply chains against disruption but again, offers few carrots to inspire cooperation.
China has created its own Regional Comprehensive Economic Partnership. It has applied to join the TPP though it would unlikely accomplish membership if the United States rejoined.
With either China or the United States in the TPP, a new Asian centered trade organization will replace the WTO—the UK is joining and pressure is building for the EU to apply.
America has a choice—it can lead globalization by reembracing free trade through the TPP, or leave the door open for China and its antidemocratic values.
• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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