The Free Trade trend is still stronger than ever!

Tradehay.com: 30/12/2020 - 10:58

International trade has been and is a growth engine of the world economy. But it's also having a negative impact. Part of the explanation for this is that we do not understand the benefits of trade, do not share its benefits, do not help those affected, do not update global rules and are not unique. maintain essential cooperation. The administration of Donald Trump has made all of this worse, and now Joe Biden should try to fix these factors .

Over the past 60 years, the ratio of trade in goods and services to world output has increased from 12% to more than 30%. It is no coincidence that this era has also seen the fastest economic growth in history, the rate of poor population in the world plummeted and for the first time since the industrial revolution, inequality. among households around the world fell . The predominant performance of free-trade economies, such as South Korea and China, has shown its active role in promoting prosperity.

However, world trade is far from thriving as before. The World Trade Organization WTO has noted: trade growth has slowed markedly after the 2008 financial crisis and suffered another blow from the COVID-19 pandemic . This slowdown was partly due to the economic crisis and a natural shortage of demand. However, it is not too difficult to understand that it has been a long time since there has been a strong wave of trade liberalization, as well as the rise of protectionism and the election of Mr. Trump as president.

In a recent book, "International Trade: What Everyone Needs to Know," Anne Krueger at Stanford University, a prominent international economist, decoded the facts about Mr. Trump's approach. And the truth is, no one can reduce a country's overall trade deficit by interfering with the bilateral deficit. The truth is, foreign exporters do not bear the cost of the tariffs that Mr. Trump imposes. The truth is, the United States will not make China do what it wants with unilateral punishment. The truth is, free trade is not a conspiracy against America. And finally, protectionism will never bring jobs in industries that have disappeared in the past.

It is time for us to turn to a new page. When it comes to reconsidering the way forward, the forthcoming US administration should take an approach that is aligned with broader priorities and goals.

They must first admit that, like other economic forms, trade produces winners and losers. A dynamic economy works well only if the benefits of change are widely shared and the people and localities most affected are helped. The aim must be to increase income in the short term, foster business operations, and equip the skills needed to exploit new opportunities.

Second, they should cooperate . Multilateral institutions provide a framework for disputes to be resolved and new and developed rules. It is important that the WTO is revived after Mr Trump has pushed the organization to the brink. The appointment of Ngozi Okonjo-Iweala, a citizen of the United States and Nigeria, as the new general manager, needs to be confirmed. The dispute resolution process should be reinstated, possibly according to the principles being modified. The US should also join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) , which was born after Mr. Trump abandoned the Trans-Pacific Partnership (TPP).

Most importantly, the United States, the EU and other major powers need to reach a new trade agreement and resolve problems with China . The agreement with China when it joined the WTO in 2001 is outdated. This makes perfect sense as China cannot be / treated like other countries. A set of principles and procedures that define how to handle trade disputes between so different superpowers is essential at this moment.Giving up a deal will cost you both economically and politically. But an attempt by one side to force the other to give up on its major ambitions or become identical with that party will have similar results. Instead, we need a more moderate agreement. The new agreements must allow participating parties to protect their vital interests, while also allowing healthy trade and investment to occur.

This won't be easy. But it would be a wrong move for the United States and its allies to give up on global cooperation on trade. Trade is not inherently bad, but it has to be controlled. A new trade strategy is needed, both internally and externally in America. But obviously we should not let commercial activities have to "wither".

FT