Tariff wars will be rendered obsolete by the broader global trends at work today
There may be a full blown conflict over trade, writes Mustafa Alrawi, but there is a more optimistic vision of our future emerging at the same time
Fears of an all-out global trade war have been growing in recent days with the accompanying anxiety over how it might affect our economic prospects. There may be a full blown conflict, there may not be. So far there we have seen opening salvos from both the United States and China, with the former putting an initial $34 billion’s worth of tariffs into effect last Friday, encompassing 818 products. China has hit back in similar fashion. Meanwhile, Europe and the US are also trading shots and EU officials have now shown they also know how to inspire saucy headlines by including tomato ketchup in a list of US products that will be part of an 18-billion-euro retaliation should potential tariffs on EU cars and car parts be triggered by the US President Donald Trump.
Quite rightly, Heinz – in many minds the maker of the best (known) ketchup – said most of its product sold in Europe is actually manufactured there. This raises the question; are tariffs these days quite possibly pointless, given the realities of the global manufacturing supply chain?
Except that the point is just that – to make the point. Which is the same old trope best illustrated by the 1976 film Network, in which Peter Finch’s beleaguered TV anchor coins the catchphrase: “I’m mad as hell, and I’m not going to take this anymore!”. Similarly, Pat Buchanan argued, as a reform candidate for the 2000 US presidential election campaign, that the United States had originally grown economically strong and prosperous because of trade barriers.
"Why do you think there's such rage and anger out there?" he said, according to Bob Woodward in his book The Choice. As Buchanan saw it, it was because the average income for American workers had fallen as a result of competing with Mexican and Chinese cheap labour.
It feels almost wearying to keep saying that nothing is ever particularly new; not Mr Trump, nor trade wars, nor Brexit, nor anti-immigration policies or fear of Russia – it all makes up the latest crescendo from the ringing of the death rattle of a bygone era that, in its last breaths, is doing its best to convince itself that it is not expiring.
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In reality, for decades the world has been moving towards a more fluid, borderless existence as demanded by the shifts driven by societies tethered to technology. This pattern could also be called globalisation if that term hadn’t become so loaded and apparently rage-inducing for many. Nevertheless, we have been turned into rampant, international, consumers and it isn’t so easy to reverse that, even if barbed tweets and angry rants seem to produce a weird kind of alchemy which has altered the political landscape across North America, Europe and Asia. The very changes that have sparked this animosity to the state of the world today, will also render any action that follows it inconsequential.
Just as products are no longer made in one place – whether ketchup, cars, jeans or iPhones – services are also becoming far more international. How would you put a protectionist tariff on an education or legal advice obtained online, for example?
The economists will always be able to prove that tariffs have an impact – especially in how an economy functions – but they cannot agree on the extent of it, whether added or removed. It is unlikely that in either case, tariffs will radically alter how global trade is conducted. There are much broader trends at work over which no one country or institution can control.
These include shifting demographics, tastes, technological innovations and climate change. We can pretend all we like that our borders protect us or insulate us from any of these forces but they don’t. The idea of creating any kind of impenetrable wall – financial, physical or virtual – is obsolete. Newer technologies, such as Bitcoin, actually make a mockery of this strategy. Likewise, migration is also as much in the mind as it is on the ground. People will always seek a better life elsewhere, even in times of reduced conflict. Citizenship will soon be as virtual as anything else we would like to be. The way in which leaders govern today will in the future seem as quaint as some of the fashion on show in the 1920s and 1930s – the last time we experienced a global trade war.
That’s not to dismiss fears of the discomfort that might be wrought by a new trade war or its effect on economic growth but rather to say that any short-term pain will be offset by the longer-term direction that we are taking. It is better to focus on the broader, more optimistic, picture of a future where individuals’ interactions are more important than how states or institutions relate to one another. The approach the UAE is choosing, for example, reflects this broader trend and the country’s openness to attracting talent from around the world and harnessing the latest innovations will put it in a far better position to benefit quicker. Other nations that are a little more fixated on futile attempts to get back what has been lost risk missing the full benefits of the opportunities to come tomorrow.
Updated: July 11, 2018 03:31 PM