The trade war is only partly about economics
by digby
Paul Krugman brings up one of the big issues around this trade war that I think gets short shrift. It’s not just about economics. It’s about keeping the peace.First he corrects the notion that Trump’s trade war is going to cause an economic crash. (Remember, Krugman won the Nobel Prize for his work on internaitonal trade so he knows what he’s talking about here.)
All of this, however, is only about the strict economics of a trade war, which may be the least important aspect of what’s happening.
For trade policy isn’t just about economics. It’s also about democracy and peace.
This is obvious and explicit in Europe, where the origins of the European Union lie in the Coal and Steel Community of the early 1950s — an agreement whose economic benefits, while real, were in a way incidental to its real purpose, preventing any future wars between France and Germany. And membership of the E.U. has always been contingent on democratization — which is, by the way, why the E.U.’s limp reaction to the de facto collapse of democracy in Hungary and, it appears, Poland represents such moral failure.
It’s more implicit in the case of the United States. But the historical record is pretty clear: the postwar trading system grew out of the vision of Cordell Hull, FDR’s Secretary of State, who saw commercial links between nations as a way to promote peace. That system, with its multilateral agreements and rules to limit unilateral action, was from the beginning a crucial piece of the Pax Americana. It was as integral to the postwar order as the I.M.F., which was supposed to provide a safety net for nations having balance of payments trouble, or for that matter NATO.
And Trump’s trade war should correspondingly be seen as part and parcel of his embrace of foreign dictators, lack of respect for our allies, and evident contempt for democracy, at home as well as abroad.
But wait, you say: China is neither an ally nor a democracy, and it is in many ways a bad actor in world trade. Isn’t there a reasonable case for confronting China over its economic practices?
Yes, there is — or there would be if the tariffs on Chinese products were an isolated story, or better yet if Trump were assembling an alliance of nations to confront objectionable Chinese policies. But in fact Trump has been waging trade war against almost everyone, although at lower intensity. When you’re imposing tariffs on imports of Canadian steel, on the ludicrous pretense that they endanger national security, and are threatening to do the same to German autos, you’re not building a strategic coalition to deal with a misbehaving China.
What you’re doing, instead, is tearing down what’s left of the Pax Americana.
Wasn’t this inevitable in any case? I don’t think so. True, U.S. economic dominance has been eroding over time, not because we’re getting poorer, but because the rest of the world is getting richer. But there was reason to hope that a relatively peaceable international order could be sustained by an alliance of democratic powers. In fact, until a few years ago it seemed to me that we were seeing exactly that taking place for the world trading system, which was transitioning from largely benign U.S. hegemony to a comparably benign co-dominion by the U.S. and the E.U.
At this point, however, things look a lot bleaker. It’s not just Trump. And it’s not even just Trump plus Brexit. The Europeans are also turning out to be a big disappointment. As I said, if they can’t even deal with the likes of Viktor Orban within their own community, they’re definitely not up to providing the kind of leadership the world needs.
But where the Europeans are weak, Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. And the eventual negative consequences for America and the world will be much bigger than anything we can capture with economic modeling of the effects of tariffs.
This to me has always been the real danger of Trump and the GOP’s muddled internationalism. It’s one thing to say that it’s time to re-evaluate the Pax Americana and step into a less militarized global role. It’s time for that. But this wild, chaotic destruction with nothing but ignorant bellicosity and a huge military is a recipe for something very terrible happening.
The US has not been a benign actor on the world stage. But it was predictable which meant that as it acted as the fulcrum for internaitonal organizing of various players, at least everyone was playing on the same field. Now we aren’t. And it’s anyone’s guess as to how that’s going to come out.
Trump’s idiotic trade war, based upon a sixth grade understanding of how trade works, is a big part of that.
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