Amid trade row, US losing international legitimacy

By Fabio Massimo Parenti Source:Global Times Published: 2018/6/27 19:53:40

Illustration: Liu Rui/GT

Trade tensions have boiled over recently not only between China and the US, but also between EU and the US. China, EU, India, Canada, Mexico, Brazil… the list of countries hit by US tariffs is long. Each country is reacting with counter-tariffs. Is it the starting point of a global trade war? Is it just a US ruse to increase negotiating power? How will these moves affect transatlantic relations?

I will focus on the last question. From steel and aluminum to washing machines, solar panels, motors and maybe cars, hundreds of products are on the list of new tariffs from both sides of the Atlantic. What is curious in this story is the role of US - the source of the new trade tensions. A powerhouse like the US experienced a long period of deindustrialization due to firms' internationalization supported by the state. It is the free-corporate model promoted by the US-driven path of globalization during the last few decades.

Looking at the negative side of this outcome, Trump promised to support US industrial base, re-expanding it at a domestic level in order to create commodity chains more embedded at home and less dependent on foreign sources. This is not completely wrong, but, because it is an approach diametrically opposite to the policies of the last few decades, the US should act carefully, gradually and find solutions and compromises with the rest of the world. Re-addressing the economic fundamentals of the US economy requires wise measures and strategies, not fast, sudden, protectionist measures without considering other countries' needs.

In my opinion, the US is losing international legitimacy. If these policies are further implemented, there will be huge economic and political repercussions. However, if we look at the recent steel and aluminum tariffs against Europe (and other countries), the impact is minimal: they account for 0.3 percent of European exports.

Moreover, the main market for European steel exports is not the US. It is surely understandable for the White House to keep conveying the message to Trump's voters about the idea of re-industrializing the country, nevertheless from the European side it is just a way of breaking WTO rules and damaging historical relations with the US. As said, trade tensions are a symptom of the US losing legitimacy in the eyes of its main economic and geopolitical partners.

Obviously, after promoting a "free trade-corporations" globalization model and developing a network transnational economy, partners of the US will be looking for alternatives, and are already looking at different avenues. First of all China, with many difficulties and tensions. However, many firms and countries also consider the Belt and Road initiative an alternative to the previous model of international interconnectedness. Germany and Italy are developing a new approach to relate with the US.

The trade tensions are also a symptom of a radical change in the balance of power on the global level. Many countries are looking for alternatives, not necessarily to replace the US as a big partner and market able to absorb a considerable part of the international demand, but to diversify beyond the traditional alliances their economic and political relations.

If we look at aggregated data, it is clear that China is also becoming a market able to absorb international demand. Creating tensions with Beijing and not being able to find a solution or compromise will affect Washington more than China, in the medium term, while Europe can be more deeply affected if it does not rethink its international role. What emerges from these trade tensions, which can transform into a real "war," is a process of US' weakening prowess as reference partner of the international system.

The Trump administration should find a balance between its new strategy, which can be partly reasonable, within the existing highly interconnected world. The US should understand that emerging countries cannot be treated like in the past.

The author is associate professor of international studies at the International Institute Lorenzo de' Medici, Florence, member of CCERRI think tank, Zhengzhou, and member of EURISPES, Laboratorio BRICS, Rome. His latest book is Geofinance and Geopolitics, Egea.

Newspaper headline: Washington’s international legitimacy erodes as trade war escalates

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