The rise of protectionism and the belief in the power (and good intentions) of the state that I described yesterday are no where more evident, in late 2016, than in tiny Wallonia and in our friendly giant of a neighbour, the USA. As Matt Gurney, writing in the National Post says, “It is no small irony that Wallonia, with just 3.5 million people, is an example of those who fear being left behind. With a population roughly the size of Greater Montreal, above-average unemployment and heavily protected farmers, locals are increasingly concerned that their livelihoods could be threatened if cheaper Canadian goods (particularly agricultural) were to squeeze its exports out of European markets … [and] … Wallonia, then, is a microcosm of the forces that have been increasingly vocal in their opposition to trade. In defending free trade, “progressive” forces, such as Canadian Liberals and U.S. Democrats, have emphasized the need to protect those who are vulnerable to the shifts in fortune it entails. That they have failed to act on their words is evident in the increasing difficulty of obtaining approval for new pacts. The same people who emphasize the importance of “social licence” have failed to convince Walloons to grant it. Going home mad won’t alter that unfortunate reality.“
There is not a whole lot to choose between Wallonia’s Premier Paul Magnette, on one hand, and candidates Hillary Clinton and Donald Trump on the other: all are driven by a very real fear amongst their constituents that free(er) trade will hurt them. They are all captives of the voters’ fear of change and voters’ faith in the notion that, somehow, the state can solve problems and bring prosperity … notwithstanding a few centuries of evidence that suggests, very strongly, that the nation state does neither as well as individuals working, cooperatively and competitively in their communities.
Globalization was a very good thing in the 1950s when American cars and refrigerators and soft drinks were sold around the world; it was still a pretty good thing in the 1970s when German and Japanese cars began to compete in both price, quality, and fuel efficiency; it was even a good thing in the 1980s, when US quality had declined markedly and Americans switched, en masse, to imported cars. It, globalization, was less good when the low skilled, high paying, unionized jobs in the US “factory belt” left, headed for Asia, mainly, and the US North-East became the “rust belt” So it was, and still is, in America and Europe… jobs are moving, being stolen according to protectionists in both the large union financed Democratic and anti-immigrant Republican fringes in the USA and by about half of European politicians of all stripes.
Globalization has been with us since the Silk Road (almost 2,500 years ago) …
… and the Hanseatic League (from about 750 years ago) …
… until the present. History shows, pretty convincingly, that extended periods of free(er) trade (even “enforced” free trade, as in many imperial eras) are more prosperous and more peaceful than periods when protectionism and fear rule the roost.
Fear, not free trade, is the enemy of peace.
Real peacemaking and peacekeeping doesn’t involve soldiers in baby blue berets, it involves working men and women producing goods and services which are then traded, all over the world, in exchange for the goods and services that others produce. When enough people have useful work to do, making things, including ideas and financial tools that others need and want, there is little appetite for wars. Does Prime Minister Trudeau really want to help bring peace to Africa? If so then he should lower the trade barriers that keep e.g. African textiles out of Canada because we want to protect our own garment workers and he should review the non-tariff (technical) barriers that also make African goods and services too difficult to import. Of course, Africa needs to reduce its own trade barriers … but so does Canada.
But, around the world, fear is on the rise and with it comes protectionism and both increase the danger of war.
There is a very interesting essay in Foreign Affairs by Indian essayist, memoirist, travel writer and novelist Pankaj Mishra, entitled “The Globalization of Rage,” in which he says that “The world is once again mired in what the Indian poet Rabindranath Tagore, touring the United States in 1916, called a “dense poisonous atmosphere of worldwide suspicion and greed and panic” … [and] … Pundits and scholars alike have struggled to explain the chaos, disorder, and anxiety that have come to define the contemporary political moment. Many blame evidently pathological antimodernisms that have emerged from places outside the West—especially the Muslim world. Having proclaimed “the end of history” in 1989, the political scientist Francis Fukuyama was not alone in wondering, soon after the 9/11 attacks, whether there is “something about Islam” that has made “Muslim societies particularly resistant to modernity.” In reality, today’s malignancies are rooted in distinctly modern reactions to the profound social and economic shifts of recent decades, which have been obscured by the optimistic visions of globalization that took hold in the aftermath of the Cold War.“
“In the hopeful period that began with the fall of the Berlin Wall in 1989 and the collapse of the Soviet Union two years later,” he explains, “the universal triumph of liberal capitalism and democracy seemed assured. A combination of free markets and representative government appeared to be the right formula for the billions trying to overcome degrading poverty and political oppression. Many economies grew rapidly; new nation-states appeared across a broad swath of Africa, Asia, and Europe; the European Union took shape; peace was declared in Northern Ireland; apartheid ended in South Africa; and it seemed only a matter of time before Tibet, too, might be free ..[and] … Even in the early and mid-1990s, however, there were warning signs of trouble ahead. Ethnic cleansing in the Balkans and genocide in Rwanda, as well as the resurgence of far-right, anti-immigrant, and neo-Nazi groups in Europe, showed that authoritarian politics, vicious ethnic prejudice, and exclusionary nationalism had hardly vanished. A decade or so of liberal triumphalism gave way to a new era of crises: the 9/11 attacks, the U.S. wars in Afghanistan and Iraq, the acceleration of climate change, the global financial meltdown and the subsequent Great Recession, the euro crisis, the rise of ISIS, and the spread of a pervasive sense of anxiety and even terror … [but] … Behind all these developments lies the fact that globalization—characterized by the mobility of people, capital, and ideas and accelerated by the rapid development of communications and information technology—has weakened traditional forms of authority everywhere, from Europe’s social democracies to the despotic states of the Arab world. It has also produced an array of unpredictable new international actors that have seized on the sense of alienation and dashed expectations that defines the political mood in many places. The extremists of ISIS have exploited these changes with devious skill, partly by turning the Internet into a devastatingly effective propaganda tool for global jihad. And demagogues of all kinds—from Turkish President Recep Tayyip Erdogan, to Indian Prime Minister Narendra Modi, to France’s right-wing leader Marine Le Pen, to Philippine President Rodrigo Duterte, to the GOP candidate in the current U.S. presidential race, Donald Trump—have tapped into the simmering reservoirs of discontent.“
He’s right: the liberal economic globalization that produced unprecedented prosperity and lifted hundreds of millions out of abject poverty and into the working class also weakened the traditional ruling elites and it allowed “an array of unpredictable new international actors” to gain some power in some places and to globalize their inchoate rage at the secular, liberal, capitalist West.
The farmers of Wallonia fear everyone bigger and more powerful than them … which is almost everyone. Factory workers in America fear Chinese workers who might make something cheaper. Chinese factory workers fear Indonesian and Philippines workers who will do the same hard work for even lower pay. The Russians, with a deep, historic sense of vulnerability and grievance, fear both the Western Europeans and the Asians. The Western Europeans fear renewed Russian opportunistic adventuresome aggression .. with good reason. And so the cycle goes, ’round and ’round the globe.
I have a different fear, one shared by Reuters, which is that “The looming failure of free trade talks with the European Union would derail Canada’s push to reduce its dependence on the United States and potentially complicate negotiations with other nations, such as India and China.” The report goes on to note that: “Canada sends 75 percent of all its exports to the United States .. [and] … “We are one of the most dependent countries in the world in regards to trade,” said former Quebec Premier Jean Charest, who initiated negotiations for the EU-Canada trade deal during his tenure … “If this agreement fails, it will be a disappointment,” he told Reuters on Friday in Montreal … [further] … It would leave Canada, which is desperate to revive a sluggish export sector, in the predicament policymakers have tried to avoid: overly dependent on the United States, where both presidential candidates have talked about changing NAFTA.”
But it also complicates things in the Asia-Pacific realms, according to Reuters: “Increasing public backlash against globalization, one of the main challenges for the EU deal, means none of the deals Canada is working on could happen soon, said Carleton University trade policy professor Michael Hart … [and] … The need to diversify away from the United States was one of the reasons Trudeau vowed to boost trade with China and India and with CETA in doubt, there will be fresh impetus to press on with those trade deals … [but] … One person close to the discussions … said Ottawa would struggle to speed up the pace of those talks … [however] … Discussions with India are going very slowly, in part because the Indian civil service is over stretched, and there is no guarantee the negotiations will succeed, said two people familiar with the talks … Meanwhile, the Liberal government is split over what concessions to make in free trade talks with China, which wants Canada to ease curbs on investment in key sectors such as energy … [and] … Opinion polls show most Canadians oppose the idea of an China agreement, which insiders say is at least a decade away .. [and, further] … The Trans-Pacific Partnership deal that Canada signed in February looks set to fall victim to political discord in the United States, killing off much-prized access to Japanese markets for Canadian beef.“
It is well known to regular readers of this blog that I have little faith in either Prime Minister Justin Trudeau or his celebrity, rookie, tear stained Trade Minister Chrystia Freeland. I think they are a pair of lightweights, rather like the celebrities who advise people not to vaccinate their children.
It seems fairly clear to me that the EU has failed … for now. Many Europeans are probably hoping that Prime Minister Trudeau will just shrug and forget about it … he didn’t campaign as a free(er) trader, and both the CETA and TPP are Conservative trade deals and he can, fairly, say, “well, I tried …” Many Liberals and those in the Laurentian Elites will be glad if he does that because free(er) trade is a contentious business in Canada. But that would be the wrong approach.
The right approach is for the prime minister, himself, to jet off to Europe to impress upon leaders there, including, especially provincial leaders in Belgium, that they have, pretty much the best deal they are ever going to get and if they screw this up the price, to them, may be huge and painful.
He needs to also stop in the UK and open trade talks with Prime Minster May, just to rub a little salt in the lashes he should administer to the EU. And, possibly, as Andrew Lilico, who, a few months ago, set out the notion of a CANZUK arrangement (Canada-Australia-New Zealand-United Kingdom) suggests, in an article in the Financial Post, Prime Minister Trudeau might get the best of both world with his own, Liberal, Canada-United Kingdom Trade Agreement (CUKTA). He notes that, already, 42% of Canada’s trade with the EU goes via the UK, so it may be a fairly easy “half a loaf,” if Canada and the UK can agree the term they both already accepted in the CETA. Then, even if the CETA is salvaged, the Brexit takes nearly half its value away with it, so the “half a loaf” needs to be renegotiated anyway.
What Prime Minister Trudeau must NOT do is to leave Canada isolated: too dependent on the US for our trade. Even his father understood that imperative; that’s why Pierre Trudeau’s government launched its “third option” campaign in 1972. Justin Trudeau needs to keep working at the CETA and the TPP, despite the USA, and he should start the CUKTA negotiations and press hard with China and India … and the Philippines, and some African nations, too, before they all fall in China’s lap.