Can globalization sustain the economic tide?
The US under Donald Trump is shaping the narrative on the abuses of globalization.
Modern globalization is creating a large number of discontents. Numerous countries feel they’ve been shortchanged over the economic benefits of globalization and free trade. This growing list includes many developing countries and, surprisingly, a few developed countries.
One of the leading countries discontented with globalization is the US. Despite its iconic status as an economic superpower, America is shaping the narrative on the abuses of globalization and the imperfect rules of international trade.
President Donald Trump spices up his opposition to globalization with emotional rhetoric. He says the US isn’t interested in the contemporary model of free trade but it is interested in fair, balanced and reciprocal trade. He refers to the US trade deficit as the downside of globalization.
Trump underlines these trade imbalances and the lack of reciprocal economic benefits as proof that America’s trading partners are taking unfair advantage of the US economy. He also says he favours bilateral over multilateral trade agreements.
Contemporary globalization is about trade liberalization and the expectation that this economic world order will create the tide that raises all ships.
Indeed, globalized trade was expected to be the great economic equalizer, the catalyst for worldwide prosperity.
But there’s a sweeping apprehension that globalization hasn’t measured up to these expectations. It hasn’t bridged the gap between economic opportunity and personal prosperity in developed and developing countries.
In some instances, the disparity in economic well-being has widened instead of shrinking. Indeed, the economic benefits of globalization remain a work in progress.
Economists have long advocated the benefits of international trade. Adam Smith referred to the concept of absolute advantage in international trade in 1776 and David Ricardo introduced his theory of comparative advantage in 1817. Since then, economics students have been taught the benefits of international trade based on an export-led growth model.
Free-trade agreements are certainly an improvement over protectionism. They benefit consumers, businesses and governments. Consumers get access to a wider choice of products at lower prices and better quality. Businesses expand their market share, achieving economies of scale and improving their profits. And international trade empowers governments to grow the economy, reduce unemployment and improve the standard of living of their citizens.
The disaffection with globalization is a symptom of national circumstances rather than a concerted global malfeasance. I’m reminded of the words of William Shakespeare in his play Julius Caesar: “The fault my dear Brutus is not in our stars but in our selves.” In other words, it’s not globalization that’s the problem but the fundamentals of some national economies.
Countries can’t enjoy the benefits of globalization if they’ve lost their competitive advantage. In this fiercely competitive international environment, marginalized and disenfranchised countries should examine the failings of their economies rather than blame globalization for their misfortune.
A free-trade agreement is simply an economic opportunity. It’s not a guarantee of economic success. It opens the door for enhanced trade opportunities with other countries that didn’t exist prior to the agreement.
What transforms economic opportunity into a business success story is the vision and smarts of domestic entrepreneurs, plus the competitiveness and quality of their products and services.
In the new economy, success depends on our smarts, our global mindset and our productive enterprise.
Global engagement through trade is the wave of the future and should be the defining feature of the economy of the 21st century.
Distributed by Troy Media © 2017