Abacus | In pursuing protectionism, Donald Trump is taking a leaf from Asia’s book
A growing number of economists are beginning to ask whether unrestricted trade really is as beneficial as the accepted theory dictates
Among the few hard and fast policy prescriptions to emerge so far from Donald Trump’s transition team is the US president-elect’s pledge, delivered last Monday, to tear up Barack Obama’s Trans-Pacific Partnership trade deal on his first day in office.
Calling the TPP “a potential disaster for our country”, Trump promised to replace his predecessor’s multi-lateral agreement with a series of bilateral trade pacts he said “will bring jobs and industry back onto American shores”.
Most Western economists roundly condemned Trump’s move, declaring that his protectionist stance would harm American consumers and corporations, diminish US influence in Asia, and damage the US economy’s future growth prospects. Unimpeded international trade, they insisted, was a positive sum game, which enriches all participants, not just Asian exporters to the US.
Trump clearly disagrees with the conventional wisdom, regarding free trade instead as a zero sum, in which Asian countries benefit and the US loses out. Yet although Trump’s is a minority view among economists, a growing number are beginning to question the conventional attitude, asking whether unrestricted trade really is as beneficial as the accepted theory dictates.
Can business and politics mix, in the US under Trump, or in Hong Kong?
Belief in the advantages of free trade dates back to the early 19th century, when the English economist David Ricardo outlined his theory of “comparative advantage”. In a nutshell, this holds that open markets benefit everyone because each economy can then concentrate on activities in which it has a competitive edge, maximising overall efficiency.