Inside Out

Asymmetrical trade: the new falsehood of our troubled times

The US president’s team -- in a Pinocchio moment -- portrays global trade since 1950 as “asymmetrical” to American interests. Where will such falsehood lead us?

PUBLISHED : Sunday, 22 January, 2017, 3:00pm
UPDATED : Sunday, 22 January, 2017, 9:37pm

Britain’s Iron Lady, Margaret Thatcher, was a brilliant practitioner in the 1980s of a scandalous but remarkably successful political skill: no matter what the falsehood she was trying to sell, she believed that if you repeated the falsehood often enough, and with sufficient braggadocio, then it would come to be believed and accepted by the ever-gullible electorate.

Predictably, the US’s newly minted president and his henchpeople have hit upon the same strategy, aided and abetted by the chronically trivialising social media.

The strategy was deployed with extravagant disregard for the truth in Davos last week by Anthony Scaramucci, a hedge fund manager who has been appointed Donald Trump’s public liaison man, and who was Trump’s official flag carrier through the World Economic Forum. He was speaking on trade, and his outpouring spoke volumes for the new administration’s future approach to trade.

It bodes ill. He insisted that it was wrong to assume that Mr Trump was opposed to free trade. On the contrary, Trump is simply trying to ensure that trade deals are “symmetrical,” rather than organised “as a means for the US to help other countries.”

“Every single trade deal that the US has [created] since 1945 was an asymmetrical deal, because we were trying to help countries improve their living standards,” he claimed. “We called those agreements free trade but they were free asymmetrically. So all we are asking for now is to create more symmetry in these trade agreements.”

What? Pass that by me again.

Scaramucci is saying that the US has for the past 60 years been negotiating trade deals out of a sense of charitable concern for “the poor people” out there in the dark developing world?

The claim was so deludedly preposterous that it took my breath away. Like that moment five years ago when a fresh-faced, wide-eyed US neo-con academic tried to explain to me how the world should be grateful that the US military keep the world safe, and that concerns over who polices the policeman were unwarranted: of course the US can be trusted.

I am certain that there are many in the neophyte Trump team who will quickly bring Scaramucci to order, but such outrageous and false claims make clear the starting prejudices and instincts that sit at the heart of Trump’s “fact footloose” policy team.

For the record, as the Financial Times’ trade editor through the North American Free Trade Area (Nafta) negotiations, and witness to the negotiations to create the trade-liberalising regime called the World Trade Organisation, I can report that US negotiators were among the most relentless, ferocious and focused negotiators I have ever seen.

Hounded behind the scenes by well-funded and unapologetically self-interested US business lobbies, these negotiators did exactly what the US government employed them to do: get the best deal possible for the US companies and the US economy. The smell of philanthropy was nowhere to be found.

For Scaramucci to suggest this was all a favour to the world’s poor people is as outrageous a “Pinocchio” as I have ever heard.

It is true that globalisation and trade liberalisation – the two key objectives pursued by US negotiators – have benefited us all. Negotiators were confident that US companies, being among the strongest and largest in the world, could benefit greatly from openness.

Openness helped the developing world, too, but to suggest that the US was not a prime beneficiary, or that it was acting out of some urge to charity, is downright offensive – not least to the thousands of US officials who negotiated on Washington’s behalf.

It was US negotiators that consistently since 1950 decided whether there would be a trade negotiation, what should be included in a trade deal and determined whether a deal could be concluded or not. The US business lobbies were more powerful and engaged in determining the specific content of trade deals than any other business lobby worldwide.

US lawyers more than any other crafted deals so they complied with US law, and could be passed with minimum impact on domestic legislation, or domestic interests.

The post-Second World War Bretton Woods institutions were forged mainly by the US, and provided the US-conceived framework for all trade negotiations. To suggest that these have not been exploited to the maximum in the interests of the US and its people is flabbergastingly false.

Because that post-Second World War vision was by and large an inspired one, other economies joined and endorsed this US-created framework, and have benefited alongside the US from committing to globalisation and freer trade and investment. Even China.

Global average real incomes per head have risen almost sixfold between 1950 and today, and the proportion of the world’s population living in extreme poverty has fallen from 72 per cent to 10 per cent in the same period.

People today can expect to live on average to 71. In 1950, people on average died by 48. More than half of the world’s seven billion people today live free lives in democracies, compared with barely 30 per cent in 1950.

Similar gains have arisen from Nafta – both for the US and the Mexican economy. Today, Mexico is the US’s second-largest goods export market, with exports amounting to US$236 billion in 2015.

That is equal to US exports to China, Japan, Germany and Britain combined, and it is a fivefold increase from 1993 before Nafta was signed.

It is true that Mexico’s gains are even greater – up sevenfold to US$295 billion – leaving it with a trade surplus of US$58 billion – but to suggest that US negotiators did a bad job because of some misplaced “asymmetrical” charitable urge is ludicrous. And to abandon this framework in favour of old-style mercantilism can only be harmful for us all.

It is my own suspicion that Trump and his trade policy acolytes may come seriously to regret the decision to renegotiate Nafta, and to prefer mercantilist bilateral trade deals rather than multilateral or plurilateral deals like the Trans-Pacific Partnership.

In the meantime, Scaramucci, no doubt with approval from Wilbur Ross, his commerce secretary boss, has in this outrageous “Pinocchio” moment, gifted us with a new “weasel word” for the protectionist lexicon – “asymmetrical trade”. I dread to think where it will lead us.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view