What the US midterm elections mean for the Donald Trump show - and world trade

  • David Dodwell says Trump is undoing US trade policies, even as China continues to move, however slowly, towards openness and liberalisation
  • The midterm elections will reveal whether Trump’s ‘America first’ policies are here to stay for six more years
PUBLISHED : Saturday, 03 November, 2018, 2:01pm
UPDATED : Saturday, 03 November, 2018, 2:02pm

You might have noticed I have taken a consistently dim view of Donald Trump’s trade policies over the past two years, and have taken many swipes at the sillier aspects of his tariff war. Some readers have complained that I am China’s poodle, blind to obstacles Beijing puts in the way of international companies trying to trade with or invest in the mainland.

So let me be clear. The United States is significantly more open to trade and investment than China, and is likely to remain so for many years, whatever the costly consequences of Trump’s “America first” policies for US consumers, or the harm Trump’s swashbuckling administration does to the US’ reputation for reliability and trustworthiness in trade.

Why then do I rant on so about Trump and his team, and turn a blind eye to the unreasonable obstacles Beijing continues to put in the way of good international companies trying to do honest business on the mainland? There are at least three good reasons.

First, consider the direction of movement: China, starting from impenetrability in the 1970s, has moved steadily towards openness for 30 years, and continues to do so. Not as fast as most of us would like, but at least in a consistent, positive direction. By contrast, the US, the erstwhile champion of openness and transparency and advocate of trade liberalisation, has gunned into reverse, with wild disregard for self-harm and harm to economies worldwide.

Trump’s cynical, systemic manipulation is depressing to see

Second, the hypocrisy of the Americans sticks in my craw. I know I should be calmer, more mature, after being preached to over three decades by government officials everywhere about the perfidy of foreign companies, which would never succeed against their plucky, honest, hard-working local companies were it not for their conniving. There is not a business chamber worth its members’ fees that does not insist that brilliant, innovative local companies would be invincible were it not for unfair obstacles and devious tactics deployed by foreign competitors.

Behind Trump’s sanctimonious victimhood is just such a presumption, and it is hypocritical nonsense. The truth is that all economies – including the US – have their flaws, their devious tripwires and their conniving local companies keen to exploit local loyalties for all they are worth to fight off foreign competitors.

Having watched over three decades as US trade negotiating teams bludgeoned foreign governments into submission in so many areas of trade and investment liberalisation in the interests of mighty US multinationals, it is surreal and nauseating to listen as Trump’s trade team suggests its predecessors had been naive patsies all this time. And it does a dreadful disservice to a generation of smart, dogged and creative negotiators who have conscientiously served US interests and opened the world’s markets to US goods and services.

Third, the blizzard of falsehoods propelling Trump’s tariff war – and the wider US war on China – just irks me so. Sure, this is his usual tactic, creating a constant stream of entertaining distractions that allows him to utter falsehoods without ever being brought to account, but his cynical, systemic manipulation is depressing to see. It also reflects badly on US citizens who should know better than to be mesmerised by the showmanship of a successful con man.

It is untrue that China has reneged on the commitments it made when it joined the World Trade Organisation in 2001. It is true that China has given preferences to local and state-owned enterprises, retains high barriers to inward investment, imposes tough technology transfer rules, and has frequently failed to respect intellectual property rights.

To see why Trump’s tariffs have hit a Chinese nerve, read history

But guess what? Unsavoury practices in such areas still largely fall outside the scope of the WTO’s rule book (shame on the WTO for failing to maintain the pressure to continue liberalisation after 1994), and are carried out by other important economies (including the US). It is true that we need progress towards liberalisation in these areas. But these sins are not being committed by China alone, and need to be dealt with multilaterally, at the WTO.

Anyone who has been blocked from selling products or services in the US because of the Buy America Act or national procurement rules will be familiar with the justification: most purchases made under the act are by state governments or agencies – which are subject to neither federal regulations nor WTO rules. How, then, can we complain when countries like China learn from the US, and protect large parts of the economy from foreign competitors by making contracts subject to provincial regulations rather than national ones?

Watch: China denies spying on Trump’s iPhone, suggests he get a Huawei instead

The coming week brings a moment of truth. At this point, it is still possible to blame the erratic trajectory of US trade policy on Trump alone, or perhaps his trade team. But if voters endorse him in next week’s Senate and House of Representative elections, then it will be clear this dangerous xenophobic mood of victimhood is not just Trump’s fault.

As the midterm election results emerge, I will be flying down to Port Moresby for this year’s Asia-Pacific Economic Cooperation leaders’ meeting. Trump himself will not be going, but the election outcome will influence, or even shape, the Apec discussions.

A humbled Trump administration (is such a thing conceivable?) would doubtless lift the mood. President Xi Jinping would be given his chance to put substance behind China’s commitments to opening up, and to multilateralism.

A Trump vindicated would cast a dark cloud, and point towards six gruelling years ahead, not just for China, or Asia, but for the entire global economy. It would test the mettle of all those who believe that the liberalisation championed since the 1944 Bretton Woods agreements has in net terms been a source of great good for most people worldwide. These are such interesting times.

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