THE GIST of Editorial for UPSC Exams : 20 August 2019 (The far right’s disruption of globalisation (The Hindu))

The far right’s disruption of globalisation (The Hindu)

Mains Paper 2: International Relations
Prelims level: Not Much
Mains level: Globalisation policy adopted by U.S. and its significance

Context

  • A trade war against China, the United States government that had pressured many a country to liberalise trade and globalise seems to have turned against its own agenda.
  • In a series of aggressive moves, the U.S. the one-time votary of freer trade has put in place and widened the coverage of a protectionist shield aimed at stimulating domestic production and reducing the country’s trade deficit.
  • While these moves initiated by the Donald Trump administration were on occasion targeted at multiple countries and involved rewriting the North American Free Trade Agreement with Canada and Mexico, the focus of the trade and technology war has been China.

Steps against China

  • China-specific tariff aggression began with a 25% tariff on imports worth $50 billion, out of the total of $540 billion imported by the U.S. from China in July 2018.
  • Soon, an additional $200 billion worth of imports from China were subjected to tariffs of 10%, and those levies were also raised to 25% in May this year.
  • Most recently on August 1, the balance of around $300 billion worth of imports from China were subjected to a phased 10% levy, with a clear threat that these levies too can be raised to 25%. China’s responses to U.S. actions, which came at every step of the trade war, have in turn led to the $120 billion of goods it imports from the U.S. being subject to a 25% duty.
  • The U.S. has also imposed sanctions on and shut off business relations with individual Chinese firms, such as Huawei, on grounds varying from national security to alleged theft of intellectual property from U.S. firms.
  • This prevents the firms targeted from either selling in U.S. markets and that of its allies or buying goods, services and technology from U.S. firms or those of its allies.

The U.S. argument

  • The U.S. justifies its actions against China by citing that country’s significance as a source of inadequately reciprocated imports into the U.S. Imports from China account for more than a fifth of aggregate U.S. imports.
  • With exports to China being nowhere as large, the U.S. runs an annual trade deficit with that country of around $420 billion, which ‘imbalance’ is attributed to Chinese policy.
  • There are, however, two important facts that this argument sidesteps.
  • The gains to the U.S. from its economic relationship with China are inadequately captured by the trade figures.
  • A major gain for U.S. companies, even if not for the U.S. per se, is the local sales by subsidiaries of American multinationals located in China. Official statistics from the U.S. indicate that U.S. multinational affiliates based in China notched up local sales of $222 billion in 2015, which do not figure in trade calculations. Second, these subsidiaries are responsible for a chunk of China’s exports to the U.S.
  • According to one estimate, more than half of Chinese exports to the U.S. originate in foreign invested enterprises which are either U.S. multinational arms or firms with parents in other advanced economies.
  • The U.S. trade deficit with China is the result of the off-shoring associated with globalisation, rather than to Chinese policy favouring its own firms.

Reading Trump

  • It troubles the neoliberal policy establishment that the fallout of this kind of trade aggression can set back globalisation across the world.
  • Members of the G20 other than the U.S. have strenuously and unsuccessfully tried to get the latter to sign on to another call for strengthening free trade.
  • The International Monetary Fund, the World Trade Organisation and a host of international institutions have warned of the dangers of the new protectionism.
  • Implicit in their reasoning is that the tariff aggression is an error being made by a maverick or misguided administration.
  • But that does not take into account the fact that Mr. Trump had been railing against trade agreements that hurt the U.S. even in the course of his election campaign and withdrew from the Trans-Pacific Partnership

Agreement days after he took office.

  • It also ignores the fact that a section hurt by the Trump tariffs — U.S. farmers for whom China was a $6 billion market in 2018 with it absorbing 60% of U.S. soyabean exports — still support him.
  • A survey by the Purdue Center for Commercial Agriculture found that 78% of farmers held that the Trump tariffs will in time benefit them and a Pulse survey by Farm Journal found that Mr. Trump had a 79% approval rating among farmers.

In Europe

  • That this is not confined to the U.S. comes through from the rise of what is dismissed as “right wing populism” in Europe, which is not just sceptical of free trade even within the European Union but is coming out against the fiscal conservatism promoted by financial interests that leaves the continent mired in a trajectory of low growth and high unemployment and individual countries reeling under austerity.
  • Combining this with anti-immigrant rhetoric delivers a toxic mix that is helping them gain popularity and even a seat in some governments.
  • On the other hand, sections of the centre left that had bought into the neoliberal paradigm are being shown the door.
  • The pleasure derived by the advocates of neoliberalism from the significant decline of the left in the decades since the collapse of the Soviet Union (which deprives the progressive critique of neoliberalism of a strong political base) has proved short-lived.

Conclusion

  • The far right is hardly committed to the anti-globalisation strain implicit in its rhetoric.
  • It is as wedded to the hegemony of capital and the markets as are the neoliberal dogmatists. Their ideological pragmatism is opportunistic and fickle.
  • Yet for the moment, their actions, especially that of Mr. Trump, have disrupted globalisation.

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Prelims Questions:

Q.1) Recently, the government approved construction of the longest bridge connecting Dhubri and Phulbari. Which of the following is the current longest road bridge in India?
(a) Bandra-Worli Sea Link
(b) Bogibeel Bridge
(c) Patna-Hajipur Mahatma Gandhi Setu
(d) Dhola Sadiya Bhupen Hazarika Setu

Answer: D
Mains Questions:

Q.1) How Donald Trump’s emulators have tapped into globalisation’s long-standing discontents? Analyse it.