Tue, Oct 30, 2018 - Page 8 News List

Trump’s effects on global economy

By Eric Chiou 邱奕宏

Last week, the administration of US President Donald Trump announced its withdrawal from the world’s oldest international organization, the Universal Postal Union (UPU), in protest of its unfair rates favoring China. This latest assault by Washington is not only designed to target the preferential treatment enjoyed by China under the global postal system, but also to indicate another radical attempt to overturn the existing multilateral trading system.

With the capacity to process about half of the world’s mail, the US is a heavyweight in the 192-member multilateral organization. Despite its significance, the US’ appeals to reform the global postal rate system, which gives preferential advantages to developing countries, including China, have been largely ignored over the years.

If it were not for White House trade adviser Peter Navarro’s open letter published in the Financial Times last month — which pointed out the odd reality that it costs more to ship a package between cities in the US than to ship the same package from China to the US — many people would not have realized that the export competitiveness of Chinese goods overseas, to some extent, is caused by the twisted global postal rate system.

The Trump administration has decided to pull out of the multilateral organization, demonstrating its firm resolve to address the unfair shipping system, and revealing its firm determination to defend and protect US interests.

As global economic prospects are being increasingly overshadowed by the ongoing trade war between the US and China, many Western mainstream media, liberal economists and commentators have unequivocally lashed out at Trump’s trade policies.

They claim that Trump’s unilateral approach would not only have devastating impacts on the global trading system, but will eventually undermine the US economy and sabotage US interests.

Despite the disparagements, Trump’s tough trade stance toward China has largely received bipartisan support in the US Congress.

The finalization of a revamped US-South Korea free-trade agreement and the US-Mexico-Canada treaty, or NAFTA 2.0, suggest that Trump’s unilateralism has made significant achievements in making better trade deals for the US.

Nevertheless, Trump’s economic nationalist proclivity, and preference of unilateralism and trade protectionism have dramatically collided with the fundamental principles of the current global trade order, which was mainly orchestrated and established by the US after World War II, with visionary goals of constructing a multilateral trade system to facilitate a free and open global market.

Against this backdrop, the so-called Bretton Woods system emerged to become the most influential economic structure in fostering global economic growth and stability in the post-war period.

The IMF, World Bank and General Agreement on Tariffs and Trade (GATT), which became the WTO in 1995, are the most significant pillars in the post-war liberal economic world.

With its predominant economic position after the war, Washington’s unwavering support for the liberal economic order has been key to sustaining it for more than six decades.

It is not because of Washington’s altruism, but because the liberal elites genuinely believed that a free and open multilateral trade order would benefit the US in the long run.

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