The United States administration under President Donald Trump appears determined to create trade problems for all, including its closest allies, and in the process has been isolating itself without really understanding its implications. One of a series of such spat involved Canada's Bombardier jet aircraft manufacturer and Boeing of the US with Washington's imposing 220 per cent anti-dumping duties on the Canadian company's new C-Series of jetliners.
Washington is currently involved in trade disputes with scores of countries - both close allies and adversaries. Its abrupt decision to kill Trans-Pacific Partnership (TPP) with 11 other Asia-Pacific nations, stall talks with transatlantic free trade zone and force renegotiation of North American Free Trade Agreement (NAFTA) clearly reflect the US's intentions of stifling such talks and impose decisions of its own choice.
While discussing Trump's foreign policy initiatives at a CNN talk-show on October 23, the participants highlighted some of Trump's characteristic traits. They suggested that he treats relationship with other countries as trade deals in which he has a life-long involvement and has an overarching desire to win. This means the countries he deals with have to lose as he does not believe in losing any deal. He tends to forget that in a democracy, like him, other leaders involved in such deals also want to win or at least need a face-saving device to explain to their countrymen. The phrase 'win-win' situation means in any deal it has to be based on 'give and take' which is perhaps absent in the Trump doctrine.
TRUMP DOES NOT BELIEVE IN AMERICAN LEGACY: The latest annual week-long meeting of the International Monetary Fund (IMF) and the World Bank (WB) held in Washington in mid-October underscored the growing rift between the US and rest of the world. Explaining this, an agency report on the meeting suggested that that it showed a diminished view of the Bretton Wood institutions that actually shaped a US-led order after the World War II. Trump Administration rejects efforts to expand their activities and defends its attack on free trade as part of the President's "America First" agenda.
Not only that. The US has continued to block China's efforts to elevate its global role by expanded stake in both IMF and the World Bank.
The US straightway rejected the World Bank's proposal which sought to expand its global anti-poverty mission. The US Treasury Secretary Steven Munchin in his statement on October 13 bluntly said: "More capital is not the solution when existing capital is not allocated sufficiently." He also criticised the IMF and WB bureaucracies and called them "inefficient and overpaid." Interestingly, only a day before, on October 12, World Bank President Jim Yong Kim stated that he believed the Trump administration was now supportive of the move.
The Trump administration's negative view was also evident during the G-20 meeting of finance ministers and central bank chiefs that also took place during the IMF-WB joint meeting. This clearly manifested the Trump administration's new-found strategy to impose its own thinking on its allies without considering their views. This authoritarian attitude has not been well liked by most of its allies and they are now trying to evolve an alternative to achieve their goal without the United States, if necessary.
DIFFERENCES BETWEEN US & OTHERS WIDEN: The differences between the US and its allies during the weeklong meeting of the two giant global institutions were subdued and did not surface. However, the World Bank's Kim and IMF chief Christine Lagarde maintained their focus on the long-term reform while the global growth is strong. They also addressed the growing inequality, especially in the developed countries.
Reports from Washington, however, pointed out that many countries in their statements to the steering committee clearly mentioned their differences with the US. Most of them backed a capital hike for the World Bank. German Finance Minister Wolfgang Schaeuble was tough on trade issues and also described capital hike as "urgent."
Germany being the biggest economy in Europe, its views count in such global meetings. Without mincing words, Schaeuble said: "We all should be concerned about slow global trade growth and increased anti-free-trade rhetoric. Both are a threat to our common economic prosperity…. Protectionist measures will not only harm growth and harm those they claim to protect."
Many other countries in Europe and in other continents present in the meeting also made similar comments but were cautious in not making them public. But it fits in a pattern if one tries to piece together other important developments that preceded the Washington meeting. For example, in early July this year, Japanese Prime Minister Shinzo Abe and top European Union officials had agreed to a broad outline of a landmark trade deal that was presented as a direct challenge to the protectionism championed by US President Donald Trump.
The trade agreement was clinched after a four-year-long talk and on the eve of the G-20 meeting hosted by Germany in which Trump had preached his trade mark "America First" doctrine and protectionist stance on global trade.
The EU and the Japanese economies together account for a quarter of global output, making the deal one of the biggest trade pacts ever. Through this deal, perhaps Japan seized an opportunity for greater trade ties with the European Union (EU) after the failure of Trans-Pacific Partnership (TPP) that Trump had torpedoed after assuming his presidency in January this year.
THE US-CANADA TRADE ROW: Coming back to the two neighbours - Canada and the US - who are perhaps the closest allies and world's one of the largest trading partners with goods exchanging over half-a-trillion US dollars annually. The imposition of 220 per cent countervailing duty on Canadian Bombardier jet manufacturer by the US sparked by a Boeing complaint and followed by an investigation into state subsidies naturally drew heavy criticism. Canadian Foreign Minister Chrystia Freeland strongly denied the allegation.
The duties are to be applied in 2018 when America's Delta Airlines would receive the first of 75 C-Series jetliners it ordered. It is likely to have a negative impact on the ongoing NAFTA deal. Prime Minister Justin Trudeau said: "We are disappointed by the decision and I will continue to fight hard for good Canadian jobs" and called the US tariff "protectionist and warrantless."
In this age of globalisation, most economies are interlinked despite Trump's anti-trade tirade and protectionism. For example, Bombardier has production facilities in Northern Ireland which employs about 4,200 workers and Britain naturally would like to save the jobs. Closing their ranks, Canada and Britain have threatened to boycott Boeing which is now in the process of selling 18 Super Hornet fighter jets to Canada and 50 Apache helicopters to Britain.
Another report said that Quebec Premier Philippe Couillard has described the Boeing-Bombardier row as a low point in Canada-US relations and said that Boeing will regret this and the American economy and American workers will suffer because of this ruling.
Meanwhile, Jerry Diaz, president of Canada's largest union, Unifor, bluntly said: "If they (US) are looking for a trade war, we ought not to continue to back down …. We have to be very strong and we need to tell them, enough is enough" and added "Ultimately, we are going to have to retaliate."
At this stage, it is difficult to predict how the Canada-US trade row is going to end. However, in the light of strong protests made by both Canada and Britain and their readiness to retaliate against the prospects of Boeing's sell of multiple units of military aircrafts and helicopters, it may end up giving bloody nose to both the sides.
sayed.kamaluddin@gmail.com
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