A few weeks ago I spent some time reporting in North Carolina, a red state known for turning blue from time to time. I had a fascinating conversation with a production executive who told me, “Sometimes we vote Democrat and sometimes we vote Republican. But we always vote on trade.”
He specifically referred to China’s entry into the World Trade Organization in 2001, which decimated certain sectors of US industry. While holding his nose and voting for Donald Trump in the last election, this special gentleman also supported President Joe Biden’s trade policies, which were not just about tariffs, but also about higher labor and environmental standards in all new trade deals.
The fact that both Republicans and Democrats are rethinking trade policy says something important about our geopolitics. Gone is the notion that trade was primarily a route to global peace and unity, rather than a necessary way to reconcile both national and global concerns.
We are entering a new era in which concepts such as Francis Fukuyama’s “end of history” or Thomas Friedman’s “Golden Arches” theory are no longer relevant.
All of this was expressed quite eloquently in a speech by Canadian Deputy Prime Minister Chrystia Freeland at the Brookings Institution in Washington DC last week.
Freeland called for an end to panglossic assumptions that free trade would necessarily make countries free, and a clearer approach to global capitalism and diplomacy in the wake of Russia’s war in Ukraine and China’s support for Russia.
As she rightly put it: “Workers in our democracies have long understood that without values-based rules governing it, global trade has left our populations poorer and our countries more vulnerable. They have long known that it enriched the plutocrats but not the people.”
Our system of neoliberal globalization has created more prosperity worldwide in the last half century than ever before. But inequality has also increased enormously in many countries. And there is research showing that the companies that have benefited most from the last few decades of globalization have been multinationals and the Chinese state – or, more specifically, the people who run them.
Autocrats have also done well, often using trade and commerce as weapons in geopolitical conflicts. “In retrospect,” Freeland said, “it is clear that the appointment of Gerhard Schröder to the Rosneft board was as essential an element in Putin’s war planning as any military exercise.”
Likewise, China restricted Norwegian fish exports when human rights activist Liu Xiaobo received the Nobel Prize. Canadian exports of pork and canola were banned as Canada honored an extradition deal with the US and arrested Huawei’s CFO.
All these things, like Beijing’s post-Covid mask hoarding, are understandable from a Chinese perspective. And the West is certainly guilty of its own historical mercantilism and transactionalism. I’ve always thought that America’s approval of China’s accession to the WTO had more to do with US corporate lobbying than genuine belief in the possibility of political change.
The point here is that the current system of economic globalization will not magically resolve political differences. We are heading towards a new, post-neoliberal paradigm in which values, rather than just “everyday low prices”, as Walmart retails slogan goes, will become a more important consideration in economic policy decisions.
Change will come with challenges. I was recently asked on TV how people in the US living on $25,000 a year would be faring in a new era of inflation fueled in part by the end of the cheap capital for cheap labor agreement between China and the United States West is heated. Not good in the short term.
And yet, if you were to ask these people if they’d rather have more cheap goods from Amazon, or a job that pays for education, healthcare, and housing (all of which have been rising at multiples of core inflation for some time). now), they would choose the latter.
The creation of these jobs is the opportunity of the new era. In her speech, Freeland presented the possibilities of “friend shoring”. This should not be a closed club but open to any number of countries that abide by the rules.
It should also be green: The transition to clean technology is the classic example of a “productive bubble” in which public support for a transformative technology, which is then privatized by companies of all sizes (not just large incumbent monopolies), is sustainably shared becomes growth.
The USA, Canada and Mexico have a real chance here. For example, there are many Canadian and American start-ups that have important intellectual property in the field of green batteries. If they can work together and leverage manufacturing capacity and demand in both the US and Mexico, you could see a win for the economy and the planet.
Friend shoring will have its challenges. But I doubt they will be more difficult or riskier than relying on autocrats for energy and a single geopolitically contested island, Taiwan, for most of the world’s semiconductors. Let the new era begin.
Rana’s new book Homecoming: The Path to Prosperity in a Post Global World releases this week