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Cold War...?

Cyber-security and trade in intellectual property and even electronic equipment confuses the boundaries between military and civilian trade: one country’s semi-conductor export is another country’s cyber-defence import...  

 

There is little comfort in being right, but six months ago, I co-authored a book, “The Weaponization of Trade” , which pointed out that the use of militaristic, aggressive language around trade was shifting the trade relations between countries. Economic nationalism and protectionism were rhetorically on the rise. If it continued, it would have severe consequences for the structures of trade that have been built since the second world war. The zero-sum thinking inherent to a nationalist agenda creates a “we export more, you export less – we win, you lose” mentality that tips trade into the domain of politics and isolationism, rather than the domain of economics and multilateralism.

Politics and trade have always been intertwined – it would be naïve to say otherwise. But the weaponisation of trade that we are seeing at present is something different. War is a strong word but in that it is a means of achieving political ends, anything can be used as a means of coercion and aggression.

The examples are manifest. President Trump signalled a profound strategic shift in the US position on trade when he first invoked national security as the rationale for iron and steel and aluminium tariffs. The General Agreement on Tariffs and Trade (GATT) was first constructed after the second world war to prevent the Hooper-style protectionism that deepened the Great Recession; its basic premise was that tariffs in key sectors would not be implemented unless a country was in a state of war or there was an existential national security threat. Using this clause in the GATT was tantamount to declaring that the US was, at worst, in a state of war and at best under severe threat.

What we are seeing now is a series of diplomatic skirmishes. The US administration rowed back fairly swiftly from the initial Twitter-based proclamation: clearly the move offends US allies in Europe, North America and Asia. The subsequent exemptions from tariffs were made to allow time to negotiate and it is more than possible that any permanent exemption will be tied to NATO contributions or strategic support in the South China Seas, or concessions within the on-going NAFTA discussions.

Similarly, although the rhetoric has ramped up between China and the US, the US has its own objectives in bringing China to a negotiating table. Nominally these are about closing the trade deficit with China. However, there are bigger geo-strategic and geopolitical issues at stake: the issue of Intellectual Property, 5G licenses and national security are clearly inter-woven, as is the desire of the US administration to continue its aerospace exports to China. Nor has the conflict with North Korea gone away – trade is a means of bringing North Korea to the table via Beijing, as we have seen recently. As we move closer to a Summit between North Korea and the US, we might expect more of the belligerent language between China and the US – not because they want a Trade War, but because they are vying for strategic influence.

The reason why trade is being used like this is clear. Western powers are reluctant to fight a “boots on the ground” war. The period of globalisation has depleted the armed forces in Europe in particular; cyber-security and trade in intellectual property and even electronic equipment confuses the boundaries between military and civilian trade: one country’s semi-conductor export is another country’s cyber-defence import. As trade, and conflict, become increasingly technologically-driven, the distinction between Trade War and military war is blurred.

Clausewitz, talked of “the fog of war.” Is there a fog coming down now?

Trade Wars are worrying, but at present the escalation is purely rhetorical and full of contradictions: Larry Kudlow, Director of the US National Economic Council argues that the tariffs against China are proposals at the moment. There is room for negotiation and the goal is to start discussions with China. The US pulled back from the brink with Bombardier and with its unilateral approach to tariffs on its allies. China has appealed to the WTO, but is not afraid of a Trade War – not because it thinks it will win, but because triggering a trade war is the economic equivalent globally to pushing the nuclear button and would mean mutually assured destruction.

War never has a purpose in and for itself – only as a means of fulfilling political objectives. President Trump has one political agenda: America first. But in speaking to this domestic and nationalistic agenda, especially in the early hours of the morning and without a strategic approach to his tweets, he runs the risk of dismantling the structures of trade which have underpinned its role in foreign policy and international relations since the end of the Cold War.

Dr. Rebecca Harding is an independent economist, co-author of “The Weaponization of Trade: the great unbalancing of politics and economics” and the CEO of Coriolis Technologies.

 

 

 

 

Dr. Rebecca Harding, Liveryman

Women in FinTech Powerlist, 2017: http://womeninfintech.co.uk/wp-content/uploads/2017/11/wif_2017_powerlist.pdf

Email:   rh@coriolistechnologies.com    /     website is www.coriolistechnologies.com.

Tel: +44-(0)7803-710711

Skype: rh.equantanalytics  

Twitter: @RebeccaAHarding

“The Weaponization of Trade: the Great Unbalancing of Politics and Economics” :  Rebecca Harding and Jack Harding. 

October 25th 2017 * 170pp paperback *£9.99
ISBN 978-1-907994-72-2
ORDER HERE: http://londonpublishingpartnership.co.uk/weaponization-of-trade/