[SCMP Column] Dangerous Allegations

January 23, 2017


Britain’s Iron Lady – Margaret Thatcher – was a brilliant practitioner in the 1980s of a scandalous but remarkably successful political skill: no matter what the falsehood she was trying to sell, she believed that if you repeated the falsehood often enough, and with sufficient braggadocio, then it would come to be believed and accepted by the ever-gullible electorate.

Predictably, the US’s newly-minted president and his henchpeople have hit upon the same strategy, aided and abetted by the chronically trivializing social media.
The strategy was deployed with extravagant disregard for the truth in Davos last week by Anthony Scaramucci, a hedge fund manager who has been appointed Trump’s public liaison man, and who was Trump’s official flag-carrier through the World Economic Forum. He was speaking on trade, and his outpouring spoke volumes for the new administration’s future approach to trade. It bodes ill.

He insisted that it was wrong to assume that Mr Trump was opposed to free trade. On the contrary, Mr Trump is simply trying to ensure that trade deals are “symmetrical”, rather than organized “as a means for the US to help other countries.”

“Every single trade deal that the US has (created) since 1945 was an asymmetrical deal, because we were trying to help countries improve their living standards.” He claimed: “We called those agreements free trade but they were free asymmetrically. So all we are asking for now is to create more symmetry in these trade agreements.”What? Pass that by me again. Scaramucci is saying that the US has for the past 60 years been negotiating trade deals out of a sense of charitable concern for “the poor people” out there in the dark developing world?

The claim was so deludedly preposterous that it took my breath away. Like that moment five years ago when a fresh faced, wide-eyed US neo-con academic tried to explain to me how the world should be grateful that the US military keep the world safe, and that concerns over who polices the policeman were unwarranted: of course the US can be trusted.

I am certain that there are many in the neophyte Trump team who will quickly bring Scaramucci to order, but such outrageous and false claims make clear the starting prejudices and instincts that sit at the heart of Trump’s “fact-footloose” policy team.

For the record, as the Financial Times Trade Editor through the North American Free Trade Area (Nafta) negotiations, and witness to the negotiations to create the trade-liberalising regime called the World Trade Organisation (WTO), I can report that US negotiators were among the most relentless, ferocious and focused negotiators I have ever seen. Hounded behind the scenes by well-funded and unapologetically self-interested US business lobbies, these negotiators did exactly what the US government employed them to do: get the best deal possible for the US companies and the US economy. The smell of philanthropy was nowhere to be found. For Scaramucci to suggest this was all a favour to the world’s poor people is as outrageous a “Pinocchio” as I have ever heard.

It is true that globalization and trade liberalization – the two key objectives pursued by US negotiators - have benefited us all. Negotiators were confident that US companies, being among the strongest and largest in the world, could benefit greatly from openness. Openness helped the developing world too, but to suggest that the US was not a prime beneficiary, or that it was acting out of some urge to charity, is downright offensive – not least to the thousands of US officials who negotiated on Washington’s behalf.

It was US negotiators that consistently since 1950 decided whether there would be a trade negotiation, what should be included in a trade deal, and determined whether a deal could be concluded or not. The US business lobbies were more powerful and engaged in determining the specific content of trade deals than any other business lobby worldwide. US lawyers more than any other crafted deals so they complied with US law, and could be passed with minimum impact on domestic legislation, or domestic interests. The post World War 2 Bretton Woods institutions were forged mainly by the US, and provided the US-conceived framework for all trade negotiations. To suggest that these have not been exploited to the maximum in the interests of the US and its people is flabbergastingly false.

Because that post-WW2 vision was by-and-large an inspired one, other economies joined and endorsed this US-created framework, and have benefited alongside the US from committing to globalization and freer trade and investment. Even China.

Global average real incomes per head have risen almost six-fold between 1950 and today, and the proportion of the world’s population living in extreme poverty has fallen from 72% to 10% in the same period. People today can expect to live on average to 71. In 1950, people on average died by 48. More than half of the world’s 7bn people today live free lives in democracies, compared with barely 30% in 1950.

Similar gains have arisen from Nafta – both for the US and the Mexican economy. Today, Mexico is the US’s second largest goods export market, with exports amounting to $236bn in 2015. That is equal to US exports to China, Japan, Germany and the UK combined, and it is a five-fold increase from 1993 before Nafta was signed. It is true that Mexico’s gains are even greater – up seven-fold to $295bn – leaving it with a trade surplus of $58bn – but to suggest that US negotiators did a bad job because of some misplaced “asymmetrical” charitable urge is ludicrous. And to abandon this framework in favour of old-style mercantilism can only be harmful for us all.

It is my own suspicion that Trump and his trade policy acolytes may come seriously to regret the decision to re-negotiate Nafta, and to prefer mercantilist bilateral trade deals rather than multilateral or plurilateral deals like the Trans-Pacific Partnership (TPP). In the meanwhile, Scaramucci, no doubt with approval from Lester Ross, his boss as Commerce Secretary, has in this outrageous “Pinocchio” moment, gifted us with a new “weasel-word” for the protectionist lexicon – “asymmetrical trade”. I dread to think where it will lead us.
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