Jack Ma, CEO of Alibaba Group, Chinese richest billionaire, made a thought provoking observation recently in Melbourne, Australia, ‘trade stops war starts’. The chief executive is the staunch supporter of international free trade because it brings the people closer besides accruing staggering prosperity juxtaposed with good will. His caveat in creating barriers in the free trading may be analysed in the context of US President Donald Trump’s declaration in his inaugural speech repeated umpteen times afterwards “buy American and hire American” entailing protectionism policy that the new US administration intends to pursue vigorously as a magic wand to address the burgeoning unemployment problem swaying across America. It may prove as crass over-simplification because addressing the complex problem holistically is easier said than done in the face of highly competitive international market deeply mired in the labyrinth of interdependence in the era of globalisation.
Protectionism may not bode well for the rest of the world and for the US at the end of the day also because the retribution of other countries in the form of raising tariff to protect their own industry as a quid pro quo will be the forgone conclusion and hence trade will get trampled upon in the fight of gladiators. The unfolding of the resultant cut throat competition based on the denial of peaceful co-existence of the economies is more likely to hurt all the economies to downward spiral triggered by parochialism. This emerging international trading may not prove beneficial for any country as the snowball impact is going to upset the global political economy in myriad ways. The dynamics of the international trade and the international market forces have their own rhythm and momentum that cannot be pre-determined no matter how powerful state or states may be.
Trade between the countries is generally a peace time endeavour that espouses the cause of normalisation of relations among the countries engaged as trading partners. It creates enabling environment to flourish. The uncalled for restrictions by the governments on trade normally turn out to be against the narrative of cost-benefit analysis because unilateral restrictions by one country trigger the cycle of such restrictions creating inhospitable conditions where negatives surely outweigh the positives. The inexorable shrinking of the trade volume is followed by the higher prices of consumer goods attributed to protectionism policy.
Tariffs are passed on to the consumers by the governments barring those who are blessed with the “black gold”. For example, the raising of tariffs on goods made in Mexico by the Trump administration will also hurt the US economy because Mexico will also pay back the compliments hitting the US industry and the resultant job losses. This tit- for- tat action by both the countries may land the USA and Mexico in an unmitigated trade war with untoward diplomatic ramifications. The history of trade wars is the history of acute tension, retrogression and stagnation among the countries and therefore should be avoided. Repeating the history is like treading on the Einstein’s definition of lunacy.
Alibaba observation’s compatibility in the contemporary world is amazing where, quite sensibly, the geo-economic interests have generally been put before geo-political interests in the inter-state trade relations. Their reckless pursuit may not be possible in tandem due to the diplomatic intricacies analogous to Gordian knot. The countries those remained stuck to prioritising the strategic considerations at the expense of the economic gains ended up as abject losers because their dream of translating their strategic calculus into reality remained forlorn hope even after passing of many decades. Their short sightedness meanwhile led to the missing of rare opportunities to make remarkable economic headway. The opportunities withered away for being time bound. The resultant economic stranglehold tightened its grip in the form of acute problems like poverty, deprivation, illiteracy, disease and backwardness, attributed to the poor judgments of the unqualified and unauthorised mandarins. They preferred to get hold of the wrong end of the stick at the expense of prosperity and the well- being of the people. What a pity?
The digital age has further reinforced the indispensability of interdependence of the countries as the communication technology has made it possible to transmit information instantaneously that is only a click away. The flow of information and its efficient use can be effectively used to compete in a healthy trade marathon making it the win win undertaking. The countries those closed their economies due to ideological considerations resulted in crippling trade deficit, decline in productivity, recessionary trends shaking the foundations of the countries. The Soviet Union and its communist allies’ economies faltered because their economies did not generate enough revenues to bear the burden of running the states.
Ultimately, they had to cave in to the marked forces, market economy. Today, all these countries are very much part of the global economy and they have integrated with the international economic order.
Nato is crumbling today because America’s political economy is not strong enough to bear the financial burden of the alliance to meet defence requirements. It means US geo-economic considerations have put the geo-political interests in the periphery aimed at making the economy stronger to keep the federation strong and healthy. However, cutting down the defence expenditures should not be used as a pretext in favour of the policy of protectionism by the new US administration. It is more likely to bring about the same results as during such trade wars in the past.
The countries those did not cling to prioritising the geo-political interests at the expense of geo-economic interests have reaped the amazing dividends. China has border disputes with India and also with Japan like of South China Sea. With the United States, China does not see eye to eye on various international and regional issues especially on Taiwan. But China did not allow trade relations with the US, India and Japan as hostage to the border or other disputes. This strategic decision has led China emerging as the second biggest economy of the world today after the USA, and plausible predictions are that it will overtake American economy by 2030. If China has taken the opposite route its economy may have been inconsequential with tens of millions of people still living below the poverty line.
Today, China is the biggest exporter of goods and services to the USA with astounding balance of trade in its favour. Similarly, China has territorial disputes with India but their dispute has not come in the way of their burgeoning trade volume that has grown magnificently during the last decade and the trend is continuing in leaps and bounds.
Now, President of the USA Donald Trump is contemplating to pursue the policy of isolationism and protectionism under the slogan of America first urging the private sector and the consumers “buy American and hire American”. His revocation of the Free Trade Agreement with North American countries will not bode well with the super power. Unilateral rescinding of Nafta will also shake its diplomatic standing detrimental to superpower’s political interests. Apprehensively, Donald Trump is going to prove as naïve if he blatantly defies the rule of interdependence which is bigger reality than the USA and its strong-headed president. His unilateral meddling with China is going to bite the American consumers more who have developed an appetite for Chinese goods at much lower rice. Donald Trump may be wise if he rationalise his trade policy and thus prove his mettle as the president of the only superpower. This distinction entails big international responsibility on his shoulders.
Pakistan relations with India present the outlook of abject loser of opportunities because Pakistan’s state had been consistent in its stance that normalisation of relations with India hinged on the resolution of the Kashmir issue. But to no avail. The solution of the Kashmir issue remained elusive even after the lapse of the seven decades. The commencement/resumption of trade relations between the two countries on robust basis remained a distant cry and as such the two countries failed to realise the amazing potential of trade emanating from the geographical proximity.
It may be recalled that India had given Pakistan most Favoured Nation Status (FNS) unilaterally that any country would bend backward to get it. The last civilian government of PPP led by Syed Yusuf Raza Gilani wanted to reciprocate but the traditional anti-India lobby successfully resisted his endeavours. According to many observers, if Pakistan and India had resumed the fullest trading relations Pakistan economy in particular would have made significant gains. Also, trade relations with India on sustainable basis might have given some degree of leverage to Pakistan to convince Indians to seek sense in the resolution of Kashmir issue.
Putting pre- conditions surely did not force five time bigger neighbour (India) to see redemption in the resolution of Kashmir issue. India can bear the blowback of not going for free trade with Pakistan because of its size of economy and massive diversification of its trade. On the contrary, Pakistan is not benefiting from the huge market in its backyard. Its fear of Indian hegemony is misplaced because Pakistan is a nuclear power equipped with state of the art missile technology. Trade and diplomatic efforts to resolve the Kashmir issue may be pursued in tandem because severing trade links had not and will not force India to honour UN resolutions that it had been defying during the last seventy years. Trade diplomacy may be given the chance without compromising the principled stand on Kashmir dispute, “marsoon marsoon Kashmir na dasson” as declared by Chairman Bilawal Bhutto.
muhammadshaheedi@ yahoo.com
Head of PPP Media Cell
