Trading As Equals or Trade War?

U.S. Trade Wars

News reports about evolving trade wars are not uncommon recently. Quite a change of direction, given that the preceding years were characterized by efforts to implement Free Trade Agreements. News outlets report about a potential trade war between the U.S. and China, a trade war between the U.S. and the EU, and a trade war between the U.S. and Canada. On the one hand, one can put things in perspective, because all these cases consider only the U.S., while the rest of the world still believes in Free Trade. Yet due to the volume of U.S. trade (e.g. in 2017 the EU exported to the U.S. goods with a value of 375 billion Euro), the impact of trade wars involving the U.S. may have major impact on the U.S., on China, on the EU, on Canada and on many other countries whose supply chains are somehow dependent of those economies.

Imbalance In Trade Among Developed Countries Is Not The Problem

In this light it is interesting to read a simple yet important and insightful comment made by Lars Karlsson in his recent blog. Lars, one of the most respected persons in the International Customs community, has held senior director positions at Swedish Customs and at the World Customs Organization in the past, and is currently running a successful business providing services to traders and Customs administrations.

In his blog he posits that while international trade is not balanced, “it is really not a trade balance challenge in developed countries that had been and is the problem with international trade. We have all in the western world lived extremely well on trade for many decades. It was developing countries limited access to the global arena that was the real challenge”.

Neither the U.S., nor China, the EU or Canada are “developing countries”. Thus the current “trade war” is not about trade balances (I won’t discuss what it is about, as I do not want to discuss politics).

Developed Economies Have a Historical Responsibility Towards Emerging Economies

But the more important point to highlight in Lars’ text is the acknowledgement that especially the emerging economies have suffered under the present system. In fact, they have suffered since the beginning of the “Age of Discovery” in the 15th century, which led to the birth of global trade, which in these days meant that the European conquerors extracted valuable resources from the “new world”, and transferred them back home, becoming rich from them.

In the light of this historic injustice, the European Union’s current approach to trade is refreshing. The EU recognizes that free trade agreements are a Win-Win engagement that promote prosperity. Its trade organ DG/TRADE has been negotiating free trade agreements with countries of both developed countries (e.g. South Korea) and developing counties (e.g. Vietnam). In doing so, the EU helps create a more equal trade environment; the EU helps fix the injustice that has characterized the global trade system for many years. An environment where also developing countries are treated as equals.

Trade as Equals is the way forward.



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