A depressing scenario

23158392405_d3e3b60cb8_oTrade wars are a bad thing. It may seem as though they are less serious than shooting wars, but not necessarily. The trade war that exacerbated the Great Depression probably contributed very substantially to the impoverishment of the planet. International trade fell by 50%. Some estimates suggest that Global Planetary Product (GPP) contracted by 25% in the Depression (though statistics were unreliable in those days). Though individual countries have faced recessions causing single digit contractions since then, GPP has not fallen in any year since the Depression ended. A new Depression would leave hundreds of millions in the developed world much poorer and many millions in the developing world would die. 

A trade war is also a likely consequence of policies being advocated by all three of the remaining presidential candidate: Bernie Sanders, Donald Trump and Hillary Clinton. 

Sanders is a consistent and sincere trade skeptic. He believes that protectionist regulations and tariffs will benefit American workers more than they harm American consumers. He is profoundly mistaken. At a minimum they would put up prices and restrict trade, leading to job losses. If they provoked counter-measures by other countries then the job losses could be in the tens of millions range. Sanders would not only block the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) which will boost American trade but would like to scrap the North American Free Trade Area (NAFTA) and World Trade Organization (WTO) too.

Trump claims he is not against trade agreements, just “dumb” trade agreements. If he tries to renegotiate existing deals and impose widespread tariffs he could also trigger a trade war, but his language is sufficiently vague that we cannot be sure if this is likely or not. There is a real chance that his policy, in practice, would differ enormously from the rhetoric.

Hillary Clinton helped negotiate TPP and TTIP and her husband implemented NAFTA. She once said that TPP was the “gold standard” of trade agreements, though America has not adhered to the gold standard in decades. She now says she opposes the agreement as it is currently written. Any attempt to rewrite it would damage America’s standing as a partner of good faith and could cause the whole deal to unravel. But this is a risk with Clinton’s policy. It would be the aim for President Sanders. 

Your columnist’s best guess is that Clinton would just seek some face-saving trivial amendments so she could say that she had “saved” the agreement. 

If presidents could simply change trade policy unilaterally, this election would stand out as a very dangerous moment indeed. This would be by far the biggest issue on the agenda. (And I say this conscious that the president can, in theory, launch a  nuclear strike. That disaster seems extremely unlikely to me, whereas deterioration in the liberal trade regime that has seen the whole world prosper is much more so). 

Presidents can’t simply tear up existing treaties and there is little support in Congress for doing so. Presidents can’t write new agreements without congressional support. But presidents can impose “temporary” tariffs and block the two very significant agreements which are being finalized now. All three candidates promise policies that pose this risk. In the most depressing sentence I have ever written about politics: Clinton is the best candidate because she is probably lying about her intentions.

ql

 

Quentin Langley is a Senior Lecturer in Marketing at the University of Bedfordshire Business School as well as a freelance columnist published in the UK and all parts of the US. He blogs on social media and crisis communications at brandjacknews.com

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