Globalization should be fixed, not junked in age of Trump

Posted on January 21, 2017 in Policy Context

TheStar.com – Opinion/Editorials – ‘What needs to be done is not to throw globalization into reverse, but to more aggressively address the ways the current model has shortchanged too many people.’
Jan. 20, 2017.   By STAR EDITORIAL BOARD

You know globalization is in deep trouble when its most visible defender is the man who leads the Communist Party of China.

China’s president, Xi Jinping, took on the unlikely role of champion of international integration when he went to Davos this week and warned the assembled elites about the risks of the course that many western countries seem to have chosen.

“No one will emerge as a winner in a trade war,” he said. “Pursuing protectionism is just like locking oneself in a dark room. Wind and rain may be kept outside, but so are light and air.”

Of course, this was extremely rich coming from the leader of a country that practices its own brand of tough protectionism. But it resonated because it came in a week that began with British Prime Minister Theresa May spelling out the “hard Brexit” her government intends to pursue in quitting the European Union, and ended with the inauguration of Donald Trump, whose presidential campaign amounted to an assault on the existing international economic order.

In fact, globalization has become deeply unfashionable, condemned on both the right and the left for destroying jobs, creating an international class of obscenely rich plutocrats, and undermining democracy. And now that Trump is installed in the White House, a global trade war that would send nations retreating behind walls is more than a theoretical possibility.

There’s a lot of truth to the criticism, which makes it all the more powerful. But much of it is overstated and misses the real reasons for economic discontent. What needs to be done is not to throw globalization into reverse, but to more aggressively address the ways the current model has shortchanged too many people.

This is especially true seen from the vantage point of Canada, which has long been the most trade-dependent member of the G8 club of advanced economies. As has been frequently said, more than a third of Canadian jobs depend on trade; we are one of the most open economies in the world and hiving ourselves off from our trading partners simply isn’t an option. Especially when two-thirds of our exports go to just one country – Donald Trump’s United States.

That’s why the biggest cheerleader these days for international trade – aside perhaps from the Chinese president – is the Trudeau government. While others dwell on the dark side of globalization, Canada’s government persists in drawing attention to the benefits. Chrystia Freeland, now foreign affairs minister, underlined that in early January when she was still in charge of international trade by emphasizing that Canada is still on the hunt for “partnerships and prosperity” (aka trade deals) world-wide.

In reality, globalization is already retreating. That’s partly because of slow growth in the world economy since the Great Recession of 2008-09; global capital flows have dried up and world trade is actually down. Governments have made things worse by adopting many protectionist measures – even before Trump exploded on the scene. His election is a symptom of the crisis in globalization, not its cause.

Still, the Trump administration threatens to exacerbate the trend towards protectionism and make things worse, especially for a vulnerable country like Canada. His nominees for commerce secretary and trade representative are already banging the drum for import barriers and punitive tariffs on overseas rivals.

Many people, including some on the left, will cheer Trump on as he leans on U.S. companies to keep jobs at home. But, taken overall, the direction he threatens to go in risks kneecapping trade and slowing global growth even more. It would almost certainly just make things worse for vulnerable Americans, as well as workers in other countries.

The trick will be to head off such policies of mutual destruction and focus on what the Nobel Prize-winning economist Joseph Stiglitz, a trenchant critic of global inequality, calls “taming globalization” – making it work for everyone, not just the corporate class.

In the U.S., many of those measures are obvious – but still haven’t been done because of stubborn right-wing opposition to building a decent social safety net that will protect those who lose jobs. Barack Obama addressed the most glaring gap by bringing in so-called Obamacare and getting health insurance for 20 million additional people. But even that is under threat from Trump and his Republican allies in Congress.

As Stiglitz has written, opponents of protectionism “can’t have it both ways”: if globalization is to benefit the majority, strong social protection programs must be put in place.

Canada is way ahead of the U.S. on this front, but there are still things that must be done. They include changes in labour laws and employment insurance to better protect those in “precarious” work, as well as strengthening health protection with such badly needed measures as pharmacare. Social programs built in an era of long-term employment and work-related benefits must be refashioned to meet the realities of the new economy.

Benefits from increases in global prosperity must also be more widely shared through progressive tax systems. The enormous inequality gulf that has opened up in the past few decades must be addressed in many ways; they include a global crackdown on tax cheats and tax havens, and stopping the flow of tax subsidies to rich people who don’t need them.

Trade deals themselves must be crafted to ensure they are not captured by corporate interests. Governments must do much more to ensure they take into account the well-being of all who will be affected – including workers in countries with weak or non-existent labour rights.

All these measures are possible and have been advocated for years by critics of globalization. The only way to fend off Trump and Trumpism will be to address them seriously. Better to fix the global economic order than see it torn apart by short-sighted politicians.

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