Policy uncertainty threatens trade growth, says World Bank


February 22, 2017

Policy uncertainty threatens trade growth, says World Bank

Warning on protectionism and threats to trade agreements in Trump era

https://www.ft.com/content/9d49b092-f859-11e6-9516-2d969e0d3b65

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Political uncertainty is slowing trade growth, a World Bank report has concluded, indicating that the rise of Donald Trump may already be casting a shadow over the global economy.

Major international institutions such as the IMF, the OECD and World Bank have recently upgraded their forecasts of global economic growth largely due to expectations that tax cuts, rising infrastructure spending and a wave of deregulation will boost the US economy under the new president. But the report by World Bank economists, released on Tuesday, highlights the fragile state of one historically important engine of global growth — trade.

To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued. Michele Ruta, World Bank report co-author

The study avoids naming Mr Trump, but highlights rising protectionism and threats to unwind trade agreements — such as those made by the president. It also raises the prospect that attempts by the Trump administration to force companies to repatriate global supply chains to the US could undermine efforts to boost lagging productivity growth. To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued Michele Ruta, World Bank report co-author International trade has been growing below historic trends for the past five years. The 1.9 per cent growth recorded in 2016, according to the team at the bank, was the slowest since the 2009 collapse in commerce that followed the global financial crisis.

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Prime Minister Justin Trudeau meets with U.S. President Donald Trump in the Oval Office at the White House–The Future of NAFTA

The team found that some of the reasons for the anaemic trade growth, which affected both developed and developing economies, were broader trends such as slow economic growth around the world and a collapse in commodity prices. But in 2016 the principal change was a surge in uncertainty about economic policy. According to the World Bank’s calculations, such uncertainty was responsible for 0.6 percentage points of the 0.8 percentage-point fall in trade growth between 2015 and 2016. The team at the bank based their figure on a study of the relationship between trade and economic policy uncertainty in 18 countries over three decades. They added they expected the impact to continue in 2017. “To the extent that the policy uncertainty will remain high we should continue to expect [global] trade growth to be subdued,” said Michele Ruta, one of the authors. The World Bank team also sought to quantify the impact of trade agreements on global trade growth. World trade grew at an annual rate of 6.53 per cent between 1995 and 2014, they calculated. Had no new members — including China — joined the World Trade Organisation or no new trade agreements been signed, international trade would have grown at just 4.76 per cent annually, they found.

One of the big consequences of the explosion in trade deals in recent decades has been the emergence of global supply chains. Such chains are widely seen by economists to have made businesses more efficient and boosted productivity. But Mr Trump and his administration have said they want to unwind those international supply chains and bring them home. “It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” Peter Navarro, one of the president’s top trade advisers, told the Financial Times last month.

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According to the World Bank team such a move, coupled with unwinding existing trade agreements that have encouraged the establishment of international supply chains, would hurt productivity growth. “Preserving and expanding the reach of trade agreements, rather than backtracking on existing commitments, would help to sustain the growth of productivity,” the bank’s economists wrote.

East Asia: Trade Regime critical for Economic Stability and Political Security


East Asia: Trade Regime critical for Economic Stability and Political Security

by  EAF Editorial Group

What the Trump Administration will ultimately do to the shape of the global trade regime is difficult to foretell but there’s no question that it will change it forever, even if there is strong global push-back against Trump’s threat to unravel trade agreements and carry a protectionist stick.

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The trade regime, and the way in which it encourages open trade and international interdependence among those who sign on to its rules, is not simply an instrument of economic policy strategy that can be changed without political consequence. For most countries, and certainly those in East Asia which are so dependent on open trade to sustain their basic livelihood, the trade regime is a critical instrument of political security.

Trump has already signed executive orders to withdraw the United States from the Trans-Pacific Partnership (TPP) and renegotiate the North American Free Trade Agreement (NAFTA). What appeared noisy campaign rhetoric has been transformed into concrete action.

Trump’s withdrawal from the TPP is no big deal in itself: with the exception of what it promised in terms of liberalisation of the Japanese economy, the economic effects of the deal that was on the table were oversold. Even renegotiation of NAFTA may have more limited economic consequences than have been threatened. But these steps, together with the threat of punitive tariffs on imports from China and Mexico, plus a total retreat from multilateral or regional trade agreements, tears at the core principles upon which the US supported postwar economic order had been built.

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POTUS Donald J. Trump and China’s President Xi

Anyone who says that a switch of this magnitude and direction in the trade policy strategy of the world’s largest economy and second-largest international trader is of little consequence is seriously delusional. The old certainties that brought prosperity and a significant measure of stability to world affairs for nearly three-quarters of a century after the Second World War are under serious threat.

A world in which the defining characteristic is a lot of bilateral trade agreements rather than one in which multilateral and regional frameworks are predominant imposes costs on business and consumers alike because of the need for compliance with different rules of treatment across different trading partners. It also injects a different tone into international politics. These concerns are what motivates the argument for regional and global trade regimes that govern international flows of goods and services through unified rules and standards.

The broader the framework within which trade can take place, the greater will be the scope for division of labour and the higher the gains from international trade. Bilateral trade deals can’t replicate the gains from regional and multilateral agreement, and they will unhelpfully cut across global and regional value chains. As the largest centre of production networks, East Asia has much at stake in the push back against an open, global rules-based trading system and the regional arrangements that support it.

While the direct economic costs of Trump turning America’s back on the TPP and other measures might be relatively small, the systemic costs are much larger.

As Shiro Armstrong and Amy King write in this week’s lead essay, Trump’s executive order to withdraw the United States from the TPP agreement in the Asia Pacific ‘is a strategic turning point in the open economic order. It is a blow to furthering reform for some members, a lost opportunity for the United States to write the rules of international commerce, and more worryingly a sign of the United States turning its back on the global economic system it helped create and lead’.

How can East Asia, which includes China and Japan — the world’s largest and fourth-largest trading nations — stand against the corrosion of a global trading order that is so central to their common economic and political interests?

The economies of East Asia must, of course, stand quietly firm in global and regional forums and in all their bilateral representations to the United States against the undermining of the global trading system, giving strength to those forces in America that can help to shape much better outcomes than the present circumstances threaten. But, through their own commitment to collective liberalisation and reform, they can also help to lead the system back from the brink.

With major multilateral trade deals at the WTO now too difficult and bilaterals only able to make slow and incomplete progress towards freer markets, Armstrong and King observe, all eyes now turn to Asia’s Regional Comprehensive Economic Partnership (RCEP) agreement. It is the most important initiative on the global trade scene.

Image result for flags of asean member statesASEAN is the hub of RCEP Agreement

RCEP comprises the 10 Southeast Asian members of ASEAN as well as Australia, China, India, Japan, New Zealand and South Korea. Though, as Armstrong and King say, there are many misconceptions about the RCEP enterprise.

‘The first misconception is that RCEP is China-led. But China is a spoke and ASEAN is the hub of the arrangement. RCEP was built to consolidate ASEAN’s five separate free trade agreements with China, South Korea, Japan, India and Australia–New Zealand. And the RCEP idea and its guiding principles were crafted not in China, but in Indonesia. ASEAN centrality has ensured that RCEP has incorporated Asia’s other large power — Japan — and reflects Japanese preferences as much as those of China. Originally, China wanted to limit core membership of Asian cooperation to ASEAN plus China, Japan and South Korea. Japan wanted a larger membership, involving Australia, New Zealand and India, to help provide a counterweight to China’.

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In the end, ASEAN centrality and the interests of Australia and India in the region meant a broader and representative group ideally placed to take the lead collectively on global trade.

‘With the world trading system under threat’, as Armstrong and King conclude, ‘it is time for leaders in Asia to step up and push for opening markets and deepening reforms to enhance economic integration, not just with each other but with Europe, the United States and the rest of the world’.

*The EAF Editorial Group is composed of Peter Drysdale, Shiro Armstrong, Ben Ascione, Ryan Manuel, Amy King and Jillian Mowbray-Tsutsumi and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.

http://www.eastasiaforum.org/2017/02/20/east-asias-agreement-to-keep-the-world-economy-open/

The State of Asia Pacific Free Trade


February 11, 2017

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Number 370 | February 10, 2017
ANALYSIS

The State of Asia Pacific Free Trade

By Eduardo Pedrosa

On January 23, three days after taking office, President Donald Trump issued a memorandum to permanently withdraw the United States from the Trans-Pacific Partnership (TPP), fulfilling one of his campaign promises. The decision came amidst rising concerns about the future of globalization. Since 2006, the Pacific Economic Cooperation Council (PECC) has been undertaking an annual survey of policy experts to provide insights into the debate about free trade and globalization. The belief that the best route to growth is through freer trade is under siege, with accusations from seemingly opposite poles of the political spectrum, that globalization only benefits the top ten or even 1 percent of citizens of a particular country.

Trade-skeptic sentiments are strongest in high income economies. As seen in the PECC survey, respondents from high income economies like the United States gave the lowest assessment of the political environment for freer trade with a net favorability rating of only +16 percent, compared to +41 percent in emerging economies. While the decision to withdraw the US from the TPP may have been driven by opposition to this particular trade deal rather than free trade generally, it will nonetheless hamper attempts to modernize trade rules already out of synch with commercial reality.

In place of the TPP, the Trump administration has said that it will pursue a series of bilateral deals, an approach that runs counter to a trend to consolidate multi-member trade deals in the Asia-Pacific region.  The Regional Comprehensive Economic Partnership (RCEP) negotiations, for example, are an attempt to consolidate ASEAN’s existing bilateral agreements, and the Pacific Alliance (PA) consolidates a series of bilateral agreements among Latin American economies.

The reason for this consolidation was that the “spaghetti bowl” of bilateral agreements was making it harder and more costly to do business, especially for smaller firms. Much of the increase in global trade in recent years has come from the emergence of global value chains. These international chains of production require components to cross borders multiple times. Global value chains have led to a significant reduction in the prices of goods such as cars and mobile phones, making them more affordable for consumers. However, complex rules of origin in bilateral deals made them hard to use and hence costs were passed on to the consumer.

The introduction of more border taxes will raise costs for consumers, and is unlikely to create the kinds of jobs people hope for. Where businesses choose to base production depends on a variety of factors – proximity to the market, availability of skills, ease of doing business, and the applicable tax regime. The current uncertainty over policy is adding to the economic volatility evident since the 2008 Global Financial Crisis, with businesses taking a ‘wait and see’ attitude towards hiring and capital expenditure. One reason for this attitude is uncertainty and negative expectations for future global growth. Increased trade frictions are likely to lead to even greater caution from members of the corporate sector, encouraging them to keep even more cash on their balance sheets. Concerns about protectionism are rising dramatically, with 32 percent of respondents to the PECC survey selecting it as a top five risk to economic growth compared to 16 percent two years ago. North Americans were the most worried about the impact of rising protectionism on their economies with 52 percent of respondents picking it as a top five risk to growth (making it the 2nd highest risk).

“If progress is made on trade deals such as the RCEP and PA, businesses will view the economies involved as beneficial locations to operate.”

If progress is made on trade deals such as the RCEP and PA, businesses will view the economies involved as beneficial locations to operate because of lower costs, a predictable trade environment, and proximity to the world’s fastest growing markets. A fifth of North American respondents to the PECC survey thought that the RCEP would have a negative impact on their economy – echoing a concern from an earlier era about ‘drawing a line down the Pacific.’ This uncertainty about transpacific cooperation comes at a critical juncture – over the next 5 years the Asia-Pacific is expected to account for almost two-thirds of all global growth.

The PECC survey results also give some indication of the challenges to freer trade today. Respondents were asked to rate different factors that influence attitudes toward freer trade: income inequality, job security, failure to communicate the benefits of trade, slower global economic growth, and sustained political leadership. Two findings stand out: First, North American respondents were much more concerned about all factors compared to all other survey respondents; and second, there are problems with perceptions about trade (the failure to communicate) and other deeper problems such as rising income inequality and job insecurity.

While a lot of energy and time will be expended on the future of globalization, the critical question is: where are jobs and growth going to come from? Over the past 4 years two-thirds of the region’s growth has come from the services sector, compared to 28 percent from the manufacturing sector. At an average of 57 percent of total output, the services sector in the region’s emerging economies is smaller compared to 80 percent of total output in more advanced economies. Moreover, the way in which services are being delivered is changing – 70 percent of respondents to PECC’s survey thought that digital trade, e-commerce, and the internet economy would be very or extremely important to the future growth of their economies.

While tariffs and border taxes have come down from an average of 17 percent to less than 6 percent, many of the barriers that remain are regulatory in nature. Two-thirds of respondents to PECC’s survey selected transparency, multiple layers of authority, and predictability of regulations as serious or very serious impediments to services trade. These issues are not easily dealt with in the context of trade negotiations – for the most part they are not designed with foreign trade in mind, but are put in place to protect other concerns such as consumer safety. A forward-looking trade agenda needs to find ways to reduce the burden on businesses to allow them to grow – creating jobs and lowering prices.

The Asia-Pacific is undergoing a period of historic change and its trajectory, now more than ever, is unclear. Given the large populations and rising incomes, it is most likely to remain the center of global growth for decades. While the Asia-Pacific policy community remains committed to freer trade, there are significant differences on the domestic political economy of freer trade. A trade agenda that addresses the concerns of those negatively impacted by trade will be critical to continuing the forward momentum in making free trade more desirable and sustainable.

About the Author

Eduardo Pedrosa is the Secretary General of the Pacific Economic Cooperation Council (PECC). He can be contacted at Eduardo.Pedrosa@PECC.org
The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.

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Theresa May–A Global Britain Post BREXIT


January 17, 2017

Theresa May– A Global Britain Post BREXIT

In a major speech on Tuesday, the British Prime Minister Theresa May outlined a 12-point plan on what relationship Britain will seek to have with the E.U. once it leaves the bloc. Here’s the text of her speech, as delivered at London’s Lancaster House on January 17, 2017

A little over six months ago, the British people voted for change.

They voted to shape a brighter future for our country.

They voted to leave the European Union and embrace the world.

And they did so with their eyes open: accepting that the road ahead will be uncertain at times, but believing that it leads towards a brighter future for their children – and their grandchildren too.

And it is the job of this Government to deliver it. That means more than negotiating our new relationship with the EU. It means taking the opportunity of this great moment of national change to step back and ask ourselves what kind of country we want to be.

My answer is clear. I want this United Kingdom to emerge from this period of change stronger, fairer, more united and more outward-looking than ever before. I want us to be a secure, prosperous, tolerant country – a magnet for international talent and a home to the pioneers and innovators who will shape the world ahead. I want us to be a truly Global Britain – the best friend and neighbour to our European partners, but a country that reaches beyond the borders of Europe too. A country that gets out into the world to build relationships with old friends and new allies alike.

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I want Britain to be what we have the potential, talent and ambition to be. A great, global trading nation that is respected around the world and strong, confident and united at home.

A Plan for Britain

That is why this Government has a Plan for Britain. One that gets us the right deal abroad but also ensures we get a better deal for ordinary working people at home.

It’s why that plan sets out how we will use this moment of change to build a stronger economy and a fairer society by embracing genuine economic and social reform.

Why our new Modern Industrial Strategy is being developed, to ensure every nation and area of the United Kingdom can make the most of the opportunities ahead. Why we will go further to reform our schools to ensure every child has the knowledge and the skills they need to thrive in post-Brexit Britain. Why as we continue to bring the deficit down, we will take a balanced approach by investing in our economic infrastructure – because it can transform the growth potential of our economy, and improve the quality of people’s lives across the whole country.

It’s why we will put the preservation of our precious Union at the heart of everything we do. Because it is only by coming together as one great union of nations and people that we can make the most of the opportunities ahead.

The result of the referendum was not a decision to turn inward and retreat from the world.

Because Britain’s history and culture is profoundly internationalist.

We are a European country – and proud of our shared European heritage – but we are also a country that has always looked beyond Europe to the wider world. That is why we are one of the most racially diverse countries in Europe, one of the most multicultural members of the European Union, and why – whether we are talking about India, Pakistan, Bangladesh, America, Australia, Canada, New Zealand, countries in Africa or those that are closer to home in Europe – so many of us have close friends and relatives from across the world.

Instinctively, we want to travel to, study in, trade with countries not just in Europe but beyond the borders of our continent. Even now as we prepare to leave the EU, we are planning for the next biennial Commonwealth Heads of Government meeting in 2018 – a reminder of our unique and proud global relationships.

A message from Britain to the rest of Europe

And it is important to recognise this fact. June the 23rd was not the moment Britain chose to step back from the world. It was the moment we chose to build a truly Global Britain.

I know that this – and the other reasons Britain took such a decision – is not always well understood among our friends and allies in Europe. And I know many fear that this might herald the beginning of a greater unravelling of the EU.

But let me be clear: I do not want that to happen. It would not be in the best interests of Britain. It remains overwhelmingly and compellingly in Britain’s national interest that the EU should succeed. And that is why I hope in the months and years ahead we will all reflect on the lessons of Britain’s decision to leave.

So let me take this opportunity to set out the reasons for our decision and to address the people of Europe directly.

It’s not simply because our history and culture is profoundly internationalist, important though that is. Many in Britain have always felt that the United Kingdom’s place in the European Union came at the expense of our global ties, and of a bolder embrace of free trade with the wider world.

There are other important reasons too.

Our political traditions are different. Unlike other European countries, we have no written constitution, but the principle of Parliamentary Sovereignty is the basis of our unwritten constitutional settlement. We have only a recent history of devolved governance – though it has rapidly embedded itself – and we have little history of coalition government. The public expect to be able to hold their governments to account very directly, and as a result supranational institutions as strong as those created by the European Union sit very uneasily in relation to our political history and way of life.

And, while I know Britain might at times have been seen as an awkward member state, the European Union has struggled to deal with the diversity of its member countries and their interests. It bends towards uniformity, not flexibility. David Cameron’s negotiation was a valiant final attempt to make it work for Britain – and I want to thank all those elsewhere in Europe who helped him reach an agreement – but the blunt truth, as we know, is that there was not enough flexibility on many important matters for a majority of British voters.

Now I do not believe that these things apply uniquely to Britain. Britain is not the only member state where there is a strong attachment to accountable and democratic government, such a strong internationalist mindset, or a belief that diversity within Europe should be celebrated. And so I believe there is a lesson in Brexit not just for Britain but, if it wants to succeed, for the EU itself.

Because our continent’s great strength has always been its diversity. And there are two ways of dealing with different interests. You can respond by trying to hold things together by force, tightening a vice-like grip that ends up crushing into tiny pieces the very things you want to protect. Or you can respect difference, cherish it even, and reform the EU so that it deals better with the wonderful diversity of its member states.

So to our friends across Europe, let me say this.

Our vote to leave the European Union was no rejection of the values we share. The decision to leave the EU represents no desire to become more distant to you, our friends and neighbours. It was no attempt to do harm to the EU itself or to any of its remaining member states. We do not want to turn the clock back to the days when Europe was less peaceful, less secure and less able to trade freely. It was a vote to restore, as we see it, our parliamentary democracy, national self-determination, and to become even more global and internationalist in action and in spirit.

We will continue to be reliable partners, willing allies and close friends. We want to buy your goods and services, sell you ours, trade with you as freely as possible, and work with one another to make sure we are all safer, more secure and more prosperous through continued friendship.

You will still be welcome in this country as we hope our citizens will be welcome in yours. At a time when together we face a serious threat from our enemies, Britain’s unique intelligence capabilities will continue to help to keep people in Europe safe from terrorism. And at a time when there is growing concern about European security, Britain’s servicemen and women, based in European countries including Estonia, Poland and Romania, will continue to do their duty.

We are leaving the European Union, but we are not leaving Europe.

And that is why we seek a new and equal partnership – between an independent, self-governing, Global Britain and our friends and allies in the EU.

Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave.

No, the United Kingdom is leaving the European Union. And my job is to get the right deal for Britain as we do.

Objectives and Ambitions

So today I want to outline our objectives for the negotiation ahead. 12 objectives that amount to one big goal: a new, positive and constructive partnership between Britain and the European Union.

And as we negotiate that partnership, we will be driven by some simple principles: we will provide as much certainty and clarity as we can at every stage. And we will take this opportunity to make Britain stronger, to make Britain fairer, and to build a more Global Britain too.

Certainty and clarity

1. Certainty

The first objective is crucial. We will provide certainty wherever we can.

We are about to enter a negotiation. That means there will be give and take. There will have to be compromises. It will require imagination on both sides. And not everybody will be able to know everything at every stage.

But I recognise how important it is to provide business, the public sector, and everybody with as much certainty as possible as we move through the process.

So where we can offer that certainty, we will do so.

That is why last year we acted quickly to give clarity about farm payments and university funding.

And it is why, as we repeal the European Communities Act, we will convert the “acquis” – the body of existing EU law – into British law.

This will give the country maximum certainty as we leave the EU. The same rules and laws will apply on the day after Brexit as they did before. And it will be for the British Parliament to decide on any changes to that law after full scrutiny and proper Parliamentary debate.

And when it comes to Parliament, there is one other way in which I would like to provide certainty. I can confirm today that the Government will put the final deal that is agreed between the UK and the EU to a vote in both Houses of Parliament, before it comes into force.

A Stronger Britain

Our second guiding principle is to build a stronger Britain.

2. Control of our own laws

That means taking control of our own affairs, as those who voted in their millions to leave the European Union demanded we must.

So we will take back control of our laws and bring an end to the jurisdiction of the European Court of Justice in Britain.

Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast. And those laws will be interpreted by judges not in Luxembourg but in courts across this country.

Because we will not have truly left the European Union if we are not in control of our own laws.

3. Strengthen the Union

A stronger Britain demands that we do something else – strengthen the precious union between the four nations of the United Kingdom.

At this momentous time, it is more important than ever that we face the future together, united by what makes us strong: the bonds that unite us as a people, and our shared interest in the UK being an open, successful trading nation in the future.

And I hope that same spirit of unity will apply in Northern Ireland in particular over the coming months in the National Assembly elections, and the main parties there will work together to re-establish a partnership government as soon as possible.

Foreign affairs are of course the responsibility of the UK Government, and in dealing with them we act in the interests of all parts of the United Kingdom. As Prime Minister, I take that responsibility seriously.

I have also been determined from the start that the devolved administrations should be fully engaged in this process.

That is why the Government has set up a Joint Ministerial Committee on EU Negotiations, so ministers from each of the UK’s devolved administrations can contribute to the process of planning for our departure from the European Union.

We have already received a paper from the Scottish Government, and look forward to receiving a paper from the Welsh Government shortly. Both papers will be considered as part of this important process. We won’t agree on everything, but I look forward to working with the administrations in Scotland, Wales and Northern Ireland to deliver a Brexit that works for the whole of the United Kingdom.

Part of that will mean working very carefully to ensure that – as powers are repatriated from Brussels back to Britain – the right powers are returned to Westminster, and the right powers are passed to the devolved administrations of Scotland, Wales and Northern Ireland.

As we do so, our guiding principle must be to ensure that – as we leave the European Union – no new barriers to living and doing business within our own Union are created,

That means maintaining the necessary common standards and frameworks for our own domestic market, empowering the UK as an open, trading nation to strike the best trade deals around the world, and protecting the common resources of our islands.

And as we do this, I should equally be clear that no decisions currently taken by the devolved administrations will be removed from them.

4. Maintain the Common Travel Area with Ireland

We cannot forget that, as we leave, the United Kingdom will share a land border with the EU, and maintaining that Common Travel Area with the Republic of Ireland will be an important priority for the UK in the talks ahead.

There has been a Common Travel Area between the United Kingdom and the Republic of Ireland for many years. Indeed, it was formed before either of our two countries were members of the European Union. And the family ties and bonds of affection that unite our two countries mean that there will always be a special relationship between us.

So we will work to deliver a practical solution that allows the maintenance of the Common Travel Area with the Republic, while protecting the integrity of the United Kingdom’s immigration system.

Nobody wants to return to the borders of the past, so we will make it a priority to deliver a practical solution as soon as we can.

A Fairer Britain

The third principle is to build a fairer Britain. That means ensuring it is fair to everyone who lives and works in this country.

5. Control of immigration

And that is why we will ensure we can control immigration to Britain from Europe.

We will continue to attract the brightest and the best to work or study in Britain – indeed openness to international talent must remain one of this country’s most distinctive assets – but that process must be managed properly so that our immigration system serves the national interest.

So we will get control of the number of people coming to Britain from the EU.

Because while controlled immigration can bring great benefits – filling skills shortages, delivering public services, making British businesses the world-beaters they often are – when the numbers get too high, public support for the system falters.

In the last decade or so, we have seen record levels of net migration in Britain, and that sheer volume has put pressure on public services, like schools, stretched our infrastructure, especially housing, and put a downward pressure on wages for working class people. As Home Secretary for six years, I know that you cannot control immigration overall when there is free movement to Britain from Europe.

Britain is an open and tolerant country. We will always want immigration, especially high-skilled immigration, we will always want immigration from Europe, and we will always welcome individual migrants as friends. But the message from the public before and during the referendum campaign was clear: Brexit must mean control of the number of people who come to Britain from Europe. And that is what we will deliver.

6. Rights for EU nationals in Britain, and British nationals in the EU

Fairness demands that we deal with another issue as soon as possible too. We want to guarantee the rights of EU citizens who are already living in Britain, and the rights of British nationals in other member states, as early as we can.

I have told other EU leaders that we could give people the certainty they want straight away, and reach such a deal now.

Many of them favour such an agreement – one or two others do not – but I want everyone to know that it remains an important priority for Britain – and for many other member states – to resolve this challenge as soon as possible. Because it is the right and fair thing to do.

7. Protect workers’ rights

And a fairer Britain is a country that protects and enhances the rights people have at work.

That is why, as we translate the body of European law into our domestic regulations, we will ensure that workers rights are fully protected and maintained.

Indeed, under my leadership, not only will the Government protect the rights of workers’ set out in European legislation, we will build on them. Because under this Conservative Government, we will make sure legal protection for workers keeps pace with the changing labour market – and that the voices of workers are heard by the boards of publicly-listed companies for the first time.

A Truly Global Britain

But the great prize for this country – the opportunity ahead – is to use this moment to build a truly Global Britain. A country that reaches out to old friends and new allies. A great, global, trading nation. And one of the firmest advocates for free trade anywhere in the world.

8. Free trade with European markets

That starts with our close friends and neighbours in Europe. So as a priority, we will pursue a bold and ambitious Free Trade Agreement with the European Union.

This agreement should allow for the freest possible trade in goods and services between Britain and the EU’s member states. It should give British companies the maximum freedom to trade with and operate within European markets – and let European businesses do the same in Britain.

But I want to be clear. What I am proposing cannot mean membership of the EU’s Single Market.

European leaders have said many times that membership means accepting the “four freedoms” of goods, capital, services and people. And being out of the EU but a member of the Single Market would mean complying with the EU’s rules and regulations that implement those freedoms, without having a vote on what those rules and regulations are. It would mean accepting a role for the European Court of Justice that would see it still having direct legal authority in our country.

It would to all intents and purposes mean not leaving the EU at all.

And that is why both sides in the referendum campaign made it clear that a vote to leave the EU would be a vote to leave the Single Market.

So we do not seek membership of the Single Market. Instead we seek the greatest possible access to it through a new, comprehensive, bold and ambitious Free Trade Agreement.

That Agreement may take in elements of current Single Market arrangements in certain areas – on the export of cars and lorries for example, or the freedom to provide financial services across national borders – as it makes no sense to start again from scratch when Britain and the remaining Member States have adhered to the same rules for so many years.

But I respect the position taken by European leaders who have been clear about their position, just as I am clear about mine. So an important part of the new strategic partnership we seek with the EU will be the pursuit of the greatest possible access to the Single Market, on a fully reciprocal basis, through a comprehensive Free Trade Agreement.

And because we will no longer be members of the Single Market, we will not be required to contribute huge sums to the EU budget. There may be some specific European programmes in which we might want to participate. If so, and this will be for us to decide, it is reasonable that we should make an appropriate contribution. But the principle is clear: the days of Britain making vast contributions to the European Union every year will end.

9. New trade agreements with other countries

But it is not just trade with the EU we should be interested in. A Global Britain must be free to strike trade agreements with countries from outside the European Union too.

Because important though our trade with the EU is and will remain, it is clear that the UK needs to increase significantly its trade with the fastest growing export markets in the world.

Since joining the EU, trade as a percentage of GDP has broadly stagnated in the UK. That is why it is time for Britain to get out into the world and rediscover its role as a great, global, trading nation.

This is such a priority for me that when I became Prime Minister I established, for the first time, a Department for International Trade, led by Liam Fox.

We want to get out into the wider world, to trade and do business all around the globe. Countries including China, Brazil, and the Gulf States have already expressed their interest in striking trade deals with us. We have started discussions on future trade ties with countries like Australia, New Zealand and India. And President Elect Trump has said Britain is not “at the back of the queue” for a trade deal with the United States, the world’s biggest economy, but front of the line.

I know my emphasis on striking trade agreements with countries outside Europe has led to questions about whether Britain seeks to remain a member of the EU’s Customs Union. And it is true that full Customs Union membership prevents us from negotiating our own comprehensive trade deals.

Now, I want Britain to be able to negotiate its own trade agreements. But I also want tariff-free trade with Europe and cross-border trade there to be as frictionless as possible.

That means I do not want Britain to be part of the Common Commercial Policy and I do not want us to be bound by the Common External Tariff. These are the elements of the Customs Union that prevent us from striking our own comprehensive trade agreements with other countries. But I do want us to have a customs agreement with the EU.

Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position. I have an open mind on how we do it. It is not the means that matter, but the ends.

And those ends are clear: I want to remove as many barriers to trade as possible. And I want Britain to be free to establish our own tariff schedules at the World Trade Organisation, meaning we can reach new trade agreements not just with the European Union but with old friends and new allies from outside Europe too.

10. The best place for science and innovation

A Global Britain must also be a country that looks to the future. That means being one of the best places in the world for science and innovation.

One of our great strengths as a nation is the breadth and depth of our academic and scientific communities, backed up by some of the world’s best universities. And we have a proud history of leading and supporting cutting-edge research and innovation.

So we will also welcome agreement to continue to collaborate with our European partners on major science, research, and technology initiatives.

From space exploration to clean energy to medical technologies, Britain will remain at the forefront of collective endeavours to better understand, and make better, the world in which we live.

11. Cooperation in the fight against crime and terrorism

And a Global Britain will continue to cooperate with its European partners in important areas such as crime, terrorism and foreign affairs.

All of us in Europe face the challenge of cross-border crime, a deadly terrorist threat, and the dangers presented by hostile states. All of us share interests and values in common, values we want to see projected around the world.

With the threats to our common security becoming more serious, our response cannot be to cooperate with one another less, but to work together more. I therefore want our future relationship with the European Union to include practical arrangements on matters of law enforcement and the sharing of intelligence material with our EU allies.

I am proud of the role Britain has played and will continue to play in promoting Europe’s security. Britain has led Europe on the measures needed to keep our continent secure – whether it is implementing sanctions against Russia following its action in Crimea, working for peace and stability in the Balkans, or securing Europe’s external border. We will continue to work closely with our European allies in foreign and defence policy even as we leave the EU itself.

A phased approach

12. A smooth, orderly Brexit

These are our objectives for the negotiation ahead – objectives that will help to realise our ambition of shaping that stronger, fairer, Global Britain that we want to see.

They are the basis for a new, strong, constructive partnership with the European Union – a partnership of friends and allies, of interests and values. A partnership for a strong EU and a strong UK.

But there is one further objective we are setting. For as I have said before – it is in no one’s interests for there to be a cliff-edge for business or a threat to stability, as we change from our existing relationship to a new partnership with the EU.

By this, I do not mean that we will seek some form of unlimited transitional status, in which we find ourselves stuck forever in some kind of permanent political purgatory. That would not be good for Britain, but nor do I believe it would be good for the EU.

Instead, I want us to have reached an agreement about our future partnership by the time the two-year Article Fifty process has concluded. From that point onwards, we believe a phased process of implementation, in which both Britain and the EU institutions and member states prepare for the new arrangements that will exist between us will be in our mutual self-interest. This will give businesses enough time to plan and prepare for those new arrangements.

This might be about our immigration controls, customs systems or the way in which we cooperate on criminal justice matters. Or it might be about the future legal and regulatory framework for financial services. For each issue, the time we need to phase-in the new arrangements may differ. Some might be introduced very quickly, some might take longer. And the interim arrangements we rely upon are likely to be a matter of negotiation.

But the purpose is clear: we will work to avoid a disruptive cliff-edge, and we will do everything we can to phase in the new arrangements we require as Britain and the EU move towards our new partnership.

The Right Deal for Britain

So, these are the objectives we have set. Certainty wherever possible. Control of our own laws. Strengthening the United Kingdom. Maintaining the Common Travel Area with Ireland. Control of immigration. Rights for EU nationals in Britain, and British nationals in the EU. Enhancing rights for workers. Free trade with European markets. New trade agreements with other countries. A leading role in science and innovation. Cooperation on crime, terrorism and foreign affairs. And a phased approach, delivering a smooth and orderly Brexit.

This is the framework of a deal that will herald a new partnership between the UK and the EU.

It is a comprehensive and carefully considered plan that focuses on the ends, not just the means – with its eyes fixed firmly on the future, and on the kind of country we will be once we leave.

It reflects the hard work of many in this room today who have worked tirelessly to bring it together and to prepare this country for the negotiation ahead.

And it will, I know, be debated and discussed at length. That is only right. But those who urge us to reveal more – such as the blow-by-blow details of our negotiating strategy, the areas in which we might compromise, the places where we think there are potential trade-offs – will not be acting in the national interest.

Because this is not a game or a time for opposition for opposition’s sake. It is a crucial and sensitive negotiation that will define the interests and the success of our country for many years to come. And it is vital that we maintain our discipline.

That is why I have said before – and will continue to say – that every stray word and every hyped up media report is going to make it harder for us to get the right deal for Britain. Our opposite numbers in the European Commission know it, which is why they are keeping their discipline. And the ministers in this Government know it too, which is why we will also maintain ours.

So however frustrating some people find it, the Government will not be pressured into saying more than I believe it is in our national interest to say. Because it is not my job to fill column inches with daily updates, but to get the right deal for Britain. And that is what I intend to do.

A new partnership between Britain and Europe

I am confident that a deal – and a new strategic partnership between the UK and the EU – can be achieved.

This is firstly because, having held conversations with almost every leader from every single EU member state; having spent time talking to the senior figures from the European institutions, including President Tusk, President Juncker, and President Schulz; and after my Cabinet colleagues David Davis, Philip Hammond and Boris Johnson have done the same with their interlocutors, I am confident that the vast majority want a positive relationship between the UK and the EU after Brexit. And I am confident that the objectives I am setting out today are consistent with the needs of the EU and its Member States.

That is why our objectives include a proposed Free Trade Agreement between Britain and the European Union, and explicitly rule out membership of the EU’s Single Market. Because when the EU’s leaders say they believe the four freedoms of the Single Market are indivisible, we respect that position. When the 27 Member States say they want to continue their journey inside the European Union, we not only respect that fact but support it.

Because we do not want to undermine the Single Market, and we do not want to undermine the European Union. We want the EU to be a success and we want its remaining member states to prosper. And of course we want the same for Britain.

And the second reason I believe it is possible to reach a good deal is that the kind of agreement I have described today is the economically rational thing that both Britain and the EU should aim for. Because trade is not a zero sum game: more of it makes us all more prosperous. Free trade between Britain and the European Union means more trade, and more trade means more jobs and more wealth creation. The erection of new barriers to trade, meanwhile, means the reverse: less trade, fewer jobs, lower growth.

The third and final reason I believe we can come to the right agreement is that cooperation between Britain and the EU is needed not just when it comes to trade but when it comes to our security too.

Britain and France are Europe’s only two nuclear powers. We are the only two European countries with permanent seats on the United Nations Security Council. Britain’s armed forces are a crucial part of Europe’s collective defence.

And our intelligence capabilities – unique in Europe – have already saved countless lives in very many terrorist plots that have been thwarted in countries across our continent. After Brexit, Britain wants to be a good friend and neighbour in every way, and that includes defending the safety and security of all of our citizens.

So I believe the framework I have outlined today is in Britain’s interests. It is in Europe’s interests. And it is in the interests of the wider world.

But I must be clear. Britain wants to remain a good friend and neighbour to Europe. Yet I know there are some voices calling for a punitive deal that punishes Britain and discourages other countries from taking the same path.

That would be an act of calamitous self-harm for the countries of Europe. And it would not be the act of a friend.

Britain would not – indeed we could not – accept such an approach. And while I am confident that this scenario need never arise – while I am sure a positive agreement can be reached – I am equally clear that no deal for Britain is better than a bad deal for Britain.

Because we would still be able to trade with Europe. We would be free to strike trade deals across the world. And we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain. And – if we were excluded from accessing the Single Market – we would be free to change the basis of Britain’s economic model.

But for the EU, it would mean new barriers to trade with one of the biggest economies in the world. It would jeopardise investments in Britain by EU companies worth more than half a trillion pounds. It would mean a loss of access for European firms to the financial services of the City of London. It would risk exports from the EU to Britain worth around £290 billion every year. And it would disrupt the sophisticated and integrated supply chains upon which many EU companies rely.

Important sectors of the EU economy would also suffer. We are a crucial – profitable – export market for Europe’s automotive industry, as well as sectors including energy, food and drink, chemicals, pharmaceuticals, and agriculture. These sectors employ millions of people around Europe. And I do not believe that the EU’s leaders will seriously tell German exporters, French farmers, Spanish fishermen, the young unemployed of the Eurozone, and millions of others, that they want to make them poorer, just to punish Britain and make a political point.

For all these reasons – and because of our shared values and the spirit of goodwill that exists on both sides – I am confident that we will follow a better path. I am confident that a positive agreement can be reached.

It is right that the Government should prepare for every eventuality – but to do so in the knowledge that a constructive and optimistic approach to the negotiations to come is in the best interests of Europe and the best interests of Britain.

Conclusion

We do not approach these negotiations expecting failure, but anticipating success.

Because we are a great, global nation with so much to offer Europe and so much to offer the world.

One of the world’s largest and strongest economies. With the finest intelligence services, the bravest armed forces, the most effective hard and soft power, and friendships, partnerships and alliances in every continent.

And another thing that’s important. The essential ingredient of our success. The strength and support of 65 million people willing us to make it happen.

Because after all the division and discord, the country is coming together.

The referendum was divisive at times. And those divisions have taken time to heal.

But one of the reasons that Britain’s democracy has been such a success for so many years is that the strength of our identity as one nation, the respect we show to one another as fellow citizens, and the importance we attach to our institutions means that when a vote has been held we all respect the result. The victors have the responsibility to act magnanimously. The losers have the responsibility to respect the legitimacy of the outcome. And the country comes together.

And that is what we are seeing today. Business isn’t calling to reverse the result, but planning to make a success of it. The House of Commons has voted overwhelmingly for us to get on with it. And the overwhelming majority of people – however they voted – want us to get on with it too.

So that is what we will do.

Not merely forming a new partnership with Europe, but building a stronger, fairer, more Global Britain too.

And let that be the legacy of our time. The prize towards which we work. The destination at which we arrive once the negotiation is done.

And let us do it not for ourselves, but for those who follow. For the country’s children and grandchildren too.

So that when future generations look back at this time, they will judge us not only by the decision that we made, but by what we made of that decision.

They will see that we shaped them a brighter future.

They will know that we built them a better Britain.

The Age of Trump


January 2, 2017

The Age of Trump

by Joseph E. Stiglitz

http://www.straitstimes.com/opinion/the-age-of-trump

NEW YORK • On January 20, Mr Donald Trump will be inaugurated as the 45th President of the United States. I would hate to say “I told you so”, but his election should not have come as a surprise.

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As I explained in my 2002 book, Globalization And Its Discontents, the policies we have used to manage globalisation have sown the seeds of widespread disaffection. Ironically, a candidate from the same party that has pushed the hardest for international financial and trade integration won by promising to undo both.

Of course, there is no going back. China and India are now integrated into the global economy, and technological innovation is reducing the number of manufacturing jobs worldwide. Mr Trump cannot re-create the well-paying manufacturing jobs of past decades; he can push only for advanced manufacturing, which requires higher skill sets and employs fewer people.

Rising inequality, meanwhile, will continue to contribute to widespread despair, especially among the white voters in Middle America who handed Mr Trump his victory. As economists Anne Case and Angus Deaton showed in their study published in December 2015, life expectancy among middle-aged white Americans is declining, as rates of suicides, drug use and alcoholism increase. A year later, the National Centre for Health Statistics reported that life expectancy for the US as a whole has declined for the first time in more than 20 years.

In the first three years of the so-called recovery after the 2008 financial crisis, 91 per cent of the gains went to the top 1 per cent of earners. While Wall Street banks were bailed out with billions of dollars in taxpayer money, home owners received only a pittance. President Barack Obama saved not only the banks, but also the bankers, shareholders and bond holders. His economic policy team of Wall Street insiders broke the rules of capitalism to save the elite, confirming millions of Americans’ suspicion that the system is, as Mr Trump would say, “rigged”.

Though Mr Trump ran on a pro-growth platform, the economic agenda he has professed could be undermined if he exacerbates inequality through his tax proposals, starts a trade war or abandons America's commitments to reduce greenhouse gas emissions, sa

Though Mr Trump ran on a pro-growth platform, the economic agenda he has professed could be undermined if he exacerbates inequality through his tax proposals, starts a trade war or abandons America’s commitments to reduce greenhouse gas emissions, says Prof Stiglitz. PHOTO: AGENCE FRANCE-PRESSE

Though wealthy, Mr Trump is clearly not a member of the traditional elite, which lent credence to his promise of “real” change. And yet it will be business as usual under Mr Trump, who will adhere to Republican orthodoxy on taxation and, by appointing lobbyists and industry insiders to his administration, has already broken his promise to “drain the swamp”.

Mr Obama brought “change you can believe in” on certain issues, such as climate policy; but with respect to the economy, he bolstered the status quo – the 30-year experiment with neoliberalism, which promised that the benefits of globalisation and liberalisation would “trickle down” to everyone. Instead, the benefits trickled up, partly owing to a political system that now seems to be based on the principle of “one dollar, one vote”, rather than “one person, one vote”.

Rising inequality, an unfair political system and a government that spoke as if it was working for the people while acting for the elites created ideal conditions for a candidate like Mr Trump to exploit. Though wealthy, Mr Trump is clearly not a member of the traditional elite, which lent credence to his promise of “real” change. And yet it will be business as usual under Mr Trump, who will adhere to Republican orthodoxy on taxation and, by appointing lobbyists and industry insiders to his administration, has already broken his promise to “drain the swamp” in Washington, DC.

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The rest of Mr Trump’s economic agenda will depend largely on whether House Speaker Paul Ryan is a true fiscal conservative. Mr Trump has proposed that large tax cuts for the rich be combined with massive infrastructure spending programmes, which would boost gross domestic product and improve the government’s fiscal position somewhat, though not nearly as much as advocates of supply-side economics hope. If Mr Ryan is not as concerned about the deficit as he says he is, he will rubberstamp Mr Trump’s agenda and the economy will receive the Keynesian fiscal stimulus that it has long needed.

Another uncertainty relates to monetary policy. Mr Trump has already spoken out against low interest rates, and there are two vacancies on the US Federal Reserve’s Board of Governors. Add to that the large numbers of Fed officials itching to normalise rates, and it is a fair bet that they will do so – perhaps more than offsetting Mr Trump’s Keynesian stimulus.

Mr Trump’s pro-growth policies will also be undermined if he exacerbates inequality through his tax proposals, starts a trade war or abandons America’s commitments to reduce greenhouse gas emissions (especially if others retaliate with a cross-border tax). Now that Republicans control the White House and both houses of Congress, they will be relatively free to weaken workers’ bargaining power, deregulate Wall Street and other industries and turn a blind eye to existing antitrust laws – all of which will create more inequality.

If Mr Trump follows through on his campaign threat to impose tariffs on Chinese imports, America’s economy would probably suffer more damage than China’s. Under the existing World Trade Organisation (WTO) framework, for every “illegal” tariff that the US imposes, China can retaliate anywhere it chooses, such as by using trade restrictions to target jobs in the congressional districts of those who support US tariffs.

To be sure, measures against China permitted under the WTO framework, such as anti-dumping tariffs, may be justified in some areas. But Mr Trump has enunciated no guiding principles for trade policy, and the US – which directly subsidises its automobile and aircraft industries and indirectly subsidises its banks through ultra-low interest rates – would be throwing stones from a glass house. And once this tit-for-tat game begins, it could very well end in the destruction of the open international order created since World War II.

Similarly, the international rule of law, which is enforced primarily through economic sanctions, could fare poorly under Mr Trump. How will the new president respond if Russian-aligned troops escalate the conflict in eastern Ukraine? America’s real power has always derived from its standing as an inclusive democracy. But people around the world have now lost confidence in democratic processes. Indeed, throughout Africa, I have heard remarks such as “Trump makes our dictators look good”. As American soft power continues to erode, the future of the international order will become more uncertain.

Meanwhile, the Democratic Party will surely be conducting an election post-mortem. Mrs Hillary Clinton undeniably lost because she failed to offer voters a convincing vision that was markedly different from the neoliberal agenda that her husband Bill Clinton embraced in the 1990s. Having pursued a political strategy of “triangulation” – adopting versions of its opponents’ policies – for more than a generation, the party of the left could no longer present itself as a credible alternative to the party of the right.

The Democrats will have a future only if they reject neoliberalism and adopt the progressive policies proposed by leaders such as Mrs Elizabeth Warren, Mr Bernie Sanders and Mr Sherrod Brown. This will put them in a strong position against the Republicans, who will have to figure out how to manage a coalition of evangelical Christians, corporate executives, nativists, populists and isolationists.

With the arrival of Mr Trump, and with both major parties now redefining themselves, the coming year may well be remembered as a turning point in US and world history. PROJECT SYNDICATE

• Joseph E. Stiglitz, a Nobel laureate in economics, is university professor at Columbia University and chief economist at the Roosevelt Institute. His most recent book is The Euro: How A Common Currency Threatens The Future Of Europe.

A version of this article appeared in the print edition of The Straits Times on January 02, 2017, with the headline ‘The age of Trump’. Print Edition

 

Trump and National Neoliberalism


December 25, 2016

Published on
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Trump and National Neoliberalism

And why the world is about to get much more dangerous

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Many writers and pundits are currently framing Trump’s election in terms of a dispossessed and disenfranchised white, male working class, unsatisfied with neoliberal globalization and the insecurity and hardship it has unleashed—particularly across regions of the United States that were formerly manufacturing powerhouses (like the Rust Belt states of Pennsylvania, Michigan, Ohio and Wisconsin, four states believed to have cost Hillary Clinton the election). While there is much truth to this perspective and substantial empirical evidence to support it, it would be a mistake to see Trump’s election wholly in these terms.

“What Trump’s election has accomplished is an unmasking of the corporate state.”

Trump’s election is in some ways a neoliberal apex, an event that portends the completion of the U.S. government’s capture by wealthy corporate interests. While in my opinion Trump’s election does not signal the beginning of a rapid descent into European-style fascism, it appears to be a key stage in the ongoing process of American democratic disintegration. American democracy has been under attack from large and wealthy corporate interests for a long time, with this process accelerating and gaining strength over the period of neoliberal globalization (roughly the early 1970s to the present). This time period is associated with the rise of powerful multinational corporations with economic and political might that rivals that of many national governments.

In terms of the political consequences of these trends in the U.S., certain thinkers have argued that the U.S. political system is not democratic at all, but rather an “inverted totalitarian” system. Political commentator Chris Hedges notes: “Inverted totalitarianism is different from classical forms of totalitarianism. It does not find its expression in a demagogue or charismatic leader but in the faceless anonymity of the corporate state.” Citing the American political theorist Sheldon Wolin, Hedges continues, “Unlike the Nazis, who made life uncertain for the wealthy and privileged while providing social programs for the working class and poor, inverted totalitarianism exploits the poor, reducing or weakening health programs and social services, regimenting mass education for an insecure workforce threatened by the importation of low-wage workers.” Our inverted totalitarian system is one that retains the trappings of a democratic system—e.g. it retains the appearance of loyalty to “the Constitution, civil liberties, freedom of the press, [and] the independence of the judiciary”—all the while undermining the capacity of citizens to substantively participate and exert power over the system.

In my view, what Trump’s election has accomplished is an unmasking of the corporate state. Trump gives inverted totalitarianism a persona and a face, and perhaps marks the beginning of a transformation from inverted totalitarianism to totalitarianism proper. In spite of this, it makes no sense to me to call the system toward which we are heading (that is, if we do not stand up and resist with all our might right this second) “fascism” or to make too close comparisons to the Nazis. Whatever totalitarian nightmare is on our horizon, it will be uniquely American. And it will bear a striking resemblance to the corporate oriented system we’ve been living in for decades. Indeed, if the pre-Trump system of inverted totalitarianism solidified in the context of global neoliberalism, the period we are entering now seems likely to be one characterized by what I call “national neoliberalism.”

Trump’s Election Doesn’t Mean the End of Neoliberalism

Trump’s election represents a triumph of neoliberal thinking and values. Perhaps most importantly, we should all keep in mind the fact that Americans just elected a businessman to the presidency. In spite of his Wall Street background and billionaire status, Trump successfully cast himself as the “anti-establishment” candidate. This configuration—in which a top-one-percenter real estate tycoon is accepted as a political “outsider”—is a hallmark of neoliberal thinking. The fundamental opposition between market and government is a central dichotomy in the neoliberal narrative. In electing Trump, American voters are reproducing this narrative, creating an ideological cover for the closer connections between business and the state that are in store moving forward (indeed, Trump is already using the apparatus of the U.S. federal government to promote his own business interests). As states and markets further fuse in coming years, this representation of Trump and his administration—as being anti-government—will help immunize his administration from accusations of too-cozy relationships with big business. Trump’s attempts to “drain the swamp” by imposing Congressional term limits and constraints on lobbying activities by former political officials will also help to hide this relationship. (Has anyone else noticed that Trump only addresses half of the “revolving door,” i.e., he plans to limit the lobbying of former politicians, but not the political roles of businessmen?)

“Whatever totalitarian nightmare is on our horizon, it will be uniquely American.”

Trump’s Contract with the American Voter, his plan for the first 100 days in office, discusses policies and programs many of which are consistent with neoliberal thinking. (I understand the term “neoliberalism” to emphasize at its core the importance of private property rights, market-based social organization, and the dangers of government intervention in the economy.) Trump’s plan redirects the activities of the U.S. government along the lines touted by neoliberal “market fundamentalists” like Milton Friedman, who advocate limiting government’s role to market-supportive functions like national defense (defense stocks are doing very well since the election) and domestic law and order (Trump’s proposals have a lot to do with altering immigration policy to “restore security”). Trump also plans to use government monies to revitalize physical infrastructure and create jobs. Other government functions, for example, health care provision and education as well as protecting the environment and public lands, are open for privatization and defunding in Trump’s agenda. Under Trump, the scope of federal government activities will narrow, likely to infrastructure, national defense, and domestic policing and surveillance, even if overall government spending increases (as bond markets are predicting).

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Trump also seems content to take neoliberal advice in regard to business regulation (less is best) and the role of the private sector in regulating itself (industry insiders understand regulatory needs better than public officials). Trump’s plan for the first 100 days specifies “a requirement that for every new federal regulation, two existing regulations must be eliminated.” As of the time of this writing, his selection of cabinet appointees illustrate a broad willingness to appoint businesspeople to government posts. As of mid-December 2016, a Goldman Sachs veteran, Steven Mnuchin, has been appointed Secretary of the Treasury; billionaire investor Wilbur Ross has been appointed Secretary of Commerce; fossil fuel industry supporter and Oklahoma Attorney General Scott Pruitt has been appointed as EPA administrator; and fast-food mogul Andrew Puzder has been appointed as Secretary of Labor. Trump’s business council is staffed by the CEOs of major U.S. corporations including JP Morgan Chase, IBM and General Motors. To be fair, the “revolving door” between government and industry has been perpetuated by many of Trump’s predecessors, with Trump poised to continue the tradition. But this is not to say that neoliberalism will continue going in a “business as usual” fashion. The world is about to get much more dangerous, and this has serious implications for patterns of global trade and investment.

Trump’s Election Does Mean the End of Globalism

The nationalism, xenophobia, isolationism, and paranoia of Donald Trump are about to replace the significantly more cosmopolitan outlook of his post-WWII predecessors. While Trump is decidedly pro-business and pro-market, he most certainly does not see himself as a global citizen. Nor does he intend to maintain the United States’ extensive global footprint or its relatively open trading network. In other words, while neoliberalism is not dead, it is being transformed into a geographically more fragmented and localized system (this is not only about the US election, but also about rising levels of global protectionism and Brexit, among other anti-globalization trends around the world). I expect that the geographic extent of the US economy in the coming years will coincide with the new landscape of U.S. allies and enemies, as defined by Donald Trump and his administration.

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Trump’s Contract with the American Voter outlines several policies that will make it more expensive and riskier to do business abroad. All of these need not occur; I think that even one or two of these changes will be sufficient to alter expectations in business communities about the benefits of certain cross-border economic relationships. Pulling the United States out of the TPP, along with threats to pull out of the Paris Climate Agreement and attempts to renegotiate NAFTA, is already signaling to other countries that we are not interested in international cooperation and collaboration. A crackdown on foreign trading abuses will prompt retaliation. Labelling China a currency manipulator will sour relations between the two countries and prompt retaliation by China. As Trump goes forward with his anti-immigration and anti-Muslim rhetoric and policies, he will alienate the United States’ traditional allies in Europe (at least until Europe elects its own nationalist and xenophobic leaders) and communities across the Global South. The U.S. election has already undermined performance in emerging markets, and bigoted rhetoric and policy will only increase anti-American sentiment in struggling economies populated largely by people of color. Add to this the risk of conflict posed by any number of the following: his antagonizing China, allying with Russia, deploying ground troops to stop ISIS, and pulling out of the Korean DMZ, among other initiatives that seem likely to contribute to a more confrontational and violent international arena. All of this is to say that Trump will not have to intervene directly in the affairs of business in order to nationalize it. The new global landscape of conflict and risk, combined with elevated domestic spending on infrastructure and security, will bring U.S. business and investment back home nonetheless.

National Neoliberalism and State-Market Relations

Fascist states are corporatist in nature, a state of affairs marked by a fusion of state and business functions and interests, with an often significant role for labor interests as well. In the fascist states on the European continent in the 1930s and 1940s—systems that fall under the umbrella of “national socialism”—the overwhelming power of the state characterized this tripartite relationship. Political theorist Sheldon Wolin writes in Democracy, Inc. in regard to Nazi Germany and Fascist Italy (as well as Stalinist Russia), “The state was conceived as the main center of power, providing the leverage necessary for the mobilization and reconstruction of society”.

By contrast, in Trump’s America—where an emergent “national neoliberalism” may be gradually guiding us to a more overt and obvious totalitarian politics—we can expect a similar fusion of state and market interests, but one in which the marketplace and big business have almost total power and freedom of movement (I think that labor will do poorly in this configuration). State and market in the U.S. will fuse further together in the coming years, leading some to make close parallels with European fascism. But it will do so not because of heavy handed government dictates and interventions, but rather because domestic privatization initiatives, appointments of businessmen to government posts, fiscal stimulus and the business community’s need for protection abroad will bring them closer. Corporate interests will merge with state interests not because corporations are commanded to, but rather because the landscape of risk and reward will shift and redirect investment patterns to a similar effect. This may be where a budding U.S. totalitarianism differs most starkly from its European cousins.

Of course it helps that much of the fusion of state and market in the United States is already complete, what with decades of revolving doors and privatization initiatives spanning the military, police, prison, healthcare and educational sectors, among others. It will not take much to further cement the relationship.

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Sasha Breger Bush is an Assistant Professor of International Relations in the Department of Political Science at the University of Colorado Denver. Her first book, Derivatives and Development, was published in 2012 by Palgrave Macmillan. Sasha can be reached at sasha.breger@ucdenver.edu .