Editorial: Trump threatens trade war

Submitted by SJW on 14 March, 2018 - 12:28 Author: Editorial
World trade

On 1 March Donald Trump announced tariffs of 25% on steel imports, 10% on aluminium imports.

Other governments are alarmed by this shift towards trade war. The OECD, a consortium of the world’s 35 strongest capitalist economies, has criticised the move. Further argument will come at the meeting of the finance ministers and central bank governments of the G20 (20 strongest countries) in Buenos Aires on 19-20 March.

Socialists should be alarmed too, for our own distinct reasons.

Socialists do not endorse capitalist free trade. We are not for the unfettered rule of markets. We are for fettering market forces through social-provision and worker-protection policies, as international as possible. As the working class gains political strength, we aim to make democratically-decided social solidarity the chief regulator of economic affairs.

We are not necessarily opposed, even, to all bourgeois protectionist policies. “Nursery tariffs”, allowing new industries to make a start in weaker countries, are not our way of doing things, but they have a rationale, and we would not condemn them in favour of undiluted free trade.

Tariffs
In general, however, our approach is as Marx outlined in 1847:

“Do not imagine, gentlemen, that in criticising freedom of trade we have the least intention of defending the system of protection. One may declare oneself an enemy of the constitutional regime without declaring oneself a friend of the ancient [i.e. autocratic or aristocratic] regime...

“In general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favour of free trade”.

The German Marxist movement, in its heyday before 1914, campaigned against the German government’s protective tariffs, so much so that when Lenin in his pamphlet What Is To Be Done? wanted to cite an easily-grasped example of how socialists should conduct a political campaign, he chose a German socialist anti-tariff effort.

Free trade first spread in the mid-19th century. Tariff protection became more popular with governments later in the 19th century, but on the whole tariffs of the leading capitalist countries remained fairly low until about 1930, with the USA as the main exception.

A spiral of beggar-my-neighbour tariffs in the 1930s crashed world trade and worsened the economic slump then.

Since World War Two it has been bourgeois orthodoxy to favour making trade barriers low, with argument only about the scale and type of the exceptions to that rule. From the 1960s the running-into-a-wall of “developmentalist” trade barrier regimes in second-tier capitalist countries from Ireland to Argentina has broadened the hold of that orthodoxy.

After the crash of 2008, the chief, in fact only clear-cut, decision of the emergency G20 summit of November 2008 was to demand of all governments that they avoid building trade barriers in response. On the whole, that decision held.

Trump’s move spurred the Director of his National Economic Council, Gary Cohn, to resign.

Cohn had already been at odds with Trump since, last August, he criticised Trump’s response to the white-supremacist demonstration then in Charlottesville, Virginia.

Research into the proposed tariffs suggested that they may save 33,000 jobs in the steel and aluminium industries, but lose 179,000 jobs in other industries dependent on affordable imported steel and aluminium ().

According to the Financial Times, the new tariffs were opposed within Trump’s inner circle by Rex Tillerson, his secretary of state; Steven Mnuchin, his Treasury secretary; and Jim Mattis, his defence secretary, as well as by Cohn.

Trump has sacked Tillerson. Mnuchin and Mattis remain in post. There is talk of Cohn being replaced by Larry Kudlow, a commentator who has publicly criticised the tariffs. Trump has hinted that the tariffs may make exceptions for Canada and Mexico. Ronald Reagan, US president from 1981 to 1989, also imposed tariffs early in his presidency.

The Economist magazine, shrewdly from its point of view, identifies the most alarming novelty of Trump’s tariffs as the pretext Trump gives in terms of the rules of the World Trade Organisation, the overseer of world trade procedures for its 164 countries and successor to GATT, set up by the USA in 1947.

Dumping

The WTO allows for tariffs to be put on to fend off “dumping” (the sale of excess capacity at artificially low or subsidised prices) or destructive surges of imports.

Trump, however, says that the tariffs are justified by “national security”. The USA, he says, needs those tariffs to keep enough steel and aluminium capacity to serve its military.

That “national security” pretext has rarely been invoked before. It is difficult to contest through WTO panels. It leaves other states with the options only of shrugging — which, they may reasonably conclude, will encourage Trump to go further — or of finding their own pretexts to retaliate. As the EU economic think-tank Bruegel puts it, Trump’s move is “a challenge to the world trading system as we know it”.

The Economist reckons that a general escalation of tariffs among the 163 non-US members of the WTO is unlikely, even if trade barriers between those 163 and the USA increase.

Probably so, for now. Even the hardest-Brexiters among the Tories want some trade deal with the EU, and want more trade deals with non-EU states. Nationalist-populist parties in Europe like France’s Front National (now trying to rename itself Rassemblement National) and Italy’s Five Star Movement have, as they have looked like nearing government office, become more hesitant and vaguer about policies which might reverse European economic integration.

But that is now, when the faltering economic recovery after 2008 is at about the strongest (or least weak) it has been since then.

What in the next crisis? The crisis for which so much explosive material is accumulating in the financial markets? Will bourgeois patience and restraint hold the line then? Quite likely not.

The response of the labour movement cannot be to endorse the more far-sighted and rational elements of established bourgeois opinion.

But it must include vigorous rejection of the drift towards trade war, and of all suggestions that there is something socially-desirable or pro-working-class about the drift.

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