Is the US ready for a shared future in a fractured world?
January 2018 marks the end of Donald Trump’s first year in office as the president of the United States. In the course of this year, he declared that the U.S. withdrew from the Paris Climate Accord and the Trans-Pacific Partnership (TPP). Negotiations with the European Union on the Trans-Atlantic Trade and Investment Partnership (TTIP) have been suspended and China has been identified as a major challenge to the American economy.
Last year, Chinese President Xi Jinping, who was considered to be the most important guest at Davos, defended globalization. Trump’s messages this year, therefore, were expected to show whether the U.S. and China continued to have competing visions on the future of global trade, capital flows and economic integration. Many hoped that Trump’s visit to Davos as a guest of the World Economic Forum would give signs of opening new horizons for the world economy.
This year’s theme at Davos was identified as “creating a shared future in a fractured world.” It is said that French President Emmanuel Macron has been influential in persuading both the organizers to invite Trump and the latter to participate in the World Economic Forum this year.
Trump’s main arguments on global trade, so far, have been interpreted as the prelude to a new wave of protectionism. In Davos, there were signs that he had a softer approach to what he contributed in 2017 to the emergence of a “fractured world.” He continued to stress on his “America first” campaign slogan but freshened it up with the caveat “that it does not mean America alone.”
In one of his interviews, Trump even signaled that the U.S. could consider rejoining the Paris Climate Accord, if the conditions were revised to be in favor of the U.S. Interestingly, he underlined that he would do so because he liked Macron. It is good to know that world politics could be affected by personal empathy of world leaders to one another.
Trump does not feel the same empathy to some other leaders or countries. Although he did not choose to name, it is apparent that China is at the top of this list. He complained from “predatory” trading, intellectual theft and unfair trade practices as serious challenges to world economy, without forming any doubt among the audience that he was referring to China.
In 2017, in spite of the suspended or cancelled trade deals by the U.S., the global economic performance has been remarkably upswing. The International Monetary Fund (IMF) forecasts that the pace of growth in 2017 will be around 4.2 percent, which is almost double the rate of 2.4 percent in 2016. That is mainly due to a surge in global trade in goods and services. The World Trade Organization (WTO) also confirmed that in the last year restrictive measures in global trade were reduced.
The EU has also concluded trade deals with Canada and Japan. China, on the other hand, is expanding its integration with the world economy by means of its ambitious project labeled “One Belt One Road,” which will facilitate its trade particularly with Europe.
There is no doubt that both the U.S. and China are trying to increase their economic and political influence across the world. Apparently, they try to affect the world order in their favor, too. From Trump’s point of view, Chinese exports into the U.S. may require more careful monitoring. It is also important to remind, however, that China offers inexpensive manufacturing of many high-cost items produced in the U.S. Furthermore, the Chinese Central Bank is in command of more than $3 trillion, and close to half of this amount consists of U.S. Treasury bonds.
It may be true that there are trade imbalances between the U.S. and China and that it is in favor of China. The remedy, however, does not appear to be a trade war which carries the risk to destabilize world financial markets. In Davos, Trump underlined the importance of “reciprocal bilateral trade deals” and also signaled sympathy toward the idea of renewed multilateral talks. Let us hope that America will increase its efforts to contribute to our shared future and avoid further fracturing of the world.