Abstract

The global economic and political order that was created in the aftermath of World War II is under attack by President Trump.  That order has been of enormous benefit to the entire world.  The first half of the twentieth century was one of the worst:  two world wars and a Great Depression.  Though the second half has not been without conflict, there have not been the great conflagrations that marked the previous half century.  The era of colonialism was brought to an end, as hundreds of millions could once against determine their own destiny.  And while there have been economic fluctuations, none of the downturns has come anywhere near that of the Great Depression.  Hundreds of millions were moved out of poverty—500 million in China alone.  Parts of the world that had been mired in stagnation and poverty for centuries saw unprecedented growth. 

The international institutions and arrangements that have been created the last seventy years have, I believe, played an important role in these successes. These include the UN, the IMF, the World Bank, the regional development banks, and GATT and its successor institution, WTO.  None of these are perfect.  Indeed, in many of my books I have criticized them—as not democratic enough, too dominated by the US and other advanced countries, too influenced by special interests and particular ideologies.  But I criticized them from the perspective not of walking away from globalization, but from that of making it work better, to the betterment of all individuals around the world. 

Seemingly, President Trump is arguing for a new era of protectionism.  I say seemingly, because there is a lack of consistency in his statements and some of those he has appointed.  But in his recent message to the US Congress, he reiterate the protectionist themes that dominated the election, and it would be wise for countries to orientate their policies around the possibility, or even likelihood, that he will, to at least a certain extent, carry out his promises.  These measures include a tariff of some 35% against China, a renegotiation of NAFTA, and a tariff against Mexico of some 20%. 

The world is lucky:  it has in place an effective set of international institutions.  Some would argue that without the US, it would have been difficult to create these institutions.  Doing so required a global public spirit that is not always present—the times in which most of the institutions were created were unique, the moment of solidarity as World War II was being brought to a close, or that following the fall of the Iron Curtain.  But these institutions have taken on a life of their own.  We have created a system of global governance without global government.  These institutions can help the world maintain an open yet regulated trading and financial system, even if the US withdraws into its shell, or decides to take actions which violate its obligations. 

In the following pages, after describing briefly the scope for action of the President, I suggest how countries, such as China could and should respond.