Author: The Hon. Andrew Robb AO
Publication: The Financial Review

President Trump has taken the world back to the 1930’s where depression, unemployment and growing global conflict was turbo charged by the adoption of protectionist policies across the developed world.

As a consequence, the global depression deepened national dis-trust, saw the evaporation of hope and resulted in World War II.

Sadly, President Trump has ignored the lessons of the subsequent post war global reformation, admirably led by the United States, which has created a stunning increase in global prosperity over much of the last 70 years, due entirely to the evolution of society in the direction of freedom, and the institutions and values that support a free and market-based community.

These free, market-based communities fostered globalisation which then saw the steady emergence of millions of interconnected global supply chains. These drove growth and prosperity and promoted peaceful co-existence across the globe – more so than in any period in the history of the world.

The globalisation has been responsible for billions of people being lifted out of poverty.

Much of this globalisation was in many ways instigated by the West, led by the United States, based on three pillars:

  • A common set of trading and investment rules;

  • Acceptance of the law of comparative advantage; and

  • Open borders, involving removal of protection.

Absurdly, under the direction of the President of the United States, these proven foundations of prosperity and peaceful co-existence, are under threat and face the biggest challenge since World War II.

We are seeing much of the West closing up and regressing to massive subsidies, tariffs and non-tariff barriers.

This has accelerated greatly because President Trump has violated all of these three fundamental foundations of prosperity and peace.

Yet, ironically the biggest beneficiary, by far, of opening markets over the last 70 years, under the leadership of the US, has been the Unites States; to assert otherwise is to be totally disingenuous.

How can President Trump plead “unfairness, currency manipulation and trade barriers” when the highest living standards in the world, by a country mile, exist in the United States. Sure, there are serious inequities in the United States, but it is a problem of their own making, not ours.

Furthermore, 100% of exports to Australia from the United States face zero tariffs (as does 100% of exports from China) because of bi-lateral Free Trade Agreements. As such, Trump’s tariffs against Australia are illegal, as were China’s sanctions.

Secondly, the privilege the United States enjoys having the world’s dominant reserve currency – which is not solely determined by a country’s GDP or trade volume, but by comprehensive national strength, education, research and development, governance, legal infrastructure, military powers, diplomatic influence and openness to the global economy – confers huge advantages on the United States.

As people around the world seek to protect the value of their savings, especially in times of any global instability, investment monies flow into the home of the world’s reserve currency in the United States. This leads to billions of dollars flooding into the US from over 200 countries.

This provides the capital for US companies, and US citizens, to purchase imports from around the world, and in the process has a profound and continuous impact on increasing the trade deficit of the US against so many countries.

In other words, the US trade deficit is in large part self-inflicted because of the great privilege and opportunity the United States enjoys by having the world’s reserve currency.

You can’t tell me that President Trump doesn’t understand such a fundamental issue – if he doesn’t, woe is the world!

As such, the President’s “woe-is-me is a total charade”. It is pure politics.

The President has very successfully promoted rising populism, growing isolation and nationalism, accelerating de-globalisation and protection, all under the pre-test of protecting economic security, where economic interdependence is framed as a liability.

The world is once again at a crossroad.

The President’s emerging populist ideology has no sustainable framework; it is a vehicle for expressing concern about the pace and direction of change, and current policies, but while being destructive it offers no effective alternatives.

Such populist ideologies offer short-term satisfaction by delivering a sense of revenge, but the inevitable major uncertainty in international politics stymies global investment, closes millions of important supply chains, curtails economic growth and innovation and increases the fears and apprehension of the general population.

History shows that this promotes authoritarianism and undermines hard won freedoms, democracy and happiness, with the large and strong doing what they will, and the smaller and weak suffering what they must.

President Trump should be very mindful of all this as he unilaterally traverses the globe with his tariff led campaign of revenge, entitlement and coercion.

America does not become greater through making allies into supplicants. We are a sovereign nation not to be bullied and intimidated.

We cannot negotiate with this man – he is just a wrecking ball.