Can Japan and the European Union together save the world trade order from destruction at the hands of Donald Trump, who seems intent on wrecking it in pursuit of America’s national interest? Their recent agreement to sign what would be the world’s biggest trade deal to date might appear to suggest so.
But the truth is that attempts by Japan’s Prime Minister Shinzo Abe, European Commission president Jean-Claude Juncker and European Council president Donald Tusk to present themselves as champions of multilateral trade are really little more than political posturing in the face of deeper challenges to the global economic order.
Their agreement to create a trade pact covering around one-third of global gross domestic product certainly sounds enlightened at a time when, by contrast, Trump has pulled the US out of the Trans-Pacific Partnership (TPP) and is threatening to walk away from the North American Free Trade Agreement (Nafta).
Abe, meanwhile has managed to keep a scaled-down version of the TPP on the road among 11 of the original dozen members. This plus the Japan-EU agreement makes the Japanese leader look good at a time when China’s President Xi Jinping is also billing himself as a champion of free trade.
By comparison, Trump’s attempts to restore “balance” in US trade by levying tariffs on imports from key trading partners appear crude, inward-looking and autocratic. However, the global trade system was in trouble even before the US president weighed in.
Trade has been used increasingly as a strategic weapon in recent years, not least in Asia where the TPP, for example, was based on bringing together countries that subscribed to similar views on how their economic and political systems should be organised, rather than on purely trade ends.
Increasing trade within and between regional blocs has also come at the cost of unemployment for certain groups of workers in advanced economies, thus contributing to income inequality and social stresses. In turn, this is helping to foster popular resentment against free markets.