The “bicycle theory of international trade” goes a little like this: think of trade as a bicycle; you keep peddling or you stop and if you keep peddling hard enough and get enough momentum, the rider (the government) can afford to step back once in a while just to keep minimum checks, but eventually the peddling has to keep going.
The theory was said to have been popularized by Fred Bergsten. Or Jagdish Bhagwati. Either way, it had been used to justify continued liberalization of trade despite possible burdens being suffered by poorer peoples as they absorb the dislocations that increased competition necessarily brings.
However, as Dani Rodrik points out, it is also being used by others to justify the continued freeing up of trade even though “further trade liberalization may not be an important priority for the world economy given how open it already is: you need to keep liberalizing, otherwise you risk giving up all the gains.”
Somehow, am reminded of the foregoing when thinking of the upcoming 10-13 December 2017 WTO Ministerial in Argentina. Much will be made of the meet, of the stakes for the global economy. But, in truth, does it really mean anything?
One immediate consideration is the lack of leadership with regard to international trade. I know some people eagerly look to China for that leadership but — short of something drastic occurring — it will not happen. Neither can the EU, plagued and confused as they are right now by their immigration and welfare policies, with the only intellectually stable country in terms of policy (the UK) opting out of the union.
No, at most, what the EU (or rather the exiting UK), along with Japan and South Korea, could do is serve as cheerleaders for trade while the United States makes up its mind. India (and perhaps Brazil) could continue in the role they’ve happily played so far: as ombudsman for the other big trading players.
Most of the opprobrium has been heaped on US president Donald Trump, for being “protectionist,” “isolationist,” or “anti-trade.” In truth, Mr. Trump simply verbalized what many Americans and what the US has always been generally: a domestically oriented country that just happens to see itself as a model for other countries. That it plays a role at all in the international scene is merely the accidental outflow of that latter belief.
Economic Policy Institute’s Jeff Faux confirms this: “The United States has always been a trading nation, but not a ‘free-trading’ nation. Until a quarter century ago trade policy — primarily the raising and lowering of tariffs — was an instrument of domestic economic development. As the US economy grew, so did its trade with the rest of the world. For the hundred years of America’s post — Civil War industrialization, America’s trade was in balance or in modest surplus, i.e., we paid for our imports with exports.”
The problem is thus not Mr. Trump, who has merely channeled the American ethos as to trade, but rather the hypocrisy of the cosmopolitan elite and of liberal politicians like former US president Barack Obama that (as Faux puts it) “cared more about its relationship with Wall Street and foreigners than with Americans whose lives were being wrecked by globalization.”
And Faux makes a significant point (citing Scott, Salas, and Campbell: Revisiting NAFTA: Still not Working for North America’s Workers, Economic Policy Institute Briefing Paper #173, September 2006): “Trade as a share of our economy was increasing way before NAFTA and will continue at a high level after TPP is officially rejected.”
Now consider the foregoing in relation to the upcoming Buenos Aires Ministerial. The 9th Ministerial in Bali did good, somewhat reviving sincere interest in trade and — more importantly — a tiny hope the Doha Round could go eventually get back on track. The 10th Ministerial in Nairobi quickly dashed any such notions, introducing new issues that are really more of a distraction and seemingly there to keep as many people to remain interested in the WTO.
The thing is that what one wants with regard to international trade — at this point in the WTO’s existence — is quality and not quantity of those interested in working with it.
So, instead of focusing on reviving the WTO’s primacy of place over that of regional trading blocs or free trade arrangements, one hears a lot of static regarding small and medium enterprises, gender equality, and even food security. All matters definitely taking away oxygen from the more crucial matters needed to be discussed at the Ministerial and are better off deliberated before domestic institutions of the individual members.
At this point, the US is right to examine its trade deficits or the discriminatory trade practices against it vis-à-vis individual countries, its unemployment levels, its growth, and competitiveness, rather than plunge itself into an international trade scene that is as confused as it has never been before.
And so should the Philippines.
Jemy Gatdula is a Senior Fellow of the Philippine Council for Foreign Relations and a Philippine Judicial Academy law lecturer for constitutional philosophy and jurisprudence.