“Make America Great Again!” is the slogan that got Trump voted in. His view of a great America involved deporting illegal immigrants and building a wall on the Mexican border. As the process of re-negotiating NAFTA takes place, Trump has already warned that he might terminate NAFTA altogether. And he continues to look with askance at countries with which the U.S. has a negative balance, aka Mexico and China.
Anti-Brexit David Cameron resigned and was replaced by Theresa May after the referendum that declared that UK wants an identity separate from that of the European Union. Frexit (French exit), Nexit (Netherlands exit), Italeave (Italy leave) and Auxit or Oexit (Austria exit) have been bandied about by fringe parties at least, if not the populace. And since Brexit, these parties have increased their efforts towards call to action.
On one hand we have One Belt One Road (OBOR), with CPEC being a vital part of it. On the other we have the widening trade deficit with calls to Pakistan to renegotiate trade agreements with “friendly” countries. No country is a bigger “friend” to Pakistan than China and with no country does Pakistan have as significant a trade deficit as with China.
Pakistan Business Council, a strong proponent of opening of trade with the caveat of a level playing field is singing a more “Pakistan first” tune. While regional trade was top of the list on its National Economic Agenda in 2011, it was dropped altogether in 2017. In a broader perspective, no one is arguing about lower tariffs and more open trade any more.
Call it anti-globalism, call it nationalism, call it protectionism, the trend on the rise is to protect one’s identity, one’s nationality, one’s country. Historically, this is a stance that developed and developing economies return to as trade slides and investments dip. Global recession goes hand in hand with the wave of protectionism.
On the skirts of the Great Depression in the 1930s came the tariff war. It was then that GATT and later WTO was set up to open up international trade barriers. Regionalism and trade blocs sprung up next with neighbours increasing volume of trade.
Since that time, agreements impacting trade seem to keep getting bigger. OBOR involves 60 countries. Transatlantic Free Trade Agreement (TAFTA) involved Europe and North America. The African Union consists of 55 countries. But bigger does not necessarily mean better.
In a strong reaction to harmonizing of economies and identities, nationalism and protectionism have risen as part of the global cycle of boom and bust. When economies boom, the world is a friend and calls are made to open trade. As countries face economic crisis, protectionism rises.
Pakistan is part of these contradictory trends. While rising imports evoke signal more protectionist policies, CPEC is set to increase world trade through OBOR. Amidst the mega regional agreements and spiraling-out-of-hand-imports, Pakistan has to find the advantageous middle ground that will allow it to curtail its trade deficit without spooking away flow of capital.
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