By Pinak Ranjan Chakravarty
While speculation ran wild on how US President Donald Trump would translate his egregious campaign promises into action, no one was sure how the Trump administration would deal with important national and international issues.
He is slowly and surely revealing his hand.
Trump need no longer be considered a riddle wrapped up in an enigma. We are now getting a jolting glimpse of his policy roadmap. He issued 10 executive orders after assuming office – on sensitive issues ranging from immigration, the border wall, healthcare and trade.
Trump’s action on immigration controls has led to chaotic scenes at American airports, with confused officials blocking entry of travellers, subsequent to Trump signing an Executive Order (EO) to deny entry to travellers from designated countries in West Asia and North Africa, all majority Muslim countries.
The EO also introduced stringent and restrictive measures on admitting refugees, mostly from Muslim countries. Trump has also named Afghanistan, Pakistan and Saudi Arabia as countries whose citizens will face more rigorous vetting for issue of visa, because these countries have terrorist networks operating on their territories or support terrorist organisations.
There has been pushback from the American public, industry and courts. Hollywood, academia and IT majors like Google, Facebook, and Microsoft, have all criticised the EO. Demonstrators have poured out into the streets protesting against the new regulations.
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Several federal court judges have stayed the provisions of the EO that blocked entry to Green Card holders and travellers holding valid entry visas. This has eased the confusion, panic and chaos at airports.
International reaction has been adverse, though stray right wing groups in Europe and Australia have supported Trump’s move and demanded similar restrictions on Muslims trying to enter their countries.
Other Executive Actions
The executive actions taken by Trump since entering office are derived from the “Contract with the American Voter” blueprint, released last October, outlining Trump’s vision for his first 100 days in office.
So far, Trump has signed Executive Orders to construct the border wall with Mexico, speed up deportation of illegal aliens – promises he made repeatedly during his campaign.
These orders direct recruitment of extra personnel, thus creating more government jobs.
On economic and commercial issues, Trump has ordered a review of regulations that have a bearing on manufacturing licences, use of American-made steel in pipelines, speeding up environmental review of infrastructure projects, including gas and oil pipelines, freezing federal jobs, except for the military, and critical public safety positions.
Other mainly domestic related issues relate to the denial of federal funding for abortion, rolling back Obama’s healthcare programme and freezing the issue of any new regulations.
The Trans-Pacific Partnership (TPP) has been junked, and the USA has withdrawn from all negotiations and will not sign any deal.
Sparks are flying on trade issues and the border wall with Mexico.
Following a tweet by Trump, vowing to make Mexico pay for the border wall and saying that if the Mexican President was unwilling to pay, he would not meet him, the Mexican President was left with no choice and cancelled his scheduled visit to Washington, even while the Mexican Foreign Minister was in Washington to negotiate various issues.
Trump officials have hinted that a 20% import tax could be imposed to raise revenue for the wall. Analysts promptly pointed out that American importers of Mexican goods, who would have to pay this tax, will simply pass on the cost to the consumer. This is sure to fuel inflation and the American consumer will pay the price.
It did not take long for Trump officials to say that the import tax was only one of many options.
Is the chaos deliberate?
Is Trump trying to deliberately create chaos, uncertainty, and panic, with the purpose of making various countries jittery, so that his administration can negotiate new deals on trade and immigration?
Many believe that this could be part of his strategy. Renegotiating NAFTA and other trading arrangements will certainly put pressure on Canada and Mexico if the Trump administration demands concessions in pursuit of his “Buy American and hire American” objectives.
It is not clear at all how Trump will re-negotiate NAFTA, which has created an integrated North American market with almost zero tariffs across virtually all trade between Canada, Mexico and the USA over the last 22 years. Typically, exports from Mexico into the USA contain 40% American content.
Withdrawing from NAFTA will be huge jolt to the economies of all three countries, considering that Canada and Mexico are the top two markets for US exports. It is inconceivable that dismantling NAFTA will benefit the USA, when over $3 billion in trade takes place every day within NAFTA.
It is educative to remember that the Great Depression of the 1930s owes much to the “Smoot-Hawley” unilateral punitive tariff on imports, that virtually brought international trade to a halt, deepening and prolonging the Depression.
His China Policy
What Trump does with China will surely be the most awaited. If he goes after China, as promised during his campaign, it will surely churn up international trade even more.
Trump had also targetted Japan and Mexico, both countries with whom the USA runs large trade deficits. The largest trade deficit is with China, almost $320 billion. Any attempt to rein in this deficit by erecting a tariff wall will not only violate WTO regulations, but also lead to retaliatory measures.
If Trump pursues these protectionist policies, a global trade war will definitely follow, leading to a global recession. This result will affect adversely every country, including the USA, which will suffer cuts in GDP growth.
The scrapping of the TPP, widely regarded as the economic aspect of the ‘pivot’ or ‘rebalance’ towards the Asia-Pacific, has left the trade arena open for China to exploit.
How all this can affect India
The Regional Comprehensive Economic Partnership (RCEP), comprising 16 Asia-Pacific nations, the 10 ASEAN countries plus China, India, Japan, South Korea, New Zealand and Australia, may now get a boost. (India and China were not in the TPP. The USA is excluded from the RCEP.)
If this mega trade deal comes to fruition, it would be the largest trading bloc in the world, encompassing 3.4 billion people, a cumulative GDP of $17 trillion, with 40% share of global trade.
Negotiations on RCEP have been meandering along for over three years. With China’s huge investment corpus and commitment to spend billions of dollars in ‘One Belt, One Road’ and the Silk Route, the RCEP will become much more attractive to Asian and European countries.
China is already dumping its goods in the region, and India is struggling with a huge adverse trade imbalance with China, while it faces non-tariff barriers for the entry of its products and services into the Chinese market.
India is seeking greater access in the services sector, and is reluctant to lower tariffs to protect its own industries.
Though India is not on Trump’s radar screen, in so far as adverse trade imbalance is concerned, in the services sector, India will also be targetted in the IT and BPO sectors, which constitute a huge chunk of India’s services export to the USA.
The mitigating factor will be the upswing in Indo-US relations, that has gathered momentum in the last decade. The powerful military industrial lobby in the USA can be a balancer, as India’s defence requirements increase rapidly. The USA has emerged as India’s largest defence partner over the last decade.
Can Corporate Lobby clip Trump’s wings?
Many believe that the American corporate lobby and bureaucracy will mitigate Trump’s adventurism, because his economic goals cannot be achieved if Trump antagonises this powerful segment of the US.
Whatever the fallout of it, we are entering a phase in global politics wherein the established post-World War II global order, as we have known, is undergoing a huge churning.
We may be facing a seminal change on how the new global security and economic order will evolve.
This article was first published in Catch News.