Trade In The Era Of De-Globalisation – Analysis


Trump promises to reform the post World War II global order. Neelam Deo discusses how India can benefit from the changes Trump will cause in the existing trade structure as well as the transformation of trade networks in Europe after Brexit.

By Neelam Deo*

The appointment of Donald Trump as the 45th President of the United States is a turning point in world affairs. This will not only bring to an end the post-World War- II global governing order, it will also reconfigure the might of countries like India in trade relations for years ahead. India would do well to examine opportunities to reform trade agreements in its favour as the tectonic plates of the current global order shift.

During his campaign, Donald Trump vowed to ‘Make America Great Again’, touting the belief that the U.S. has lost its pole position among nations, economically and politically. Granted, 70 years since Western dominance was cemented through the establishment of the United Nations and Bretton Woods institutions, it is now Asian countries that occupy a central role in the global economy. China is now the world’s second-largest economy and Japan the third.

India is the world’s sixth-largest economy, and the fastest growing. This economic expansion has led to a profound shift in political prominence. The Indian government remains committed to global economic integration, and its influence is growing.

The U.S. may remain the most powerful country in the world with the largest economy, an estimated GDP of $18.5 trillion in 2016, and in what counts most in today’s knowledge-driven world: a globally unmatched university and technology innovation ecosystem. But the gap with other countries has narrowed. For example, when the People’s Republic of China emerged in 1949, its economy was a tenth of the U.S.’. Today, it is roughly $11.5 trillion in nominal terms and has already exceeded the U.S. in PPP terms. India’s GDP was $23 billion in 1949, whereas it was an estimated $2.095 trillion at the end of 2015.

Trump, who calls himself the ‘disrupter-in-chief’, has threatened to shatter the established order, both within the U.S. and globally, in order to halt the ravages of globalisation on the U.S. economy. In order to keep American jobs in America, Trump has pulled the U.S. out of the Trans Pacific Partnership and announced on numerous occasions that he will place high tariffs (35-45 per cent) on imports from China and Mexico, reject the North American Free Trade Agreement and maybe even leave the World Trade Organisation. This kind of protectionism could start a trade war once other countries retaliate. The old trade agreements, which traditionally favoured developed nations could have lasted longer had not Brexit commenced the unravelling of the EU Single Market and revived a preference for bilateral trade agreements. Now their demise seems more imminent.

This comes at a time when the Indian government has also recognised that numerous bilateral, regional and multilateral trade agreements focused on goods rather than services, resulting in a continuing deficit in India’s current account.

The Trump administration’s preference for bilateral trade deals, and its obsession with domestic manufacturing, could be the opportunity for India to demand that trade in services be incorporated into the new arrangements. Equally, Trump’s demand to negotiate the price at which the U.S. procures drugs from pharmaceutical companies can be an opening for India to reopen discussions on IPR issues. These have been among the obstacles to more reasonable health care costs in the U.S. and an irritant in Indo-U.S. relations.

With the expected changes to the global trade framework in the wake of Trump’s election and Brexit, countries like India, which had no influence in 1949, are now considerable powers in their own right and in a better position to ensure that the new trade frameworks are less skewed in favour of the old powers. The geo-economic world order could be disrupted sooner than expected.

About the author:
*Neelam Deo
is a co-founder of Gateway House – the Indian Council on Global Relations. The Gateway of India Geoeconomic Dialogue, their flagship annual event, is being held on February 13-14 in Mumbai.

Gateway House: Indian Council on Global Relations, this article was originally published in DNA on the 3rd of February 2017, and has been republished with permission.

Gateway House

Gateway House: Indian Council on Global Relations is a foreign policy think-tank established in 2009, to engage India’s leading corporations and individuals in debate and scholarship on India’s foreign policy and its role in global affairs. Gateway House’s studies programme will be at the heart of the institute’s scholarship, with original research by global and local scholars in Geo-economics, Geopolitics, Foreign Policy analysis, Bilateral relations, Democracy and nation-building, National security, ethnic conflict and terrorism, Science, technology and innovation, and Energy and Environment.

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