Inside Trump’s trade bluster

Sept. 2018 Trum Merkel 3

German Chancellor Angela Merkel faces off against Trump during trade discussions at the June G-7 conference in Quebec.

By JEFF MACKLER

Analyzing President Donald Trump’s excoriating traditional U.S. trading partners at the Group of Seven’s (G7) May meeting in Quebec, Marxist economist Michael Roberts commented: “What all these Trumpist antics revealed is that the period of the Great Moderation and globalization, from the 1980s to 2007, when all major capitalist states worked together to benefit capital in all countries (to varying degrees) is over. The Great Recession of 2007-8 and the ensuing Long Depression since 2009 has changed the economic picture.

“In a stagnating world capitalist economy, where productivity growth is low, world trade growth has subsided and the profitability of capital has not recovered, cooperation has been replaced by increasingly vicious competition—the thieves have fallen out.”

The “thieves” here include the most powerful capitalist nations on earth. German Chancellor Angela Merkel, Europe’s most influential leader and representative of its most powerful economy, concluded similarly. The New York Times summarized Merkel’s views as follows: “The United States of President Trump is not the reliable partner her country and the Continent have automatically depended on in the past. Clearly disappointed with Mr. Trump’s positions on NATO, Russia, climate change and trade, Ms. Merkel said that traditional alliances were no longer as steadfast as they once were and that Europe should pay more attention to its own interests ‘and really take our fate into our own hands.’”

We should note here that Merkel’s May 7, 2017, remarks were made a year before Trump’s Quebec outburst, an indication that the June 2018 Quebec G7 fireworks were far from a first in the ongoing tensions between ever-competing world capitalist entities.

Merkel continued, “The times in which we could rely fully on others—they are somewhat over.”

Two additional paragraphs from Robert’s assessment make the point that, notwithstanding Trump’s disgusting reactionary hyperbole on an ever-broadening range of issues, the antics of a “rogue” president are subordinate to the reality of the deepening world capitalist crisis. The margins for long-term resolution via the major international institutions that previously served to at least partially mitigate major disputes have narrowed.

U.S. elites in overall agreement with Trump

Trump’s seeming idiocies include withdrawal from the Iran nuclear agreement, withdrawal from the nearly worthless 21 Paris climate accords, his ultra-reactionary racist immigration policies—though similar to Obama’s in separating detained/imprisoned parents from their children—praise for the Supreme Court’s approval of the “constitutional” right (freedom of religion?) of a baker to refuse to prepare a wedding cake for an LGBTQI couple, a proposal/suggestion to his National Security Council to increase the U.S. nuclear weapons stock “100 fold”—also similar to Obama’s proposals to “modernize” the U.S. nuclear weapons stock—and his most recent order to establish a sixth arm of the Pentagon( the “Space Force”) to militarily “defend” U.S. “interests” in outer space. It can be demonstrated, however, that on virtually every front, his twisted politics have a rational core—that is, to advance what he perceives as the policies required to protect a weakened U.S. capitalism from its competitors abroad, while advancing their interests against U.S. workers at home.

Obviously, he is an embarrassment to the majority of the ruling-class elite. Virtually every major corporate newspaper and media outlet in the country daily pillories his too overtly right-wing tweets and pronouncements, but the essence of his direction, as opposed to the form, is not too dissimilar from mainstream ruling-class views.

Robert’s summary is quite apt: “At the [G7] meeting Trump slammed into the other leaders, claiming that their governments were imposing ‘unfair’ trading rules on US products and they needed to reduce their surpluses on trade with the US. The other leaders had already responded to the US tariff measures with planned reciprocal tariffs on key US exports and now they replied to Trump’s attacks with arguments and evidence that, on the contrary, it was the US that restricted foreign imported goods and services.”

Roberts concludes dramatically: “And thus the trade war has begun—a war that the major capitalist economies have not engaged in since the 1930s depression and which was supposed to be resolved by international agreements like General Agreement on Tariffs and Trade (GATT), its successor, the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) in the post-war period. Trump has called the WTO the worst possible trade deal and NAFTA the next worst (for America).”

Rules governing the now fragile WTO

The WTO, established in 1995, today includes 164 nations. It was formed to resolve trade disputes via a system of binding arbitration wherein a seven-member panel, operating under established rules, has the final word. Over the past two decades, the U.S. has brought more disputes to the WTO than any other nation, winning, according to Trump administration figures, more than the global average. This is Trump’s way of stating that more often than not the U.S. has been the victim of unfair practices of its competitors.

In truth, the founding rules of the WTO, as we shall see, operate to the advantage of the U.S. and its previously associated great imperial partners. Partners no more in a world based on ever-increasing competition for ever-decreasing world markets, each player seeks to impose its own rules to the advantage of its own capitalist class.

But there is a “Catch 22” in the WTO’s “rules,” that is, a series of exceptions to this “free trade” agreement that allow for its violation for claimed reasons including environmental protection, national security. Today, Trump has repeatedly cited the WTO’s “national security” exceptions to impose punitive tariffs on its leading competitors.

With this in mind, the WTO may be in danger of collapse. During this month, September 2018, four of the seven arbitration panelists are scheduled to be replaced, leaving but three—the bare minimum needed to issue rulings on trade disputes. If the Trump administration continues to refuse to reach agreement as to who will replace these termed-out arbitrators, in just over a year’s time only one will be left, a number insufficient, according to WTO rules, to operate.

Needless to say, the choice of arbitrators is crucial. In the multi-billion dollar game of international trade agreements, there are no neutrals. The top dogs want their “expert” arbitrators in place to decide such disputes. A number of Trump’s internationally prominent critics have not been silent on this matter. The Aug. 13, 2018, New York Times made this clear as follows:

• Jennifer Hillman, professor at Georgetown Law Center: “It’s putting tremendous stress on the system. There are those who would go so far to say that the U.S. has almost effectively withdrawn from the WTO by engaging in all the unilateral tariffs we’ve seen.”

• Rufus Yerxa, president of the National Foreign Trade Council and a former deputy director general of the World Trade Organization: “If the United States has rewritten the rules of the WTO system to say you can do anything you want if it’s in your national security interests, be prepared for every country in the world to come up with a new definition of what is its critical national security interest.”

• Roberto Azevêdo, current WTO Director General, referring to the WTO challenges to Trump’s aluminum and steel tariffs: “Whatever the outcome—regardless of how objective, balanced and unbiased it is—somebody is going to be very unhappy.”

• Marc Vanheukelen, European Union ambassador to the WTO, speaking to a July meeting of the organization’s 164 members at its Geneva headquarters: “In such a world, where power has replaced rules as the basis for trade relations, it will be the smallest and poorest that will be hurt the most.”

The Times noted that “Mr. Vanheukelen was among dozens of members who stood to complain that the WTO was on the verge of becoming dysfunctional. Many blame the Trump administration for encouraging other countries to flout long-established rules of the game and introducing a confrontational tone to an organization that has traditionally functioned by consensus and good will.”

China and erosion of “trade consensus”

Today, in the context of a crisis-ridden world capitalist economy, “consensus” and “good will” have been cast aside, with the ruling classes of all declining nations, including the most powerful, finding themselves ever more locked into the deadly competition for markets and profits, ever maneuvering to stay afloat at the expense of their capitalist adversaries and always at the expense of its own workers.Workers are seen inside a Foxconn factory in the township of Longhua in the southern Guangdong province

It is doubtful that any section of the U.S. ruling class involved in steel and aluminum production objected to Trump’s imposing tariffs on competitive foreign imports for these commodities, or, for that matter, on any others where U.S. corporations lag behind foreign competitors. What irked the anti-Trump wing of the U.S. ruling class was less Trump’s defense of one or another key section of U.S. capital and qualitatively more the fact that he failed to do so in the “civilized” framework of the WTO, where they believe that the United States still retains the upper hand.

But the relationship of forces in the world capitalist order, and thus in the WTO, has undergone some important changes over the past decades. China is a classic example. China’s WTO entry in 2001 was conditioned on its respecting foreign corporations’ intellectual property rights—that is, agreeing not to compete in the future when its own primitive factories could, in time, be converted to state-of-the-art technologies, which the U.S. today insists are protected by U.S. patents. These “inviolable” intellectual property rights, as with the U.S.’s claimed national security interests, are at the center of Trump’s steaming rhetoric against Chinese exports to the U.S.

For close to two decades and to this date, the level of Chinese labor productivity has lagged far behind that of most capitalist nations. But this is rapidly changing. With regard to an increasing number of key commodities traded on world markets, including major machine tools for industrial production and high technology hardware, China’s productivity levels are rapidly increasing—ever more closing the gap and thus posing a threat to U.S. corporate interests.

In the imperialist mindset, any nation seeking to introduce modern and competitive technology is considered a threat. Trump today, and the broader sections of the U.S. elite for the past decades, had always considered China the perfect solution to the growing incapacity of the United States to effectively compete on world markets.

China offered a virtually unlimited supply of cheap labor for hire to U.S. and foreign corporations more generally. Not too long ago, for example, teenage women were housed permanently in dormitory factories and paid six cents per hour. These labor conditions, as well as tax-free guarantees and other perks sent profit-declining U.S. manufacturers there to boost their prospects. Today, the average Chinese wage is closer to $2.50 per hour, a labor price that has led some of the capitalists to leave for lower wage nations like Vietnam, Indonesia, and Thailand. The paradise of near-slave labor in China has given way today to the Chinese ruling class’s effort to create its own “middle-class” market to consume China’s cheap commodities, the same market that U.S. capitalists hoped to dominate.

We need only add here for future edification that in the course of creating this internal market, China’s income disparity has soared to be among the greatest on earth, with the vast proportion of its new wealth going to the capitalist elite and the new middle class of perhaps 300 million people, while the remaining 1.1 billion languish in overall poverty or close to it.

Trump’s denunciation of China for “stealing” U.S. technology was followed by his administration’s widely publicized list of proposed tariffs on Chinese imports. The list includes 1102 categories of goods, all focused on high-tech industries like nuclear reactors, aircraft engine parts, ball bearings, bulldozers, motorcycles, and industrial and agricultural machinery. These are precisely the categories in which China has employed the advanced robotics and related super-modern production technologies—that is, intellectual property rights.

Chinese capitalists long ago estimated that their agreement to subordinate their economies to U.S. and world imperialist investment in order to secure the necessary initial foreign investment was temporary and would, in time, allow them to participate on world markets as serious competitors. That time has come—hence the Trump countermeasure tariffs aimed at perpetually keeping China as a second-rate player. Obviously, neither China nor the European Union nations, nor any other “self-respecting” big time capitalist entrepreneur, intend to remain permanent second-rate players.

North American Free Trade Agreement

NAFTA is another example of how trade agreements are arrived at. It emerged as the joint product of essentially the entire U.S. ruling class. Both NAFTA and the U.S. congressional vote to admit China to the WTO were accomplished under the aegis of the Bill Clinton Democratic Party administration. But both were opposed, for the sake of appearances only, by the then House majority Democrats, who (falsely) claimed to be interested in protecting U.S. workers against cheap foreign labor. Similarly, in the case of China’s admission to the WTO the vote in favor included only 74 Democrats joined by 164 Republicans, the latter a congressional minority at that time, but joining with the needed Democrats to accomplish an overall ruling-class objective.

Despite its “free trade” imprimatur, NAFTA incorporated a myriad of negotiated protectionist measures aimed at defending the weaker sections of U.S. capital. It was the product, as with all such trade agreements, of the broadest deliberations between U.S. capitalists on the one hand, and similar negotiations with Mexican and Canadian elites on the other, with the latter two compelled to make concessions to the stronger U.S. capitalists in order to remain players—but lesser players to be sure.

Ruling class agrees with Trump’s policies

In truth, there are no fundamental disagreements among the U.S. elites regarding trade. As a generalization, every sector has long become accustomed to behind-the-scenes deals wherein its particular interests are protected at the expense of foreign competitors. Undoubtedly, the lines sometimes become blurred when the “foreign competitors” are in reality U.S. corporations. But this too is usually factored in during the course of the usual secretive dealing that marks top-level decision-making.

There were near-zero objections, for example, when a bipartisan Congress gifted $1.5 trillion in tax relief to the corporations and banks of the ruling rich, a fact that in and of itself enabled bourgeois economic analysts to post and predict some figures that indicated a modest, but one-time uptick in otherwise stagnant GDP figures.

Similarly, there were few, if any, objections when Congress boosted annual military spending by an unprecedented $80 billion, an amount exceeding even Trump’s initial request. We note here in passing that the $80 billion increase exceeds Russia’s total annual military budget of $50 billion—as compared to the U.S.’s budgeted $1 trillion for overall war purposes! On June 21, 2018, the U.S. Senate, by a vote of 85-15, approved this military budget. The few “doves” that voted “no,” like Bernie Sanders, Elizabeth Warren, and “libertarian” Rand Paul, did so likely to preserve their future political “peace candidate” credentials.

Working people have no stake in trade wars

The recent joint statement by Socialist Action (U.S.) and our sister party Socialist Action/Ligue pour l’action socialiste in the Canadian state summarizes our views well:

“Global capitalist competition [including the current trade wars] is a completely unavoidable aspect of the system of private profit. As competition results in new innovation and automation temporarily increases the rate of profit for the first innovators these gains are soon offset again by the rapid adoption of even newer technologies by competitors and the consequent resumption of the fall of profit rates.

“In their desperate struggle to fight the falling rate of profit, (or, as Marx said, “the law of the tendency of the rate of profit to fall), capitalists try to reduce costs by attacking trade unions and workers’ rights, by attacking wage and benefit levels, by attacking general social benefits such as education, medical, and pension benefits, by refusing to accept responsibility for the massive environmental damage caused by cutthroat capitalist competition, and by transferring production to low-wage, unregulated areas both within and outside their own countries…

“The world’s working people have no interest in this potential world conflagration. In the end, when capitalists win, workers lose—a fundamental law of the capitalist system that has been verified time and again over the past decades and centuries. The common interest of workers lies in defending working people everywhere against all the onslaughts of capital. This means international solidarity on every front, from united worldwide efforts to organize workers into powerful unions to united opposition to capitalist wars and the capitalist destruction of the environment…

“There is no such thing as peaceful and/or regulated competition among capitalist nations. No self-respecting capitalist is in business to be the world’s “nice guy.” There are only winners and losers in this deadly game of production for private profit. Donald Trump simply tore the mask off the brute face of a predatory system in decline. Justin Trudeau plays the same game as Trump on the world scene and makes sure that everyone knows that Canadian capitalism can bare its own claws in the profit game.”

The most serious representatives of the U.S. ruling class would much prefer a more verbally tempered president, one like Obama, or even Hillary Clinton, who would seek the counsel of the leading ruling-class representatives—that is, of the traditional team of cabinet and other “advisers” who are less blatant in guaranteeing the real interests of the nation’s leading bankers, financiers, and corporate magnates.

That Trump has fired one after another of his advisors who are slightly less noxious and more cautious in their rhetoric, after each has counseled him to moderate his vitriol and embarrassing tone and tweets, is subordinate to the fact that no section of the ruling class, including their Democratic and Republican Party spokespersons, has broken with Trump on fundamental policies that favor the rich over the 99 percent.

Working people have no interest in the outcome of the upcoming “lesser-evil” electoral charade that is today being orchestrated to a fever pitch by the corporate media. A break with ruling-class politics is on the order of the day. The formation of an independent labor party based on a reinvigorated, democratic, and fighting union movement, in alliance with all the oppressed and exploited, would be a major step forward in challenging capitalism’s current dominance in the political and economic arenas.