Experts say Republican candidate’s anti-free trade message clear indicator of working class frustration.
After Britain’s shock vote to quit the E.U., Donald Trump’s victory is a new powerful sign of a popular backlash against the drive for globalization and more free trade.
The maverick Republican tycoon propelled himself into the presidency of the world’s largest economy with an anti-free trade message to undo the harm such pacts had caused American workers. It resonated with many U.S. voters who may not have benefited from the start of a pickup in the U.S. economy, as did Trump’s promise to renegotiate the trade deals and win back jobs.
His victory comes at a key time for several free trade deals, including the sweeping Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and E.U. “The global economy is struggling. Those who are suffering are left with impressions that globalization is to blame,” said Seiji Katsurahata, senior economist at Dai-ichi Life Research Institute in Tokyo.
French economist Thomas Piketty, who shot to prominence with a book arguing that wealth inequality was growing as investors gained better returns than overall economic growth, has a similar view. “Working classes in particular believe that they are paying the costs of globalization,” he said.
The disillusionment may have been reinforced by trade deals being negotiated behind closed doors, leaving people feeling vulnerable and sending thousands onto European streets to protest.
“I think that there is the perception, and I think it’s correct, that these trade agreements were basically designed for and by corporate interests,” Nobel award-winning economist Joseph Stiglitz said during a recent visit to Paris. The international push to increasingly tear down barriers to free trade has exasperated many in industrial countries as they lose their jobs or see their wages stagnate.
To the surprise of many political leaders, anger over immigration and other facets of globalization prompted British voters in June to opt to leave the European Union. But, with the expansion of free trade seen as a key driver of global economic growth since the end of World War II, the International Monetary Fund last month urged world leaders to make the case for continued globalization.
“We know that globalization has worked over the years, that it has delivered great benefits to many people,” said IMF chief Christine Lagarde. “We don’t think it’s time to push against it.”
However U.S. voters did push back. Democratic presidential candidate Hillary Clinton had even tried to ride the wave of popular anger against globalization by coming out against the Trans-Pacific Partnership (TPP) free trade deal she had previously supported.
Trump’s victory comes at a critical moment for that trade deal between 12 Asia-Pacific countries, which has been signed but has yet to be ratified by lawmakers in the U.S. It also pulls the rug from under the negotiations on the Transatlantic Trade and Investment Partnership (TTIP) between the E.U. and U.S.
“TPP and TTIP are dead,” said Paul Ashworth, chief U.S. economist at Capital Economics. Trump has also pledged to renegotiate NAFTA, the free trade deal between the United States, Canada and Mexico.
Berenberg Bank economist Holger Schmieding said “the election victory of Trump could exacerbate what, so far, has been a rather restrained trend towards more protectionism in the Western world. The result will be slower potential growth.”
The anti-free trade wave could next crash on France and Germany, where voters go to the polls next year. Paris sent to Berlin on Tuesday a series of proposals to make trade deals more democratic and transparent.
“There will be no European future if there is not extremely robust democracy,” said France’s junior trade minister Matthias Fekl. “Europe is threatened today by very dangerous internal temptations and tendencies,” he said in a reference to far-right movements in several countries that have tapped into anger over the deep scars left on many European economies as industries shut and move elsewhere.
Markets will be keenly waiting for indications of whether Trump intends to follow through on his pledges. “On trade, we expect Trump to start by labeling China a currency manipulator and to bring a number of perceived disputes to the” World Trade Organization, said Ashworth at Capital Economics. “He will also insist on renegotiating NAFTA, but it is hard to know what he hopes to achieve.”