With deepening China, America standoff on tariffs and Trump’s naked attack on Merkel’s open-door immigration policy amidst growing anger in US on his family separation immigration policy the Secretary General of NATO has called for increase in defense spending as demands for improving Europe’s economy grow louder ahead of the upcoming EU Summit in Brussels.
Beijing has promised reciprocal steps in response to Trump’s statement of imposing tariffs on $200bn Chinese goods. If the tit-for-tat policy continues, it is going to turn into a Sino-US trade war. It could have negative consequences for the two countries and rest of the world in economy, trade, defence and foreign policy. Without overcoming the underlying causes, Trump cannot bring long-term benefit to America and its people and rest of the world as major world economy.
Trump blames previous US governments for huge trade deficits with China. In 2017 alone, it was $375bn. But what he fails to realize is that for three decades, US manufacturers have “offshored” productions to China to benefit from lower labor costs. These US manufacturers have avoided US taxes on their huge profits when they sold the goods back home. The same is true for multinationals including US firms in Mexico, Canada and the EU.
No doubt trade deficit is a serious issue. It is linked to lost jobs and revenue that is used for public welfare. Trump is using negative trade imbalance to play politics with countries, treaties and global peace. He blamed Trudeau for not agreeing to renegotiating bilateral agreements every five-year (sunset clause) and in turn refused to sign G-7 communiqué.
The fact of the matter is multinationals, business tycoons, politicians, mafias are using offshore havens, governments, privatization policies, financial sector and legal covers to make billions of dollars in profits, avoid taxes and skim money from public projects in poorer countries, businesses and hiding mega corruption money.
It is more politics than protectionism. Trump has been criticizing multinationals including Amazon publicly for stealing jobs, automation, and not paying fair taxes. But it is just to appease his base because he has not used the US tax authorities, academics, experts, international setups including the EU, the WTO, G-7 or OECD to work out a unified tax policy for multinationals.
To cut trade imbalance, Trump should have de-incentivized overseas investments. It would have created more jobs, revived manufacturing, improved workers rights and in turn generated more tax revenue. Instead, Trump gave huge tax breaks to big businesses forcing the federal and state governments to cut budgets, withdraw healthcare and social welfare of millions of Americans including children and all those who are already struggling to get education, survive in low paid jobs, working on hourly wages and don’t have health insurance.
The reports of coalition of “like minded leaders” in Europe on immigration are unfortunate. If EU plans for migrant processing centers in North Africa are discussed in Brussels with €36bn refugee pushback plan mired in gross human rights abuses including rapes, it will be another shame. Merkel accepted refugees to overcome manpower shortage, support economy and country’s exports. In 2017, German exports exceeded $1.6 trillion. Trump is simply using immigration to undermine Germany’s trade interests.
Reports and surveys in Europe have shown that immigration has built nations. The politicians and the EU should find a unified immigration policy to meet Europe’s needs. The people of Europe will have to recognize America as their competitor and take charge of their future by forcing their politicians and the EU to stand-up to protect their economic, trade and job interests.
The leaders of Europe should end austerity, bring mega investment plans, give productivity targets, banking reforms, abolish tax havens, introduce accountability and transparency. Jobs, education and development cannot be left to private businesses which are only there to make profit.
Europe should reduce military spending. Trump was right that NATO is obsolete. Jens Stoltenberg, the current NATO Secretary General, should be shown door for pushing militarized Europe, demanding increased defence spending amidst poverty stricken Europe and rest of the poor world. The growing populism in Europe is direct result of austerity, unemployment and refugee crisis due to failed Western foreign policies, wars and gross human rights violations in the ME, Asia and Africa.
Instead of listening to Stoltenberg, Brussels should ask Trump to end drug export to Europe from Afghanistan to save their youth from drug addiction. The tax money should be used for ending drug trade and infrastructure development in line with China’s Belt and Road Programs. Euro-Asia economic prosperity, not arms buildup can make the world a lot safer and better place and help overcome challenges.
—The writer is senior political analyst based in Islamabad.