Real dangers in escalating trade conflict: Barroso

HAS a global trade war officially started? Not even Goldman Sachs International chairman and former president of the European Commission, Jose Manuel Barroso can say for sure, but “it seems [to have]”, he said at the Diggers & Dealers 2018 mining forum in Kalgoorlie, Western Australia. Barosso said he was hopeful the US and China would change course “because in a trade war there are really no winners”.
Real dangers in escalating trade conflict: Barroso Real dangers in escalating trade conflict: Barroso Real dangers in escalating trade conflict: Barroso Real dangers in escalating trade conflict: Barroso Real dangers in escalating trade conflict: Barroso

Jose Manuel Barroso: "The more serious risk I see to global growth is the rise of protectionism"

Delivering the opening keynote address at this year's edition of Australia's major annual mining investment conference, the 62-year-old ex-prime minister of Portugal said the tit for tat tariff exchange between the US and China, that had strangely also been aimed at US allies Canada and Europe, did not just mean potential economic and collateral social damage for warring parties.

Barroso said escalation of rhetoric from US president Donald Trump and his Chinese counterpart into tariffs and protectionism "is a problem of course because it creates [a] lack of confidence in global trade and global order".

Barroso told the conference "protectionist challenges to the global economic order" were among projections of political and social anxieties caused by the speed and dynamism of the "new globalisation" changing the world. It was a version of past globalisation fuelled by technology and significant new elements such as the meteoric economic rise of China. He reminded delegates that international levels of prosperity, measured not only in wealth, but quality of life, child mortality rates and scientific and technological breakthroughs, were arguably higher than ever. "But so is anxiety."

Describing the 2016 US federal election vote for president Trump as "to a large extent … a vote of resentment against globalisation", Barroso said the result reflected growing concerns in US society about the spread of the new globalisation the country itself, paradoxically, laid most of the foundations for post-World War II, but perhaps more specifically a world where "the balance of power is changing … with the extraordinary rise of China".

"These are the deep movements we see in the United States but also other parts of the world," he said.

"Even those who criticise the United States … what happens is that sooner or later they are going to follow the US example, for the better or the worse.

"And we are already seeing that in some countries in Europe, and elsewhere."

Barroso said while history showed globalisation was not a new trend, history also showed anxiety and fear were also constants that could be more dangerous.

"We have to recognise that the global economy is doing well; I would say very well indeed.

"It's one of the best moments in decades for the global economy because we are witnessing simultaneous growth in most advanced economies … in the United States, first of all, a very robust economic growth also driven by the recent tax reform. Europe is also growing, though not at the same level. There is no country in Europe in recession and we can say that all the doubts of the financial and sovereign debt crisis are behind us.

"Japan also is growing.

"All of the advanced economies are giving a positive contribution to global growth.

"China, albeit at a somewhat slower pace, continues its spectacular growth.

"And the so-called emerging economies - a very vague term to designate very different situations - are also in positive territory.

"It is not very common to have … sectors and regions of the global economy, growing, as we are seeing today.

"But there are some risks, and the more serious risk I see to global growth is the rise of protectionism. This is a serious risk and it should not be underestimated.

"When I say protectionism I don't only mean the rise in tariffs and counter-tariffs, I also mean restrictions to cross-border investments, and other restrictive measures.

"And most worryingly, threats to the very principles and institutions of free trade, including some attempts to delegitimise the [new world economic/trade] order, based on the World Trade Organisation and its systems and rules, and also the preference that some are expressing for unilateral and sometimes [an] ultra-politicised approach.

"I believe it is not good for trade, it's not good for business certainty, to have this unilateral approach, and negotiate on a case by case basis, and sometimes linking political considerations to trade arrangements.

"If we accept now the principle of going unilateral, it means we're not having the benefits of stability that are usually an incentive for growth.

"We enter a territory of permanent uncertainty which by definition is not good for investment or at least the kind of sustainable, job creating investment that we think is better for our economies. This is detrimental to growth, these attacks against trade, not only because it is disruptive to trade, but because it undermines business confidence and may restrict investment, with of course the well-known impact on growth and jobs."

Barroso suggested such economic dissonance historically sowed the seeds of social disruption, and worse.

"Europe was [the] origin of two world wars in the 20th century and in fact it was a result of this aggressive nationalism [which] usually brings war," he said. Europe, often in concert with the US, was able to dilute the tide of fervent nationalism after WWII, "ultimately restoring economic prosperity and peace".

"We need now this commitment to open trade, to open societies and to peace globally," Barosso said.

"I think it's important that we keep this commitment for peace, and I am linking this to the issue of trade because if you want open societies and open economies we should be in favour of a global open order based on trade."

New trade agreements between Europe and Australia, and Japan, and some suspension of measures out of the US that could escalate trade tensions between traditional allies, were encouraging developments.

"It is a very important signal for the rest of the world if we create more of these free trade agreements," Barroso said.

"I express my concerns to you, but I don't want you to think that I am negative or pessimistic. I continue to think that the world now is in a better place than before.

"We are in a more peaceful world than in the 20th century … and the economic and social development is huge.

"So I think there are sufficient forces to promote this open society globally. What we are witnessing is a contradiction - a fight - between flux on one side, and friction on the other. Who is going to win that battle? Is it going to be the forces of openness or those that want a more closed world?

"Let's make that judgment ourselves. Think about 10 or 20 years from now … Do you believe the world will have more or less trade, more or less cross border investment, more or less international travel, more or less information exchanges, through the internet for instance?

"I really believe there will be more, even if there are some conflicts, because we may have some setbacks but I believe the long term trend is for more global approaches.

"We know there are risks, but we must [embrace this openness], and teach our kids to embrace openness, and change.

"We prepare better the future generation if we make them confident to embrace change, and to see a world where, of course we defend our identity, we love our countries … but patriotism is different to nationalism. Patriotism is to love what belongs to us. Nationalism is to hate what belongs to others.

"We can be patriotic without being nationalistic.

"We can be citizens of our countries and at the same time have respect for other parts of the world."