Trump phenomenon could lead to a restrictive trade era
Updated: 2016-05-10 08:26
By Peter Liang(HK Edition)
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The Donald Trump phenomenon has shown up a fundamental change in public mood that is going to change US foreign policy, especially on trade, whether or not he wins the presidency.
Trump's tirades against China and his threats to impose punitive tariffs on Chinese imports are often dismissed as nothing more than election rhetoric. But the rising tide against globalization and free trade among US workers and the middle class has helped him clear all obstacles to the Republican nomination.
This is bad news for Hong Kong, which, as one of the freest ports in the world, thrives on the free flow of goods and services across borders. If that flow is hampered in any way, Hong Kong's pillar industries, including banking, trade and logistics, will suffer.
Trade financing is one of the most profitable businesses of banks in Hong Kong and the bulk of Hong Kong's total exports consist of merchandise shipments to and from the region, particularly the mainland. Hong Kong is also the regional sourcing center and transportation hub for many multinational companies and regional enterprises. A decline in global trade will have a far-reaching impact on the local economy which could not depend entirely on government expenditure and domestic consumption to fuel growth.
Many observers outside the US believe that if elected, Trump, who is a hard-nosed businessman, would appreciate that protectionism could stir a global trade war that would hurt US corporate interests. Not even General Motors, Apple or Microsoft, which count the Chinese mainland as a major market for their wares, have sufficient power and influence to counter the shift in public opinion that prevails among the millions of Trump's supporters.
The question more and more American workers are asking is: Why have median wages stayed stagnant for nearly 40 years while they have been constantly reminded by the government and economists of the benefits of globalization? US middle class families are particularly disillusioned by globalization as they helplessly watch the persistent erosion of their living standards. Meanwhile, they are seeing the ranks of the middle class in the emerging markets in Asia and South America swell at a breathtaking pace.
In a development that is surprising only to the liberal intellectuals in academia and the media, millions of discontented workers and frustrated middle class are throwing their support behind Trump, an outsider who is brash enough to break all the rules of political correctness to say what they want to hear. If Trump is elected president in November, he will be under tremendous pressure to deliver, even if it is only 10 percent of what he has promised.
Even this would be enough to throw the established global trade order into disarray. If the US refuses to play, the World Trade Organization (WTO), like the General Agreement on Tariffs and Trade (GATT) or the Multi Fibre Arrangement (MFA) before it, would be just another footnote in history.
Whoever becomes president in the November election, a shift to a tougher US foreign trade policy can be expected. The new president simply cannot be expected to ignore the Trump phenomenon and carry on as if nothing had happened.
This shift would pose a serious challenge to Hong Kong business people's ingenuity and adaptability. But the options are limited for Hong Kong's externally oriented economy. A viable alternative is to ride on the coat tails of the nation's Belt and Road Initiative.
The response to the initiative, at this early stage, by the private sector has been lukewarm at best. Many local business people do not see the need to worry about it as they are still doing well. But they should consider the business potential of the initiative more seriously.
In a more restrictive global trade environment, it is going to be their best bet.
The author is a veteran current affairs commentator.
(HK Edition 05/10/2016 page10)