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The Financial Express

About-turn angst: The popularity and peculiarity of foreign reversals

| Updated: October 22, 2017 14:45:28


About-turn angst: The popularity and peculiarity of foreign reversals

 

Far from being criminal or illegitimate, foreign policy reversals have, in fact, been popular across history and countries: it is one way to acknowledge errors, or reinvent policy approaches vis-à-vis changing circumstances, or reflect predilections of presidents/prime ministers in particular. The Soviet Union did that dramatically as it transformed into Russia during the 1990s; China began admixing various foreign-policy approaches, especially economic, from the 1980s; India also made partial shifts in the 1990s from full-fledged nationalistic orientations, much as many other countries practising import-substitution industrialisation (ISI) had done, mostly across Latin America, Egypt, and so forth. Of course, the United States shifting from isolationism to multilateralism was one of the fundamental shifts of the 20th Century.
Less common is the double switch: that is, shifting from one end of the pole to the other, then returning to that initial spot. Here the causes may be less structural than partisan, although both are neither pure nor unalloyed. Many democracies have parties with polar opposite platforms, among them the pro-labour versus pro-business being the most obvious. As one such party is replaced by another, policies also shift: during election campaigns, with grand promises reflecting extremes, but after elections, along more pragmatic middle-of-the-road pathways. As these parties keep alternating, so too the foreign policy orientations. Note how these are not structural developments, that is, reflective of wholesale shift from agricultural protection to manufacture-driven multilateralism (as the United States was in the 1930s), but piecemeal policy preferences. Since the structural shift from the faded Latin ISI developmental strategy to neo-liberalism after the 1980s, several countries in this continent have been swaying one way or the other, but never able to reach the extreme (neither full protectionism as under an ISI strategy, nor full liberalism as GATT/WTO membership and multilateralism requires, but somewhere in-between): Argentina, Brazil, Chile, Colombia, among others, show these frequent tossing and turning varieties.
For example, when the Latin "lost decade," that is, the 1980s, ended, countries after countries abandoned the ISI strategy (though not necessarily the mindset) for a neo-liberal future, demonstrated by a series of free trade agreements (FTAs) in the 1990s, only to re-install state controls in some of them (Argentina and Brazil, for example). After the 2008-10 Great Recession, they returned to various degrees of socialism yet again (Argentina, Brazil, Chile, Ecuador, and so forth), or revitalised the 19th Century Bolivarian Alternative (Bolivia). Even as this article is being written, Argentina in 2015 and Brazil this year have opted, through an election or because of corruption, to trek their own way back to the market. At stake is not only how policy-makers handle or mishandle the options before them to promote their electoral pledges, but also a public increasingly losing sight of their hopes and plans as vividly under democracy as they did under authoritarian rule. Colombia and Peru may be replacing such Latin giants and symbols as Argentina and Brazil behind the economic steering wheel with their trans-Pacific overtures, while Chile and Mexico seem determined to hold on to their diluted neo-liberal anchors amid increasingly choppy waters: Chile's neighbourhood turmoil may sink its own chances, while Trump-driven devaluation deepens Mexico's quagmire.
Another policy somersaulting arena is West Europe, a region where European Union (EU) promises have been overtaken by nationalistic sentiments. Of course, the Brexit episode dominates the region's current turbulence, but to be fair to Britain, its nationalistic reason for leaving the continental embrace necessary harbours global goals. On the one hand, it does not have a choice but to revive transatlantic ties with Canada and the United States, when the former only just concluded an overpowering deal with the European Union, while the latter is on track to push the faltering European negotiations over any British-based deal. Both circumstances compromise Britain's chances. On the other, France, Germany, Italy, and the Netherlands stand on the precipice of that national-regional divide more exposed than ever before: France's 2017 presidential election already exposes the strength of nationalistic outcomes, and Germany's the accumulating anti-immigration snowball, while Italy's constitutional referendum might expose how Italy has served as an emperor with no clothes, while the Dutch tip-toes a mixture of both Brexit Britain, Marie LePen France, and extremist German choices. 
At stake are (a) nationalism, since some of the world's largest industrialised countries here need more than the nation-state to survive; (b) regionalism, since European countries must face a triple whammy: nationalistic upsurge, an EU-exit precedence that may be hard to contain; and the Turkey window collapsing, thus exposing immigration pathways, Russian walls strengthening, and resource-diversion from economic integration to security safeguarding; and (d) global anchors: EU ambivalence over multilateral trade/investment rules, China's unilateral policy-pursuits, Asian emerging-market challenges, and a vanishing U.S. partnership.
No 21st Century global account can be complete without accounting for the dominant 20th Century player: the United States, and sometimes its hesitant or unwilling northern neighbour, Canada. The pre-World War II about-turn of the United States engineered a global tectonic shift: its agricultural revolution from the 1920s (introduction of mechanised farming spawned urban migration and coincided with the expansion of assembly-line factory production), culminated in modifying its protectionist farm trade policy by the 1940s, in paving the way for multilateral trade, embodied incrementally in the General Agreement on Tariffs and Trade (GATT) from 1947. Its weight as an economic superpower induced many countries to follow suit (Canada), modify negligibly (the European Community), or resist (as the Soviet Union and the Communist bloc, as well as ISI Latin America). Those which modified negligibly or resisted eventually yielded: by the time of the Uruguay Round agreement in 1993, the European Union liberalised agriculture partially, the Soviet Union and communism were by now extinct except in China, China added neo-liberalism to communism, and the Latin bloc embraced neo-liberalism in degrees (of mostly to fully), all by the 1990s. It was a momentous U.S. victory, coming on the crest of its military victory over the Soviet Union without a gunshot being fired by the major combatants.
Yet, the United States could not savour the outcome because it itself had begun privatising multilateral trade to fend off trade-bloc rivalry: first through bilateral trading arrangements from 1984 (with Israel), then free trade arrangements across Latin America (NAFTA in 1993), then the competitive liberalism approach of the early 21st Century suggested the United States actually dismantling any multilateral trading order that it could not sufficiently control. That was a contradiction in itself, setting the stage for another tectonic trade-plate shift.
Not only was the trading fulcrum shifting from the North Atlantic to the Pacific, but the use of off-shore low-wage production the United States started in 1965 (Border Industrialisation Program with Mexico), not only crossed the Pacific too, but also invoked China, converting it into the largest manufacturing assembly under the neo-liberal sun. There was only one catch in the world becoming as fully neo-liberal as it possibly could: since the ups and downs of the product-cycle breeds competitiveness, which itself shifts as much from one product to another as it does from one country to another, China dramatically shifted from an insouciant stance to one of increasingly deliberate desire to dismantle the United States from the apex. The European Union and Japan could not, and indeed, would not, go for the kill as China is doing since a strong United States is pivotal to their own welfare. China can view the United States as a dispensable partner in the 21st Century just as it could not in the 20th.  No other country really matters on this count.
Even as this piece is being written, the self-inflicted wounds of U.S. multilateralism now find the United States back where it once sprang from: with a spotted protectionist order, as one century ago. This second about-turn could mature under Donald J. Trump's declared policies, or after him, but it will wreak global havoc: as its second-largest trading partner, China, challenges it, the top-trading, Canada, will both hug some aspects of a protectionist United States while exploring independent pathways too, initiating what might become a global pattern, at least for Japan, the third top-trading U.S. partner, Latin countries, and almost all emerging and/or frontier countries. Even in relative decline, it seems, sizable countries still catch the flu when a superpower coughs.
In the final analysis, trade volumes will expand, but so too frictions and fights; and increasingly the survival-of-the-fittest atmosphere will compel countries to feel more nostalgic about multilateral trade. Once again the themes of nationalism, regionalism, and globalism (or protectionism versus liberalism), meshing with each other is set to predict truly messy outcomes. Though this order will not at all fall short on action and drama, we must still fasten our seat belts if we are to digest this century of some breathtaking about-turns.
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.
inv198@hotmail.com
 

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