Threat Level Trump: Trade War or Free Trade?

Donald Trump’s rapid ascend to the center of the political world has been fueled by one controversy after another.  Although Trump has said enough distasteful and troubling remarks throughout the 2016 Primary Election to offend pretty much everyone, including his stalwart horde of supporters, he has contributed to the political process by fracturing the alliances that have allowed the political establishment to shun outsiders, which is forcing special interests to reveal their priorities.  He has also forced the world to face uncomfortable issues, such as racial tensions surrounding illegal immigration and Muslim migration into the US, through his blunt stances against these groups.
 
The strength of democracy is rooted in the ability of people to freely express their needs and wants, so the interests of the entire population can be properly addressed in a balanced fashion.  The ability to recalibrate public policy to reflect the interests of the population, instead of adhering to the interests of a stagnant political class, enables functional democracies to thrive over long periods of time with added stability.  In accordance, Trump’s influence is an opportunity to infuse new blood into the world of the political elite.  It is also a chance to openly and honestly confront public policies that are misaligned with the interests of the American People as a whole.

The Global Forecasting Service of the Intelligence Unit of The Economist has qualitatively determined the election of Donald Trump is currently the sixth greatest threat to the ability of businesses to reach “target profitability.”  Where uncertainty surrounding what President Trump’s public policies would look like and his provocative nature are factors in this threat assessment, the largest concern seems to be that “he has been exceptionally hostile towards free trade….” Reflecting on the media coverage of this assessment, which characterizes Trump as a threat to “global stability” and “the global economy,” it is clear how high world elites prioritize “free trade,” not just trade or the prevention of a trade war.
 
What this threat assessment fails to recognize is that Trump is not the problem.  In this case, Donald Trump is fulfilling the promise of democracy by representing the growing backlash against free trade and the manner in which trade agreements, such as NAFTA and TPP, are negotiated to serve special interests.  The push for free trade, in general, fails to recognize the widespread lack of faith in “free trade” and the belief that free trade is a net negative to average people.  Where pro-free trade advocates like to trumpet around statistics that demonstrate the aggregate benefits of free trade, the apparent economic impact of free trade on the average individual’s finances is harmful. 
 
In theory, a trade war is devastating to an economy, because it creates barriers to trade, thus starving the economy of economic activity.  Not only do increases in tariffs raise import and export prices, they undermine the sustainability of global production by raising the cost of outsourcing too quickly.  Sharp increases also create a lack of uncertainty, which inhibits consumer spending and capital investment, thus helping to stall and destabilize the economy.  Because growing anti-free trade sentiments are pushing America, and the world, toward a global trade war, the failure of Donald Trump to become the next US President will not abate this movement against free trade.
 
That said, the economic interests of trade partners shift very rapidly with the changing nature of the economy, especially in an era defined by democratic uprisings and a pull back from rapid globalization to community-centered thinking.  Because a stable global economy depends on healthy national economies, national economies must be built on industries that serve the local needs of a people with locally plentiful resources that are as local as possible with excess production being used to participate in the global economy.  As such, trade agreements must be recalibrated regularly to reflect shifting economic interests.  Unfortunately, NAFTA and TPP do not include maintenance provisions. 
 
Instead of feeding opposition to trade and provoking a dramatic embrace of trade wars, which the American People do not seem to fear, the best course is to turn to diplomacy.  It is necessary to confront this misalignment of the population’s interests and public policy.  This is particularly important when recognizing the geopolitical processes like the resovereignization that is threatening the EU and driving the aggressive nationalist behavior of Russia and China.  In terms of economic policies, this means addressing the economic interests of a nation’s majority.  To do this, government should seek to economically empower their peoples, including business owners, through leverage.
 
The biggest issue with unfettered free trade is that it deleverages workers and localized businesses by forcing them to compete as part of a global workforce struggling to provide for global demand.  Because free trade essentially turns the global economy into a lowest bidder economy, the future bargaining power of workers in poor countries is also hindered.  Based on “supply and demand,” a massive global workforce without enough work means workers face downward pressure on their wages.  Conversely, the need to enhance global supply to meet global demand puts upward pressure on the cost of natural resources and goods.
 
With that in mind, businessmen like Donald Trump see the world in terms of deal making and bargaining.  When the parties involved in a business deal have equal leverage and/or act to address each others’ interests, the most viable and mutually advantageous deal is likely to be produced.  When one party has greater leverage over the others, that party has an advantage.  When the advantage is too great and/or successive deals continually neglect the interests of the other parties, either the negotiations or the business deals will collapse.  A lack of adequate leverage prevents workers and localized businesses from pursuing their interests to the detriment of the whole economy.
 
Celebrities and CEOs are routinely able to extort millions of dollar in pay for their services. The average person cannot do this. The reason is that affluent people have greater leverage when they are seeking compensation, i.e. the potential revenue they can make their employers affords them leverage. For most other individuals, education, expertise, union membership, professional affiliation, and a whole host of other factors give them varying degrees of leverage.  Reflecting on America’s Golden Age, the much of the Twentieth Century was spent empowering the masses with greater leverage.
 
Some of this was accomplished by government bolstering the leverage of individuals with the force of law, e.g. the Labor Movement.  This was seen with the passage of laws designed to protect worker rights, customer rights, civil liberties, and the environment.  Additionally, the expansion of education afforded more people greater leverage in the economy, until too many acquired college level degrees. In other cases, nongovernmental actions, such as the organization of labor unions, allowed individual workers to establish an equal footing against abusive corporations.
 
In the 1980 and 1990's, the push for accelerated economic globalization forced workers in wealthy Western countries to directly compete against those working in under-regulated, under-taxed, far poorer nations. NAFTA, for example, was sold to the American People as an opportunity to gain access to new markets and cheaper goods, even though cheaper, less durable goods do not increase living standards.  In general, NAFTA deleveraged workers in the US, Canada, and Mexico. China's special trade status was an even bigger assault on individual power due to the size of the Communist country.

In contrast, the formation of the Europe Union helped give the US a stronger economic partner and allowed the Europeans to balance American influence in the global economy.  Unfortunately, it also created layers of bureaucracy that put distance between the Peoples and their democratically elected leaders, thereby undercutting the democratic authority of individuals. In all, the over "liberalization" of international trade undercut the ability of governments to tax, regulate, and protect their national economies, thus neutralizing the leverage governments had once extended to their Peoples.  In other words, countries outsourced their economic sovereignty and deleveraged their Peoples.