G7, Trade Disputes, and the Decline of Liberal Internationalism

“What worries me most is the fact that the rules-based international order is being challenged — quite surprisingly not by the usual suspects, but by its main architect and guarantor, the U.S.,” - European Council President Donald Tusk.

"When does a feud become a separation? A separation a divorce? When do arguments, sharp-tongued put-downs and perceived betrayal among allies become the collapse of the Western-dominated order that has ruled the world, under U.S. leadership, for the past seven decades?" - Karen DeYoung, Washington Post.

Washington Post June 10 2018 (Photo Credit: AFP)

These are the headlines underlining (or undermining) the 2018 G7 Summit in Canada,  capped by President Trump's early departure from the G7 and decision to withdraw US support joint statement. At the center of this debate is the Trump administration's threat to the international trade architecture as President Trump threatens to slap tariffs on goods - steel, aluminum, and automobiles in particular - of our closest allies in the name of national security. These allies include Canada, Germany, and Japan. Although there might be some "nuggets of truth" to Trump's claims on trade, most analysts believe the US will bear a significant economic cost in a trade war, translating into the loss of millions of jobs.  I don't have the economics or math background to prove to what extent Trump's trade policies would help or hurt the US economy, but if there's anything I learned from my IPE class in graduate school, it's that international trade always carries winners and losers. Steel and aluminum producers in the US may get their jobs back as Trump rises tariffs on foreign imported metals. But what about all the US manufacturers who rely on lower cost materials to make their products? What about the US pork and dairy farmer who will face retaliatory tariffs in Europe. The Washington Post had a great feature story on a sausage-making manufacturer in Ohio who will potentially lose millions of dollars b/c of Trumps steel tariffs. Here's an excerpt:

Bill Adler was invited last year to bid on a contract to make commercial sausage stuffers for a company that wanted to replace its Chinese supplier. The customer had just one non­negotiable demand: Match China’s price.

Adler, owner of metal-parts maker Stripmatic Products, thought he could. But even as he readied his proposal, talk of President Trump’s steel tariffs sent the price of Stripmatic’s main raw material soaring.

In April, with prices up nearly 50 percent from October and the first wave of tariffs in place, Adler’s bid failed. His costs were too high.

Today, instead of taking business from China, Adler worries about hanging onto the work he has. He hopes that the president’s tariffs are just a negotiating tactic.

Washing machines are another product in which trade tariffs, initially put in place to reduce competition from foreign competitors such as LG and Samsung, have backfired as those companies have continuously moved production to avoid tariffs, and ultimately moving production to the United States itself, complete with tax breaks and subsidies while creating US jobs. Here's a PBS video exploring if trade tariffs actually help US workers.

A looming trade war with China also stands to have the US losing billions, particular among US farmers as demonstrated in this clip from Vice News.

This is not only about trade. The rift at the G7 has broader implications for the liberal international order. The Trump administration has battled its allies on other issues including climate change (the US pulled out of the Paris Accords);  non-prolilferation (the US pulled out of the Iran nuclear deal). Some questioned whether Trump was looking after US or Russian interests as Trump called on the G7 to reinstate Russia as part of the G8. Max Boot headlined an article stating the US turned the G7 into the G6 vs. the G1.

In his PostEverything colum, Dan Drezner is circumspect about the possible long term damage of Trump's "bad-cop/bad-cop" approach to global affairs. Perhaps the most likely pathway linking Trump to a longer US withdrawal from the liberal order is increasing polarization in the US which promotes Trump's nationalist/anti-liberal policies. He ends the piece by stating. "Trump could get reelected. if that happens, the tombstone for the current order can safely be planted."

If there's any optimism, though, we need to remind ourselves that America has faced worse, and has tended to rebound from tumultuous periods (i.e. Civil War in the 1860s, the 1930s depression, riots of the 1960s). There is always recourse to head back to the political center - or return to some consensus.