What's next for global trade

Why the pushback?

Protesters rally against the Trans-Pacific Partnership on the sidelines of the Apec Summit in Lima last month. Asia-Pacific leaders were urged to defend free trade from rising protectionism after Mr Donald Trump clinched the US presidency on a platfo
Protesters rally against the Trans-Pacific Partnership on the sidelines of the Apec Summit in Lima last month. Asia-Pacific leaders were urged to defend free trade from rising protectionism after Mr Donald Trump clinched the US presidency on a platform campaigning against free trade and accusing it of eroding jobs in the United States.PHOTO: AGENCE PRESSE-FRANCE

The stunning victories of Brexit and Donald Trump have put the failings of globalisation into sharp focus. But protectionism was already rising even before then.

Last month's Asia-Pacific Economic Cooperation (Apec) Summit, the annual meeting of an organisation formed to promote free trade, was a gloomy affair.

It was already looking to be a bad year for economic integration after Brexit, the June referendum in which the British people voted to leave the European Union.

Then, just one week before world leaders flew in to Lima, Peru's capital city, Mr Donald Trump clinched the US presidency on a platform campaigning against free trade and accusing it of eroding jobs in the United States.

His victory injected a sudden urgency to recognising and addressing the rising anti-free trade sentiment spreading across the world.

Almost every meeting and panel discussion at the Apec Summit was dominated by talk of how the public came to be so sceptical of global trade, and New Zealand Prime Minister John Key said he sensed "tremendous despair" among those gathered in Peru because of Mr Trump's position on trade.

THE BLAME GAME

Almost every meeting and panel discussion at the Apec Summit was dominated by talk of how the public came to be so sceptical of global trade, and New Zealand Prime Minister John Key said he sensed "tremendous despair" among those gathered in Peru because of Mr Trump's position on trade.

While Brexit and Mr Trump's win share some factors, they are driven by unique circumstances as well.

In Britain, the referendum became infused with issues of loss of sovereignty to a faceless European Union bureaucracy and anxiety over immigration.

Over in the US, a large bloc of Mr Trump's supporters were working- class voters in the Rust Belt who have lost their jobs as the region's once-booming industrial sector declined. These voters blame their economic woes on globalisation and believe their jobs were shipped overseas to cheaper manufacturing bases. In Mr Trump, they found a champion.

There is some truth in this perception, said National University of Singapore economics associate professor Davin Chor, who cited research showing that rising imports from China, coupled with technological change, played a part in the loss of manufacturing jobs.

"Of course, the long-term trend towards automation and mechanisation meant that US manufacturing employment was already on a secular downward trend. But globalisation certainly hastened this decline," he added.

In an interview with the Financial Times newspaper in October, Deputy Prime Minister Tharman Shanmugaratnam said not enough had been done to help those left behind by new technology and global competition.

"It's not that it was inherent in globalisation or technological change that you get towns and cities left depressed decade after decade. But it happened and the efforts weren't aggressive enough to help them get back in the game, grow new industries, help individuals who have been displaced in the workforce to come back in with some retraining," he said.

"It was assumed that the market would do this. But we've learnt that even in the US, which has a more flexible labour market than most mature economies, the market doesn't do it quickly enough or sometimes doesn't do it at all. People stay displaced for a long time."

EVEN ASIA GETS PROTECTIVE

 

Another challenge that economic integration faces is the rise of protectionism, or barriers put up by countries to impede the free flow of goods and services between borders. The number of trade-restricting policies adopted by Asia-Pacific economies has steadily risen from 28 in 2008 to 345 last year, according to figures from the Pacific Economic Cooperation Council (PECC), an organisation of individuals from business, government and academic backgrounds who discuss policy issues in the Asia- Pacific region.

Senior government officials, business leaders and academics in the region are aware of the problem. About a third of respondents to a PECC survey conducted in August thought protectionism is a risk to growth, up from about 15 per cent two years ago.

Noting the protectionist turn and the slowdown in global trade, Dr Chor said: "Not since the end of World War II has the outlook for cross-border commerce looked so uncertain."

Not surprisingly, the respondents of the PECC survey from North America perceived the least positive political environment for free trade.

Also, business leaders had ranked the goal of a Free Trade Area of the Asia-Pacific as their first priority for the last 10 years, but the emergence of anti-globalisation sentiments was at the top of their minds this year.

"There is a recognition that the political economy is greatly important at this time," says PECC secretary-general Eduardo Pedrosa.

Of course, the world found out just how bad the political climate is just three months later, with Mr Trump's surprising election.

Chong Zi Liang

A version of this article appeared in the print edition of The Sunday Times on December 11, 2016, with the headline 'Why the pushback?'. Print Edition | Subscribe