Commentary: International trade is a major part of modern geopolitics. In the post-World War II era, the U.S. used trade as part of its political efforts in order to prevent future wars, and to smooth relations with countries not historically friendly with the U.S. Trade was a tool that our country used to solidify the strong friendship that it enjoys with former U.S. enemies such as Japan and Germany. It also was used with countries in Asia such as Taiwan, Singapore, and South Korea as a counterweight against the Soviet Union’s Iron Curtain.
Prior to becoming an economic and military superpower, the U.S. adopted an isolationist stance from a political, and to a great extent, from a trade standpoint. Immediately before WWII ignited, the U.S. imposed an embargo on Japan for critical production supplies such as oil, because Japan had invaded Manchuria and was flexing its muscles in Asia. This caused tensions to be strained even more, and to this day Japan cites being cut off from American supplies as a reason it went on the attack against the U.S. and attempted to gobble up as much of Asia as possible.
To say that the U.S. is at a crossroads in terms of trade and geopolitics is an understatement. The incoming Trump administration has railed against NATO in Europe, based on member contributions, making traditional allies nervous. The president-elect has stated that he will cancel U.S. participation in the Trans-Pacific Partnership (TPP) on the day he takes office. In North America, he is continuing the rhetoric of rescinding the North American Free Trade Agreement, slapping a 35 percent tariff on goods being imported from China and Mexico, and building a wall on the Mexican border.
While the direction that Trump will take will unfold after he takes office, China is wasting no time in attempting to fill the perceived void that the U.S. is creating in Latin America. Chinese President Xi Jinping has visited Latin America three times during the past three years, and has physically visited 10 Latin American countries since becoming president in 2013. Most recently, he was in Peru last month attending the Asia-Pacific Economic Cooperation summit. The Soviet Union and the U.S. fought for influence in Latin America during the Cold War. And now, China is stepping up its game to be able to access from Latin American countries precious commodities that it needs to fuel its economy.
It appears that the U.S. is giving China an unobstructed green light to be able to craft its own overarching trade network with Pacific Rim countries, provided that the Trump administration carries out its promise to not participate in the TPP. If China forges such an agreement, it could set the economic and political agenda for decades to come, and make China the go-to country for much of the world’s trade.
Rhetoric and threats in political campaigns often do not translate into policy or reality. Trump is filling his cabinet with successful business leaders whom he will need to rely upon for advice on international relations and trade. No one person can keep up with or process the rapid changes in the world economy, and the challenges that are presented to a U.S. president. Even though Trump prides himself as an extremely intelligent person, his team will need to help shape strategy and guide the economic course of the U.S. during the next four years, especially on issues of trade.
The U.S. must decide whether we retreat as a leader in the international arena, and if we abdicate our role as the bastion of open markets and capitalism. Trade has been a tool that the U.S. has used to spread its agenda of freedom and opportunity to not only major economic powers, but also smaller countries that are striving to provide for their citizens. Nations that trade very rarely go to war with each other – there is too much at stake to lose. In the U.S. system of capitalism, there are winners and losers. Open markets create competition, which in turn leads to the efficient allocation of resources and more quality choices. As the ultimate recipient in the capitalist chain, the consumer is the beneficiary.
While we wait to see how Trump’s viewpoint on trade will set the course of U.S. relations in the next few years, countries such as China will continue to steal from the U.S. playbook and use trade to grow their influence throughout the world.
Jerry Pacheco is the President of the Border Industrial Association and Executive Director of the International Business Accelerator. His columns are first published in The Albuquerque Journal.