‘Trump victory will plunge world into recession’
Washington – The United States and the world will plunge into recession if Republican candidate Donald Trump is elected US president in November, an American trade expert has warned.
Trump’s plans to roll back several US free trade agreements would drag US economic growth down to minus 0,1 percent by 2019, increasing unemployment by 8.7 percent and destroying four million jobs, Paul Drazek, a former US trade negotiator said in Washington.
Drazek, who is now a private trade consultant, was briefing South African journalists visiting the US to study US-South Africa agricultural trade.
Drazek said that some commentators believed that Trump would not carry out his campaign threats to shut down free trade deals if he were elected. But Drazek said that Trump had made such an issue of this, that he thought he would be obliged to follow through.
So he would probably terminate the implementation of the huge Trans Pacific Partnership (TPP) free trade agreement which the US has just finished negotiating with eleven other Pacific Rim countries (excluding China)
The other TPP countries would continue to implement it without the US.
Trump would probably also carry out his threat to slap anti-dumping duties on the imports into the US of countries – notably China – which “manipulated” their currencies to boost their exports, Drazek said.
He would demand changes to the rules of the World Trade Organisation (WTO) to allow the US to do that and would withdraw America from the WTO if it did not agree to those changes.
Trump would also threaten to withdraw the US from the North American Free Trade Agreement (NAFTA) if the other members, Canada and Mexico, did not agree to renegotiate it.
Drazek said Canada and Mexico might agree to re-open negotiations to modernise the 22 year-old trade deal – but not to restrict trade, which is what Trump wants.
And Trump was likely to threaten to impose new import tariffs on countries which had trade surpluses with the US, unless they took steps to reduce the US deficits, Drazek said.
He noted that the Washington-based Peterson Institute for International Economics, an independent research body, had calculated that if Trump did carry out these threats against free trade, “the US would collapse into recession by 2019, with growth at -0,1 percent. The unemployment rate would shoot up to 8,7%, with the economy losing upward of 4 million jobs.”
The US could then “lead the world into a recession or worse”, he said.
While the US was closing down free trade, its global competitors would be racing to open up trade with each other, putting US exports at a growing competitive disadvantage. The European Union, for example, had 37 free trade agreements with 93 countries and was busy negotiating more.
Drazek said Trump was wrong that free trade agreements increased America’s trade deficit with other countries.
The opposite was true. Between 2002 and 2014, America’s trade deficit with its free trade agreement partners decreased from $100 billion to $62 billion, while its deficit with the rest of the world increased from $368 billion to $660 billion.
“Trade has benefited the US economy and the agricultural sector especially. Real incomes are 9% higher than they would have otherwise have been as a result of trade liberalising efforts since World War II.” That had added $1,5 trillion to American income.
“Elimination of remaining global trade barriers would increase the benefit America already enjoys from trade by another 50%. From the second quarters of 2009 to the 3rd quarter of 2014, US real GDP grew 2,3% at an annual rate, with exports contributing one-third of this growth.
“Jobs supported by US exports of goods and services are up an estimated 1,6 million since 2009, to an estimated 11,3 million in 2013.”
Agricultural exports had increased American farmers’ cash receipts from 22% to 35% since the early 1990s. Every one billion dollars in agricultural exports created 7,550 US jobs and total agricultural exports now supported over one million US jobs.
Drazek warned that it was the US decision to impose heavy import tariffs in 1930 rather than the stock market crash just before that, which had contributed most to the Great Depression.
US unemployment had risen from about five percent to about nine percent after the crash and then declined again to just over six percent. Then the US enacted the Smoot Hawley Act in 1930, imposing heavy tariffs to try to save jobs. The opposite happened – unemployment immediately shot up to about 14 percent and then continued to climb towards its peak of about 28%.
Drazek noted that for the first time in many years, neither presidential candidate backed free trade. Trump’s Democratic Party rival Hillary Clinton had in the past supported some free trade deals but not all. But her main rival for the Democratic Party nomination, Bernie Sanders, who opposed all free trade agreements, had forced her to take a stronger position against free trade, particularly by opposing the TPP.
But Drazek predicted that she would take a softer position against trade if elected as president next month. She would likely suspend America’s trade agreements and negotiations for about six months to review policies, towards the TPP, the Transatlantic Trade and Investment Partnership (TTIP) – the US-EU free trade agreement which is still being negotiated – and the WTO.
She would try to persuade America’s TPP trading partners to agree to “side letters” to address US concerns about the main agreement.
She would also try to negotiate come changes to TTIP, would open discussions with the UK on a separate trade agreement after it left the EU and would ask Congress to enact legislation to create a special prosecutor to challenge unfair foreign trade practices more aggressively.
African News Agency