What does a Trump presidency mean for the developing world?

After an 18-month campaign characterised by inward-looking nationalism and often racist vitriol, the idea that US president elect Donald Trump might somehow be good for the developing world is not one that has crossed most people’s minds. 

Not so for Eric LeCompte, executive director of the Jubilee USA Network, which advocates for a fairer financial system for the world’s poorest. Speaking to Public Finance International, Le Compte explains that he is hopeful that, at least in some quite specific terms, Trump could make some positive changes for developing nations. 

Trump’s campaign tapped into a well of pent up resentment for the establishment and outrage at a world order that many people feel simply does not work for them. Amidst all his toxic rhetoric, he raised some valid points that resonated with people’s concerns. Some of these include issues the political left has been highlighting for some time, and that people like LeCompte have been striving to push up the agenda. 

These include the obscure court system under which corporate investors and governments resolve disputes, which have been kicking up a storm in Europe in particular over the past year. Objections to these investor-state dispute settlement (ISDS) systems has left an US-EU trade deal (TTIP) largely dead in the water and may still derail an EU-Canada agreement (CETA).

The way these disputes are settled, and who they are settled in favour of, is one of Jubilee USA Network’s biggest concerns when it comes to trade agreements, LeCompte says.

“We have certainly been very concerned about how this element of trade negotiations can impact labour, environment and other social laws,” he says. “[Trump has] also raised concerns about predatory hedge funds or the need to curb corporate tax avoidance, so those are very particular things that we work on and that we know do have impacts in the developing world in very real ways.”

As a mogul who “built a career on US bankruptcy law”, LeCompte says Trump must also understand some of the “very particular debt and finance issues” affecting developing nations, and may be supportive of more stable and fairer debt restructuring or bankruptcy systems globally.

He highlighted Trump’s support for legislation that enabled Puerto Rico to restructure its debt – but, PFI notes, only after some typically mixed signals.

“In all of these issues, we think we’re going to get a good reception at the White House,” LeCompte continues. “We believe there are some things he said during the campaign that were positive, so it’s a matter of us being able to work with him and holding him to account on these.”

Rodrigo Polanco, an expert from the World Trade Institute, however, is not convinced. He tells PFI his view is much more “cynical” and he doubts developing nations are likely to benefit from any Western insurgence against problematic features of global trade agreements.

“If the consensus is that the system is broken then they should terminate it for everyone, not just for some countries that have the power to say no,” he says. “The consistent measure would be to terminate ISDS in all the thousands of treaties where it already exists. Nobody is going to do that.”

Nick Dearden, director of Global Justice Now, an NGO which also campaigns on some of the issues raised by LeCompte, scoffs at the idea Trump is on their side when it comes to areas like ISDS.

“In some ways, his view does overlap with our concerns,” he tells PFI. “But it comes from a completely different place. He’s really only interested in how trade deals affect Americans, not about the super exploitation of the rest of the world by the US.

“His theory is that the US needs to be more exploitative to developing countries essentially in order to provide more jobs for Americans. So his view isn’t internationalist in any way at all. I would seriously question LeCompte’s judgement, given what [Trump] has said about his own people [in regards to race].”

Whether or not Trump fixes issues like ISDS in the US, let alone beyond, is yet to be seen. Likewise, he may not pursue the protectionist trade policies he promoted in the run up to the election. If he does, however, experts agree this would be disastrous for an already sluggish world trade system, flagging global economy and, consequently, developed and developing countries alike.

The rules of international trade “are very much influenced by what the US is doing”, Polanco notes. A move to raise tariffs, for example, would not only likely spark tit-for-tat retaliations but could also encourage other countries to close off.

While he believes any moves towards protectionism by the US will be felt all over the world, he adds that just how far Trump can go in that direction is “kind of limited”.

To really close America down to globalisation, he says, Trump would have to alter domestic law and potentially face the wrath of the World Trade Organisation, if his actions triggered disputes under WTO rules. Similarly, he continues, his promise to tear up free trade agreements like NAFTA, with Mexico and Canada, would require some level of agreement from his counterparts if he wants to avoid WTO arbitration.

This would make it “quite difficult”, although “not impossible”, to substantially turn away from free trade, Polanco says.

Likewise, the massive infrastructure programme Trump is planning on undertaking will require both workers and materials – more workers than the US’s unemployed population, Polanco thinks, and certainly commodities the country does not produce itself.

Too much protectionism would hamper this plan. And if that’s true, Polanco notes, many commodity-reliant developing countries may be able to expect an economic boost as Trump moves to upgrade America’s highways, schools, and, perhaps, border walls. Prices of raw materials like copper have already surged just off the back of his infrastructure announcements. 

But while Trump’s remarks may have brought an unlikely uptick for some developing countries in economic terms, at Global Justice Now Dearden notes that the overall impact of his presidency on the developing world is likely to be catastrophic.

“I really think he will be an absolute disaster for the majority of developing world countries,” he says. “From the more closed borders to the impact on climate change, which could be horrific in the next eight years and cost lots of people their lives in Africa and the rest of the global south, as well as on trade agreements.”

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