Saturday, June 3, 2023

Have we reached the end of peace through trade?

In the early 20th century, British author Norman Engel published a famous book called The Great Illusion, in which he claimed that economic progress and increased world trade had made war obsolete. Nations, Engels argued, could no longer prosper through conquest: industrial workers could no longer be exploited like peasants, and even smaller nations could survive by importing raw materials and selling their products to the world. Could have become rich by selling in the markets. Furthermore, in a war between economically interdependent nations, the victors would also pay a heavy price.

Engel did not predict an immediate end to the war, which boded well for his credibility, as the carnage of World War I was just around the corner. However, he aspired to persuade politicians to give up their dreams of military glory. And one implication of his argument was that closer economic ties between countries would promote peace.

In fact, the idea of ​​peace through trade would become a cornerstone of Western diplomacy after World War II. In my last column I discussed the General Agreement on Tariffs and Trade, which has governed world trade since 1948. The origins of this system are largely due to Cordell Hull, Franklin Roosevelt’s Secretary of State, who saw world trade as a force for peace. As well as for prosperity. The European Union began with the creation of the Coal and Steel Community, one of the aims of which was to create such interdependence between France and Germany that a future European war would be impossible.

But now, as I wrote in that column, the United States, which in large part built the global trading system, is imposing new trade restrictions in the name of national security, explicitly claiming that whenever it He has the right to do so. When the Trump administration did, it could be dismissed as an aberration: Donald Trump and those around him were crude mercantilists without an understanding of the historical reasons behind today’s trade regulations. But the same cannot be said of Biden officials, who understand both economics and history. So, have we reached the end of peace through trade? Not exactly, but it’s a theory that has lost a lot of traction recently, for various reasons.

First, it is possible that the idea that trade promotes peace only holds true for democracies. The United States briefly invaded Mexico in 1916 in an unsuccessful attempt to capture Pancho Villa; This would be unimaginable today, as Mexican factories are an integral part of the North American manufacturing system. But are we sure that Taiwan’s equally deep integration into the Chinese manufacturing system precludes any possibility of invasion?

Unfortunately, authoritarianism has been on the rise in many countries around the world for quite some time now. This is partly because some fragile democracies have collapsed; Partly because some autocracies, notably China, have opened up economically if not politically; And partly because some of these autocracies (again, China in particular) have experienced rapid economic growth.

And what about the idea that the increasing integration of the world economy would in itself be a democratic force? The idea was a major pillar of the economic diplomacy of some Western countries, especially Germany, which bet heavily on the doctrine of exchange through tradeChange through business. A look at Vladimir Putin’s Russia or Xi Jinping’s China shows us that this theory has failed: China began opening up to international trade more than 40 years ago, and Russia 30 years ago, but neither has democracy. shows no signs of changing nor in a country where the rule of law is strict.

In fact, international interdependence may have made the current war in Ukraine more likely. It is no nonsense to suggest that Putin expected Europe to accept Ukraine’s conquest because of its dependence on Russian natural gas.

Once again, I’m not saying that the idea of ​​peace through trade is completely wrong. A war in the heart of Europe (though unfortunately not on its periphery) has become difficult to imagine thanks to economic integration; Wars for secure access to raw materials seem to be much less common than in the past. But the dream of “commercial peace” certainly has lost a lot of its staying power.

It is very important. We live in a world of very open markets, but it didn’t have to be like this and it doesn’t have to stay like that. Rigorous economic logic hasn’t gotten us here: globalization can backfire in the long run and lose political support. Nor have we gotten here because economists have convinced politicians that free trade is good. Rather, the current world order largely reflects a number of strategic considerations: leaders, particularly in the United States, believed that more or less free trade would make the world more sympathetic to our political values ​​and the nation’s interests. As will be safe for us.

But now even relatively internationalist policy makers like Biden administration officials are not convinced. This is a huge change.

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