Calls grow louder for end to trade war

Trade peace: Georgieva calls for a move from a trade truce to trade peace.

Stop the trade war, should be the call not just from 37 top economists but all who view the disastrous impact this year-long quarrel has had on the global economy.

The US and China should find a more progressive way to iron out their trade tech grouses and not engulf other nations in their conflict.

Everybody wants to survive and we cannot force the survival of one group at the expense of many others.

Surely there are more skilful ways of dealing with imbalances and dissatisfaction in line with modern trends and a good understanding of economics.

The International Monetary Fund (IMF) and World Bank have appealed to their 189 members to resolve trade conflicts, as these could worsen the global slowdown.

Move from a trade truce to trade peace, said IMF managing director Kristalina Georgieva; in this synchronised slowdown, 90% of the global economy is facing weaker growth this year, while the trade war may cost US$700bil by 2020.

Efforts to help 700 million poor people are hampered by the global slowdown, said World Bank president David Malpass.

Global growth is projected at 3% this year, the weakest in a decade, undermined also by weakness in Europe and geopolitical tensions in the Middle East.

Trade fights are taking are taking a toll in business investment and confidence; undoing these disputes can ‘‘significantly boost confidence, rejuvenate investments, halt the slide in trade and manufacturing and raise world growth, ’’ said IMF chief economist Gita Gopinath.

Some may feel the wounds have gone too deep for healing but there are hopes that the current “precarious” economic situation can be salvaged.

Corporate debt at risk of default could surge to US$19 trillion representing 40% of the total debt in eight major economies, in the event of a major downturn.

In advocating the abandonment of the trade war, the US-China trade policy working group formed by a group of 10 economists from the US and China, has proposed a regime of “peaceful economic co-existence.”

This third option or middle path “preserves policy space for both countries – for China to conduct its industrial and growth policies, and for the US to safeguard its labor markets and technological systems.”

The ability of countries to develop rules and regulations for digital and emergent technologies is preserved, while redressing any extraterritorial damages inflicted by such policies.

The US and China need to move away from the current intellectual approach that frames their economic relationship as a choice between economic decoupling, or deeper economic integration, said the statement signed by another 27 economists that include five nobelists.

Decoupling forsakes the gains from trade and does little to advance national security.

Integration seems unrealistic as it presumes China will converge on a US or European style-economy.

“This is a more reasonable view, ’’ said Inter-Pacific Securities head of research Pong Teng Siew.

While it does not presume that the US has the ‘right to stay ahead of all countries, ’ it preserves the right of the US to be assured of its security; if China’s rise is advanced by way of military threats to the US, then it should only be reasonable for the US to react, said Pong.

Nations are entitled to trade policies that protect their economic models such as industrial policies or social safeguards; instruments of industrial policies range from subsidies, tax promotions, regulation and deregulation or boosting innovation activities.But they cannot have policies that make other countries change their systems like in the case of trade wars, or beggar-thy-neighbour policies that benefit the country enacting them but harm its neighbours or trading partners.

To be prohibited are practices such as monopoly conduct, predatory pricing or rent-shifting on world markets.

“China has a right to have its own economic vision, to pursue industrial policies and create a dominant presence on the world stage, in terms of global trade and financial flows, ’’ said Socio Economic Research Center executive director Lee Heng Guie.

The ‘untiring efforts’ of the US to challenge China’s rights seem hard to justify especially within the space of globalisation and a fast-moving digitalisation landscape, said Lee.

It is actually the World Trade Organisation (WTO), the world trade body, that oversees the global rules of trade between nations.

But world rules need to change as the old belief that economic practices would eventually converge, does not apply anymore, as is seen in the case of a powerfully rising China.

Economic diversity has to be dealt with and the “dysfunctional role” of the WTO in the handling of US-China trade hostilities has undermined the flow of in a smooth, predictable and free manner.

Columnist Yap Leng Kuen sees challenges in managing global economic changes. The views expressed here are solely the writer’s own.