Donald Trump‘s election presents an opportunity for American institutions — businesses, universities, governments, non-profits — to reexamine their own policies towards globalization and determine whether these need to be “rebooted.”
For globalized U.S. citizens, the question is simple but the answer is complex: “Even though I have thrived, the Trump election indicated scores of millions of fellow Americans have not.”
For globalized companies (think Apple), the question is more complex: “Can I be an American company under President Trump’s emerging new rules?”
For the country’s leading universities, who have accepted more and more (full-paying) foreign students and fewer Americans, do they still want to be “global” if there’s an increased cost associated with that in terms of separation from resurgent “nativism” (the ugly word) or patriotism (the noble word)? Will they tack back to wanting to be more focused on being great American universities?
That’s the American side of the story of disenchantment with globalization. There’s also a lot of evidence for widespread worldwide disenchantment with globalization. The imposition of American culture, business, and politics has been resisted if not rejected by the representatives of the majority of the globe. Back in the early 1990s, when the Berlin Wall came down and the Soviet Union collapsed, political scientist Francis Fukuyama famously wrote that the end of the Cold War was “the end of history.” It was a defining moment to be sure, but it was not the end of history. It’s not unreasonable to say that the American model has been rejected by the Middle East, Russia and China. We are unwelcome neo-colonialists in many parts of Africa, Latin America and Asia.
The rejection of globalism by a substantial percentage of the world has created new security risks. We appear headed for territorial conflict with a China to whom we opened our markets in the 1980s and 1990s, and where much of “our” high-tech industry is located. Our ill-planned invasion of Iraq has created a mess in the Middle East, where millions have been left without the economic and political assets that our intervention aimed to create. Our efforts to enroll the satellites of the former Soviet Union into our orbit have met with increasingly direct opposition from Russia.
Economists will continue to debate the costs and benefits of globalization for years to come. But for now, the reality is that a minority of the American people, through the Electoral College process, elected a man whose inaugural address was startling in its declaration that the “carnage” created by the ruling elite of both parties over the last decades “stops now.” That oath will have an echo effect abroad, with Brexit possibly starting a disintegration trend in Europe, as one election after another tests whether other countries decide to leave the EU. The way things are shaping up now, these elections are — like America’s — referendums on whether European countries want to maintain their national identities or be submerged into the new identity of “globalized citizen.”
The effects of Donald Trump’s election and his blunt inauguration speech are profound. The phrase “make America great again” is not just a reflection of chauvinism. It’s an acknowledgment that the era of American policies to create a global order is ending. This era had empowered the global elite that recently met in Davos, created global companies (like Exxon and Apple and Siemens and Toyota), required the investment of trillions of American taxpayer dollars for failed invasions of the Middle East, and enabled first Japan and then China to become rich making and selling stuff for the American market.
In his inaugural address, Trump made a historic pledge: “We will bring back our jobs. We will bring back our borders. We will bring back our wealth. And we will bring back our dreams. We will build new roads and highways and bridges and airports and tunnels and railways all across our wonderful nation. We will get our people off of welfare and back to work rebuilding our country with American hands and American labor. We will follow two simple rules: buy American and hire American.”
So, the Trump Doctrine. The full execution of that promise would change the world. It effectively brings to an end the security arrangements defined by our military alliances (NATO et al), our trade agreements (the WTO, NAFTA, et al), and the way we tax the businesses that both buy and sell goods abroad. His early executive actions indicate he intends to try and fulfill many of these promises and threats. What is a reasonable, summary way to imagine the consequences for the U.S. and global economies?
Here is one approach: the imposition of the Trump Doctrine will push trade relations from multilateral to bilateral. The critical bilateral U.S. trade relations will be renegotiated, one by one. The most critical one for the world is the U.S.-China nexus. Equally critical for U.S. citizens are the deals with Mexico, Europe, and Saudi Arabia. The rest of the world – through the Trumpian economic prism – is marginal. That includes Russia.
Trade relations with China will be upended. By the time Trump is done with his first term, major manufacturers will have totally stopped building factories in China for the export of goods to the United States. That change will affect products like iPhones and solar panels the most. To avoid annoying U.S. consumers, the Trump team will have to be sure that U.S. energy costs remain the nation’s competitive advantage because labor costs clearly aren’t. It’s important, therefore, that manufacturers can find ways to rebuild factory capacity in places where energy prices are low and stable. The effect this change will have on China is very difficult to predict, but it can’t be good. China will be unwilling, initially, to negotiate with Trump, so it’s hard to see a way China can avoid this. It has little leverage. Even selling the U.S. Treasuries it holds is an empty threat.
Trade relations with Mexico will be similarly upended. Trump has already used his bully pulpit to talk some companies out of building new factories there. That effort will now become systemic. Mexico initially will resist, and both its currency and GDP will continue to decline precipitously. In time, the Mexican government has to come to the table, and a deal of sorts will be struck whose outcome will be far less investment in Mexico by U.S. investors.
Canadian trade will not be upended because it’s mostly in energy. U.S.-Canadian energy trade is usually conducted on a fair and even playing field, hence Trump’s early approvals of the Keystone pipeline, which essentially provides access to world markets for Canadian oil, since U.S. refiners generally don’t need Canadian crude. Canadian-U.S. electricity trade can also thrive, as long as there are no implicit or explicit subsidies paid to Canadian hydro producers. Those producers would be well advised to team up with U.S. wind producers to create firm wind-and-hydro combinations that East and West Coast U.S. states so eagerly want.
Europe and the Middle East will have to accommodate themselves to the changes the Trump trade team imposes. Other than the threat of an oil embargo, it’s hard to see what leverage the Middle East has in the coming change in the rules of the international trade game. It is important for the leaders of other countries to try to understand the causes for Trump’s election and the basis for President Trump’s actions.
The inaugural address was eloquent on this point: “We’ve defended other nations’ borders, while refusing to defend our own, and spent trillions and trillions of dollars overseas, while America’s infrastructure has fallen into disrepair and decay. We’ve made other countries rich while the wealth, strength and confidence of our country has dissipated over the horizon. One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind. The wealth of our middle has been ripped from their homes and then redistributed all across the world.”
Whether or not one agrees with this view of America in the world, the fact is that the American people – through the mechanism of their Electoral College – elected a man who holds this view. “Fasten your seat belts” does not feel like a strong enough warning for the change that’s about to come.
–Ed Krapels is the Founder and CEO of Anbaric, an electricity infrastructure development company focused on upgrading and enhancing the U.S. power grid.
Article originally appears in Huffington Post