The jury’s still out on this one.
The prospect of an isolationist and self-centred United States (US) sends chills down the spines of most people, given that many economies of the word are intimately intertwined with the 18 trillion USD guzzling economic behemoth. The concept of a closed US is not something anyone is familiar with, but that is something that will change over Donald Trump’s first presidential term. But what exactly is a closed US? Late night talk show hosts often make fun of how the world may sort disputes or seek avenues of partnership that do not involve the US given that Trump’s brash foreign policy reeks of inexperience, but the reality could not be further from a laughing matter. An isolationist US will lead to a world that learns to live without it, as countries seek dispute resolution without the US’ helo and as regional alliances start to ink trade deals among themselves. The sustainability of these deals, however, depends on the political stability of these countries.
Countries currently involved in any form of animosity—rhetorical or military—seem to be eager to exclude the US from any imminent peace process. In deviating from established norms and misunderstanding the United States’ position as the leader of the free world, President Donald Trump has made brash moves in foreign policy that seem to exude a lack of any kind of deep thought. Such moves include the almost careless declaration of Jerusalem as the eternal capital of Israel (a shift from 70 years of US foreign policy) and his Twitterplomacy, which is infamous for coining terms like ‘Rocketman’ in reference to North Korean leader Kim Jong Un. The US has historically played the role of the world’s peace broker (until recent times, of course), and some significant US-led peace initiatives include baby steps of brokering peace in the Middle East in the heat of the Arab-Israeli conflict, a role which the US has held since the Camp David Accords in 1978. The Oslo Accords are also a US-led peace effort which gave rise to the one picture people think of when it comes to the Arab-Israeli conflict: of Yitzhak Rabin and Yasser Arafat shaking hands with a jubilant Bill Clinton drawing the two leaders closer together (below).
President Trump’s clear deviation from that role through misguided foreign policy nullifies the trust that the US has built in the region. Trump thought that the Jerusalem declaration would take Jerusalem ‘off the table’, thereby simplifying negotiations. Not at all. Head of the Palestinian Authority Mahmoud Abbas has vowed not to recognize any US-led peace initiatives after President Trump’s recent declaration of Jerusalem as the eternal capital of Israel. In a conference shortly after the landmark announcement, Abbas said that “we will not accept for the U.S. to be a mediator” and that “the deal of the century [was] the slap of the century”. This consternation was further reflected in Abbas’ decision not to meet American Vice President Mike Pence upon his visit to the Middle East in mid-January 2018. Furthermore, the region, which is typically torn apart by sectarian conflict, came together in an extraordinary meeting and stood behind Palestine in its unequivocal rejection of the US’ role in the peace process. The US even earned a rare rebuke on the Jerusalem declaration from longtime ally and Saudi Arabian King, King Salman. Countries are putting their disputes aside and uniting under a common banner knowing that the US is no longer going to be the rational and independent arbiter it attempted to be before. Furthermore, other countries have stepped into the fray to present themselves as a neutral alternative to a US that steadily losing its credibility. This way, the US will slowly lose its relevance in the world as countries learn to live without the US as a peace engendering entity.
On an economic plane, countries are committing to multilateral and plurilateral trade deals in the face of a rising tide of protectionism, regardless of whether the US is a part of those initiatives. The most significant of these measures was the modification of the Trans-Pacific Partnership (TPP)— which included the US—to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) after President Trump pulled the US out of the landmark trade deal, which would have given the US greater market access and tariff reductions among Asian powerhouses. The CPTPP still allows for improved market access for goods and services, substantial tariff reductions, greater investment protections and opportunities, and improved access to government procurement contracts, and was a move led by Australia and New Zealand after the US took its leave. What should be noted is not so much the economic benefit of still inking the deal after the US’ departure (the TPP covered 40% of the world’s GDP, while the CPTPP only covers 14%), but that signatories decided to proceed with signing the document—a message that the world is ready to ensure that it benefits regardless of US involvement.
Trump’s ‘America First’ drive has scared the international community into a frenzy, pushing it to pursue free trade with a renewed vigour now that the strongest proponent of free trade since the establishment of the WTO and the GATT in 1994 is going back on its hallowed word. An example of this is Trump’s recent move to slap hefty import tariffs on Korean-made washing machines and solar panels, a move which he hopes will lead to more jobs. This has been met with much consternation from Chinese and Korean producers, who intend to dispute the move at the WTO for fear of more tariffs to come. This new trend of protectionism and anachronistic method of creating jobs (for protectionism is beneficial only when an economy is growing, not when it is advanced like the US’) has scared the rest of the world into a frenzy. With the imposition of tariffs, its trade policy is starting to look like those of Argentina and Brazil, old-time protectionist countries who have just begun their recovery after their dark foray into protectionism. Today, Argentina and Brazil are the very economies shaking the shackles of protectionism as their pro-trade Presidents attempt to move into a new milieu of economic prosperity. Regionally, a recent meeting involving the ministers of Finance and Foreign Affairs of member countries from the formidable Pacific Alliance and MERCOSUR trading blocs ‘reiterated their commitment to an open, transparent, inclusive, and rules-based system of multilateral trade’ in ‘response to the developed world’s recent pushback against trade liberalization’ (Argentina and Brazil are member countries of MERCOSUR). One can argue that Trump’s isolationist ‘America First’ drive, albeit not ‘America Only’, must be given credit as a move that any enterprising President would take in the efforts to protect the local industries of their country. However, these policies are out of place in the bastion of democracy and free trade—the country which was the head of the Bretton Woods conference in 1945, the World Trade Organization, and the arguable founder of the General Agreement on Tariffs and Trade (GATT). For all its efforts historically in cementing itself as a strong proponent of free trade, the US’ current trade stance seems to signal the opposite given that the US will now think more for itself in attempting to secure ‘fair trade deals’.
However, political signals showing a grand coming together rarely last longer than the flash on the cameras used to take photos of smiling politicians. Often times these are merely symbols of good faith which are reneged upon once circumstances change. In the case of the Middle East, one can easily look to how Hamas and Islamic Jihad, two important political factions in the Palestinian political narrative, did not attend the very meeting that the PLO had organized to discuss Palestinian strategy after the Jerusalem declaration, as it was held in the disputed West Bank. Recent peacemaking overtures by North Korean leader Kim Jong Un seem to be a part of a North Korean diplomatic script of aggravation and detente. It simply does not make sense that he test a suite of nuclear weapons only to replace belligerent rhetoric and actions with a host of friendly gestures with his sister’s appearance at the Pyeongchang Winter Olympics and a handwritten invitation for South Korean President Moon Jae-In to visit Pyongyang for talks over the period of two months.
However, developments among these emerging markets and developing economies—even among countries engaging in daily hostilities with one another—may be short-lived or ineffectual. The longevity of growth that can be brought about by openness to trade may be shortchanged by domestic politics that are unconducive to ensuring its longevity. The strongest of these cases are in the MERCOSUR economies, all of whose current member country Presidents are pro-trade. However, both Brazil and Paraguay go to the polls this year, while Argentina and Uruguay will enter elections in 2019. With openness came lower levels of protection for the local worker, a condition which these workers do not accept. Brazil’s workers protested late-2017 labour reforms that raised the retirement age. Argentines rejected the latest modifications to their pension calculations (which slashes public spending but makes severance packages smaller) as a part of austerity measures. Paraguayans bemoaned current President Horacio Cartes’ 2013 private-public partnership (PPP) laws that allow for foreign private entities to invest and have a stake in local firms. Given the upcoming elections and widespread voter discontent in an historically protectionist region, it is entirely possible that anti-trade leaders will be voted into power. The region then runs the risk of returning to its protectionist history, a move that will sound the death knell for these countries (that suffer, or used to suffer, from double-digit inflation, high levels of unemployment, and large government deficits).
Hence, the jury is still out on this one—it is too soon to tell if the world can simply move on without the US. It has historically cemented its role as the chief proponent of free trade and peace—its vacating this role is a mind-boggling prospect which leaves experts wondering who will fill the vacuum (China? Russia? India?). Many factors are at play: whether anything changes after the US’ 2018 midterm Congressional and Senate elections, whether belligerent countries move past short-lived signalling and manifest their political image into something more enduring, and whether South American voters vote for pro-trade Presidents. So, is the US isolating itself such a bad thing? It depends. The world seems to be ready to move on to a world without the US as a broker of peace and seems willing to engage in trade deals without the US. But the answer to this question will elude us until 2020, when President Trump and political watchers—indeed, the world—evaluates his first term.