IN a major deviation from the traditional free-trade stance of American leaders, US President Donald J. Trump openly declared that his administration is pursuing America First policy. He has withdrawn US support to the Trans-Pacific Partnership (TPP), which his predecessor crafted as a strategic response to the growing Chinese trade dominance of the region. He has also called for an overhaul of the 1994 North American Free Trade Agreement (Nafta) involving Canada and Mexico, claiming that America has been a big loser under the said agreement in terms of jobs and exports. Trump also announced his administration’s resolve to build a long and expensive concrete wall to prevent Mexican labor and goods in flooding the US territory. Trump intoned: He wants more manufacturing jobs to remain and expand within the US under his America First policy. Yes, he will still continue trade talks, but this time on a bilateral or country-by-country basis. Trump’s America First is outright trade unilateralism, outright economic nationalism.
The larger picture, however, shows that the US has always pursued an America First policy since its formal separation from the colonial mother country, Great Britain. George Washington and his Treasury secretary, Alexander Hamilton, were also the original proponents of economic protectionism or economic nationalism. After gaining independence from the British monarchy in 1776, Washington proceeded to build the foundation for industrial America based on Hamilton’s 11-point plan to build up “American Manufactures”. Hamilton’s four most important proposals are as follows:
• Application of duties on “foreign articles which are the rivals of the domestic ones intended to be encouraged”;
• Prohibition of the “exportation of materials of manufactures”, meaning keeping within America materials needed by domestic
industry;
• “Exemption of the [raw] materials of manufactures from duty”; and
• “The encouragement of new inventions and discoveries, at home, and of the introduction into the US of such as may have been made in other countries, particularly, those which relate to machinery.”
As a result of the foregoing, America was transformed from an agrarian colony to an industrial power like Britain. At the turn of the 20th century, the US was using its industrial might to push for a redivision of the world, looking for developing countries to colonize or recolonize, such as the Philippines.
It was only in the second half of the last century that the US started reducing its high protectionist walls. As Ha-joon Chang, author of Kicking Away the Ladder (Anthem Press, 2002), put it: once they were able to climb the higher rungs of the industrial ladder, the US and other developed countries embraced the free-trade ideology to become ardent proponents of economic deregulation and investment liberalization in all countries participating in trade agreements, such as those being implemented by the World Trade Organization. In short, the idea is to create bigger markets for American industries. Still America First.
So, how come Trump is backing out of the TPP and Nafta and why is he building a US-Mexico wall?
The quick answer is that Trump, the demagogic politician, has seen the impact of globalization on America’s industrial base. Instead of expanding at home, the big American companies treated the whole world as a production base under their global production networks (GPNs). Thus, instead of creating jobs in America, Apple allowed its GPN contractors and subcontractors, like Foxconn, to build the labor-intensive iPhone parts in China, not in the US. Instinctively, the voters in the American “rust belt” chose Trump’s America First and rejected Hillary Clinton whose husband, Bill Clinton, expanded Reagan’s privatization program into a large-scale liberalization of the American economy in the 1990s.
Of course, the reality is far more complex. Trump’s conglomerate has also been a major investor in hotel and real-estate business outside America, including the Philippines. It has also been importing clothing from Mexico and China to market the Trump brand. And some of Trump’s Cabinet nominees have been exposed as big outsourcers, like his Labor Secretary Andrew Puzder, who relocated Puzder’s help desk information-technology work in the Philippines.
What is clear is that Trump is not prepared to abandon the global capitalist system that has evolved under the Washington Consensus free-trade rules of the last four decades. Trump is simply trying to shake the system in a unilateral manner to reaffirm America’s leadership in the global capitalist order while placating America’s jobless by pressuring American companies to build more factories at home. Trump is also pushing for more bilateralism in trade relations because the US can easily dominate individual trading partners. It is also trying to rebuild an Anglo-American alliance in the wake of the British pullout from the European Union. In the meantime, the US is calling for sanctions against Chinese export dumping.
Obviously, the world is at the throes of a new stage or phase of global capitalist development. The dogmatic neo-liberal economists must be squirming in their pants over Trump’s trade unilateralism.
But in the meantime, what is the Philippines doing? Will the country’s economic technocrats remain committed to their idealized vision of a global free-trade order, which Trump is now unilaterally tearing apart? Is the look-toward-China policy a sensible strategic policy adjustment? Will they continue relying on more jobs being outsourced to the Philippines by our trading partners, or will they push for a more self-reliant economic development program to insulate the country from the blusters and unilateralism of the Trumps of the world?