* This is my article in BusinessWorld last June 20, 2018.
There seems to be a predominant sentiment to demonize the
United States.
These sentiments are variations of a theme, which
include: a) “US protectionism” vs G7 nations, the European Union (EU) and
China; b) US is a declining power while China is now the “new vanguard” of
globalization; and (c) US withdrawal from the Paris Agreement is adverse
unilateralism while China or Germany is the new leader of the “save the planet”
movement.
These sentiments are based on illusion and emotionalism
than hard data and propelled more by anti-Trump hysteria and pro-China wishful
thinking in its Belt and Road Initiative (BRI).
Here are the numbers that show why these assertions are
based on illusion than reality. These data sources are (a) GDP: IMF, World
Economic Outlook database, April 2018; (b) Tariff rates: Fraser Institute,
Economic Freedom of the World (EFW) 2017 Report; (c) Coal use in million tons
oil equivalent (mtoe): BP, Statistical Review of World Energy, June 2018.
Tariff rates’ standard deviation of tariff rate means the
degree of tariff variation, the higher the standard deviation, the more
protectionist an economy is for certain merchandise goods and commodities.
Covered here are the world’s six biggest economies in
terms of GDP size, current or nominal prices. The Philippines is added to help
compare our GDP size, trade and energy/climate policies.
These numbers show the following:
One, the US remains the biggest economy in the world
despite anemic growth over the past decade (for instance, not one of the eight
years of “hope and change” that the US economy grew 3% or higher). Its GDP size
is nearly equal to the combined size of China, Japan, and Germany, the second-,
third-, and fourth-largest economies.
Thus, to say that the US is a declining anchor of
globalization is based on illusion.
Two, the US has the lowest average tariff rates in the
industrialized world, has much lower rate, nearly one-third (1/3) that of
China. Thus accusing “US protectionism” and implying that the rest of G7, EU,
and China are non-protectionist is again based on illusion and not hard data.
Three, US withdrawal from the Paris Agreement is a wise
move as China and India are the world’s biggest consumers of coal power, a
favorite whipping commodity of the “save the planet” movement.
In 2017, China’s coal consumption was more than five
times larger than the US; even India’s use was larger than the US.
On a related note, it is wrong for the anti-coal groups
in the Philippines to call for further coal restriction since our coal use is
very small even compared to “green” Germany and Japan, and much smaller than
those of India and China.
China’s BRI can be considered more as a mercantilist
project than a free trade project. Mercantilism is a 16th to 18th century
economic policy that viewed more exports and less imports — more wealth
accumulation via protectionism while having aggressive exports — as good
policy.
Check China’s BRI information and these terms stand out:
• push further exports amidst slowdown in global trade;
• assist and promote troubled State-Owned Enterprises
(SOEs) via lucrative projects abroad;
• enhance the absorption capacity of export markets in
the emerging world;
• access to resource-rich nations in Central Asia, Middle
East, Africa and Southeast Asia;
• globalize Chinese technological and industrial
standards across emerging markets.
Dutertenomics’ build-build-build (BBB) with high
involvement of China banks and contractors is falling along the China BRI
mercantilism. This means the government’s build-build-build requires lots of
loans-loans-loans from China and necessitates tax-tax-tax via TRAIN and succeeding
tax laws.
The US’ zero tariff, zero subsidy challenge during the G7
Summit in Canada early this month is somehow addressed to China. As shown by
the numbers, China is far out from going to zero and thus the Trump
administration’s policy is equalized high tariff with China. Judging from
current movement in global stock markets, China stocks in Shenzhen and Shanghai
are experiencing heavy beatings. Very likely Xi Jinping will blink first.
Meanwhile, this June 20, the Stratbase ADR Institute,
Inc. (ADRi) is hosting a roundtable discussion on “The 21st Century Silk Road:
Perils and Opportunities of China’s Belt and Road Initiative” with Mr. Richard
Heydarian as main speaker, with yours truly as one of the three reactors. Venue
is the Tower Club, Makati City.
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See also:
BWorld 220, Trade imbalances, protectionism and rhetoric, June 15, 2018
BWorld 221, Mindanao power development, reality vs illusion, June 16, 2018
