America Addresses Global Free Trade

China is no longer alone in being targeted by the U.S, and exports from emerging economies are no longer the only danger to the U.S. economy, as Germany has joined the list of targets as well. The U.S. wants Germany to stimulate its domestic market and to help the recovery of the global economy; in other words, reduce their oil exports to reduce the U.S. trade deficit, allowing the U.S. economy to enjoy the largest share in world trade. In response to the American proposal to control exports, made at the G-20 summit held last week in Korea, a spokesperson for German Chancellor Angela Merkel commented, “We will not allow them to punish us for our success as leaders in the export sector.”

One proposal suggested that the trade surplus of any country should be no more than four percent of GDP. Germany, however, has renewed its refusal to determine the absolute numerical levels of the balance of commercial transactions between the states, believing that this would be contrary to the principles of global free trade, as economic imbalances between countries of the world are necessary. This was underlined by the support of the European Union countries that participated in the G-20 summit for the German chancellor in her dispute with U.S. President Barack Obama over the flow of exports from some countries to certain parts of the world. It is considered that the key to reducing imbalances is a system of exchange in a flexible manner, reflecting the fundamental principles of liberal economic theory.

These days the so-called war of currencies tops the concerns of the United States, and the U.S. is seeking a solution to correct the structural distortions of the economy to rein in the U.S. trade deficit. The U.S. is considered the foremost consumer in the world, with spending making up about two-thirds of its economic activity. The U.S. has appealed for the devaluation of its currency against major world currencies to strengthen the capacity of the U.S. economy to be competitive against foreign goods at home and abroad. The U.S. has enacted these policies, which ignited a war of currencies after the enabling the dramatic devaluation of the dollar against the Japanese yen and the euro. The U.S. has done so despite the near-collapse of the euro this year and the current exacerbation of the crisis because of the worsening debt in the euro countries, and despite the failure of the U.S. administration to reduce the trade deficit. Therefore, it has recently focused on industrial countries to restrict and adjust their exports to the certain ceilings.

One must consider the fact that the global free trade and the policy of open markets imposed by the U.S. on various countries of the world, embodied in the wider manifestations of globalization and capitalism, is responsible for the slowing U.S. economy and its inability to compete with various economic centers. This is an attempt of the U.S. to overcome the failure to address the real problems facing the U.S. economy, an issue central to the law of uneven development between the centers of capitalism and to compete with the giants of the global economy. The inability of the U.S. economy to withstand global trade patterns has made it confused and unable to approach and deal with both the East and the West.

It is ironic that the U.S. has worked since the end of World War II by various ways and means to impose an economic system based on the absolute freedom of world trade, but has now fallen victim to this freedom. On July 1, 1944, the U.S. convened a conference at Bretton Woods, where 44 countries developed a new economic system based on three basic pillars: the international monetary system, the international financial system and the international trading system, set up under the International Monetary Fund, the World Bank and the World Trade Organization. These organizations were initially manifested in the Convention on the GATT in 1947 with the participation of 23 countries that then became the WTO in 1994 with the participation of 117 countries.

Under international trade agreements led by the U.S., the economies of developing nations were subject to unequal terms with the centers of capitalism, including the agreement to remove all tariff barriers to facilitate the flow of goods between countries around the world, for local products to face a difficult competitive environment, to be able to buy foreign products from developed economies at a lower cost due to the wide use of technology. These agreements took a toll on developing countries and deprived them from the use of any form of protective tariffs or customs, or any form of tax concessions or tax credits for national exports. The agreements were drafted when U.S. interests required the terms of global trade to be so, before the U.S. economy became vulnerable to the crisis and before the U.S. faced the real dilemma of their economy. The U.S. is now seeking to develop controls and barriers on global trade, in line with current U.S. interests.

The U.S. managed to pass their policies on global free trade and impose equal conditions between north and south and between rich and poor countries when these policies served the interests of the global capitalist centers. But now they collide with the interests of major industrialized countries, and success should not be expected in this arena.