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Leaders from business and policy-making are not expecting a return to 1930s-style trade war, despite the populist backlash in parts of the world against globalisation and free trade.
Nevertheless, the reality is that nationalism and protectionism are on the rise globally and the case for globalisation needs to be made, agreed panellists in a session at the World Economic Forum Annual Meeting.
“There is no winner in a trade war,” says Min Zhu, president of the National Institute of Financial Research from the People’s Republic of China.
Indeed, raising tariff barriers on both sides would cut China’s annual GDP by around one-third and US GDP by one-half. Rhetoric coming out of the incoming US administration is concerning, he adds. “China will continue to support globalization and is willing to work with all countries.”
“Protectionism is rising and that is worrying,” says Cecilia Malmström, commissioner for trade at the European Commission in Brussels. Trade is the best tool we have to fight poverty and promote growth. “However trade needs to be more inclusive, transparent and values-based,” she adds.
David Cote, chairman and CEO of Honeywell International, stresses the need to learn the lessons of history. “Since the Phoenicians, we’ve known that trade between countries raises the standard of living.”
We just need to find a way to make it work, he adds, saying it is important not to take political rhetoric at face value and, instead, suggesting a wait-and-see approach.
David Abney, chairman and CEO of UPS in the US, also does not foresee a trade war. With so much to lose, cooler heads will prevail, he says.
“Trade is not a zero-sum game.” Nevertheless, leaders have not done a good enough job communicating the aggregate benefit of open trade and globalisation. “We need to do much more to equip displaced workers with new jobs and 21st-century skills,” he says.
“We should not talk ourselves into a trade war,” stresses Roberto Azevêdo, director-general of the World Trade Organization (WTO) in Geneva. He emphasises the need to deliver positive news on trade. Periodically, we must deliver important breakthroughs, he says, such as the Bali 2013 Trade Facilitation Agreement, which increased global exports by around $1,3-trillion.