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  • These are hard times for free trade.

  • On the one side, Donald Trump.

  • He stormed out of the G7 meeting,

  • refusing to endorse even the principle of free trade.

  • In the negotiations over NAFTA, he

  • insists on adding clauses that defeat

  • its purpose such as one requiring it to be reagreed

  • every five years.

  • And he has imposed tariffs on steel and aluminium

  • on absurd national security grounds.

  • On the other side, China.

  • It uses trade deals as a tool of political hegemony in Asia,

  • tightly controls its internal markets,

  • and extracts intellectual property from foreign firms

  • doing business there.

  • Stuck in the middle there is the EU,

  • which could become the free trade economic superpower were

  • it not for its internal divisions.

  • How to stop the world from collapsing into a trade war?

  • Push back, push forward, and be patient.

  • Canada, Mexico, and Europe are right to initiate

  • retaliatory tariffs against the US.

  • Bullying has consequences, and it is especially good

  • that these countries are showing a unified front.

  • But it is equally important that countermeasures

  • are proportionate.

  • They must meet like with like, not escalate.

  • The same applies to China.

  • Its tech companies are keen to expand overseas, often

  • by buying local companies.

  • Regulators should treat these deals with scepticism

  • so long as foreign companies operating in China

  • are treated unfairly.

  • Next, push on.

  • The world should follow the example

  • of Japan, which went ahead with the Trans-Pacific Partnership

  • trade deal after Mr. Trump abrogated it.

  • It is especially key that the EU not let issues like immigration

  • divide it on its commitment to free trade.

  • Countries outside of the US and China

  • must keep their own houses clean, too.

  • When Mr. Trump complains about dairy protectionism in Canada,

  • he has a point.

  • Finally, be patient.

  • The arc of trade history is long.

  • Even if Mr. Trump wins again, 2024 is not far away.

  • The multilateral organisations that push free trade,

  • such as the G7, must be kept going, even under duress,

  • until a new day dawns.

  • That is the FT view.

These are hard times for free trade.

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How to stop a world trade war

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    Samuel posted on 2018/06/20
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