The Coming Trade Wars Around the World

Here is a very interesting blog posting by Robert Reich:

President Obama has vowed to double U.S. exports within the next five years. That’s because exports are critical for rebooting the American economy. It’s clear American consumers can’t get the economy going on their own. They can’t restart the jobs machine. They’ve run out of money and credit.

It’s not just that one out of four Americans is unemployed or underemployed (working part-time, overqualified, or at a lower wage than before). More significantly, the Great Recession burst the housing bubble that had let American consumers turn their homes into ATMs. Now the cash machines are closed.

So the Administration figures foreign consumers will have to fill the gap.

Problem is, most other economies also relied on American consumers.

...

Last week the representatives of the world’s 20 biggest economies vowed to slash their budget deficits by half by 2013. The result will be even less domestic demand and even more pressure to export in order to avoid higher joblessness.

We’re unlikely to see a repeat of the disastrous Smoot-Hawley tariffs that worsened and lengthened the Great Depression. But you can forget trade-opening agreements. In Toronto last week, the G-20 leaders dropped their 2009 pledge to finish the Doha round this year. In the U.S., agreements with South Korea, Panama, and Columbia are languishing.

And watch out for under-the-radar protectionist moves. Since the start of 2008, when the Great Recession began, countries around the world have already imposed at least 443 measures to block imports, according to the Center for Economic Policy Research.

This is just the start.

Nobody starts out with the idea of creating a trade war. But once you start down the path of trying to solve your problem at the expense of your neighbor, you are on your way to a trade war. And don't think the US is the innocent party. When the US economy went sour in 2008, the US imposed a "buy America" requirement for all stimulus money. They meant that the NAFTA agreement -- you know, the "free trade" agreement -- was unilaterally broken by the US. Canada didn't take the US to the binding arbitration court for NAFTA. Instead, Canada just swallowed and accepted the disruption in hopes of keeping the long term relationship solid. Canada went from having a positive balance of trade with a $20 billion surplus to a negative balance of trade with a $20 billion deficit. This hurts Canadians, but I don't think any Americans noticed. That's the problem with "trade wars". The bullets start flying before war is declared and the bodies start piling up and the costs go through the roof before the supposed "antagonists" realize they have themselves in a life-or-death struggle. Rather than compromise and arbitrate, trade wars start innocently and leave a lot of dead bodies around. Sad.