Caixin
Dec 03, 2016 02:23 PM
ECONOMY

Ex-WTO Chief Says Trump’s Protectionist Talk Mostly Just That

(Beijing) – U.S. President-elect Donald Trump’s protectionism rhetoric is unlikely to escalate into concrete action because it will harm the U.S. economy “first and foremost,” said Pascal Lamy, the former director-general of the World Trade Organization, here on Saturday at the Caixin Summit.

Pascal Lamy

Pascal Lamy, the former director-general of the WTO, speaks at the seventh Caixin Summit on Saturday. Photo: Caixin

Trump’s aggressive protectionist remarks made during the U.S. presidential campaign, which ranged from pulling out from free trade arrangements to levying a 45% tariff on imports from China, have raised a specter of a rough patch for the global economy.

But Lamy said he was less worried, adding he was skeptical about how much of the talk could materialize.

“Speaking as a European, Trump is high-risk on environment, middle-risk on security, and relatively low-risk on trade,” he said.

“Going protectionist for the U.S. would harm the U.S. economy… first and foremost,” he said.

“I would bet rather on soft Trump than hard Trump.”

He lashed out at Trump’s hardline gesture as an exploitation of disadvantaged Americans’ discontent about globalization.

“For many people, scapegoating trade is a politically correct way of being Sino phobic – the problem is with foreigners,” he said.

But the real problem in the United States is its “extremely weak” social safety net, he said, adding that solutions to resentment about globalization should be reducing social insecurity, instead of resorting to protectionism.

Despite the jarring talk, little protectionist action has been taken; global trade, measured in volume, continued to grow this year, Lamy said.

The infrastructures of the global production of goods and services are now so closely interwoven that it will be much more expensive to unwind globalization than to hold on to it, he said.

“Globalization is already 80% done,” he said. “The cost of moving back on that would be much bigger”.

Trump has proposed to withdraw from the Trans-Pacific Partnership trade deal and Lamy said that could benefit China if it opens up its economy more.

“If China wants to frame the trade opening in the regions… [it] will necessitate China to open up its economy, notably in the services sector. And this is not yet done,” he said.

China “paid a lot” when it joined the WTO, he added. “But since [then] not much has happened. And that was 15 years ago.”

Contact reporter Fran Wang (fangwang@caixin.com); editor Ken Howe (kennethhowe@caixin.com)

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