U.S. president Donald Trump speaks at the Family Leadership Summit in Ames, Iowa, United States, July 18, 2015. REUTERS/Jim Young - RTX1KTWT

 

BY HON A.B. CHIKWANDA, FORMER MINISTER OF FINANCE, ZAMBIA

THE SEVEN DECADES OF POST SECOND WORLD WAR HAVE BEEN CHARACTERISED BY ROBUST GROWTH IN WORLD TRADE, LEAVING IN ITS TRAIL MIXED FORTUNES IN A DIVERSITY OF COUNTRIES. OVERALL THOUGH, GROWTH IN TRADE HAS BEEN SALUTARY. A RULES BASED SYSTEM IN WHICH THE AMERICANS HAVE PLAYED A SIGNIFICANTLY POSITIVE AND CONSTRUCTIVE ROLE, INCLUDING THE ESTABLISHMENT OF THE WORLD TRADE ORGANISATION, HAS UNDERPINNED GLOBAL TRADE EXPANSION. THE CREDIBILITY AND SUSTAINABILITY OF THIS SYSTEM RESTS ON A RATHER PRECARIOUS COMPOSITE OF FACTORS SUCH AS FAIR PLAY, MEANING ADHERENCE TO THE RULES AND NO ZERO SUMS IN WHICH PROCESS THERE ARE NO SCENARIOS WHERE SOME WIN AT THE EXPENSE OF AND TO THE EXCLUSION OF OTHERS.

GLOBAL TRADE, AS A VITAL INGREDIENT OF THE GLOBAL ECONOMIC SYSTEM, INEVITABLY REVOLVES ON LEGITIMATE EXPECTATIONS AND PERCEPTIONS OF INEXORABLE FORWARD THRUST. THE APPLE CART IS SO VULNERABLE TO BEING OVERTURNED BY FEELINGS OF THREATS TO TRADE WHICH IS REGRETTABLY SO NOW, BECAUSE OF AMERICAN HARDLINERS CURRENTLY IN THE DRIVING SEAT IN TRUMP’S WHITE HOUSE. EVEN IN AMERICA, STOCKS ARE NOW TAKING A NOSEDIVE. FOR THE ECONOMIES ON THE PERIPHERY, PARTICULARLY THE ALREADY FRAGILE AND VULNERABLE EMERGING COMMODITY DEPENDENT COUNTRIES, THE CRUNCH IS PALPABLE. THE THREAT TO WORLD TRADE HAS ALREADY INDUCED A DRASTIC FALL IN COMMODITY PRICES; OIL IS AN EXCEPTION BECAUSE THE SUPPLY SIDE IS MANIPULATED BY A CARTEL AND THE SUPPLY/DEMAND EQUILIBRIUM HAS NO MEANING IN THIS GAME.
ZAMBIA DEPENDS ON COPPER EXPORT EARNINGS TO THE EXTENT OF 70%. THE NON-MINERAL EXPORTS, ALSO KNOWN AS NON-TRADITIONAL EXPORTS, ACCOUNT FOR 30% OR LESS IN YEARS WHEN THERE ARE GLITCHES OR SLIPPAGES IN THE PERFORMANCE OF THE AGRO SECTOR WHICH WILL TAKE A WHILE TO ACQUIRE A REQUISITE SUSTAINABLE MOMENTUM. AT THE TIME OF WRITING THIS ARTICLE, COPPER PRICE HAD FALLEN FROM A PEAK OF $7,300 PER TON FOUR WEEKS AGO TO $6,300 PER TON, WELL BELOW THE MINIMUM LEGITIMATE EXPECTATION OR BENCH MARK OF AT LEAST $3 PER POUND OR $6,720 PER TON. THE FALL IN PRICES SEEMS INEXORABLE AND IS NOT COMMENSURATE WITH STOCK LEVELS WHICH ARE BELOW THE 300,000 TONS LEVEL AS CAPTURED BY THE LONDON METAL EXCHANGE (LME).

ALTHOUGH ZAMBIA PRODUCES MUCH SMALLER QUANTITIES OF COBALT, IT IS STILL THE SECOND LARGEST PRODUCER IN THE WORLD AFTER THE DEMOCRATIC REPUBLIC OF CONGO (DRC) WHICH ACCOUNTS FOR NEARLY 80% OF GLOBAL OUTPUT. THIS HEAVY METAL (SPECIFIC GRAVITY OF 8), USED IN AIRCRAFT ENGINES AND CHEMICAL INDUSTRIES, HAD REACHED A PRICE OF $91,000 PER TON BUT HAS NOW TUMBLED TO $75,000 PER TON AND THERE IS A DOWNWARD SPIRALLING.

THE DANGEROUS TRADE WAR GAMES SEVERELY IMPERIL THE MEAGRE FORTUNES OF THE COUNTRIES TRAPPED AT THE ROCK BOTTOM OF THE DEVELOPMENT LEAGUE. MR. DANIEL ARAP MOI, FORMER PRESIDENT OF KENYA, IN HIS NATIVE WISDOM ON A STATE VISIT TO ZAMBIA ILLUSTRATED THE DANGER OF GAMES OUR IMPERIALIST FRIENDS PLAYED VIS-À-VIS OUR FRAGILE ECONOMIES BY COMPARING THEM WITH A GAME CHILDREN PLAYED BY THROWING STONES IN A HUGE POND AND GETTING A TREMENDOUS KICK OUT OF THEIR ACTION. A FROG EMERGED TO TELL THE CHILDREN THAT WHAT THEY DEEMED FUN OR JOY WAS DEATH FOR THEM. GLOBAL TRADE WARS WILL ENTAIL DEATH TO DEVELOPING COUNTRIES WHILE SOME FANATICS EXHIBIT INSENSITIVITY AND CALLOUSNESS.

MR. TRUMP AND HIS COMBATANTS NEED TO BE TOLD BY THE GLOBAL COMMUNITY THAT THEY ARE SETTING THE WORLD ABLAZE WITH THE TARIFFS THEY ARE ROLLING OUT. THE UNABASHED BELLIGERENT HARDLINERS THAT SURROUND TRUMP ARE NOT BY ANY STRETCH OF THE IMAGINATION BUFFOONS – THEY ARE MEN AND WOMEN WHO HAVE SERVED WITH VARYING DEGREES OF DISTINCTION IN INDUSTRY, PUBLIC ADMINISTRATION AND ACADEMIA. WHAT SEEMS TO BE IN EXCEEDINGLY SHORT SUPPLY IN THIS GROUP ARE TWO CRITICAL ATTRIBUTES, NAMELY INTEGRITY AND VISION. THEY DISTORT THINGS TO JUSTIFY DRACONIAN MEASURES WHICH WILL HURT THE GLOBAL ECONOMY AND WILL HURT AMERICA IN THE NOT TOO DISTANT FUTURE. THESE DISTINGUISHED PEOPLE REFUSE TO CONTEMPLATE THE UGLY REALITY THAT AMERICA’S PREPONDERANCE IN THE GLOBAL ECONOMY IS A DECLINING FUNCTION OF TIME AS OTHER ECONOMIES INCREASE THEIR SHARE OF THE GLOBAL ECONOMY.

AN EXAMPLE OF DISTORTION OF FACTS IS THE EXTENT OF THE CANADIAN TRADE SURPLUS. IT IS LARGER WHEN LOOKED AT IN A UNIDIMENSIONAL WAY; WHEN SERVICES ARE FACTORED INTO THE EQUATION, THE AMERICAN DEFICIT EVAPORATES. THE $200-300 BILLION CHINESE DEFICIT ALSO HAS SOME QUALIFIERS. THE MASSIVE IMPORTS OF MANY CONSUMER GOODS WHICH AMERICANS BUY FOR PRACTICAL PURPOSES AND NOT FOR SENTIMENTAL REASONS HELP CONSIDERABLY IN TONING DOWN INFLATION. FOR ITEMS SUCH AS STEEL AND ALUMINIUM WHICH MAY BE REGARDED AS INTERMEDIATE GOODS, THEY ALSO LOWER PRODUCTION COSTS IN THE INDUSTRIES THAT THEY ARE USED. WHERE THERE ARE EXCESSES ON THE PART OF THE CHINA, THE BEST RECOURSE IS USING THE MECHANISM OF THE WORLD TRADE ORGANISATION TO INDUCE RESPONSIBLE BEHAVIOUR FROM THE CHINESE.

AS A RESULT OF AMERICAN ACTIONS, CHINA IS NOW INTENT ON RECIPROCAL TARIFFS; THE CANADIANS ARE PLANNING TO PUT TARIFFS ON $12 BILLION WORTH OF AMERICAN GOODS; AND NOT TO BE OUTDONE, THE EUROPEANS ARE ALSO PLANNING TARIFFS ON A WIDE RANGE OF AMERICAN GOODS – ALL THESE ACTIONSARE NO GOOD FOR THE GLOBAL ECONOMY. THESE ACTIONS WILL ONLY ENGENDER DISHARMONY AND INSTABILITY AND RENDER THE WORLD INSTABLE – A PLUNGE INTO THE DARKNESS WHICH THE GLOBAL COMMUNITY HAS TRIED TO PUT BEHIND THEM.

MR. TRUMP, A SUCCESSFUL BUSINESS TYCOON, IS A STRANGE MAN WITH AN INFLATED EGO AND SOME DEGREE OF MEGALOMANIA. HERE IS AN AMERICAN PRESIDENT WHO SEEMS AT TIMES UNAMBIGUOUSLY EULOGISTIC OF DESPOTS WHILE BEING UNCONSTRAINED TO SCREAM OBSCENITIES AT FAITHFUL DEMOCRATIC ALLIES WHO, FOR ALL THEIR HUMAN IMPERFECTIONS, HAVE HELPED TO ORDAIN SOME GLOBAL ORDERLINESS.

WESTERN EUROPE, A VERY RESILIENT PART OF THE WORLD, WILL SURVIVE AMERICAN SANCTIONS IN THE LONG-TERM. WESTERN EUROPE HAS A GROSS DOMESTIC PRODUCT (GDP) ALMOST EQUAL TO AMERICA. ITS SURFACE AREA IS ABOUT A THIRD OF AMERICA AND ACCOUNTS FOR JUST OVER 6% OF THE WORLD POPULATION BUT ACCOUNTS FOR NEARLY 30% OF WORLD TRADE. EUROPE EXPORTS A LARGE VOLUME OF MOTOR VEHICLES BUT EUROPEANS ALSO MAKE MILLIONS OF VEHICLES IN AMERICA, EMPLOYING IN EXCESS OF 100,000 AMERICANS. WOULDN’T LOGIC DICTATE THAT THE EUROPEAN UNION AND THE USA NEGOTIATE INSTEAD OF THE MADNESS OF TARIFF WARS?

THERE HAVE BEEN DELEGATIONS TO CHINA AT HIGH LEVELS OF AMERICAN ADMINISTRATION AND THERE DOESN’T SEEM TO BE A COMPELLING NEED OR NECESSITY TO ACCELERATE THE TARIFF WARS. CHINA’S RAPID GROWTH AND ITS GROWING POPULATIONS OF 1.5 BILLION MAKES THAT COUNTRY A SIGNIFICANT MARKET FOR ALL COUNTRIES IN THE WORLD. CHINA’S EXCESSES NEED TO BE NEGOTIATED, HOPEFULLY THROUGH THE WORLD TRADE ORGANISATION. CHINA’S EMERGENCE AS AN INFORMATION AND COMMUNICATIONS TECHNOLOGY (ICT) GIANT CAN NOT BE ROLLED BACK. WHETHER THAT GROWTH HA ENTAILED DISREGARD FOR INTELLECTUAL PROPERTY RIGHTS OR NOT, THE CHINESE NUMBERS WILL ALWAYS MATTER. LAST YEAR, CHINESE ONLINE PURCHASES WERE IN THE ORDER OF $8.5 TRILLION IN CONTRAST TO AMERICA’S VALUE OF $112 BILLION. EIGHT YEARS AGO, WHEN THE AGRICULTURAL BANK OF CHINA UNDERTOOK ITS INITIAL PUBLIC OFFER (IPO) OF $19 BILLION, THE SHARES WERE OVERSUBSCRIBED IN A FEW HOURS. THE ATTENDANT INFORMATION THAT CAME OUT WAS THAT THE CUSTOMER BASE OF THE BANK WAS 320 MILLION, ABOVE THE POPULATION OF THE USA.

BUT CHINA ALSO HAS VULNERABILITIES, BOTH INTERNAL AND EXTERNAL. LAND COSTS ARE OUTRAGEOUSLY HIGH AND THE PRICES OF HOUSES ARE EQUALLY DISPROPORTIONATELY PRICED, CREATING A BUBBLE SITUATION PRONE TO EXPLOSION AT ANY TIME. ALREADY, THE DOWNWARD SPIRALLING IN STOCKS DOES NOT ENTAIL A CHEERFUL PROGNOSIS. EXTERNALLY, CHINESE TRADE IS LARGELY DOLLAR DENOMINATED AS THE YUAN HAS A LONG WAY TO GO BEFORE GAINING CREDIBILITY AS A GLOBAL RESERVE CURRENCY. THE CHINESE ARE CREDITORS TO AMERICA BY VIRTUE OF INVESTING $2 TRILLION IN US SECURITIES. THEY CAN’T USE THAT TO LEVERAGE MATTERS AS A POSSIBLE OFFLOAD OFFERS NO IMMEDIATE BENEFITS.

IN TERMS OF SIZE AND USING THE ATLAS METHOD OF GDP COMPUTATION, CHINA’S ECONOMY IS PROJECTED TO OVERTAKE AMERICA IN TEN YEARS. USING THE PURCHASING POWER PARITY ROUTE, THE CHINESE GDP IS ALREADY THE SAME AS AMERICA (WORLD BANK GROUP, WORLD DEVELOPMENT INDICATORS 2015, PAGES 24-28). THE AMERICANS HAVE QUIT THE TRANS-PACIFIC PARTNERSHIP (TPP). THEY SHOULD HAVE STAYED TO WORK TOGETHER WITH JAPAN, CHINA AND OTHER PACIFIC NATIONS AS OPPOSED TO CONFRONTATION.

MILITARILY, THE CHINESE HAVE NEUTRALISED AMERICA IN THE PACIFIC. AMERICANS SHOULD ACCEPT GEO-POLITICAL REALITIES. WITH THE COLLAPSE OF THE SOVIET BLOCK IN 1989, THE WORLD TEMPORARILY WAS REDUCED TO A UNIPOLAR MONOCENTRIC POWER STRUCTURE WHICH WAS WASHINGTON DRIVEN. THE REALITY IS NOT SO NOW AND ENLIGHTENED PEOPLE AROUND THE WORLD HOPE THAT CHINA WILL NORMALISE RELATIONS WITH NEIGHBOURS LIKE INDIA, JAPAN AND VIETNAM.

TO DRAW THIS NOTE TO CONCLUSION, TRADE WARS ARE A TOTAL AND UNFORGIVEABLE ABOMINATION WHICH WILL ADVERSELY IMPACT ON GROWTH IN THE GLOBAL ECONOMY FOR WHICH WORLD TRADE IS A VERITABLE CONDUIT OR A DELIVERY VEHICLE. HOPEFULLY, TRUMP IS AN ABERRATION AND AMERICA WILL GET BACK TO ITS GLOBAL DUTIES, OBLIGATIONS AND RESPONSIBILITIES BEFORE IRRETRIEVABLY DANGEROUS WATERS HAVE GONE UNDER THE BRIDGE.

JULY, 2018

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