- Free trade is under assault in more than a dozen countries worldwide. The United States is no longer competitive, and neither are the UK, Germany, France, and other industrialized nations.
- The issue is not just emotional or transitory: the West is in a serious economic quandary. The US corporate tax rate stands at 35%, while other countries’ rates are 12% to 25%. It spends 17% of GDP on healthcare, versus 9.7% for other countries. It spends 13% less on R&D than its trading partners, and its leadership in global patent applications has eroded. It has the costs of a welfare state and is losing out to lower-cost, more aggressive developing nations.
- If the Trump administration withdraws from more trade agreements and European and Asian countries follow suit, a collapse of free trade could cause a global recession that may cost the US economy as much as 2.7% of GDP and the world economy as much as 1.7% of GDP – negative growth for everyone. Economic leadership would shift to China.
- If the United States forcefully renegotiates all its trading agreements, it could boost its own GDP by about 3% by bringing back offshored production and reducing costs and prices by abandoning environmental and social standards at home and abroad. Its trading partners’ economies would stall as jobs in their countries shift back to the US.
- A New Multilateralism is possible, in which mature economies become the undisputed leaders in technology and innovation, and embrace multilateral trade. This would result in the highest global growth rate and would facilitate social and environmental progress.
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ABOUT THE AUTHOR
David Jacoby has been consulting for 30 years in operations strategy and performance improvement. He is the President of Boston Strategies International, which consults to the largest industrial manufacturing, energy, and logistics companies worldwide, as well as lenders, law firms, and government and international nongovernmental organizations. He is the author of Trump, Trade and The End of Globalization (Praeger, 2018); The High Cost of Low Prices (Business Expert Press, 2017); Optimal Supply Chain Management in Oil, Gas, and Power Generation (PennWell 2012); and Guide to Supply Chain Management (The Economist 2009). Formerly, he taught Operations Management at Boston University’s graduate school of business. He holds an MBA from the Wharton School, a Master’s in International Business from the Lauder Institute, and a Bachelor of Science in Economics from the University of Pennsylvania.
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