Donald Trump joins the Leftist Seattle protesters
A global trade war is raging. From Brexit to arrival of Donald Trump, and there seems to be a rush back to the era of localisation. But in an already globalised world, the battles are waged at global stage that impact lives of millions. Donald Trump within a month of his presidency made it clear that his preference of Americanism first to globalisation. Globalisation has also created robust economies like China and India who fight for global leadership position using their economic might. USA fired the first salvo and there had been retaliation by the European Union, Canada, China and even India. Tariffs on certain imported goods were increased in a tit-for-tat reaction. Analysts saw it as a limited war in the understanding that Donald Trump was all for ‘free-trade’. But this view denies the fact that a tectonic shift is taking place in the world. It is a war for ascendency to global leadership; a contest between USA and China.
China is heaving its might on the world. President Xi Jinping’s Belt and Road Initiative is an open call for its global influence. In July 2017, China launched the ambitious plan to invest in the technology of the future–artificial intelligence (AI). There are dark (unconfirmed) whispers about how it is going about acquiring many new-age technologies by rolling over western companies operating in vast markets. The last century belonged to USA and Europe with Russia as the communist outlier. China became mighty all because of the emergence of the free trade regime in the world. Just some 40-odd years ago, it was behind the iron curtain. After the World Trade Organization (WTO) establishment in 1995, China’s trade boomed. It took over the world’s manufacturing jobs. India, too, found its place by servicing outsourced businesses like telemarketing. ‘Shanghaied’ and ‘Bangalored’ entered the lexicon–as jobs (and pollution) moved continents. This way, globalisation fulfilled its purpose to usher in a new era of world prosperity. Or so, we thought.
Instead, globalisation has made the world more complicated and convoluted. In early 1990s, when the discussions on the General Agreement on Tariffs and Trade (GATT) were at its peak, there was a clear North-South divide. The then developed world pushed for opening up of trade. It wanted markets and protection through rules on ‘fair’ trade and intellectual property. The then developing world was worried what the free trade regime would do to its nascent and weak industrial economies. More importantly, there were fears of what these new open trade rules would do to its farmers, who would have to compete with the disproportionately subsidised farmers of the developed world. In 1999 tensions flared up at the WTO ministerial meet in Seattle. By this time, reality of globalisation had dawned and so it was citizens of the rich world, who protested for labour rights, worried about outsourcing of their jobs and environmental abuses. But these violent protests were crushed. The next decade was lost in the financial crisis. The new winners told the old losers that ‘all was well’.
Trump joined the ranks of the Leftist Seattle protesters, while India and China are the new defenders of free trade. The latter in fact want more, much more of it. But again, is it so straightforward? All these arrangements are built on the refusal to acknowledge the crisis of employment. The first phase of globalisation led to some displacement of labour and this is what Trump shouted about. But the fact is that this phase of globalisation has only meant war between the old elite (middle-classes in the world of trade and consumerism) and the new elite. It has not been long enough or deep enough to destroy the foundations of the livelihoods of the vast majority of the poor engaged in farming. But it is getting there. This is where the real impact of globalisation will be felt. Global agricultural trade remains distorted and deeply contentious. The trade agreements targeted basics like procurement of foodgrains by governments to withstand scarcity and the offer of minimum support price to farmers. The Indian government is making the right noises that it will stand by its farmers. But we will not be able to balance this highly imbalanced trade regime if we don’t recognise that employment is the real crisis.
By 2018, I could see that there was already a counter to the revenge of the rich (see ‘Trumped’, p67). This is what I call the revenge of the poor. It may sound contradictory, but that’s what developments across the world convince us. In 2018, the messages mostly emanated from the streets–from Paris to Delhi. We need to understand these protests to see how they are linked–enjoined against the current economic and ecological order. We need to understand so that we can work towards change. The yellow vests in Paris out on the streets were pitted against the French government’s efforts to combat climate change by raising fuel prices. Their message to President Emmanuel Macron was that you may be worried about the end of the world, but we are worried about the end of this week. The fuel price hike became a potent symbol of their anger against increasing costs, taxes and unemployment. In their world, their President’s plans to reduce emissions seemed distant and out of touch with their reality.
This is disturbing for a world that is running out of time to reduce greenhouse gas (GHG) emissions or face a catastrophic consequence. More importantly, because large number of people in the world does not even have access to energy, it means that the rich have to do more to reduce consumption, create ecological space for the poor to increase and provide funds so that the poor too can grow, but grow without fossil fuels. This is the challenge. But the French government forced its own people against the enormous challenge of climate change–the need for ambition and the need for equity. The world not only needs equity in the global agreement for GHG emissions, it also needs to address the issue of equity in each country. The French protest was not against the poor Indian or Bangladeshi. It was against their own government’s inability to build an economic model that meets the needs (if not the aspirations) of all. It is clearly going to backfire and make governments wary of doing anything drastic or inconvenient. This is when we need even more drastic action. But what is also clear is that action–national and global–must be inclusive. It must be fair. It cannot hit the poorest–the ones without energy to even cook food. It cannot even hit the poor in the rich world–the ones without affordable alternatives to cars, for instance. Climate change action will not work unless it works for all.
It is certain now that countries in the West–those that needed to reduce ghg emissions–have only managed to show reduction because they have exported their manufacturing industries to other parts of the world, mostly China. So, there is no reduction in consumption or reduction in emission, there is a change where the emission is generated. It is time that this round of trade war should be on the need for livelihood opportunities. Global trade talks must discuss employment not just industry. It must value labour and not goods. This is what is at the core of the insecurity in the world. It is not about trade or finance. It is about the biggest losers: us, the people and the planet.
In 20 years, this idea of globalisation has soured–the proponents of the grand scheme are turning their backs to the idea of unfettered global trade, which was designed to be without distortions of subsidy and support by national governments. The question is how will these new globalisation rules take shape in a climate-risked and war-torn world? Currently, the most hyped issue is USA’ position against China. This is being talked about as the fight against autocratic and undemocratic regimes (which is true). But the real reason is to gain control over resources and technologies needed for the future, including the green economy that the world so desperately needs.
China dominates the supply chains for batteries; it processes over half of the world’s lithium, cobalt and graphite; and it is an established leader in solar energy. To fight this “enemy”, the USA has decided to give up all its ideological qualms about subsidies; the Inflation Reduction Act (IRA) is providing finance to companies to manufacture low-carbon products in USA. The issue is if the western world’s mission to break this stranglehold will lead to higher costs of the green transition and even delay it? Or will it be successful in doing the impossible–securing access to rare minerals and rebuilding its manufacturing industry, despite the higher costs of labour and environmental standards. This could lead to de-globalisation or localisation as more countries decide to maximise their advantage as holders of natural resources, and technology and the knowledge that goes with it. It is also a possibility that there are new breakthroughs in technology, which would make the China-dominated supply chain redundant. For instance, there is talk about sodium ion batteries that could take down the need for lithium batteries.
De-globalisation could equally mean that the pace of green transition is disrupted. For instance, USA, through IRA, is providing support to local manufacturing of electric vehicles. It has notified that electric vehicles that include Chinese-made battery components will not be eligible for full subsidies. It goes on to say that these vehicles will not qualify for IRA if they have ‘significant’ ties to the Chinese government or are produced with a licensing agreement with a China-based or -controlled operator. Given the near-complete control of China in the raw mineral and battery manufacturing segment, this disengagement may delay the electric vehicle transition or make it more expensive. The Chinese electric car manufacturer, BYD, has already overtaken Elon Musk’s Tesla. According to the Financial Times, in the fourth quarter of 2023, BYD sold a record 526,000 battery-only electric vehicles, as compared to Tesla’s 484,000. Therefore, managing the twin objectives of localisation and a speedy green transition in today’s China-dominated world could be a challenge.
It is the same in India. We have decided–and rightly so–to invest in local capacity for solar industry. The Indian government has announced fiscal incentives for solar cell and module manufacture and imposed higher import duties on Chinese products. It is difficult to say, as yet, if this will impede India’s ambitious renewable programme, as domestic production may not be able to keep pace or be cost-competitive. On the other hand, there is an obvious advantage in building our industry. The gradual closing of the free-trade world will also have implications for Indian industry’s exports. All in all, there is a new game in town and we need to see if this time around the rules of trade will work for or against the people and the Planet.
This is excerpted from Sunita Narain's book The rise of the neo-locals: A generational reversal of globalisation, published by the Centre for Science and Environment in 2024