Interview WTO Chief: Don't Blame Free Trade For Populism

The head of the World Trade Organization calls for free trade champions to step up and defend the idea.
Brazilian Roberto Azevedo, Director General of the World Trade Organization, WTO, defends free trade.

Roberto Azevêdo, the director-general of the World Trade Organization said that free trade was still the best bet for the global economy and said that it was not yet clear just what policies US President Donald Trump would follow.

"I have heard many statements on the part of the US authorities saying trade is a fundamental part of economic policy in the US. What they are concerned about is distortive practices or unfair trade that is being practiced by others," he said in an interview with Handelsblatt. "And that goes for everybody else as well. I haven't heard any leader actually say, 'We need less trade.'"

Donald Trump will meet Chinese President Xi Jinping in person for the first time this week after spending months attacking the United States' most important trading partner.

At a campaign rally in Indiana in May 2016, for instance, then-presidential candidate Trump said the US couldn’t “continue to allow China to rape our country.”

He was referring, as Mr. Trump has on many occasions since then - including from the White House - to the fact that China exports far more to the United States than it imports. In 2015, China’s trade imbalance with the US totaled $336 billion (€315 billion), according to the Office of the US Trade Representative. And Mr. Trump has said more than once that there would be consequences.

The director-general added that too little is known about the kind of economic policy that Mr. Trump intends to pursue, noting that Mr. Trump’s nominee for the US trade representative, Robert Lighthizer, hasn’t even been confirmed yet.

“It's one thing to tap into popular sentiment to achieve the goal of an election,” he said. “It's another thing to recognize those sentiments and try to actually fix them, address them, not by rhetoric but by actions, by doing things that actually make people feel that they are being cared for.”

Mr. Azevêdo said it was difficult to know what Mr. Trump meant exactly when he decried trade practices with the United States as being “unfair.” Trade imbalances, he said, are not inherently negative. They are, however, often incredibly complex.

Here at the WTO, and in trade in general, the devil is in the details Roberto Azevêdo, WTO Director General

Mr. Azevêdo said he had not yet spoken to anyone within the Trump administration to determine where exactly the sticking points were in the United States’ relationships with its trading partners. Blanket statements about trade being “unfair,” he said, were too general for him.

"I cannot draw any inferences, any conclusions from that. Here at the WTO, and in trade in general, the devil is in the details,” he said. “I don't think that a deficit on merchandise trade, for example, is necessarily a bad thing. It depends on the composition. It depends on how that feeds into the global strategic economic project that you have for the country.”

But Mr. Azevêdo did concede that there was growing opposition to free trade and globalization in populations around the world. This was true not only in the US, he said, but also in countries like Germany, which derives the lion’s share of its economic strength from exports.

“I couldn't for the life of me understand how a German could believe that trade is bad for the country,” he said. “A lot of it had to do with other things that were not related to trade, but they were kind of associated and put in the same basket.”

He continued: “Migration fluxes, for example, and the presence of migrants. That was perceived as foreign and therefore bad. We had instances of the loss of sovereignty and the move towards a more nationalistic stance - that had nothing to do with trade either, but it fed into this sentiment.”

Mr. Azevêdo said free trade and globalization get a bad rap because many people confuse cause and effect. They do not understand, for instance, that 80 percent of job losses in industrialized countries are due to new technologies, innovations and improvements in productivity.

“I don't think that people actually know what is happening,” he said. “And this is, by the way, a very emotional debate, so it's not only about facts. But without the facts, then you have no hope.”

He added: “Trade does sometimes cause disruption, but that's not the major part of it.”

One way to improve the situation is through better education and training for workers that gives them the skills they need to succeed in the economy of the 21st century, Mr. Azevêdo said.

“Some positions are not accessible. A person who loses his job in manufacturing will not find a place in a job that opens in the financial sector, for example. It's tougher. It's a different kind of skill,” he said. “So you also need a social safety net that helps to support those who lose their jobs and maintain a certain level of income until they find a new position."

But before that happens, Mr. Azevêdo said, globalization is going to need tireless, vociferous supporters who remind people that the disadvantages to trading openly with other countries are outweighed by the advantages.

“We need champions, we need people who will try to bring some rationality into the conversation,” he said.

 

Torsten Riecke is Handelsblatt's international correspondent. Moritz Koch has been Handelsblatt's Washington correspondent since 2013. Stephan Scheuer is Handelsblatt's China correspondent, based in Beijing. To contact the authors: [email protected], [email protected] and [email protected]