Economic Zones: The New War Fronts
The world and economic zones are currently experiencing tumultuous times. From a global pandemic to riots in over 15 states of the USA, things look bleak. Simultaneously, the globe is seeing shifts in its war fronts.
Economic Zones and Conflicts: An Introduction
New war fronts are beginning to lie in economic zones. This is evident in ongoing trade wars between the United States and China. Also, projects like China’s CPEC and BRI , the US’s trade and economic sanctions against countries like Russia, Iran and North Korea contribute towards the ideology.
The 19th century emerged with an Industrial Revolution in all of Europe. However, the rest of the globe was mostly agrarian at the time. Europeans needed markets in order to sell the goods and obtain raw materials for feeding the industries. Regions like Africa, Latin American and Asia were the best targets as they were both agrarian and rich in mineral resources. With their superior technology, Europe managed to conquer most of all three regions. Even when colonizing as one continent, they fought among themselves for greater hold on the regions. The colonized territories were exploited for their resources. Eventually, two world wars erupted.
When Second World War ended by 1945, the imperialist powers lost some of their hold. Therefore, the colonized regions began seeking independence; this took a good 15 years. Thus the neo-colonial time began. Yet the newly independent nations were still under both economic and political influence of the ex-imperialists. Dominant powers of the era included the Soviet Union and the USA. The Cold War between both powers began in 1947 and lasted until 1991, which was when the Soviet Union broke up.
The Newly Independent Countries
The newly independent nations started to establish their own industries to stock up on foreign exchange. They imposed large tariffs on imported products to protect sunrise companies. The West did not favor these tariffs. Eventually, the World Trade Organization (WTO) came to light. Conveniently, the WTO tried to liberalize trade and eliminate tariffs. Their claim was: “Let the commodities compete among themselves.” This filled the markets with industrialized products.
In order to maintain the ‘competitiveness of products’, the Transnational Corporations (TNCs) set up their operations in India, China and other ASEAN countries. Nonetheless, China benefited from this move; till today, their products swarm international markets. Employment in countries like China and India rose as well.
The West was badly affected by this move as well! Withal, Western countries concluded that their economies were going into recession because of large influxes of immigrants. This theory became so deeply ingrained that it led to events like the Brexit deal and Donald Trump’s triumph in the 2016 US Presidential elections. The main idea behind both events was anti-immigrant propaganda.
The Post-Trump Global Situation
For boosting the sluggish economy, Trump ironically implemented those very protectionist policies against which the WTO worked. The Trump regime imposed heavy tariffs on imports like aluminum and steel. China and the European Union felt the greatest jolts. As retaliation, both regions imposed duties of the same ratio on imports from America. Consequently, a trade war ensued.
The US has been experiencing a trade deficit for a long time. It has withdrawn from the Trans-Pacific Partnership (TPP). And instead switched to bilateral trade agreements. The withdrawal from the TPP alienated the US from its Asian allies even more. This was due to two main reasons. Firstly, China’s influence was increasing globally. Secondly, without the US, the TPP was in danger of failing.
However, the remaining 11 members were unified against America’s protectionism. In 2018, all countries signed a Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Despite this, Trump continued with the protectionism. He began working towards inviting back the companies which had left the US. He met up with American entrepreneurs and promised to reduce corporate taxes plus regulations. To increase American production of aluminum and steel, Trump raised tariffs on both by over 25 percent. This was catastrophic. The US imported up to 90 percent of its steel. It also imported 8 percent of worldwide steel.
The Trade Wars
China responded with tariffs of up to 25 percent on American products. The US retaliated to this with an additional 10 percent tariffs on Chinese products. Additionally, it also accused China of global imbalances. Politely, China offered to help in reducing American trade deficits with China. It even offered to improve protection of intellectual property. But it made Chinese resentment clear of the US’s initial tariffs and violation of market regulations.
Negotiations resulted in June 2018. Both countries agreed to constructively deal with conflicts.
Despite these efforts, the Trump administration did not turn back. It carried on with its global trade war. Canada has commented that these tariffs are unacceptable. Trump’s response is: “Trade wars are great if we’re losing millions of dollars.”
In the short-run, this protectionism may benefit America. Anyhow, the drawbacks of the decision will linger. It will harm US economic zones greatly. Global international trade will fall. Foreign exchange earnings of countries will also decrease. The resulting reduced purchasing power parity shall create a poor image of American products.
If continued at the current pace, protectionism will cause sluggish economies. Even among main trade war participants like Europe, China and of course, the US. Eventually, the whole world will suffer. Limiting imports from any single country means decreasing purchasing power from various countries.
China and US are clashing severely these days. As these trade wars carry on in major economic zones, the impacts are global. But they most definitely exist.
The consequences thus far include unemployment, failures of sunrise industries, a global recession, and volatile situations. Along with the recent coronavirus outbreak and riots breaking out all over America, the outlook looks bleak.