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is the pandemic likely to reinforce american economic nationalism?
June 29, 2020
by Jean-Baptiste Velut, Professor at the Université Sorbonne Nouvelle (CREW) and member of the Scientific Committee of the Institut des Amériques.
The fall of Donald Trump in the polls could be the last act in a drama-comedy that has shaken American society for the past 4 years: a President both germophobe and xenophobe who sees his political future compromised by a global pandemic originating in the Chinese Nemesis, a powerful rival, a target of Trump's economic nationalism.
At first glance, the emergence of an international plague threatening American borders seemed to fit right into the nationalistic discourse of "American disaster" imagined by the American president in his inaugural speech. And yet the link between the pandemic, economic nationalism and globalization are complex, especially within a federal model where the states and cities' actions sometimes take precedence over federal intervention (on these local dynamics, read on Covidam the contributions of Victoria Gonzalez Maltes and Emmanuelle Perez Tisserant).
Though the American president's fascination for authoritarian regimes could lead us to believe he would veer into a security digression by reinforcing the executive power, the New York millionnaire's response to the coronavirus crisis has been much more confused, a reflection of his ambiguous relationship with federalism. After minimizing the magnitude of the health crisis, the White House played the decentralization card, declaring that it was up to the governors to manage getting supplies of masks, respirators and other medical equipment. Difficult to see in the federal government's retreat from the coronavirus, and the resulting free-for-all that came from it, any of Trump's economic nationalism. And the same can be said for the reopening of the economy: outside of his stated preference for a quick reopening, the Republican administration chose to transfer the responsibility of handling the crisis to the states rather than impose a firm federal mandate for which it would have had to be responsible.
At the global level however, the pandemic has provided justification for economic nationalism and a newly assumed isolationism. On the one hand, under the guise of a pandemic, a ban on flights coming from China, the progressive closure of borders and the recent restrictions of visas seemed tailored to Trump's nativist electoral base. In the same way, the Covid-19 crisis enabled Washington to reassert its hostility against multilateral institutions - especially the World Health Organization (WHO) - while clearing the President of all responsability in its management. Finally, the resupply problems of the United States and the European Union strengthened the resolve to relocate global value chains to the US. As exemplified by the statements from the new American protectionism architects Peter Navarro, Director of the Office of Trade and Manufacturing Policy, and Robert Lighthizer, US Trade Representative. So, on April 27, Robert Lighthizer stated: "The crisis and recovery from the Covid-19 pandemic demonstrates that now, more than ever, the United States should strive to increase manufacturing capacity and investment in North America[1]."
But rather than showing the limits of globalization, the Trump administration's initiatives have mainly revealed the apories of economic nationalism and isolationism. First of all, the travel restrictions had little impact on the spread of the virus, especially the late and partial bans imposed on Europe. Secondly, just like the rush of the federated states on medical equipment, the lack of a coordinated response at the international level led to unprecedented scenes of pillage of mask supplies destined for Europe and Canada. So the American supreme power morphed into a pirate of the international distribution chains, after having sunk the international economic system and the multilateral institutions in charge of regulating it for the past three years. Thirdly, despite calls for national security or for "strategic independence[2]", from either side of the Atlantic, reconfiguring global value chains will never lead to a resurgence of industrial jobs in the United States or in Europe. The result from the commercial wars with China is irrevocable: the few jobs created by the relocations will hardly compensate for the loss of jobs caused by protectionism and the retaliation measures it sets off. This is due to the effects of diversion of exchanges (toward Vietnam or Thailand) as well as to the matter of technological progress. On the contrary, the pandemic is more likely to increase the tendency toward automization of production chains to the detriment of american workers.
It also risks accelerating the digital transformation of the economy. This digitalization is a new phase of globalisation that, there as well, contradicts the hypothesis of a nationalistic retreat in the short term, even if ironically, it is this "digitalized" transformation that contributed to blowing on the flames of nationalism, and that could continue to feed the fire with the rapid spread of artificial intelligence technologies[3]. By demonstrating the viability of remote work in many sectors, the pandemic could engender not only a new purging phenomena for the middle class similar to the one from the last financial crisis, but also accelerate the phenomena of outsourcing the service industry by using "telemigrants[4]" in a capitalism of transnational and digital plateforms that the states have difficulty regulating.
The acceleration of the digitized globalization hypothesis makes it all the more urgent to provide a framework to these new practices and the return of the United States to the multilateral table, at a time when they are confirming their disengagement, as seen by the recent pull-out of Washington from the negotiations on taxing the digital giants.
For sure, to some extent, the pandemic seems to have reinforced the United States' technological advantage. However, it also showed their dependence on global value chains and on foreign markets. Despite their competitive edge, it is to the American high-tech elite's advantage to make sure the United States reestablishes multilateral dialogues. The recent threats of the European Union with respect to imposing a tax on digital services confirms the risks of American unilateralism. Long-term, the balkanization of internet governance and digital data - the infamous "Splinternet" - and the hardening of the technological war between the United States and China seems contrary to American economic interests.
A health crisis and global economy, the Covid-19 pandemic has brought to light the gaping holes of American economic nationalism. Trump's Isolationalism could be the next victim of the second wave of contaminations.
[1] Cited from Morning Trade, Politico, 27 avril 2020.
[2] On this issue, read the speech of the European Commissioner of commerce Phil Hogan, June 16, 2020.
[3] R. Baldwin, The Globotics Upheaval : Globalization, Robotics and the Future of Work. Oxford University Press, 2019.
[4] Ibid.
Jean-Baptiste Velut is a Professor in American Politics at the Université Sorbonne Nouvelle (CREW) and member of the Scientific Committee of the Institut des Amériques. Vidéo IdA in English. His research focuses on American trade policies, debates on globalization in the United States and the American capitalism model. His recent publications include Understanding Mega Trade Deals: The Political and Economic Governance of New Cross-Regionalism (Routledge, 2018) codirected with L. Dalingwater, V. Boullet and V. Peyronel.