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America First vs. Germany First

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Headlines on both sides of the Atlantic trumpet daily hysteria about Trump’s “trade war.” When President Trump imposed tariffs on European steel, here in Berlin the mainstream media reacted as if it were a declaration of all-out war. Trump’s open break with the other G7 leaders and talk of new tariffs on automobiles fueled the fire.

European business, political and media elites are perplexed about how the U.S. president can demolish the “rules-based global trade system” that the United States and Europe jointly built over the last 50 years – a system that served them so well.

Since its establishment via the World Trade Organization and a web of so-called free-trade agreements, wealth has become increasingly concentrated in the hands of a few and income inequality has reached levels not seen for a hundred years.

Except, that system of globalization served some – those elites – much better than others. Since its establishment via the World Trade Organization and a web of so-called free-trade agreements, wealth has become increasingly concentrated in the hands of a few and income inequality has reached levels not seen for a hundred years.

Those who this system did not serve well, otherwise known as the majority, are revolting against stagnating wages and economic insecurity. These people, which include a large share of the shrinking middle class as well as the so-called “deplorables,” awarded the world with the Trump presidency, Brexit, the new populist Italian government, and similar reactionary movements in other countries.

The same disquiet resounds in Germany. The German government and big business interests have pursued a very successful strategy of “Germany First” without calling it such. Germany is the world’s longtime export champion. With almost half of GDP is based on exports, no other developed country comes close to such extreme export dependency. A highly competitive Germany has piled up a trade surplus of $300bn last year – $3,750 per capita – with the aid of a systematically undervalued currency, which is the practical effect of German goods being sold in Euros.

This might lead one to think that Germans are a main beneficiary of this “rules-based global trade system.” However, increasingly, Germany’s export dependency feels like an addiction with our economy dangerously amped up on steroids.

As with any addiction, there are painful downsides. Germany now has Europe’s largest low-wage sector. Real wages are growing more slowly than in other EU countries. Basic social security achievements are under threat. Here in one of the world’s wealthiest countries, poverty and homelessness are growing.

And, the German cost-cutting zeal has put enormous pressure on other EU countries to do likewise. This has been a key driver of the Euro crisis.

As the social price of Germany’s successful export machine has grown, people are beginning to ask: “Who is actually benefitting from this obsession with exports?”

These undemocratic, corporate-dominated rules have faced vehement opposition by citizen movements worldwide, but the agreements enacting them were pushed through against the will of small farmers, unions, environmentalists, consumers and other ordinary people.

The “Germany First” policy also now clashes with Trump’s “America First” approach, as well as with other players who no longer feel their interests are well served by the current “rules-based global trade system.” These undemocratic, corporate-dominated rules have faced vehement opposition by citizen movements worldwide, but the agreements enacting them were pushed through against the will of small farmers, unions, environmentalists, consumers and other ordinary people.

The result? Corporate-centered globalization is now eating itself. It was only a matter of time. What was sold as a rock-solid foundation for the global economy now increasingly looks like a house of cards.

That is why the global trade system needs a complete overhaul. Rules designed by corporate elites of the last century are not appropriate for the challenges of the 21st century.

We need a new balance between global and regional markets. A world market for smartphones might make some sense; but a world market for milk is nonsense. What is the point of shipping steel across the oceans rather than producing it at home? Why should trade agreements undermine governments’ ability to regulate in the public interest?

A new trading system needs mechanisms against excessive deficits and surpluses as well as against social and environmental dumping. It should not be based on race-to-the-bottom competition of everybody against everybody, but on cooperation in everybody’s interest.

Trump’s upending of the current system should have been done by other leaders long ago. Today’s destructive kind of globalization can only be stopped if governments stop treating its flawed rules as sacrosanct.

But, “America First” and “Germany First” policies are not the answer either. They also are designed by and for the corporate elite in America and Germany, not by or for you and me. What we need instead are “Ordinary People First” trade and economic policies.