A Trumpist squad shook Davos and the world

The ‘Washington Examiner’ published an op-ed by President Donald Trump on 20 January 2018: ‘We Are Putting America First, Making Real Change in Washington’. He didn’t elaborate though what this means for the rest of the world. (Photo: US government work).

Towards the end of last week, in Davos, a money devaluation war broke out. In the ‘magic’ Alpine mountains American Trumpist dignitaries did what was expected of them: they told the world they don’t give a damn about it…Trump himself, however, appeared a bit less Trumpist than his folk. Overall though, a US administration squad under President Donald Trump traveled to the Alpine wonderland and made it clear to an audience of globalizers, that this can even be the end of their game.

Destroying Global Order

Firstly, the Americans casted doubt on the global consensus about the way the international financial and trade galaxies spin around today. Secondly, they refused to resolve the problems which haunt the World Trade Organization. This is the only available institution which can resolve the highly complex international trade disputes and the US didn’t hesitate to cripple its operation. Washington has done that by blocking the function of WTO’s Appellate Body, which is the trusted and ultimate umpire of international trade disputes. To be noted, the Americans did that last Friday, not in Davos, but at the headquarters of WTO in Geneva.

Thirdly, and rather more importantly, the US broke the G20 pivotal agreement, to avoid competitive monetary devaluations. The G20 pact is the only way for the world financial and trade constellation to avoid destructive antagonism that can cripple everybody. Yet, the Americans didn’t stop not even before that, loudly favoring a cheaper dollar. In short, last week, the US Trumpist squad which landed on the spotless Swiss Alpine landscape not only disturbed the cosmic order of the trade and financial universe. They also undermined the laws and the principles which keep the planets from not falling onto each other, thus causing total destruction. Let’s take one thing at a time.

Starting Trade War

Starting from the monetary war which broke out in the Davos valley, it was the South California champion of foreclosures ex banker Steven Mnuchin, the US Secretary of the Treasury who fired the first shot. On Wednesday 24 January, arriving at the World Economic Forum venue he said “Obviously a weaker dollar is good for us as it relates to trade and opportunities”. US Commerce Secretary, Wilbur Ross, then took the tally also when arriving at Davos. Asked to comment on his colleague’s statement clearly favoring a weaker dollar, Ross said ”Trade war has been in place for quite a little while, the difference is the U.S. troops are now coming to the ramparts.”

If this is not a trade and money devaluation war then words have lost their meaning, unless the Trump administration is totally engulfed in its fake news game. However, the rest of the world still recognizes the phrase ‘trade war’ with its literal meaning. So both Mnuchin and Ross are seen and heard by a global audience, violently breaching the G20 agreement, which until this day compels the major economies of the world, to avoid any action favoring competitive currency devaluations. Surely, a monetary devaluation sequence is to leave everybody worse off and can even lead the global trade and financial universe to a cosmic destruction.

Devaluing the dollar

Mario Draghi, ECB’s President couldn’t leave this challenge unanswered. Especially so because on the next day, Thursday 25 January, he was holding the customary Press conference, after the habitual meeting of central bank’s Governing Council. By the way, last week, the ECB left all its basic interest rates unchanged. In relation to competitive devaluations, Draghi commented “In any event, the language that we agreed in Washington said this: we recognize that this is the communiqué of the 36th meeting of the International Monetary and Financial Committee in the IMF. So all the ministers and the governors there … We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes”. In short, Mnuchin and Ross violated an IMF agreement after having breached a G20 pact. The fact that Trump on the last day of the Davos Conference didn’t quite endorsed Mnuchin’s ‘money war’ doesn’t change the heart of the matter.

Now, in relation to the American blockade of the WTO: last Friday, in Geneva, the U.S. Trade Representative Robert Lighthizer participated in a meeting of the WTO decision making body, together with 28 other trade representatives of participating nations. He blatantly made clear that the US will not lift the blockade of the WTO functioning. This is tantamount to US vetoing the workings of the only globally acceptable institution able of resolving international trade issues. Obviously, the Trump administration prepares to drastically question the world order in international trade.

Blocking Institutions

To do that, the White House wants to neutralize the only institution, competent to judge the meaning of actions taken or to be taken by the US, under the policy line of “fair bilateral deals”. This policy line is what that Trump has been obscurely demanding from the rest of the world, in reference to the terms of international multilateral trade. In short, if the Trumpist Americans don’t like a decades old global institution – it’s better that it disappears. The same applies to the functioning of G20. More or less, this is Washington’s position for the United Nations Organization itself, but they are not spelling it out clearly. This was evident in relation to the recognition of the entire Jerusalem region as the capital of Israel by the US and the transfer of the American embassy there before the end of next year.

All in all, Trump’s America becomes every day more unpredictable, threatening what is left from the world order. ‘America first’ means the rest of the world must start paying its dues to the US. Europe and China are the first in the line…

 

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