Designing trade policy for a brave new world

If the fall of the Berlin Wall in 1989 marked the beginning of a new wave of globalisation, 2025 perhaps marked the end of that wave.

- Pramit Bhattacharya

After the end of the Cold War, American elites led the drive to “flatten” the world by removing restrictions on trade and capital flows. American multinational firms gained the most from globali-sation. Other parts of the world, including China and India, also benefited. But globalisa-tion did not benefit all sections of society equally. In the US, those who feel cheated by globalisation have now found a messiah in Donald Trump.

The Trump administration has decided it need not engage with too many multilateral institutions. In its National Security Strategy (NSS) document released last month, the ‘Trump administration argued that American policy elites had “placed hugely misguided and destructive bets on globalism and so-called free trade”. The NSS advocates an explicitly “America First” approach to foreign policy.

The Trump administration also released a policy document on World Trade Organization (WTO) “reforms” last month that threatens to upend the global trading system. As per existing WTOrules, developing countries such as India are allowed to levy higher tariffs (import taxes) than developed countries. The Trump administration wants to put an end to such special treatment.

Trump's message to the world is loud and clear: Global rules and institutions matter only till they are in sync with his America First policy. Investors, businesses, and all other governments will need to adapt to this capricious form of globalisation now.

How should India respond to this brave new world?