Danish capital in 2016: Free trade under serious pressure
It seems unlikely that Donald Trump will end up in the White House, but proponents of free trade, open borders and liberal values cannot simply relax.
Trump’s candidacy, combined with Bernie Sanders’ unexpected appeal, Brexit (with new British PM Theresa May railing against “citizens of the world”) and the continuing success of anti-establishment, nativist parties across Europe (including Scandinavia) have made 2016 the year when the free trade liberal consensus came under serious pressure.
Embrace the benefits
Faced with this challenge, what should free traders do? Firstly, remind everyone of the advances that have been made thanks to free trade. Consumer products are (as a percentage of an average wage) cheaper now than ever before and our supermarkets are full of all sorts of exotic products.
This is a real increase in our quality of life, not just for the elite, but for most consumers – indeed the worse-off benefit proportionally more from free trade. On top of this, the free movement of capital allows capital to flow efficiently to find the best possible use.
On the other hand, free trade has been blamed for a huge number of changes in the labour market – many of which are actually caused by automisation and digitalisation. Investing in quality education and training is the key to ensuring that those whose jobs are under pressure as a result of these changes can quickly retrain.
Address the problems
There must also be more focus on dealing with problems caused by globalisation. One of the major discussion points in the Brexit debate was the idea that immigrants were squeezing locals out of public services.
From a financial point of view this made no sense – academic analysis showed that immigrants were a significant net positive for the UK. Therefore, it is crucial that spending on public services matches population increases in an area – otherwise, immigration will continue to get the blame for governments’ lack of investment.
In the 1930s, policy-makers followed stagnant growth by invoking tariffs and coming off the Gold Standard to gain a strategic comparative advantage. Their decisions made a depression ‘great’. So let’s hope this generation of decision-makers learn from the lessons of history and make globalisation work.
Neil is a Scottish-educated lawyer with 15 years’ experience in corporate structuring and general commercial matters. Based in Copenhagen, he primarily advises on international deals. Out of the office his interests include sport and politics. His column explores topical international financial and economic issues from a Danish perspective.