Former Morgan Stanley Asia Chairman Stephen Roach said Monday that the G-20 financial leaders’ dropping their traditionally strong support of free trade was “disturbing” and reflected rising protectionism in the U.S.
“It’s pretty disappointing when you get finance ministers from leading countries in the world who, out of the blue, are unable to validate the commitment to anti-protectionism which is the underpinning globalization,” Roach, a senior fellow at Yale University’s Jackson Institute of Global Affairs, told CNBC from the China Development Forum in Beijing.
“That’s an obvious reflection of the shifts in the political winds in the United States and indicative of a U.S. economy that is backing away from multilateralism,” Roach said. “It was a disturbing meeting.”
Finance ministers and central bank governors of the world’s 20 biggest economies were unable to follow through with their commitment to endorse free trade in the G-20 communique, as the new Trump administration seeks to put “America first.”
Instead of “globalization as a force that is bringing us together, (Trump) feels it is a force that is punishing American middle-class workers,” Roach explained.
The economist explained that point with the example of an Apple iPhone having parts from over 50 countries in a “world that is linked through global supply chains.”
“To unwind these types of supply chain…would really turn back the clock on companies like Apple and others that straddle so many countries to bring goods and services to consumer around the world for incredibly low prices,” he said.
Roach reckoned that, for the Trump administration, “it’s going to be bilateral deals, get tough on China, Mexico, Germany and others that are in the cross-hairs of enlightened individuals like Peter Navarro.”
Peter Navarro, director of the White House’s National Trade Council and advisor to President Trump, has repeatedly argued that China practices a perverse form of capitalism that undermines the U.S. economy by working with U.S. businesses against America’s long-term interests.
Navarro, a former economics professor, has said that a trade priority would be the unwinding and repatriating of international supply chains which many U.S. firms rely on.
“I don’t agree with anything Peter Navarro has said or written in his entire career,” Roach told CNBC.
And is China set to assume the mantle of leadership for globalization? Roach said this is unlikely because China has a lot to cope with on the domestic front.
“History tells us that countries that are not attentive to doing reforms, rebalancing and restructuring and boosting productivity at home, if they spread their wings globally, ultimately they’re overextended and will get into trouble.”