Slaughter & Rees Report: The Tide Recedes or the Tsunami Builds?

Sunday April 23, 2017 may be the date that future historians identify as the starting point for a receding tide of global populism in the 21st century.

That said, for your reading enjoyment we note for the record that Sunday, April 23, 2017, may be the date that future historians identify as the starting point for a receding tide of global populism in the 21st century.

Yesterday French voters went to the polls for the first stage of their presidential election. Yes, history was made insofar as neither of the two parties dominating French politics for the past two generations—conservatives and socialists—advanced a candidate to the final round. And, yes, the far-right, antiglobalist Marine Le Pen finished second, with (as of counting 94 percent of all ballots) 21.7 percent of the vote. “The major issue of this election is runaway globalization, which is putting our civilization in danger,” intoned Ms. Le Pen yesterday in gearing up for the May 7 runoff.

But, no, French voters did not advance to the final round the other avowedly anti-EU candidate, Jean-Luc Mélenchon. Of the four major candidates, he polled fourth, at just 19.4 percent. Yesterday’s winner, with 23.8 percent of the vote, was Emmanuel Macron: an independent centrist who is a former banker at Rothschild. In recent years, Mr. Macron served as economy minister to the sinking President François Hollande and advocated for promarket reforms. Mr. Macron is about as sunnily pro-EU as Ms. Le Pen is darkly anti: yesterday he averred that “in the second round I will stand for the necessity of optimism and the way of hope that we want for our country and for Europe.” Although Mr. Macron has never held elected office, all recent polls forecast him defeating Ms. Le Pen in the runoff by at least 20 percentage points.

Thus did French voters fail to deliver what could have been a death blow to the euro and, quite possibly, the EU itself. Instead, in early trading in Asia the euro surged nearly 2 percent against the U.S. dollar and other major currencies. French stocks had surged by 4 percent in midday trading today, with bank stocks up about 10 percent.

Look next across the English Channel to the United Kingdom. Last week Prime Minister Theresa May called for a snap election on June 8. Much work lies ahead of the United Kingdom in sorting out what Brexit will entail. But if the election delivers a stronger Conservative Party position in Parliament—and a prime minister serving for the first time after an election rather than just an appointment—then Prime Minister May’s negotiating power should be stronger. This, in turn, should help meet her goal of a Brexit without major market disruptions and with as little economic damage as possible. A YouGov survey last week found support for the Conservatives at 44 percent versus just 23 percent for Labor, 12 percent for the Liberal Democrats, and 10 percent for the UKIP.

Finally, look across the Atlantic to the United States. Despite the scorched-earth antiglobalization campaign of Donald Trump, in his almost first 100 days in office the president’s tangible policy actions to match this populist rhetoric have been . . . virtually nonexistent.

Day one in office, President Trump did not name China a currency manipulator. Two weeks ago when the U.S. Treasury released its much-awaited Semiannual Report on International Economic and Exchange Rate Policies, it declined to name China a currency manipulator. The president has not levied across-the-board tariffs against China—or Mexico, or anyone else for that matter. The president has not ripped up the North American Free Trade Agreement or any other such trade agreement. And when is the last time the president browbeat a U.S.-based multinational in some odd-hour tweet about its global operations?

Yes, the president withdrew the United States from nearly completed negotiations for the Trans-Pacific Partnership, an unfortunate blunder about which we wrote here. But Japan is now pushing to relaunch the TPP without the United States, with finance minister Taro Aso announcing to the world that “we will start talks on an eleven-member TPP, minus the United States, at the meeting in May” of the Asia-Pacific Economic Cooperation group. And, yes, a few days ago the president announced a new study to examine whether imports of steel into the United States endanger America’s national security. But a study is, well, just a study. And in 2002, George W. Bush levied tariffs on steel imports, an unforced error that nevertheless did not herald a broader move against trade.

Today U.S. Commerce Secretary Wilbur Ross is meeting with the EU trade commissioner, Cecilia Malmström, to discuss the state of the Transatlantic Trade and Investment Partnership, which was launched by the Obama administration. Grumpy though he has been in earlier interviews about trade, like his boss, last week Mr. Ross stated matter of factly, “Clearly at some point we need to do something with Europe,” he said. “It seems a little weird that a car being shipped from Mexico to Europe pays no tariff as they have a bilateral [agreement with the EU] and a car being shipped from the US pays the full tariff.” That sort of logic sounds positively . . . protrade.

We have written time and again over the past four years about the policy and social threats from too few workers around the world seeing good jobs at decent and rising wages. This legitimate anxiety about economic opportunity drives much of the world’s populist voices. But governments have a way of listening, albeit imperfectly and sometimes slowly. There is much to be done to respond adequately to these voices. But it is not just the radical politicians who can respond. And the responses, from whomever they come, need not be the stuff of walls and wars.

Then again, in suggesting that the tide of global populism may have peaked yesterday, we might be completely wrong. Before a tsunami hits, the water often recedes for a short while—before crashing back with frightful ferocity. May 7 will likely be the next big chance to gauge the tides of history.

 

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