The new populism and its implications for global trade

Oscar Thierry Perez Analysis, Global, Politics & Society

15 minute read

Nowadays we live a quite different international reality from what we used to live during most of the twentieth century, where the ideological struggle was the center of the conflict between the different power blocks. The fall of the Soviet Union marked the end of the bipolar world, the end (to a large extent) of the struggle of ideologies and the victory of liberal democracy as the new dominant paradigm (hence the work of The End of History by Francis Fukuyama). As a result, it also paved the way to the exhaustion of military dictatorships, especially in South America

In Brief

What happened? In the last three years, there were important presidential elections in the American continent. In the United States, Donald Trump won the presidency in 2016 thanks to a nationalist speech. In 2018, AMLO won the election in Mexico in an overwhelming way, becoming the first leftist president of modern-day Mexico. In Brazil, Jair Bolsonaro, a former right-wing military officer, broke a 16-year ruling streak from the Workers’ Party. These three leaders may seem very different, however, there is something that can be related to all of them, they are presidents of a populist nature.

Why does it matter? The United States is the strongest economy in the world, and the way in which Donald Trump made his decisions will undoubtedly affect the entire world. By having a leftist leader, Mexico may change the dynamics of the region and the interaction with its northern neighbor. Brazil, on the other hand, went from having left-wing governments to a far-right government, obviously changing regional geopolitics. It is worth mentioning that these three presidents, represent the three most populated countries of North America and South America, with a population of nearly 650 million and three of the four strongest economies in the continent (excluding Canada).

Rise of populism

Such is the case in which, thanks to a greater democratic opening and to an increasingly connected world, and evidently to the socio-economic characteristics of each country, a new wave of populist governments emerged on the South American continent. Since the beginning of the 21st century, socialist left-wing governments called “Socialism of the 21st Century” led by Hugo Chávez, emerged in a democratically way. This is what Fareed Zakaria called “illiberal democracies”1, governments that came to power through the legal and democratic way, but with the objective of centralizing political and economic power.

However, not only left-wing populists emerged, but also the so-called neoliberal populists, including Menem in Argentina in 1989 and Vicente Fox in 2000 in Mexico.

Today, we can speak of three new populist Heads of State who are going to change the geopolitical table not only in the American continent, but also worldwide. The first two are right-wing populist presidents, Donald Trump in the United States, and Jair Bolsonaro in Brazil. The third is the leftist president of Mexico, Andrés Manuel López Obrador (AMLO).2

It is clear that the populist term can be vague, but these three presidents agree on several points, such as having made an anti-systemic campaign against the previous governments using them as scapegoats and blaming them for all the problems. Also having appealed to the feelings and passions of specific groups of society that feel forgotten and betrayed by the government. In the same way, they made promises of nationalism, to rise as economic powers, and go back to better times.

In their own vision, they are the voice of the people, and their will as presidents is the only one that matters, since their will is the will of the people. In practice, it is not the people who speak through them, but their will becomes what the people want and need. In the same way, as we have seen in the case of Donald Trump, Jair Bolsonaro and Andrés Manuel López Obrador, they usually disqualify the opposition´s press, the same press that does not agree and criticize them. For instance, with the famous “Fake News with Trump”, threats to the press by Bolsonaro or “La Prensa Fifi” of AMLO (press of the rich conservatives), making them enemies of the people.

It should also be noted that this type of government usually rules its people through emotions, especially through feelings of anger towards enemies against whom the government has to fight, against scapegoats, and the more anger is generated, the more support they get from population. Let`s just compare the conventional speeches of former presidents Barack Obama and Enrique Peña Nieto in Mexico, informative discourses, always in an institutional framework, on the actions that their governments are doing, against the speeches of Donald Trump or AMLO, more passionate, always changing the political agenda, playing with the audience and always pointing out enemies and blaming people. It is clear that with populist leaders, there is always a greater polarization of the population, the good people, and the enemies of the good people.

In this context of new nationalist governments where the country comes first, a new type of conflict arises, beyond the ideological or war related, which is the economic or market related. The new conflict is the protectionist governments against neoliberal governments, where the new weapons are tariffs and economic sanctions.

Donald Trump

Since the beginning of his campaign, President Donald Trump launched a nationalist and anti-globalization policy, which together with an anti-immigration policy brought him to power. In it, he intended to prioritize and promote American employment and favor products made in the United States. He criticized the deficit of the trade balance that the United States has with China and Mexico, because, in his opinion, both countries were taking advantage from his.

Thus, American protectionism in the Trump era is rewriting the commercial dynamics worldwide. Since he came to power, the American president took the United States out of the Trans-Pacific Agreement, started a trade war with China, had to renegotiate NAFTA, which had been in place for 24 years and threatened to impose tariffs on companies that relocate outside the U.S.

Ironically, Donald Trump’s ¨America´s First¨ can gradually cause the loss of hegemony by the United States that his predecessors achieved for decades by trying to prop up the country as the center of international trade through various multilateral trade agreements.

If the trade war with China continues despite the commercial truce agreed on December 2, 2018, the IMF forecasts that all countries will be affected, especially the United States and China. The dispute with China reaches the technological section as well, in a war that is being waged against Huawei and its 5G network.

However, the commercial conflict is not limited only to the Asian giant, nor to the countries of North America. In addition, given that the United States accuses the European Union of subsidizing the Airbus company, thus affecting Boeing, backed even by the same WTO, Trump has announced new tariffs for 11,000 million dollars to the European continent.

Nevertheless, in spite of the negative consequences that the protectionist measures have had and will have, so much pointed out by experts in economic matters, a large part of the republican voters agrees and they see Trump as a president who thinks for them, prioritizes and defends American interests before global interests. These measures, along with his migration policies, are part of his campaign appealing to the nationalist sentiment always pulsing in American society, for the next presidential elections.

AMLO

Mexico for the first time in its modern history has a leftist president. Andrés Manuel López Obrador won the elections in 2018 overwhelmingly with 53% of the votes in a race with four candidates. The success of his victory in his third attempt to win the presidential chair is due above all to the weariness of Mexican society against the corruption problems prevailing in past governments, low economic growth, and above all, insecurity problems.

Despite being a leftist candidate, Andrés Manuel López Obrador had a campaign very similar from his right-wing counterpart Donald Trump in the United States. AMLO always had an anti-systemic campaign blaming the parties in power to be the culprits of the problems of the Mexican people, the main factor being corruption and leaving behind a forgotten group, in this case, the poor. In the same way, AMLO used an anti-globalization and nationalist discourse, being critical of the prevailing neoliberal system in Mexico, blaming it as the responsible of the poverty and corruption generated in the country.

The Mexican President has stated that his priority is to favor the domestic market especially strengthen the Mexican countryside. What AMLO is looking for is the food self-sufficiency of the country by not having to import basic products such as white corn from the United States. To achieve this goal, the government has proposed guaranteed prices for agricultural products, that is, to subsidize producers per unit of product sold. This is meant to give them an advantage over imported products.

The other priority of the current government is energy self-sufficiency. In recent years during the government of former President Enrique Peña Nieto, oil production by PEMEX has been decreasing until falling to 1 625 000 oil barrels per day. AMLO’s solution is to incorporate 20 new oil extraction fields and rehabilitate six refineries in addition to the construction of a new one, in order to stop importing and producing its own gasoline. He also promised to review the contracts that the previous government made with private companies and respect them as long as they produce oil for the country.3

The protectionist measures that the Mexican government seeks to establish, especially following this anti-neoliberal discourse, is above all to favor the self-sufficiency of the primary sector, and of the energy sector. However, these measures were implemented decades ago with little to no success in the food sector. It should also be noted that the Mexican president gives high priority to oil, coal, diesel, but leaves much aside other types of energy, such as clean and renewable energy, moving away from the Paris Agreements against climate change.

Regarding foreign trade, although the position of the Mexican president has not yet been defined, it is clear that his interest should be to diversify his international market, although the reality is that his highest priority is to reach an amicable agreement with the United States, which corresponds to 80% of its trade. Despite all Trump’s attacks against Mexico, AMLO constantly says that he wants a good relationship with the U.S. and that he is not looking for any confrontation. Today, Mexico became, again, the new target of Donald Trump, who threatened to impose 5% to 25% tariffs in all Mexican goods unless Mexico changes its immigration policies to defend the USA border. Although both countries reached an agreement, the menace from USA remains and Donald Trump can use that card every time he needs it to blackmail Mexico.

Jair Bolsonaro

Jair Bolsonaro, the right-wing candidate of the Liberal Social Party, came to power after winning the elections in Brazil in 2018, breaking a 16-year ruling streak by the leftist party, the Worker’s Party. Just like in the case of Mexico, Bolsonaro’s victory is explained by society’s weariness in the face of corruption in the country (remember that Lula Da Silva was imprisoned, President Dilma Roussef was dismissed and Michel Temer also ended up in prison, all related to corruption), the failure of the economy, and the growing crime. These three issues were precisely the axis of Bolsonaro’s campaign.

The Brazilian president, a retired military man, has been characterized by his controversial, conservative and nationalist discourse. On more than one occasion, he has defended the coup d’état of March 31, 1964, which overthrew Joao Goulart, and defended the military dictatorship that followed it, also justifying military torture. He also made controversial comments against the human rights of the LGBT community, women, people of color and indigenous people. He also has had a hard line against migration, to the point of leaving The Global Compact for Safe, Orderly and Regular Migration (GCM). Due to his ultra-rightist position, he has been considered the Donald Trump of Brazil.

However, unlike his American counterpart, and what one might think from his conservative speech, in regards to his foreign trade policy, the Brazilian president has been much more liberal. Among his campaign promises, one was to turn Brazil into a country more open to trade. Currently, Brazil can be considered one of the most closed countries, placing it in 150th place, out of 180, in the Index of Economic Freedom4. Among the trade barriers that prevent Brazil from being an open economy are mainly a strong bureaucracy with many requirements and paperwork, high tariffs, restrictions on transportation, and above all a thought that has endured for 30 years that imports are not beneficial for the economy of the country.

Jair Bolsonaro proposes to reduce the public debt by privatizing several of the country’s public companies; he also decreed the demarcation of indigenous lands under the responsibility of the Ministry of Agriculture, thus opening the Amazons for logging, agriculture, mining and livestock. In foreign trade despite the fact that the usual right wing would try to create protectionist policies, in the case of Jair Bolsonaro, it seeks to open up to the foreign market. In order to achieve this, he proposes to eliminate tariff barriers, seek bilateral agreements (like its counterpart Donald Trump, Bolsonaro prefers bilateral agreements to the detriment of regional agreements), and reduce bureaucratic procedures for importation.

The markets have seen these measures as positive, increasing Brazil’s shares, the value of the Brazilian Real increased and the country risk has decreased. While the Brazilian president wants closer ties with the United States, he is also aware of the importance of trading with China and the difficulty it would have in growing without the support of the Asian country, despite his anti-China discourse in his campaign.

It is clear that the geopolitical situation is evolving, not only for these countries but also worldwide. The rules of the market are already changing, and from a time of neoliberal boom, we are going to a new time of protectionism, from armed conflicts, we are changing to economic wars. Much of this is a consequence of actions (or occurrences), mostly unilaterally, of powerful leaders, of a populist nature, because only then can such decisions be made. This is the case of Donald Trump, who evidently backed by his electoral base, generated a commercial war with China, thus affecting the entire international market. López Obrado, by his own will, and endorsed by his followers, canceled a gigantic infrastructure project that had a third of progression already built: Mexico´s new international airport. Jair Bolsonaro has attacked minority groups and relaxed rules for arms purchases.

However, the term populist to designate the way of ruling from certain leaders does not need to have a negative connotation, because good results can also come from controversial decisions. In Trump’s United States, the economy has grown, and unemployment has remained low. In the AMLO government, the fight against corruption has been a priority, and, to an extent, the economic power has been separated from the political power. On the other hand, crime rates have decreased slightly in Brazil in the last four months.

About the Author
Oscar Thierry Perez

Oscar Thierry Perez

Oscar Perez is an independent geopolitical analyst. He holds a B.A. in International Relations from UNAM (Universidad Nacional Autónoma de México) and a masters’ degree (M.Sc.) in International Studies from Université de Montréal. His fields of research are Geopolitics, International Politics, International Trade and Globalization.

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Footnotes

  1. Zakaria, Fareed, “The Rise of Iliberal Democracy” (1997), consulted on March the 5th, 2019
  2. Quartz, “The three most populous countries in the Americas will be led by populists in 2019” (2018), consulted on March the 6th, 2019
  3. BBC News, “AMLO y Pemex: el polémico plan del presidente de México para rescatar la petrolera de su peor crisis de producción en 40 años” (2019), consulted on March the 30th, 2019
  4. The Heritage Foundation, “2019 Index of Economic Freedom”, (2019), consulted on March the 18th, 2019