It is not the first time that countries get the ire of the European Union and others, for their tax and trade practices. The problem of fiscal paradises is still very prevalent, as shown by the continuous flow of leaks from exotic places like Panama, and the number of high figures that were proven to use them. Even within the European Union, places like Malta and Luxembourg are still considered fiscal paradises, and are the reason for a loss of up to several hundred billions of dollars to the EU members in taxes. This is not getting unpunished however, at least for the people who chose to lower their taxes by laundering their money in locations with little taxation, as the bank secrecy is weakening throughout the European Union, with Switzerland stopping the practice, as well as Luxembourg, after heavy pressure from their partners and several high profile cases of fraudsters using them to stash money from other European nations. There is now a European banking union, making it hard to fraud without being caught in an entire continent. There is even projects of an international agreement on taxes that would end tax havens, and therefore stop the respectable banks from handling people who want to hide funds, they would have to use insecure or illegal versions. That said, that wouldn't totally stop the phenomenon, as there plenty of online possibilities to stock money anonymously, though they are not quite as secure as the institutions that currently have that role.

This tendency to condemn fiscal exile, is not quite as universal as it might seem, and the states often only want it eliminated because it compromises some of their power, not for ethical reasons, like wanting people to "pay their fair share". The way they currently want to tackle this is selective, with cooperation between countries in specific cases, which allows to ignore when political friends do the same thing. On the other hand, the non-selective transparency that leaks give do not seem to be a priority to the states, they do not protect whistleblowers, and it sometimes threatens the country who then prosecute them, as in the case of LuxLeaks.

This means that they do not want the end of tax evasion but to be able to control it. It is the same for every trade practice, most countries do not mind, even ethically wrong, practices as long as they do not impact negatively their trade, and that they can be stopped if necessary (i.e. it stops to be profitable for the country). Therefore a lot of practices that are not viewed favorably by some nations are done by other countries, as they give an advantage, sometimes unfair, to them, at the expense of the nations in question. This problem of cohabitation has been partially solved with the plethora of international agreements that are currently in place, but it is being put in question by new policies that favor predatory capitalism, protectionism and trade war to cooperation.



The new nationalism that has swept the anglo-saxon world, from Brexit to Trump, is a strong sign that trade is shifting from globalisation to a multi polarisation, between big trade areas (NAFTA, EU, ASEAN) that, instead of disappearing into a worldwide custom union, start to confront each other and partially break down, creating a recomposition of the alliances. This is the opposite of the World Trade Organisation (WTO) motto to "break down the barriers" of trade, though it makes sense; in a finite world with finite ressources, trade will always be made with a limited input and output, therefore, countries are at least as much in competition for trade as they are cooperating to allow it to happen. It is nonetheless hurting the international community when countries are going rogue, despite it being natural.

The rules put in place by the WTO have been violated several times, but it is now founding countries who are not caring about the agreements. disloyal competition by China has been a strong threat to the European and American blocks, but new threats have emerged.

China's cheap steel is now heavily taxed, despite going against the dominant economic ideology and most of the reforms made for trade, in both Europe and the United States.

China's economic boom was made through three pillars that weakened the rest of the world whilst sustaining Chinese growth. There was first cheap and abundant labour, with good infrastructure, that made companies from around the world close their factories and displace them to China. The fact that they were able to make complex goods and were only lacking in the most advanced areas was the reason behind them becoming the world's manufacturer. They then used their capabilities to flood every market with those cheap goods, and that's how many countries' industrial sector took a nosedive. It was only the start for China however, they then fully embraced information and knowledge warfare, pirating very extensively industrial secrets, and, in addition to skilled reversed engineering, this made them able to create numerous generics and counterfeited goods. This pillage added a wealth of knowledge to the Chinese companies for cheap, and this, coupled with a growing and educated population, enabled a renewed growth and the creation of a middle class in China. On the other hand, it also destroyed the copyright and patent power (with the help of internet), which was what creative and innovative sectors relied upon in the developed world. The final pillar is the close links between Chinese companies and the Chinese state. Many Chinese companies are state owned, or state supported, and it gives them an enormous advantage against competitors. Not only can they be subsidized, they also have a privileged access to one of the biggest market in the world, and a government ready to do everything to support them in terms of monetary policies, devaluating the Yuan times and times again. This is widely viewed as unfair against private companies, though as the liberal (in the sense of the liberalization of exchanges) ideology is not the one adopted in China, it doesn't seem appropriate to use its ethics when analyzing China.

All this successful apparatus made China a booming economy, and the new center of trade, but it was at the expense of others, who have started to counterattack with protectionist measures, and it was part of the reason for structural crisis in the developed world. China is strong enough to keep its practices going, despite strong opposition by many countries, but it is now costing them a hefty price, as demand is stagnant worldwide, and their sole market won't be enough for them to keep growing. This end of Chinese growth, although the result of the growth itself, who stunted many markets by taking their market share, would likely result in a default, as Chinese competitivity and stable growth is now, and has been for some times, fueled by debt, private and public.

Others now want to go down the same road of unfair trade, but they are the ones who were instrumental in creating trade laws and treaties.

America's new tax plan includes protectionism parts that are against the WTO agreements, and would constitute unfair trade, with double taxation, and subsidies to companies exporting. It is not the first time the US used trade unfairly, whether to punish (France, Venezuela) or to get more control, though this last point was mostly done quietly by pushing weaker nations into trade agreements that favor them (TiSA). The United Kingdom is also trying to get an unfair agreement with the EU by using EU citizens still in its territory, though it is not quite working. This unfair trade by the developed countries extends to a more perverse territory, that though present since colonisation, is now bigger than ever because of demand, the subordination of local markets to foreign interests.



Colonisation might be finished (except in rare cases that do not involve developed countries), but its legacy is still here, and even in countries who were spared, the power by countries like the US, but also, increasingly, China, create the same effects. No local development can be made due to a lack of funds and the ideology of the world bank, who wouldn't allow government program to run parallel to a loan from them, preferring austerity instead, despite currently knowing it doesn't work and is even counterproductive. The local products are either unfairly pitted against much cheaper products from elsewhere, as no protectionism is available for countries entering WTO (exceptions are possible, but only for powerful countries), when they are not in competition with, basically free, charity goods. To complete this, poor infrastructure renders impossible exportation. This leaves the developing countries with fragile and barely functioning economies with high levels of corruption. This is the perfect place for a multinational company to get labour or raw materials. They have not only an incredible bargaining power as the ones providing most income to the state, they also are often more powerful as a company than the state they are basing themselves in, and are backed by powerful countries that do not care about unfair trade that benefits them (when they do not practice it themselves) but care about their companies losing trade, making retreat of those large companies impossible via a government action. In response, another unfair trade practice has developed in those places, nationalization of sectors detained by foreign companies. All this complex trade, and its more and more exploiting of others face, make for a destabilized and conflicted world.



To conclude, we now have several unfair trade techniques that are widely used worldwide, and despite actors wanting to eradicate them, they only want to do so partially, to suit their interests. As even powerful members of the WTO do it, the trade organisation loses its purpose and usefulness by the day. Trade wars are currently happening because of those trade policies, but they are going to intensify with the wave of nationalism that is happening in the world. The states aren't searching ethical trade, but ways to get the upper hand, and as long as this keeps happening there will be divides on what the world consensus should be, with no possibilities of a universal trade agreement, and trade will keep being a source of conflicts that could escalate into warfare. The confrontation between the two trade giants that are the US and China is imminent, and it could escalate as both economies suffer from a destructive competition, and, even if only one ends up getting a raw deal, they might still try to use military means for revenge.



You can support us by donating to our Patreon: https://www.patreon.com/TheNewRealityinForeignPolicy

You can get the latest updates by subscribing to our Facebook page: https://www.facebook.com/The-new-reality-in-foreign-policy-492287754467588/

You can submit your own articles at adrien.jouis@free.fr

Trump's tax reforms are not usual reforms. They are widely considered to include elements of trade war and several provision that go against the World Trade Organisation, and, more importantly, its treaties, which the US signed. There was indignation against this bill worldwide, as it breaks the very consensus that America shaped since the agreements of Bretton Woods, that freedom of exchange would be made by standardizing them, and have the same rules for everyone.