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World leaders find hope for globalization in Davos amid populist revolt

Chinese leader pushes back against Trump on free trade (Video: Reuters)

This story has been updated.

DAVOS, Switzerland — Amid growing doubts about the future of free trade and international economic cooperation, proponents of globalization found reasons for optimism as the World Economic Forum opened Tuesday.

The specters of President-elect Donald Trump’s protectionist rhetoric and the British exit from the European Union loomed over the annual event that attracts world leaders and dignitaries to this mountain resort town to discuss the state of the global economy.

But despite a populist push against globalism in the West, Secretary of State John Kerry told attendees that the "70-year-journey" of expanding economic integration that began after World War II was not over.
"I know some people who are looking at the world and saying, 'Oh my god, you know, the world is coming apart,' and this and that," Kerry said. "No, it isn't, folks, and it won't."

Chinese President Xi Jinping also offered encouragement, delivering a forceful critique of the protectionism endorsed by Trump and other Western populists.

“It is true that economic globalization has created new problems, but this is no justification to write off economic globalization altogether,” Xi said, speaking through a translator. “We must remain committed to developing free trade and investment.”

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China was one of Trump’s chief antagonists on the stump, and many at the World Economic Forum expressed fear that his administration will begin a new era of global barriers to commercial exchange. Trump, who will be inaugurated on Friday, has threatened tariffs of as much as 45 percent on goods imported from China, arguing that the nation’s interests must come first in U.S. foreign policy.

Without mentioning Trump by name, Xi offered an opposing viewpoint. Countries, he said, “should view their own interests in their broader context and refrain from pursuing their own interests at the expense of others.”

“No one will emerge as a winner in a trade war,” Xi said to applause.

Later Tuesday, Britain's prime minister, Theresa May, clarified the terms of her country's exit from the European Union, saying Britain plans a comprehensive break with the bloc including leaving the single market and global trade pacts negotiated by Brussels. Investors sold off the pound sterling on the expectation that barriers to trade between the United Kingdom and continental Europe would reduce demand for the currency. The pound fell to $1.21, its lowest price in decades.

For observers in Washington, Xi’s appearance in Davos suggested a claim to the kind of international economic stewardship that Trump has rejected.

“If we look back five years from now, 10 years from now, you could say this was a turning point, at which China did move up in the direction of asserting the kind of global leadership role that the U.S. has had for about a century and might willfully be abdicating,” said Fred Bergsten, the former director of the Peterson Institute for International Economics, in an interview before Xi’s speech.

German economist Klaus Schwab, founder of the exclusive economic forum that meets in Davos every winter, made a similar point in introducing Xi.

The world expects China to provide “confidence and stability,” Schwab said.

“Particularly today in a world marked by great uncertainty and volatility, the international community is looking to China,” he said.

What Americans really think about free trade

Speaking to international audiences, Xi typically eschews bold rhetoric, maintaining a low profile. Analysts say he and other Chinese officials are aware that explicit pretensions to worldwide leadership could inflame anxieties in the United States and elsewhere.

“The Chinese have been very careful not to describe themselves as a global leader,” said Bonnie Glaser, an expert on China at the Washington-based Center for Strategic and International Studies, prior to Xi’s speech.

Xi’s address Tuesday was characteristically measured and subdued. All the same, his themes of international cooperation and global stability offered an implicit contrast with the rhetoric from Western populist leaders.

“The subtext is that the United States and the West are no longer the stabilizing factors in the world order," Glaser said.

Asked about Xi’s speech, Trump adviser Anthony Scaramucci, a New York financier, reassured attendees that the new administration would support free trade. He argued, however, that existing agreements put the United States at an unfair disadvantage.

Revising those agreements would put globalization on a sounder basis, said Scaramucci, one of the few skeptics of free trade at the forum.

“We allowed goods and services to flow freely into the United States, but we allowed our goods and services to be embargoed in other countries,” Scaramucci said. “All we’re asking for now is to create more symmetry in these free trade agreements.”

Analysis: Donald Trump really might start a trade war

For instance, some American investors feel that Beijing treats foreign companies operating in China unfairly. The American Chamber of Commerce, or AmCham, released its annual survey of business conditions on Tuesday, finding that four out five companies feel less welcome in the country than before.

They argue that Xi’s government is turning more toward protectionism as its economic growth slows. The businesses’ top concern was “inconsistent regulatory enforcement and unclear laws” — often, rules adopted and interpreted to favor local companies over foreign ones.

“AmCham China still steadfastly supports China’s active and constructive participation in the global economic system,” the group’s chairman, William Zarit, said in a statement. “However, it is becoming apparent that the benefits of globalization are being taken for granted or even forgotten, as the challenges of managing a complex, modern economy increase.”

Nouriel Roubini, an economist at New York University attending the forum, noted that Beijing has prevented many Western firms from investing in China for both political and economic reasons. He cited Facebook and Twitter as examples.

Roubini was heartened by an announcement coinciding with Xi's speech that Beijing would ease restrictions on foreign banks, brokerages, and other industries seeking to do business in China. Roubini said that while the details were vague, the statement showed China is taking criticism seriously.

"It's clear that China is open and wants to be more open to trade in goods and services," he said. "It's going to be a process."

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