Angela Merkel	arrives for the European Union leaders summit Dan Kitwood/Getty Images

The Trade Leadership Deficit

Even if Donald Trump’s protectionism proves to be a short-run aberration, US global dominance is likely to continue to decline. To ensure that US hegemony gives way to a peaceful and prosperous global balance of power, the European Union must step up.

ZURICH – For all the concern over trade flows and balances nowadays, the largest deficit the world must confront is one of leadership. With the United States retreating from its global role, someone needs to step up. But who?

Henry Kissinger once said, “Peace can be achieved only by hegemony or by balance of power.” The same could perhaps be said of trade, or even of globalization itself. It is no accident that the two great eras of globalization – the decades leading up to World War I and the last 75 years – were characterized by balance of power and hegemony, respectively.

Of course, trade requires more than the absence of conflict. Like all economic activity, it flourishes when property rights are respected, taxation is efficient and purposeful, letters of credit are honored, tariffs and other barriers are removed, and so forth. In short, effective trade demands clear rules, typically enforced by a hegemon. In the age of the British Empire, the Royal Navy combated piracy; for the last 75 years, the US Navy has been responsible for keeping sea-lanes open.

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