Trump puts trade rules under strain

It would indeed be ironic if a Brexit Britain were to be an early casualty of an imploding global trade order but institutions like the WTO have also served Ireland well, writes Kyran Fitzgerald

Trump puts trade rules under strain

It would indeed be ironic if a Brexit Britain were to be an early casualty of an imploding global trade order but institutions like the WTO have also served Ireland well, writes Kyran Fitzgerald

Europe’s leaders have given the UK until the end of October to put together an EU departure deal and for now, we can breathe a sigh of relief, as the prospect of Britain crashing out of the EU diminishes.

While the Brexit soap opera continues to soak up much of the political and business oxygen in these islands, elsewhere, global trade tensions continue to mount.

Last week, Donald Trump ramped up the rhetoric on Twitter against the EU describing it as a “brutal trading partner”.

The US administration has targeted Airbus and the financial support it receives from EU governments, in particular.

The move heightened nerves across the eurozone where economic growth has slowed to a crawl.

The IMF has downgraded its global economic forecasts, and trade figures out of China point to both a sharp slowdown in imports and rise in exports which threatens to add fuel to the flames of conflict between the two economic superpowers.

Hardline Tory europhobes have taken comfort in the idea that they can switch almost seamlessly to a trading regime based on World Trade Organisation (WTO) rules.

Yet, there is plenty of evidence to suggest that the WTO is faced with a serious — perhaps even an existential crisis — of its own.

The international trading order as we have known it since the WTO was set up 1995 is in retreat.

Writing in The Spectator magazine, academic David Collins, suggested breezily that there would be nothing to fear for Britain from a no-deal Brexit, as “a viable alternative to an EU trade deal is ready and waiting”.

The “doom-mongers fail to understand the protections that will remain in place for the UK under international law”, he wrote.

The protector he has in mind is the World Trade Organisation.

Those who scoff at the WTO option, he wrote, “ignore the huge progress this body has made in promoting world trade over the past two decades”.

This sunny vision, however, does not find favour with Edward Alden and James McBride of the US Council on Foreign Relations think tank.

Both warn that the future of the WTO as the principal forum for setting the rules of world trade is now in doubt.

Mr McBride looks back over the achievements of a body which has reduced barriers to trade in both goods and services but also warns that negotiations over a comprehensive development agenda are foundering on the back of disputes over agricultural subsidies and intellectual property rights.

None of this is good news for Ireland’s economy, one of the world’s most open economies.

For his part, Mr Alden singles out Mr Trump for, in effect, sidelining the organisation.

His administration has applied tariffs to Chinese steel by using a little known national security law while bypassing the WTO.

Trade turbulence has spread into the investment arena as the US cracks down on Chinese investment on grounds of national security.

This, in turn, has cast on the prospect of US firms operating in China.

In Mr Alden’s view, the WTO has been “dying a slow death for a long time”.

China never accepted its norms, while the failure of the so-called Doha Round negotiations in 2001 has stymied attempts to update the rules.

All of which is a great pity as in many respects the WTO — like the EU — in essence involves brave attempts at fostering international cooperation in the global trade arena.

One feature of the organisation has been the attempt to ensure that smaller countries are protected from bullying at the hands of larger players.

The WTO’s predecessor, the General Agreement on Tariffs and Trade, or GATT, emerged as part of a network of international bodies after World War Two.

It set out ground rules, but the WTO — with the help of former Attorney General & EU Commissioner Peter Sutherland — put in place binding dispute mechanisms.

WTO courts were established to resolve disputes.

But even its advocates accept that the system lacked flexibility when it came to responding to changed political and economic circumstances.

In too many communities where jobs disappeared on a large scale, free trade was conflated with technological transformation.

The populists found a way of making sure that free trade copped the blame.

Some of the critics have had a point. WTO rules have often protected industry incumbents in areas such as patent law. Clever lawyers have had a field day.

On occasions, national laws aimed at protecting the environment or labour rights have been overridden.

But the achievements have more than compensated for the setbacks.

Back in 1942, US secretary of state, Cordell Hull, in President Franklin Roosevelt’s administration, suggested that freeing up trade flows would boost chances for peace.

What followed were measures such as the Marshall Plan under which aid flowed to put a battered continent of Europe back on its feet.

Bodies such as the IMF and World Bank emerged in the process, soon to be followed by the European Economic Community, in 1957.

International bodies like the EU and WTO now find themselves on the back foot.

Populist eurosceptics are gathering for an assault on the European project, while leaders like Mr Trump and China’s leader Xi Jinping seem determined to promote narrow interests at the expense of a common purpose.

Mr Trump has talked of a US departure from the WTO as part of a new focus on bilateral approaches to trade negotiation.

It would indeed be ironic if a Brexit Britain were to be an early casualty of an imploding global trade order.

But the tide could turn as far as the WTO is concerned.

Last month, its deputy director Alan Wolff pointed to continued rises in world trade and to the fact that not one of its 164 members has opted to leave the body. Indeed, over 20 countries outside have applied to join.

The WTO has moved into new areas such as environmental co-operation and the development of a rule book for global IT.

Regions such as Africa are enjoying rapid economic growth and there are signs of political modernisation in leading countries such as Ethiopia.

We will never return to the imperial world that existed before 1914 but much of the international world order of the post-1945 era may well endure and indeed consolidate itself.

If that turns out to be the case we — Irish national, or Brexit Briton — will have good reason for gratitude.

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