Global Trade 2019 - my round up!

I had the pleasure of attending the Global Trade 2019 Trade disputes, technology and transparency conference as a guest of Chatham House yesterday.

Obviously, the days discussions took place under Chatham House rules so I cannot attribute any comments of disclose any details however, I do have permission to share my notes - so I have done a (very rough) round up of observations from the day’s discussions. You will note that a number of these are conflicting giving to an idea of the range of heated debate we experienced! I thoroughly enjoyed the day. If anyone has any questions regarding my synopsis do drop me a line. I’m posting this as an article rather than post due to length of content. Again views are not my own nor that of the Energy Industries Council but my interpretation of the conversations that took place.

Protectionism and Global Power Dynamics

• Global trade deficit bigger than last year. Implications for global trade is that trade as been introduced as a blind force instrument in global politics. The main threat to WTO existence is the politicisation of trade disputes.
• The USA-China trade dispute is about technological advancement which is playing out in trade agreements. It’s a bigger conflict. Shift from power-based system rather than rules-based system. 
•  With regards to China experts argue that the WTO was not set up to deal with a non-free market economy. The USA’s frustration stem from the perception that China taking advantage of the system. There is broad agreement of US assessment of issues but not necessarily the means to deal with them.
• Need to look at the evolving role of the WTO Integration of geopolitics to trade is the biggest challenge. WTO provides safety net and a mechanism of transparency.
• Could be overcome through WTO reform and maybe bilateral trade agreements. USA walking away from multi-lateral agreements and going smaller i.e. with Japan. USA going bilateral.
• Some agreement of the need to reduce dependency on China and USA. Walk away from MFN (most favoured nation treatment). Why have rules if the largest trader violating them?
• National security measures vs. global agreements / GATT provisions. Economic security is national interest so there are blurred lines when it comes to a given country’s position on global trade matters.
• Investor confidence - divert resources and the opportunity cost of doing so. Private sector does need to be a part of the discussions as well. Not just government.
• ‘Everything must change so everything can say the same’. China’s aim is to integrate in worlds economy in order to improve its living standards. Using trade war to push through reform agendas.
• Some agreement that the EU/USA should insist on china adopt reform agenda. With others arguing this could have negative impact of foreign businesses in China ‘darker side of communist state’. 
• WTO has not digested the integration of China. The reforms expectations are not being met by China. There are domestic reasons for China to embrace some of reforms required to be in WTO community. China have been good with complying with WTO when lost cases. WTO could help resolve china/USA trade dispute and reassert value. Tech transfer discipline needed in China.
• Trade issues were present before Trump and they will continue even if Trump not re-elected. Is it that the USA is becoming increasingly protectionist?
• Tariffs are the only way to deal with things now - not 15-year legal dispute i.e. airbus US Boeing. Retaliation. Others argued that not all WTO disputes take 15 years! The process is not a problem. We are in danger of over-criticising trade dispute system of WTO.

Brexit: What now for UK Trade Policy?

• Trade is central to Brexit decisions. The EU is the second largest trading bloc in the world – 500 million consumers.
• The world wants a strong and united Europe. US companies for example benefit from free flow of goods and services within the single market. The UK is one of the most business-friendly member states.
• EU standards shape global regulatory standards.
• The UK cannot rely on diplomatic relations to negotiate trade deals. Trade is a stand-alone issue for all nations. Historical relations do come matter when it comes to trade.
• The lack of trade experts (those with experience of negotiating trade deals) is lacking and building this expertise will take time that the nation simply does not have. Therefore, diplomatic expertise is heavily been relied upon.
• A withdrawal agreement should be coupled with a new bilateral trade agreement.
• The UK is primarily a service-based economy and very little exists for multi-lateral deals for services.
• The UK ideals align more with Europe than those of other large economies i.e. USA.
• The UK needs the EU – the relationship will be central to any independent trade policy the UK will have outside of the EU.

Trade Governance and the Future of the WTO

• There is still some support for the WTO reform in the USA but not within Congress at present which poses significant challenges.
• 164 countries form the WTO – is its own success a detriment as consensus is no longer possible or even a good thing anymore in the context of the global economy.
• A huge impetus for WTO reform are bilateral agreements being formed albeit on a very small scale i.e. Japan and USA and Japan and South Korea. These are enough to undermine the overall respect of the international trade organisation.
• The WTO cannot be relied upon to resolve everything but the type of positive contribution it can make needs to be decided.
• Sustainability needs more of a prominence within trade/discussion on green aid for trade. There also needs to be more transparency on carbon standards ensuring a level playing field.
• Broad consensus for integrated policy making.

Technology, Services and Digital Trade

• The trade of services is growing faster than the trade of goods.
• The absence of governance for trade of non-goods needs addressing with urgency.
• CPTPP countries are moving towards the liberalisation of digital trade.
• Europe is in danger of falling behind because of current privacy rules and GDPR. A view that these standards cannot exist with digitalisation rules.
• Europe and the USA are the most data intensive economies in the world with the most data moving across the Atlantic.
• Others argued that barriers are proliferating, and that GATT 14 is not enough to protect GDPR standards.
• Shift in technical political plates result in trade-offs. Rebuilding the reputation of multilateral trade is essential to the future. Lack of global trade rules will lead to protectionism.