An ECIPE Occasional Paper in June 2020 got me thinking. The paper titled "Learning to Love Trade Again" lamented the fact that there was no leadership of either the US or EU in the trade arena at the moment. Every political spectrum views trade as being detrimental to national interests and that protectionism was holding sway.
It offered five initiatives that needed to be taken by the BIG THREE - the US, EU and Japan to turn around the mood on trade - to make people love trade again! The initiatives were:
A critique of this paper would be two fold:
1. The paper views leadership on trade issues being possible only from the large trading powers. So if the US or EU are not coming forward, it necessarily means that there is a leadership crisis. The presumption that there are only a few rule givers, while the rest are rule takers persist. A leaderhship charge from China or developing countries like India and Brazil are not envisaged at all. Quite expected. Rule receivers can never become rule givers!
2. On the role of the WTO's consensus principle being a step backward, the examples given don't quite seem to reverabrate in reality. There have been no smaller countries bringing the WTO to a halt for non-trade issues of AIDS, environment or the like. In fact, non-trade issues have always been an agenda that developing countries tend to oppose at the WTO.
3. The Big Three should set the norms and other should follow suit later - a la China or the rest. This was the mode earlier. Not a mode that 2020 should subscribe to.
The international trading system is facing a serious challenge from a legitimacy crisis both in the west and the developing worlds. How one needs to tackle this apathy and disdain is for the collective leadership to solve. Multipolarity must replace unipolar, bipolar and tri-polar worlds. Easier said that done though. However, the future must begin with the principle of engagement of al trading nations rather than a few.
However, the signs of the trilateral stewardship has probably begin. This trilateral statement of the way forward in subsidies negotiations at the WTO is an indication that this alignment is not a theoretical possibility but a distinct possibility. How other trading nations would react to this would determine whether trade is loved by everyone.
It offered five initiatives that needed to be taken by the BIG THREE - the US, EU and Japan to turn around the mood on trade - to make people love trade again! The initiatives were:
1. The Big Three. The U.S., EU, and Japan, should establish a consultative body on trade to forge a new approach that allows trade to move ahead in the absence of universal consensus.
2. No harm, no foul. Each of the Big Three should commit to zero tariffs on any item not produced in each particular market.
3. A de minimis strategy. Tariffs should be eliminated on all products where the current tariff is less than 2%. At that level tariffs are simply a nuisance fee.
4. Mind the social costs. Expand the Nairobi Protocols to include health products and green tech. Scrapping import tariffs on medical and green goods would not only encourage additional trade but will also provide health and environmental benefits.
5. Harmonize down. The Big Three should commit that on every tariff line each of the three will be no worse than the next worse. In other words, each of the Big Three will agree to reduce its tariff on every product where it has the highest tariff of the three.While the initiatives are to be provided by the three, it cannot be restricted to the three because of the MFN provision under GATT, unless the three are proposing a mega FTA amongst themselves. Therefore unilaterally undertaking such cuts would mean free-riding. Other countries would benefit from such a reduction without necessarily having to pay back. This would be fine for the others - but whether it is a cost the three would be willing to pay for the love of trade is debatable?
A critique of this paper would be two fold:
1. The paper views leadership on trade issues being possible only from the large trading powers. So if the US or EU are not coming forward, it necessarily means that there is a leadership crisis. The presumption that there are only a few rule givers, while the rest are rule takers persist. A leaderhship charge from China or developing countries like India and Brazil are not envisaged at all. Quite expected. Rule receivers can never become rule givers!
2. On the role of the WTO's consensus principle being a step backward, the examples given don't quite seem to reverabrate in reality. There have been no smaller countries bringing the WTO to a halt for non-trade issues of AIDS, environment or the like. In fact, non-trade issues have always been an agenda that developing countries tend to oppose at the WTO.
3. The Big Three should set the norms and other should follow suit later - a la China or the rest. This was the mode earlier. Not a mode that 2020 should subscribe to.
The international trading system is facing a serious challenge from a legitimacy crisis both in the west and the developing worlds. How one needs to tackle this apathy and disdain is for the collective leadership to solve. Multipolarity must replace unipolar, bipolar and tri-polar worlds. Easier said that done though. However, the future must begin with the principle of engagement of al trading nations rather than a few.
However, the signs of the trilateral stewardship has probably begin. This trilateral statement of the way forward in subsidies negotiations at the WTO is an indication that this alignment is not a theoretical possibility but a distinct possibility. How other trading nations would react to this would determine whether trade is loved by everyone.
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