This Talking Trade was written by our visiting Government Fellow, Nicky Stephen Littlewood, Trade Policy Manager at British Embassy Bangkok
I am spending the week (beginning 24 February) with the Asian Trade Centre as part of my 2019-20 personal development plan. This learning and development (L&D) objective was designed in order to give me an opportunity to gain insights about key developments in the context of global trade, but also a chance to learn more about specific themes affecting Southeast Asia and the wider Asia Pacific region. Both are conducive to my role as Trade Policy Manager for Thailand and the general direction of workload for the UK’s Department for International Trade.
The thinking was to use L&D in an innovative way that would allow me to temporarily enter a different realm (outside of the decision-makers in Whitehall or the various UK governmental bodies). I would explore what trade looks like through a different lens: what a typical week looks like for ATC’s expert consultants, researchers and thought leaders. I would be a sponge and try to absorb what I could, while also bringing my own knowledge and experiences to the table and contributing to the week’s discussions, debates and decision-making.
The timing of the visit was good (and bad), coming at a time when the UK has very recently begun its navigation of the brave new world of an independent trade policy (for the first time in almost 50 years), and during a period when the global trade environment seems to be under the media glare more than ever before. The visit would also unhappily coincide with the early stages of what may yet become a pandemic (the dreaded coronavirus or COVID19).
In terms of the practicalities of my visit, the coronavirus may have meant a reduction in some planned face-time, due to meetings being cancelled, conferences and events being rescheduled etc., but it had also created an environment of uncertainty that ATC is well-placed to investigate, provide insights on, and support and advise businesses through.
In terms of the practicalities of trade, the virus will very likely, at least temporarily, and most certainly materially, impact global growth rates as well as the operation of deeply integrated and typically well-oiled regional and global supply chains.
As we enter into what could become a very temperamental period for these normally seamless, ‘just in time’, and deeply componentised chains – which purr along in the background of our everyday lives, it is important that we take stock of what is happening, why, and what can be done about it.
When asked to draft a guest blog, it was suggested that I frame it around a specific trade-related topic. Instead, I ignored this advice and got drawn into a much broader subject that felt suitable in the current environment: ‘complexity’.
By complexity, I mean the multi-faceted nature, speed, scale and variation of trade policy developments affecting how the world’s countries trade with each other.
For example, on the one hand we have the ever-evolving and expanding role of globalisation and the complimentary componentisation of supply chains. While on the other, there are key recent developments that are more inward-looking and protectionist such as tariff wars (in the case of the United States and the Republic of China), or the creases that need to be ironed out with regard finalisation of the Regional Comprehensive Economic Partnership (RCEP).
Beyond these headline developments, there is also the trend of putting more and more ingredients into modern FTAs.
In recent times, these preferential agreements have become broader and deeper by design (for example, as observed in the text that underpins the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP). It is now the case that such agreements are expected to include chapters that deal more precisely with the modern trading environment (digital, investment, intellectual property rights etc.), while it is also becoming more common for FTAs to be used as vehicles to gain trajectory with regards accelerated CSR/ESG efforts (tackling climate change, worker rights and protections etc.).
To put some context to these thematic challenges, trade has had to evolve over time from very modest (mercantilist) beginnings – during which trade between nations was not to be used for the purposes of expanding product mix or increased prosperity. Instead, there was a basic overriding principle that prioritised the need for one’s exports to exceed the value of one’s imports.
As trade developed, treaties and agreements started to focus on reciprocal tariff reductions and the use of a ‘most favoured nation’ approach, while economic terms such as opportunity cost and comparative advantage helped to dilute the aforementioned historic and simplistic guiding principles regarding the explicitness of avoiding trade deficits.
The post-Bretton Woods environment built on this through accelerated multilateralism, and went a step further in terms of the planting of initiatives such as ‘Everything but Arms’ to balance the playing field for least developed countries. Meanwhile, the creation of the likes of the International Monetary Fund, World Bank and World Trade Organisation (amongst others) provided a guiding hand.
More recently still, trade has branched out into non-core areas such as sustainability. The evolution of trade deals is attempting to future-proof FTAs to better accommodate the complexities of digital transformation, the ever-increasing importance of services trade, and handle similar modern-day developments.
There is also the need to agree on specific features such as rules of origin, and the streamlining and/or standardisation of non-tariff measures (as well as removal of non-tariff barriers). All of which are imperative to maintain, nourish and grow supply chains.
But with such ambition comes complexity, and with complexity comes delay and disagreement.
The current trade policy mix is a challenging one: essentially a struggle between protectionism and free trade, and a battle between nation state and the multilateral trade environment, but also a chance to use FTAs as mechanisms to structure sustainable targets and agree broader policy direction between partners.
How these trade-offs untangle and become conducive to an ever flatter, more connected world is uncertain. There is also uncertainty regarding what a new or revised set of multilateral and regional agreements and bodies may look like, and how quickly these can be agreed upon.
From what I gather, a typical week for ATC is trying to make sense of all of the above and framing it in a way that helps businesses navigate the bumpy terrain.
***This Talking Trade has been written by ATC’s current Government Fellow, Nicky Stephen Littlewood, Trade Policy Manager at British Embassy Bangkok. If you are a government official in the region looking for a short-term Fellowship post to deepen your knowledge of trade, contact us now at info@asiantradecentre.org***