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The Titanic Has Hit the Iceberg: Global Trade in Profound Trouble

The Titanic Has Hit the Iceberg: Global Trade in Profound Trouble

We have not seen this sort of global trade system in a very long time, so it is not possible to imagine fully what it will look like.  But to return to the Titanic discussion, if the main boat is sinking, what will happen?  Everyone will be desperately looking for any way possible to avoid drowning. The ideal scenario is to have another luxurious cruise ship nearby to pick you up.  For some countries, this trade option is available.  The European Union fits the bill for some lucky passengers.  Slightly less fancy, but still desirable, will be the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which gives members significant benefits from being inside a new luxury liner. A bigger boat is much better in a wide ocean than smaller boats.  The Regional Comprehensive Economic Partnership (RCEP) with 15 members in Asia is slightly less well-appointed than the CPTPP, but will do quite nicely for most Asian countries.  Some countries will be looking for any lifeboat, including tiny rowboats made from lashing together bilateral deals with key trading partners.  Some will get stuck trying to straddle a bunch of smaller boat options. Finally, some members will have no true options and are facing the freezing waters.  One of the main purposes of the multilateral trading system, in fact, has been to help smaller, poorer countries navigate a world of bigger, more powerful countries.  Once the Titanic sinks, this safety net is no longer available.  Drowning is a real risk.

Looking Ahead: Trade in 2019

Looking Ahead: Trade in 2019

1.      US-China:  The biggest story is likely to remain the ongoing battle between the United States and China.  The most immediate deadline is March 1, when the US has promised to impose 25% tariffs on $200 billion in Chinese imports that are currently subjected to 10% tariffs, if the two sides cannot successfully negotiate their way out of the complaints lodged in the Section 301 case. Chinese officials are meant to travel to the US later in January to continue discussions, followed by more talks in mid-February.  Given the rapidly closing timeline, however, getting a satisfactory conclusion to the long list of US objectives is unlikely.  Three scenarios are possible: 1) US President Donald Trump accepts an outcome that does not really address the systemic complaints at the heart of the Section 301, but goes for a package that includes more Chinese purchases of US agricultural and energy goods plus some limited commitments on Chinese reforms; 2) the timeline is extended, as talks are making headway with a resolution closer to filling most of the Section 301 demands possible by mid-year; or 3) talks collapse and tariffs are imposed on the $200 billion in goods, ramping up to include all Chinese imports to the US before the end of the year.

Global Trade System in Crisis: A Failure to Think of Treatment Options

Global Trade System in Crisis: A Failure to Think of Treatment Options

But slow stagnation does not automatically mean crisis.  The current state of calamity in trade comes from the new approaches taken by the largest players in the system. This is not a post to discuss the diagnosis of the problem.  It is, instead, to discuss the difficulties in treating the patient.  What has been especially striking over the past few weeks has been the inability of many trade policy experts to conceptualize treatment options that go beyond simple remedies.  If, indeed, the patient is on life-support or headed for the ICU, it may be necessary to think of unusual options. Yet different forums that ought to be perfectly positioned to do so seem to be caught.  Perhaps they do not want to acknowledge the severity of the illness, do not want to admit that the diagnosis goes beyond conventional treatments, do not want to handle the intervention of others in handling the patient treatment, or do not want to think about more depressing trade news.