tag:theconversation.com,2011:/africa/topics/trade-agreements-22741/articlesTrade agreements – The Conversation2021-01-31T14:00:28Ztag:theconversation.com,2011:article/1537622021-01-31T14:00:28Z2021-01-31T14:00:28ZWhat Biden’s presidency means for Canada-U.S. agri-food trade<figure><img src="https://images.theconversation.com/files/380338/original/file-20210124-19-14iw1hi.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4000%2C2886&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Prime Minister Justin Trudeau and Joe Biden, U.S. vice president at the time, walk down the Hall of Honour on Parliament Hill in Ottawa in December 2016. </span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Patrick Doyle</span></span></figcaption></figure><p>Although international trade has long been affected by domestic politics, former U.S. president Donald Trump dramatically increased trade irritants between the United States and Canada. This was especially challenging in the agricultural sector where political interference in international trade is more prevalent than in the non-agricultural sector. </p>
<p>In our recent article in the <a href="https://doi.org/10.1111/cjag.12267"><em>Canadian Journal of Agricultural Economics</em></a>, we analyzed how Trump’s presidency affected agri-food trade between the two countries and how the situation might change under President Joe Biden. </p>
<p>We argue that Trump’s negative rhetoric and actions heightened trade uncertainty and undermined global trading rules, which tends to disrupt international trade. This was a major challenge for a small open economy like Canada that depends largely on the American market. In particular, the politically sensitive nature of the agri-food sector makes agricultural trade highly dependent on diplomatic ties between countries.</p>
<h2>Canada more reliant on the U.S.</h2>
<p>Canada’s relationship with the U.S. is important for the agri-food sector in both countries, but it’s somewhat one-sided in terms of Canadian reliance on the American market. </p>
<p>Canada is the top destination for American agricultural exports, accounting for 15 per cent of the country’s total agricultural <a href="https://www.fas.usda.gov/regions/canada">exports in 2019</a>. Conversely, the U.S. is the foremost buyer of Canadian agri-food products, accounting for <a href="https://www.fas.usda.gov/regions/canada">58 per cent of total Canadian agri-food exports</a>. This isn’t surprising due to the countries’ close proximity and similar consumer tastes and values.</p>
<p><a href="https://doi.org/10.1080/02722011.2020.1748925">But the Canada-U.S. political relationship became hostile</a> during the Trump presidency due to the former president’s erratic foreign policy decisions, tariff wars and his <a href="https://www.washingtonpost.com/politics/trump-attacks-canada-to-show-north-korea-hes-strong-aide-says/2018/06/10/afc16c0c-6cba-11e8-bd50-b80389a4e569_story.html">verbal attacks on Prime Minister Justin Trudeau</a>. The tense political relationship created an environment of uncertainty, adversely affecting the bilateral trading relationship. </p>
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<img alt="A cyclist rides between two bright-yellow canola fields." src="https://images.theconversation.com/files/381122/original/file-20210128-17-1hr0fyr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/381122/original/file-20210128-17-1hr0fyr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=354&fit=crop&dpr=1 600w, https://images.theconversation.com/files/381122/original/file-20210128-17-1hr0fyr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=354&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/381122/original/file-20210128-17-1hr0fyr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=354&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/381122/original/file-20210128-17-1hr0fyr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=445&fit=crop&dpr=1 754w, https://images.theconversation.com/files/381122/original/file-20210128-17-1hr0fyr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=445&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/381122/original/file-20210128-17-1hr0fyr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=445&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A cyclist passes between two canola fields near Cremona, Alta., in a July 2016. The U.S. was the top market for Canadian canola in 2019.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jeff McIntosh</span></span>
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<p>Major trade disputes between the two countries at both the World Trade Organization (WTO) and within the former North American Free Trade Agreement (NAFTA) <a href="https://www.jstor.org/stable/4128725?seq=1#metadata_info_tab_contents">have largely involved the agricultural sector</a>. WTO trade disputes over softwood lumber, hard wheat and durum and the compulsory country-of-origin labelling requirements, for example, were all within the agricultural sector. </p>
<p>The long-standing softwood lumber dispute predates Trump, but was <a href="https://www.nytimes.com/2017/04/24/us/politics/lumber-tariff-canada-trump.html">escalated during his presidency</a> and could not be sorted out under NAFTA and WTO dispute settlement mechanisms. It was resolved only through political negotiations when both parties signed a <a href="https://www.international.gc.ca/controls-controles/softwood-bois_oeuvre/recent.aspx?lang=eng">memorandum of understanding</a>.</p>
<h2>Canada diversifying?</h2>
<p>The graph below shows that although bilateral agri-food exports from Canada to the U.S. increased marginally from 2015 and 2019, Canadian agri-food imports from the U.S. remained flat. </p>
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<img alt="A graph shows agri-food imports and export numbers between Canada, the U.S. and the rest of the world." src="https://images.theconversation.com/files/380078/original/file-20210121-15-i9kkvo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380078/original/file-20210121-15-i9kkvo.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=372&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380078/original/file-20210121-15-i9kkvo.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=372&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380078/original/file-20210121-15-i9kkvo.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=372&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380078/original/file-20210121-15-i9kkvo.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=468&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380078/original/file-20210121-15-i9kkvo.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=468&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380078/original/file-20210121-15-i9kkvo.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=468&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Agri-food imports and exports.</span>
<span class="attribution"><span class="license">Author provided</span></span>
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<p>The increasing number of agri-food imports to Canada from nations other than the U.S., and the flat-lining of imports from south of the border, shows the Canadian economy may be diversifying away from the U.S. and not relying solely on Americans to be the main suppliers of its food basket. </p>
<p>Continuing trade uncertainty with the U.S. could push Canada to pursue its market diversification agenda more aggressively. Canada has shown serious signs of market diversification through its membership in two major free-trade agreements — the Comprehensive Economic and Trade Agreement (CETA) with the European Union and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) with Pacific Rim countries.</p>
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<h2>Biden’s presidency</h2>
<p>In his inaugural speech, <a href="https://www.nytimes.com/2021/01/20/us/politics/biden-inauguration-speech-transcript.html">Biden promised to immediately work to repair and renew relationships</a> with U.S. allies and return America to a leadership role in the world. <a href="https://www.thestar.com/politics/federal/2021/01/22/joe-biden-tells-justin-trudeau-in-their-first-phone-call-that-buy-american-plan-wont-target-canada.html">His first call to a foreign leader was made to Trudeau</a>, and he assured the prime minister that “Buy American” policies weren’t aimed at Canada.</p>
<p>Biden is facing significant domestic political challenges, and it’s too soon to know how he’ll deal with trade irritants and address the harm done by the Trump administration. But it’s clear he’s intent on returning to multilateralism. </p>
<p>The American dissatisfaction with the World Trade Organization (WTO) predates Trump and runs deep in the U.S. Barack Obama’s administration <a href="https://www.piie.com/blogs/realtime-economic-issues-watch/wto-judicial-appointments-bad-omen-trading-system">also blocked appointments to the appellate body based</a> on this dissatisfaction. However, <a href="https://www.washingtonpost.com/politics/2021/01/14/biden-trade-katherine-tai-tariff/">Biden has been clear about supporting a strong multilateral trading system</a> and isn’t expected to be obstructionist like the Trump administration, but instead will likely work with allies to address concerns with the WTO.</p>
<p>When it comes to trade deals, Biden has acknowledged the importance of deals like <a href="https://www.politico.com/newsletters/morning-trade/2019/08/01/biden-says-he-would-renegotiate-tpp-464000">the CPTPP</a> that Trump pulled out of on his third day in office. But he’s also promised to protect American workers.</p>
<h2>Protectionist forces</h2>
<p>Protectionist forces will continue to disrupt trade between the two countries, but we can expect a closer and more constructive relationship under Biden. Trade disputes won’t disappear, but the approach to them will change, and improved U.S.-Canada diplomatic relations will have a positive impact on Canada’s agri-food sector.</p>
<p><a href="https://www.ctvnews.ca/world/america-votes/president-biden-s-first-foreign-leader-call-will-be-to-pm-trudeau-1.5275207">Canada’s prime minister and Biden</a> are much closer in terms of ideology, policy objectives and leadership style than Trump and Trudeau were, and <a href="https://www.wsj.com/articles/biden-is-expected-to-review-trumps-trade-tariffs-11604917803">they share views on eliminating trade barriers</a> instead of imposing them. </p>
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<img alt="Joe and Jill Biden wave as they exit a plane." src="https://images.theconversation.com/files/380340/original/file-20210124-23-1bzwecn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380340/original/file-20210124-23-1bzwecn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=404&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380340/original/file-20210124-23-1bzwecn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=404&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380340/original/file-20210124-23-1bzwecn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=404&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380340/original/file-20210124-23-1bzwecn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=508&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380340/original/file-20210124-23-1bzwecn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=508&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380340/original/file-20210124-23-1bzwecn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=508&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Biden and his wife, Jill Biden, arrive at the airport in Richmond, B.C. in 2015 when he was serving as U.S. vice-president. THE CANADIAN PRESS/Jonathan Hayward.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jonathan Hayward</span></span>
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<p>The past four years of trade tensions between the U.S. and Canada were largely politically motivated, especially Trump’s imposition of steel and aluminium tariffs in the name of national security, which Canada responded to <a href="https://www.canadiangrocer.com/blog/trumps-trade-war-with-canada-and-the-impact-on-grocery-81308">by imposing retaliatory tariffs on a number of agri-food products from the United States</a>. </p>
<p>Such unilateral decisions will probably be minimal under Biden. Bilateral trade flows between both countries are unlikely to be affected by the types of erratic trade actions favoured by Trump.</p>
<p>Closer political ties between the Biden administration and the Canadian prime minister means a more constructive and co-operative approach to solving challenges between the two countries in the agri-food sector. Trade disputes will undoubtedly continue, but diplomatic efforts will work to resolve these disputes. This is a positive development for the Canadian agri-food industry.</p><img src="https://counter.theconversation.com/content/153762/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sylvanus Kwaku Afesorgbor receives funding from Ontario Ministry of Agriculture and Rural Affairs. </span></em></p><p class="fine-print"><em><span>Eugene Beaulieu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Closer political ties between Joe Biden and Justin Trudeau likely means a more constructive and co-operative approach to solving challenges between the two countries in the agri-food sector.Sylvanus Kwaku Afesorgbor, Assistant Professor, Agri-Food Trade and Policy, University of GuelphEugene Beaulieu, Professor, Economics, University of CalgaryLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1500822020-11-16T06:58:23Z2020-11-16T06:58:23ZWe’ve just signed the world’s biggest trade deal, but what is the RCEP?<p>The giant <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep">Regional Comprehensive Economic Partnership</a> between Australia, China, Japan, South Korea, New Zealand and the ten members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Myanmar, The Philippines, Singapore, Thailand and Vietnam) was signed online on Sunday, November 15. </p>
<p>India left negotiations in November 2019, but even so, the deal will cover one third of the world’s population and economy. </p>
<p>Australia and the other governments refused to release the <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep/rcep-text-and-associated-documents">text</a> until after signing, continuing Australia’s <a href="https://theconversation.com/last-to-know-the-european-union-knows-more-about-our-trade-talks-than-we-do-144196">regrettable secrecy about deals it is about to sign</a>.</p>
<p>India left the RCEP because of concerns about its potentially negative impact on local <a href="https://www.globalasia.org/v14no4/feature/a-step-too-far-why-india-opted-out-of-rcep_rajaram-panda">industry development</a>.</p>
<p>Since Australia already has free trade agreements with all of the remaining members, India’s absence significantly diminishes what might have been in it for Australian exporters.</p>
<p>What’s left are some agreements on <a href="https://www.trademinister.gov.au/minister/simon-birmingham/media-release/australia-welcomes-agreement-finalise-regional-trade-dea">common standards</a> and the claimed ability for Australia to talk to China more than it can through its own one-on-one trade agreement.</p>
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<p>The text was completed before the pandemic and has not been revised since. </p>
<p>As it happened, Australia took actions during the pandemic that were technically contrary to the rules embodied in the RCEP in order to boost <a href="https://www.abc.net.au/news/2020-04-19/scott-morrison-government-coronavirus-covid19-manufacturing/12153568">local manufacturing capacity</a> for essential products. </p>
<h2>We’ve already bent the rules</h2>
<p>The prime minister has since announced <a href="https://www.abc.net.au/news/2020-10-01/australia-manufacturing-industry-bolstered-coronavirus-recovery/12721828">longer term local industry support</a> and the <a href="https://www.trademinister.gov.au/minister/simon-birmingham/speech/trading-australia-towards-future">trade minister</a> has said that the challenge for the future is about getting “the balance right”. </p>
<p>But the rules signed up to on Sunday will integrate Australia further into regional production chains and commit Australia to avoid assistance for local industries of the kind that will arguably be needed to <a href="https://www.futurework.org.au/pandemic_shows_australia_needs_domestic_manufacturing">rebuild and strengthen the economy</a>.</p>
<p>Other rules signed up to on Sunday open <a href="https://www.dfat.gov.au/sites/default/files/rcep-chapter-8.pdf">essential services</a> such as health, education, water, energy, telecommunications, finance and digital trade to foreign investors and restrict the ability of governments to regulate them in the public interest. </p>
<p>It remains to be seen whether these rules will give governments the flexibility they will need to get “the balance right”</p>
<p>Oddly for an agreement dealing with standards, there’s nothing in it about forced labour or child labour, and no mention of climate change. </p>
<p>Its members include countries like <a href="https://www.abc.net.au/news/2019-07-15/uyghur-forced-labour-xinjiang-china/11298750?nw=0">China</a> and <a href="https://www.hrw.org/news/2020/08/24/myanmar-rohingya-await-justice-safe-return-3-years">Myanmar</a> in which there is mounting evidence of labour rights and human rights abuses.</p>
<p>But there are also welcome omissions. </p>
<h2>No further rights for foreign investors</h2>
<p>The final text confers no special rights on foreign corporations to sue governments through what are known as <a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">Investor-State Dispute Settlement</a> clauses common in other agreements, although there is an opportunity for the members to revisit the idea two years after ratification </p>
<p>Nor are there increases in <a href="https://thediplomat.com/2018/11/indonesia-and-rcep-beware-the-public-health-risks/">patent monopolies</a> for medicines of the kind included in the original Trans-Pacific Partnership. These were suspended in the revised <a href="https://www.dfat.gov.au/trade/agreements/in-force/cptpp/Pages/comprehensive-and-progressive-agreement-for-trans-pacific-partnership">Comprehensive and Progressive Agreement for Trans-Pacific Partnership</a> now ratified by Australia and six other countries. </p>
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<p>The RCEP will be reviewed by a parliamentary committee which, as is usual in these agreements, will be <a href="https://theconversation.com/last-to-know-the-european-union-knows-more-about-our-trade-talks-than-we-do-144196">unable to change the text</a>. </p>
<p>The Coalition has a majority on that committee.</p>
<h2>Broader manoeuvring</h2>
<p>Some commentators see the RCEP through the lens of <a href="https://www.washingtonpost.com/business/why-china-is-creating-a-new-asia-pacific-trade-pact/2020/11/12/0d67b996-24bb-11eb-9c4a-0dc6242c4814_story.html">US-China competition.</a>.</p>
<p>Looked at this way, the US has been weakened by the Trump administration’s decision to <a href="https://theconversation.com/if-trump-pulls-america-out-of-the-tpp-the-question-is-what-next-69396">pull out</a> of the original Trans Pacific Partnership.</p>
<p>It is argued that the RCEP is China’s creation, and the incoming Biden administration will need to counter it by re-joining the revised Trans-Pacific Partnership, which excludes China.</p>
<p>But this is a US-centric a view that downplays the leading role of the <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep#:%7E:text=RCEP%20negotiations%20were%20launched%20in,India%2C%20Japan%2C%20New%20Zealand%20and">ASEAN countries </a> in creating the RCEP.</p>
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Read more:
<a href="https://theconversation.com/what-a-biden-presidency-means-for-world-trade-and-allies-like-australia-149735">What a Biden presidency means for world trade and allies like Australia</a>
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<p>A Biden administration is unlikely to re-join the Trans Pacific Partnership any time soon. Parts of the Democratic party remain strongly opposed to it. </p>
<p>The US will rejoin genuinely multilateral organisations such as the World Health Organisation and the Paris Climate Agreement.</p>
<p>But Biden’s trade policy is likely to focus on <a href="https://www.nytimes.com/2020/10/28/business/economy/democrats-biden-trade.html">domestic priorities</a> such as the pandemic and climate change, about which the RCEP says nothing.</p><img src="https://counter.theconversation.com/content/150082/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Patricia Ranald is an honorary research associate at the University of Sydney and is an honorary Convener of the Australian Fair Trade and Investment Network.</span></em></p>Australia and other governments refused to release the text until after it was signed on Sunday. It’ll do little for Australian trade.Patricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1361612020-05-07T14:04:26Z2020-05-07T14:04:26ZCanada needs to see the U.S. and its trade motives clearly<figure><img src="https://images.theconversation.com/files/331964/original/file-20200501-42942-1aperbf.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4974%2C3179&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">U.S. President Donald Trump speaks during a meeting with Prime Minister Justin Trudeau in London in December 2019.</span> <span class="attribution"><span class="source">(AP Photo/ Evan Vucci)</span></span></figcaption></figure><p>Existential crises that threaten one’s entire society have a way of forcing us to see the world as it truly is. The coronavirus pandemic is no exception. Canada, once mocked by <em>South Park</em> as “<a href="https://youtu.be/bOR38552MJA">not even a real country anyway</a>,” has come together in remarkable fashion. Canadians and their leaders, from every region and across the political spectrum, are all pushing in the same direction.</p>
<p>But while the pandemic has showcased the country’s inspiring cohesiveness, it has also revealed the tragic costs, measured in lives lost and economic opportunity squandered, of Canada’s continued adherence to a one-dimensional ideology that long ago passed its best-before date.</p>
<p>Since the 1990s, Canadian economic development policy has been anchored in two words: free trade. The previously widely accepted notion that countries should have an industrial policy — a strategy for encouraging strong and desirable economic growth — was cast aside in the single-minded pursuit of comprehensive trade agreements. </p>
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<img alt="" src="https://images.theconversation.com/files/331960/original/file-20200501-42942-1ytj0g5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/331960/original/file-20200501-42942-1ytj0g5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=472&fit=crop&dpr=1 600w, https://images.theconversation.com/files/331960/original/file-20200501-42942-1ytj0g5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=472&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/331960/original/file-20200501-42942-1ytj0g5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=472&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/331960/original/file-20200501-42942-1ytj0g5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=593&fit=crop&dpr=1 754w, https://images.theconversation.com/files/331960/original/file-20200501-42942-1ytj0g5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=593&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/331960/original/file-20200501-42942-1ytj0g5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=593&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Standing from left, Mexico’s Carlos Salinas de Gortari, George H. W. Bush of the United States and Canada’s Brian Mulroney are all smiles standing behind their trade representatives as they sign the North American Free Trade Agreement in San Antonio in 1992.</span>
<span class="attribution"><span class="source">(AP PHOTO/Pat Sullivan)</span></span>
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</figure>
<p>Economic security and prosperity, so the conventional wisdom held, was best ensured by lowering trade barriers and encouraging specialization. Production would be global, which wouldn’t pose any problems in a free-trade world.</p>
<h2>Two flaws</h2>
<p>There have long been two flaws in this policy. First, while Canada may be “<a href="https://www.ubcpress.ca/a-trading-nation">a trading nation</a>,” trade is merely a means to an end: securing markets for Canadian producers and ensuring Canadians’ access to foreign goods and services. At the end of the day, it’s production, not trade, that matters most for a country’s economic security and power.</p>
<p>Second, policy-makers failed to appreciate the extent to which the entire free-trade world was dependent on the actions and support of the United States given its global superpower status. After the Second World War, the U.S. decided to underwrite a liberal multilateral order that encouraged free trade, which it was able to reinforce in the 1990s after the end of the Cold War. </p>
<p>For a long while in the 1990s, Canada was able to get away with neglecting industrial policy and to imagine that free trade would be our economic salvation. This was because the world of open borders, ostensibly supported by U.S. power, hid the long-term costs of de-industrialization since we still had easy access to cheap production in other countries.</p>
<p>Unfortunately for Canada, that world hasn’t existed for almost 20 years. The multilateral free-trade world was only ever as resilient as the American commitment to it. </p>
<p>The unilateral U.S. choice of security over prosperity following the 9/11 terrorist attacks was the beginning of the end of this multilateral economic order. The unsanctioned <a href="https://www.britannica.com/event/Iraq-War">American invasion of Iraq</a> hastened the system’s decline, as did its <a href="https://www.cnn.com/2013/10/30/world/meast/iraq-prison-abuse-scandal-fast-facts/index.html">open embrace of torture</a> in contravention of international conventions and basic human decency.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/331961/original/file-20200501-42903-1xjmre7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/331961/original/file-20200501-42903-1xjmre7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=296&fit=crop&dpr=1 600w, https://images.theconversation.com/files/331961/original/file-20200501-42903-1xjmre7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=296&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/331961/original/file-20200501-42903-1xjmre7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=296&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/331961/original/file-20200501-42903-1xjmre7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=372&fit=crop&dpr=1 754w, https://images.theconversation.com/files/331961/original/file-20200501-42903-1xjmre7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=372&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/331961/original/file-20200501-42903-1xjmre7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=372&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A U.S. Customs canine enforcement officer and his dog examine a line of cars entering the United States from Canada at the inspection station near Blaine, Wash., in August 2003, part of increased border security measures following 9/11.</span>
<span class="attribution"><span class="source">(AP Photo/Ted S. Warren)</span></span>
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<p>Less dramatically, U.S. economic policy, under Democrats and Republicans alike, turned trade agreements from potentially win-win tariff-lowering treaties into agreements designed to <a href="https://www.theglobeandmail.com/report-on-business/tpp-is-about-many-things-but-free-trade-not-so-much/article27169740/">lock in the American advantage</a> on issues of the future: intellectual property, <a href="https://www.cigionline.org/articles/data-not-treaty-ready-and-cusma-not-data-ready">data governance</a> and internet governance. Free trade agreements are no longer about free trade.</p>
<h2>COVID-19 exposes the cracks</h2>
<p>All this happened before the pandemic exposed the physical vulnerability of countries lacking guaranteed access to producers of medical equipment. The current international scramble for medical equipment is not causing the world order to collapse: it’s a symptom of an order that has been falling apart in slow motion for a long while.</p>
<p>Countries have been tentatively, almost unconsciously, adjusting to this reality. These include forms of what I call digital economic nationalism, in which countries, <a href="https://www.ic.gc.ca/eic/site/093.nsf/eng/00008.html">including Canada</a>, are pursuing national industrial policies in high-tech areas <a href="https://ec.europa.eu/knowledge4policy/ai-watch/germany-ai-strategy-report_en">like artificial intelligence</a> and are seriously considering <a href="https://www.bbc.com/news/technology-47135058">the regulation</a> of global, mostly American, online platforms.</p>
<p>Still, <em>tentatively</em> is the operative word. Policy continues to be marked by a failure to think through the consequences of these long-term trends, and by the hope that U.S. President Donald Trump’s eventual departure from the Oval Office will restore the multilateral order. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/331973/original/file-20200501-42962-9zn1mz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/331973/original/file-20200501-42962-9zn1mz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=414&fit=crop&dpr=1 600w, https://images.theconversation.com/files/331973/original/file-20200501-42962-9zn1mz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=414&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/331973/original/file-20200501-42962-9zn1mz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=414&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/331973/original/file-20200501-42962-9zn1mz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=520&fit=crop&dpr=1 754w, https://images.theconversation.com/files/331973/original/file-20200501-42962-9zn1mz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=520&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/331973/original/file-20200501-42962-9zn1mz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=520&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Trump is seen in the Oval Office in January 2018. His eventual departure isn’t likely to result in changed American attitudes about bilateral trade.</span>
<span class="attribution"><span class="source">(AP Photo/Carolyn Kaster)</span></span>
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</figure>
<p>It won’t, for the simple reason that there is no longer a political bipartisan consensus on Capitol Hill that this order is worth saving. The liberal, multilateral world order that has been underwritten by the United States since the end of the Second World War cannot survive this degree of instability for very long.</p>
<p>Canada’s free-trade obsession has put us in a bind, making us overly reliant on global supply chains. That’s a huge unforced error given that 19 years ago, 9/11 showed us just how quickly border policy can change.</p>
<p>The recently concluded NAFTA 2.0, officially known as the U.S.-Mexico-Canada trade agreement (USMCA), has <a href="https://theconversation.com/nafta-has-been-replaced-but-at-what-cost-to-canada-104174">myriad</a> <a href="https://www.cbc.ca/news/politics/nafta-economic-impact-analysis-1.5477542">loopholes</a> that leave Canada open to future harassment and <a href="http://www.michaelgeist.ca/2020/02/we-dont-have-any-specific-analysis-cusma-negotiators-surprising-admission-on-key-privacy-issues/">concessions on data localization made without any analysis on their impact</a>. It also illustrates Canada hasn’t fully comprehended how the world has transformed since 1994. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/nafta-has-been-replaced-but-at-what-cost-to-canada-104174">NAFTA has been replaced, but at what cost to Canada?</a>
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<p>Policy-makers could well find that the USMCA, purpose-built for a world that no longer exists, severely restricts their ability to set a production-focused policy appropriate for 2020 and beyond.</p>
<p>Still, acknowledging reality is the first step in dealing with a crisis. The post-Second World War order is gone. Trade policy must be put in its proper place, a component — but not the entire game — of a comprehensive, government-led domestic industrial policy that involves actual, production-focused planning for a world in which the conventional wisdom of the past 70 years no longer holds. </p>
<p>Just signing trade agreements is no longer enough to ensure Canadian prosperity. We have to deal with the world as it is, not as we wish it would be.</p><img src="https://counter.theconversation.com/content/136161/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Blayne Haggart receives funding from the Social Sciences and Humanities Research Council of Canada.</span></em></p>Canada’s free-trade obsession has made us overly reliant on global supply chains. That’s a huge unforced error given that 19 years ago, 9/11 showed us just how quickly border policy can change.Blayne Haggart, Associate Professor of Political Science, Brock UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1366042020-04-23T03:52:53Z2020-04-23T03:52:53ZCorporations prepare to sue as pandemic reveals trade flaws<figure><img src="https://images.theconversation.com/files/329955/original/file-20200423-47815-1diq0cu.jpg?ixlib=rb-1.1.0&rect=48%2C101%2C2044%2C1178&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/@peterlaster">Pedro Lastra/Unsplash</a></span></figcaption></figure><p>Global companies are positioning themselves to use little-known rules in trade agreements such as the Comprehensive Progressive Trans-Pacific Partnership (<a href="https://theconversation.com/the-trans-pacific-partnership-is-back-experts-respond-87432">CPTPP</a>) to claim millions of dollars in compensation for restrictions imposed during the pandemic.</p>
<p>They and other companies have successfully lobbied for rules in the CPTPP and other bilateral and regional agreements that give them rights to bypass courts including Australia’s High Court and sue governments in extraterritorial tribunals for income they claim restrictions have cost them, using so-called Investor-State Dispute Settlement (ISDS) procedures.</p>
<p>Such provisions do not exist in the rules of the World Trade Organisation iteslf, which is the body formally charged with regulating global trade.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
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<p>The Philip Morris tobacco company used such rules in a Hong Kong-Australia agreement to claim billions of dollars in compensation from Australian for plain packaging legislation. </p>
<p>Defeating this claim took Australia seven years and <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">A$12 million in legal costs.</a></p>
<p>There have been <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">increasing numbers</a> of such cases against governments regulating to reduce carbon emissions and combat climate change.</p>
<p>An international arbitration <a href="https://www.acerislaw.com/the-covid-19-pandemic-and-investment-arbitration/">law firm </a> Aceris Law LLC has told its clients</p>
<blockquote>
<p>while the future remains uncertain, the response to the COVID-19 pandemic is likely to violate various protections provided in bilateral investment treaties and may bring rise to claims in the future by foreign investors</p>
</blockquote>
<p>An Australian law firm <a href="https://www.lexology.com/Events/Details/7930">Alston & Bird</a> is advertising an event called “The coming wave of COVID-19 arbitration – looking ahead”.</p>
<p>Legal scholars critical of ISDS say governments could face an <a href="https://www.iisd.org/library/investor-state-claims-amidst-covid-19">avalanche</a> of ISDS cases after the pandemic is over. </p>
<h2>ISDS clauses establish rights to sue</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Phillip Morris lost its case against Australia’s plain packs law in the High Court, then went to an extraterritorial tribunal.</span>
<span class="attribution"><span class="source">LUKAS COCH/AAP</span></span>
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<p>Foreign investors could allege that governments are breaching the “direct expropriation” clauses of ISDS rules by appropriating private health and other assets for public use. </p>
<p>Lock down rules that affect profits could be interpreted as “indirect expropriation”.</p>
<p>The pandemic is also raising questions about other aspects of Australia’s trade agreements. </p>
<p>Despite pleas from the <a href="https://www.pc.gov.au/news-media/speeches/free-trade-agreements">Productivity Commission</a>, each is <a href="https://www.smh.com.au/opinion/trade-agreements-need-more-public-and-parliamentary-scrutiny-20150501-1mxqc9.html">negotiated in secret</a> without an <a href="https://www.smh.com.au/politics/federal/trade-minister-andrew-robb-criticised-for-seeking-tpp-ratification-without-independent-analysis-20160209-gmpmwf.html">independent evaluation </a>of its costs and benefits.</p>
<p>Often the agreements open up <a href="https://link.springer.com/chapter/10.1007%2F978-3-319-29215-1_6">essential services</a> including health, to private foreign investment, with only limited carve outs to allow regulation which can be wound back, but not widened, over time.</p>
<p>They have also allowed pharmaceutical companies to <a href="https://www.nytimes.com/2015/01/31/opinion/dont-trade-away-our-health.html">increase their 20-year monopoly on new medicines</a>, delaying the availability of cheaper medicines. </p>
<p>In the past month the realities of the pandemic have forced the Australian government to (at least temporarily) back away from this approach.</p>
<p>It has <a href="https://www.theguardian.com/australia-news/2020/mar/31/federal-government-pay-half-integrate-private-public-hospitals-covid-19-response">directed private hospitals</a> to treat pandemic patients.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/three-simple-things-australia-should-do-to-secure-access-to-treatments-vaccines-tests-and-devices-during-the-coronavirus-crisis-136052">Three simple things Australia should do to secure access to treatments, vaccines, tests and devices during the coronavirus crisis</a>
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<p>It has assisted local firms to reestablish the capacity to manufacture equipment such as <a href="https://www.abc.net.au/news/2020-03-27/inside-australias-only-medical-mask-factory/12093864">facemasks</a>. </p>
<p>And it has <a href="https://www.smh.com.au/politics/federal/foreign-buyers-face-scrutiny-on-every-bid-after-sharemarket-slump-20200329-p54f1s.html">ramped up</a> screening of foreign investment by the Foreign Investment Review Board, in a way trade agreements would <a href="https://www.dfat.gov.au/trade/agreements/in-force/chafta/fact-sheets/Pages/chafta-outcomes-at-a-glance">normally prevent</a>.</p>
<p>Post-pandemic trade policies should reject both the extremes of recent agreements and the Trump and Hanson policies of building walls and a return to high tariffs.</p>
<h2>Post-pandemic, we should wind such clauses back</h2>
<p>Australia should also reject the trap of taking sides in the US-China trade wars.</p>
<p>Trade agreements should be negotiated openly in a system that takes account of the specific needs of developing countries.</p>
<p>They should reinforce internationally-agreed and fully-enforceable labour rights and environmental standards, allow countries such as Australia to maintain the manufacturing capacity that will be needed in the event of crises and enable governments to regulate for purposes of public health and the environment. </p>
<p>They most certainly should not strengthen medicine or other monopolies, or give additional legal rights such as ISDS to global corporations that already have enormous market power.</p><img src="https://counter.theconversation.com/content/136604/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Patricia Ranald is the Convener of the Australian Fair Trade and Investment Network of community groups which advocates for fair trade based on human rights, labour rights and environmental sustainability.</span></em></p>Investor State Dispute Settlement Procedures open the prospect of legal cases it would cost Australia millions to defend.Patricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1253212019-10-20T19:06:10Z2019-10-20T19:06:10ZArrogance destroyed the World Trade Organisation. What replaces it will be even worse<figure><img src="https://images.theconversation.com/files/297760/original/file-20191019-56198-16xy1hv.jpg?ixlib=rb-1.1.0&rect=813%2C34%2C2073%2C1107&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">As the public face of globalism, the WTO mobilised protesters. It'll be replaced by the law of the jungle.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/fuzheado/73079281">fuzheado/Flikr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>In line with his usual practice, Australia’s Prime Minister Scott Morrison has backed Donald Trump over the World Trade Organisation, criticising of China’s status in it as a “developing country”. </p>
<p>Critics of the intervention have pointed out that being a “developing country” <a href="https://theconversation.com/myth-busted-chinas-status-as-a-developing-country-gives-it-few-benefits-in-the-world-trade-organisation-124602">doesn’t provide China with many benefit</a>, and that Australia would be better off not taking sides. </p>
<p>But the debate, to use the cliché, is like arguing about the deck chairs on the Titanic. </p>
<p>In the absence of a surprising reversal from Trump, the World Trade Organisation will cease to exist as it has been <a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">in a matter of weeks</a>. </p>
<p>More likely than not, it will never be revived.</p>
<p>The demise has been a long time coming. </p>
<h2>Higher than heaven…</h2>
<p>The WTO was established to replace the <a href="https://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Trade">General Agreement on Tariffs and Trade</a> at the end of the long <a href="https://www.wto.org/english/thewto_e/minist_e/min98_e/slide_e/ur.htm">Uruguay round</a> of trade talks in 1995. </p>
<p>Its establishment coincided with the peak of market liberal triumphalism, exemplified by such books as Fukuyama’s <a href="https://books.google.com.au/books?id=NdFpQwKfX2IC&printsec=frontcover&dq=The_End_of_History_and_the_Last_Man&hl=en&sa=X&ved=0ahUKEwi2rNfS4anlAhWGbn0KHQgJC7QQ6AEIKDAA#v=onepage&q=The_End_of_History_and_the_Last_Man&f=false">The End of History</a> and Thomas Friedman’s <a href="http://www.thomaslfriedman.com/the-lexus-and-the-olive-tree/">The Lexus and the Olive Tree</a>. </p>
<p>It embraced the hubris of the times. </p>
<p>Its mission, according to one of its director-generals Renato Ruggiero, was “<a href="https://unctad.org/en/pages/PressReleaseArchive.aspx?ReferenceDocId=3607">writing the constitution of a single global economy</a>”.</p>
<p>In that context it felt free to override national governments on any issue that might affect international trade, most notably environmental policies.</p>
<p>Most famously, the WTO overrode US laws that required tuna and shrimp sold in the US (whether by US firms or importers) to follow practices that protected <a href="http://www.globalization101.org/the-tuna-dolphin-case/">dolphins</a> and <a href="http://www.globalization101.org/the-shrimp-turtle-case-in-the-new-wto-context/">turtles</a> in decisions that were eventually reversed.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/myth-busted-chinas-status-as-a-developing-country-gives-it-few-benefits-in-the-world-trade-organisation-124602">Myth busted: China’s status as a developing country gives it few benefits in the World Trade Organisation</a>
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<p>Unsurprisingly, it became a symbol of the way democratic governments were becoming powerless to resist the forces of the global economy. Popular resistance, including <a href="https://en.wikipedia.org/wiki/1999_Seattle_WTO_protests">demonstrations and riots</a>, boiled over at the 1999 WTO conference in Seattle.</p>
<p>Although tight security prevented a recurrence of the “Battle of Seattle” in later years, the WTO never recovered its aura of invincibility.</p>
<h2>…too close to the sun</h2>
<p>The Doha round of negotiations, launched in 2001, broke down over attempts by developed countries to push the so-called “<a href="https://en.wikipedia.org/wiki/Singapore_issues">Singapore issues</a>” that would have extended the free trade agenda to government procurement, investment, and competition. They would have mandated the adoption of free-market policies throughout the world, and so met vigorous resistance. </p>
<p>After limping along for a decade or more, the negotiations petered out in a limited agreement reached at Bali in 2013.</p>
<p>Meanwhile, the United States, which had been the primary promoter of the worldwide rules-based WTO model, shifted its focus to one-on-one agreements unencumbered by rules, such as the <a href="https://theconversation.com/a-decade-on-is-the-australia-us-fta-fit-for-the-21st-century-33016">Australia-US FTA</a>, where it could take advantage of its superior bargaining power.</p>
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Read more:
<a href="https://theconversation.com/a-decade-on-is-the-australia-us-fta-fit-for-the-21st-century-33016">A decade on, is the Australia-US FTA fit for the 21st century?</a>
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<p>In all these agreements, including the Australia-US agreement, the US gave hardly any ground on issues such as agricultural protection, while extracting concessions on intellectual property and special treatment for US investors.</p>
<p>The culmination of the process was going to be the Trans-Pacific Partnership, a 12-nation agreement which had the geopolitical goal of <a href="https://www.geopoliticalmonitor.com/the-tpps-loss-is-chinas-gain/">keeping China out</a> of important trading agreements. </p>
<p>This deal, lauded by Hillary Clinton as the “gold standard” of international agreements, was dumped by Trump. It was resurrected by the remaining parties, but is <a href="https://theconversation.com/theres-no-point-to-australias-push-to-ratify-the-tpp-71796">largely pointless without the participation of the US</a>.</p>
<h2>We’re entering a world with few rules…</h2>
<p>As in other areas of policy, Trump’s tariff wars are often characterised as a radical break with the past, but they can also be seen as a continuation of long-standing trends. </p>
<p>Trump’s attempts to exploit the greater size of the US economy to extract concessions isn’t new. The problem is that his chosen targets, China and the European Union, have been big enough to resist, using the WTO.</p>
<p>His response has been to cripple the WTO by <a href="https://www.reuters.com/article/us-usa-trade-wto-idUSKCN1LC19O">refusing to appoint new judges to its appellate panel</a>. </p>
<p>By December only one judge will be left and the WTO will be <a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">unable to take on new cases</a>.</p>
<p>To prepare for this likely outcome, the EU has <a href="https://www.politico.eu/article/eu-builds-anti-trump-trade-bazooka/">set up structures</a> that would allow it to retaliate against the US on a far larger scale than WTO rules would allow. </p>
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Read more:
<a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">Are Trump's tariffs legal under the WTO? It seems not, and they are overturning 70 years of global leadership</a>
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<p>China is attempting to do the same thing using <a href="https://www.scmp.com/economy/china-economy/article/3021246/china-pushes-rcep-regional-pact-amid-us-trade-war-japan-korea">Regional Comprehensive Economic Partnership</a>), in which Australia – but not the US – would be a member. And it is going beyond trade restrictions, warning Chinese tourists and businesses <a href="https://www.usatoday.com/story/money/2019/06/18/trade-war-china-hits-tourism-us/1477264001/">against travelling to the US</a>. </p>
<p>The recent thaw in the trade war might halt the escalation for a while, but it’s unlikely to reverse it.</p>
<h2>…for which we’ve few plans</h2>
<p>If Trump is re-elected in 2020, the World Trade Organisation will be, for all practical purposes, finished.</p>
<p>The rules will revert to those of the earlier General Agreement on Tariffs and Trade, which give large countries like the US much more scope to do what they want.</p>
<p>Even if Trump is defeated, it is unlikely Humpty Dumpty can be reassembled. Likely Democratic alternatives such as Elizabeth Warren are not free-traders. </p>
<p>And, having rearmed in response to the US, other countries aren’t likely to put down their weapons.</p>
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Read more:
<a href="https://theconversation.com/a-no-deal-brexit-wont-end-the-uncertainty-for-business-123217">A no-deal Brexit won't end the uncertainty for business</a>
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<p>It raises interesting questions for advocates of a “hard Brexit” who are relying on Britain relying on WTO rules. </p>
<p>UK trade minister Liz Truss says she is backing Trump in his campaign to “<a href="https://uk.reuters.com/article/us-wto-britain/uk-will-back-wto-reform-after-brexit-trade-minister-says-idUKKBN1WO1RB">reform</a>” the WTO, but the reform he is talking about will make its universally-applied rules weaker. By the time the UK emerges alone into the world market, it is likely to find there is little to protect it from the trading practices of the US, China and EU, whether they are fair or not.</p>
<p>The same points apply in spades to Australia. In backing Trump against China, our government is a (presumably unwitting) partner in the dismantling of the rules-based order we have previously defended. </p>
<p>It would be nice to imagine that we have plans for what comes next, but there is little to suggest we do.</p><img src="https://counter.theconversation.com/content/125321/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We are about to go from having rules that overreached to having few rules. The US, China and the EU will be able to act with impunity.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1235822019-09-16T20:38:38Z2019-09-16T20:38:38ZSuddenly, the world’s biggest trade agreement won’t allow corporations to sue governments<figure><img src="https://images.theconversation.com/files/292564/original/file-20190916-19076-1kwqch6.jpg?ixlib=rb-1.1.0&rect=153%2C191%2C1457%2C658&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The 16 nations negotiating the Regional Comprehensive Economic Partnership account for almost half the world's population.</span> <span class="attribution"><span class="source">Shutterstock/Datawrapper</span></span></figcaption></figure><p>The Regional Comprehensive Economic Partnership has been <a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">touted</a> as the best hope for keeping world trade flowing after the attacks on the World Trade Organisation. </p>
<p>The WTO isn’t dead yet, but in a two-pronged attack, US President Donald Trump has been flouting the spirit if not the letter of its rules by on one hand imposing tariffs on China and other countries, and on the other blocking appointments to its appellate body. The latter means that after December the appellate body will no longer have enough members to <a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">hear new cases</a>.</p>
<p>Although nothing like a proper replacement for the WTO (it would have 16 member nations instead of the WTO’s 164) the Regional Comprehensive Economic Partnership (RCEP) is being talked about as a backstop. The 16 RCEP members account for almost half the world’s population; among them China, India, Japan, Indonesia, Malaysia, Vietnam, Australia, and New Zealand.</p>
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Read more:
<a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">Are Trump's tariffs legal under the WTO? It seems not, and they are overturning 70 years of global leadership</a>
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<p>The RCEP negotiations have dragged on since 2012, in part because of what had been seen as a near intractable sticking point: so-called investor-state dispute settlement (ISDS) procedures. </p>
<h2>ISDS was one of worst parts of the RCEP</h2>
<p>The World Trade Organisation doesn’t have ISDS. In the WTO, governments can take action against governments under WTO rules but corporations can’t sue governments.</p>
<p>ISDS provisions, present in many one-on-one or regional trade deals, allow foreign corporations (but not local corporations) to take on governments.</p>
<p>When the Philip Morris tobacco company lost its case against the Australian government over plain packaging laws in Australia’s High Court, it was able to have a second go in an international tribunal using the ISDS provisions of an Australia-Hong Kong investment treaty. This right would not have been available to an Australian company.</p>
<p>Although Australia successfully had the case thrown out, it took it seven years and cost A$24 million. Australia recovered only <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">A$12 million</a> from Philip Morris.</p>
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Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
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<p>ISDS provisions were developed in the post-colonial period after World War II to compensate international investors for the direct expropriation or taking of property by governments. But over the past 20 years they expanded to include “indirect” expropriation, “minimum standard of treatment” and “legitimate expectations”, which do not involve taking of physical property and do not exist in many national legal systems.</p>
<p>Because the cases are very costly, they are mostly used by large global companies that already have enormous market power, including tobacco, pharmaceutical, agribusiness, mining and energy companies.</p>
<p>There are now <a href="https://investmentpolicyhub.unctad.org/ISDS">942</a> known ISDS cases, with increasing numbers against <a href="http://aftinet.org.au/cms/sites/default/files/Key%20ISDS%20health%20cases_1.pdf#overlay-context=Against_ISDS">health</a> and environment laws, including laws to address <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">climate change</a>.</p>
<h2>The tide is turning against it</h2>
<p>Legal experts like former High Court Chief Justice <a href="http://www.hcourt.gov.au/assets/publications/speeches/current-justices/frenchcj/frenchcj09jul14.pdf">Robert French</a> have noted they are conducted by temporary tribunals often presided over by <a href="https://www.bilaterals.org/IMG/pdf/isds-the_wild,_wild_west_of_international_law_and_arbitration.pdf">practising advocates</a> who can represent a corporation or government in one case and then sit on a tribunal the next, calling into question their independence. The decisions need not make use of precedents and have no appeals, meaning they need not be consistent. </p>
<p>Both the United States and European Union are moving against ISDS provisions. In January the 28 EU member states decided to <a href="https://ec.europa.eu/info/publications/190117-bilateral-investment-treaties_en">terminate ISDS arrangements between themselves</a>. </p>
<p>The EU is not including ISDS in any of its current negotiations, including those for a EU-Australia free trade agreement.</p>
<p>In the longer term, Europe is pursuing a controversial proposal for a permanent Multilateral Investment Court, which would once again allow foreign investors to sue sovereign governments but would address <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2692122">procedural concerns about temporary tribunals</a>. It hasn’t yet gained support from the US, Japan, Australia or other key players, so is not likely to be implemented soon.</p>
<p>The US and Canada have excluded ISDS from their part of the new North America Free Trade Agreement, known as the <a href="https://www.iisd.org/library/usmca-investors">United States-Mexico-Canada Agreement</a>. </p>
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Read more:
<a href="https://theconversation.com/how-is-new-nafta-different-a-trade-expert-explains-104212">How is new NAFTA different? A trade expert explains</a>
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<p>Two institutions that oversee ISDS cases, the United Nations Commission on International Trade Law and the World Bank International Centre for Settlement of Investment Disputes, are conducting <a href="https://uncitral.un.org/sites/uncitral.un.org/files/wp166.pdf">reviews</a> of the system.</p>
<h2>It looks as if the RCEP will be free of it</h2>
<p>Australia is notoriously tight-lipped about international trade negotiations. But late last week Malaysia’s trade minister <a href="https://themalaysianreserve.com/2019/09/13/rcep-talks-to-proceed-without-isds/">Datuk Darell Leiking</a> revealed that Malaysia and each of the other 15 parties to the RCEP negotiations had agreed to exclude ISDS provisions from the deal.</p>
<p>Malaysia, India, Indonesia and New Zealand are all officially opposed to ISDS provisions, but this is the first public sign that all the RCEP countries have agreed to exclude it.</p>
<p>“Once the agreement is in force, which is within two years, the member states will re-look into it and see whether or not we are going to have the ISDS. But it must be an agreement made by all countries,” he is quoted as saying. “For now, there is no ISDS.” </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">The fossil fuel era is coming to an end, but the lawsuits are just beginning</a>
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<p>Opposition to ISDS is growing. The Australian government’s apparent agreement to remove ISDS provisions from the RCEP raises questions about why it is continuing to pursue such provisions in the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/Indonesia-AustraliaCEPA">Indonesian</a> and <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/A-HKFTA">Hong Kong</a> trade deals currently being reviewed by the parliament’s joint standing committee on treaties. </p>
<p>It also raises the question of whether Labor, the Greens and the Centre Alliance, each of which has has policies opposing ISDS, will support the agreements when committee reports on them in mid-October.</p>
<h2>But problems remain</h2>
<p>Defeating ISDS in the RCEP will be a victory for social movements and governments concerned to retain public interest regulation. </p>
<p>But other problematic proposals remain on the RCEP agenda. </p>
<p>These include <a href="https://croakey.org/calls-to-end-secrecy-on-trade-negotiations-underway-this-week-amid-public-health-concerns/">longer monopolies for medicines</a> that would delay the the availability of cheaper medicines and would have the worst impacts in developing countries. </p>
<p>It remains to be seen whether this and other sticking points can be resolved and the negotiations completed by their current target date of the end of 2019.</p><img src="https://counter.theconversation.com/content/123582/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald is an honorary research fellow at the University of Sydney and the honorary convener of the Australian Fair Trade and Investment Network</span></em></p>The biggest barrier to Australia and much of the rest of the world signing up to the world’s biggest trading bloc appears to have been removed.Patricia Ranald, Research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1142792019-03-26T17:57:09Z2019-03-26T17:57:09ZWhen even winning is losing. The surprising cost of defeating Philip Morris over plain packaging<p>Australia scored a victory over the tobacco giant Philip Morris in the High Court in 2012. The court held that Australia’s plain cigarette packaging laws <a href="http://www.hcourt.gov.au/cases/case-s389/2011">were legal</a> and did not constitute an unjust confiscation of trademarks and intellectual property. Philip Morris had to pay all of Australia’s costs.</p>
<p>If it had been an Australian company, that’s where it would have ended. </p>
<p>But because of a once obscure but increasingly common class of provisions in international treaties known as an ISDS (remember that name) it tried again.</p>
<h2>ISDS actions are costly…</h2>
<p>ISDS or <a href="http://aftinet.org.au/cms/Against_ISDS">investor-state dispute settlement</a> clauses give to foreign companies rights unavailable to local companies. They get to claim billions in compensation through an extraterritorial tribunal if they believe their rights have been infringed on even after losing in Australia’s highest court.</p>
<p>Philip Morris, a US company, moved ownership of its Australian operations to Hong Kong to take advantage of ISDS in an Australia-Hong Kong investment treaty.</p>
<p>The case made headlines around the world, in part because it scared other countries out of following Australia’s plain packaging law and being on the hook for massive compensation and legal fees if they lost.</p>
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<figcaption><span class="caption">Australia versus Philip Morris. Last Week Tonight with John Oliver (HBO) February 2015.</span></figcaption>
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<p>In December 2015 Australia won, completely. </p>
<p>The tribunal decided said that Philip Morris was not a Hong Kong company and had moved ownership of its Australian operations to Hong Kong in order to take advantage of the ISDS provision.</p>
<p>And that’s where things rested until late last month when a half a decade later a freedom of information request revealed how much Australia’s win cost it.</p>
<p>Australia’s external legal fees and arbitration costs amounted to almost A$24 million. It is likely to have had to bear substantial internal costs in the departments of health, attorney generals and foreign affairs and trade on top of the A$24 million.</p>
<p>Even though Philip Morris had its case thrown out on the grounds that it was an abuse of process, it will <a href="http://aftinet.org.au/cms/sites/default/files/190322%20Unredacted%2BExcerpt%2Bof%2BCosts%2BAward.pdf#overlay-context=users/editor">only have to pay half</a> of Australia’s costs.</p>
<h2>…even if you win</h2>
<p>There are now <a href="https://investmentpolicyhub.unctad.org/ISDS">942</a> known ISDS cases, with increasing numbers against <a href="http://aftinet.org.au/cms/sites/default/files/Key%20ISDS%20health%20cases_0.pdf#overlay-context=Against_ISDS">health</a> and <a href="http://aftinet.org.au/cms/ISDS">environment</a> laws, including laws to address <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">climate change</a>.</p>
<p>Australia’s tobacco plain packaging laws were recommended by the <a href="https://www.who.int/tobacco/global_report/2011/en/">World Health Organisation</a> and designed to reduce the numbers of young people becoming new smokers. Research showed that young people were attracted to the glamorous images on the packaging, and that plain packaging could reduce the attraction.</p>
<p>The tobacco plain packaging law was passed with bipartisan support in 2011. The tobacco companies responded with a barrage of strategies to obstruct the law. They claimed billions of dollars of compensation in the High Court, and <a href="http://www.scoop.co.nz/stories/PO1208/S00225/philip-morris-on-australian-plain-packaging-for-tobacco.htm">helped other governments</a> take a dispute with Australia in the World Trade Organisation. </p>
<h2>And they are secretive</h2>
<p>Until now the loss in the tribunal set up under ISDS provisions has been a secret. It was blacked out in the publication of the original <a href="https://pcacases.com/web/sendAttach/2190">costs decision</a> in 2017.</p>
<p>ISDS tribunals have notoriously lower standards of transparency than national courts but costs figures have been published in other ISDS cases. The refusal to reveal them was a new low in secrecy. <a href="http://aftinet.org.au/cms/node/1434">Community organisations</a> argued that taxpayers had the right to know.</p>
<p>The first <a href="https://www.theguardian.com/business/2018/jul/02/revealed-39m-cost-of-defending-australias-tobacco-plain-packaging-laws">FOI case</a> to reveal the costs, launched by Senator Nick Xenophon and continued by Senator Rex Patrick, resulted in the Australian government releasing internal government figures in 2018 which showed invoices for external legal costs of A$39 million. </p>
<p>The government later claimed the A$39 million covered the ISDS case, the earlier High Court challenge and the World Trade Organisation case. It refused to reveal the specific ISDS legal costs and what percentage of the total costs had been awarded to Australia.</p>
<p>The most recent FOI case on the ISDS costs, launched in 2017 by a <a href="https://www.iareporter.com/articles/final-costs-details-are-released-in-philip-morris-v-australia-following-request-by-iareporter/">legal publication</a>, took another two years to reveal in February that the costs were almost $A24 million but Australian taxpayers were awarded only <a href="http://aftinet.org.au/cms/sites/default/files/190322%20Unredacted%2BExcerpt%2Bof%2BCosts%2BAward.pdf#overlay-context=users/editor">half of this</a>.</p>
<p>This decision reinforces the case against ISDS provisions. Australia could afford to defend the case, but A$12 million is still a loss to taxpayers that could have been spent on health or other community services. </p>
<h2>Other countries are phasing them out</h2>
<p>It is a cost poorer countries simply cannot afford. Uruguay was only able to defend its tobacco regulation against a Philip Morris ISDS case because the <a href="https://www.theguardian.com/society/2015/mar/18/bloomberg-gates-foundation-fund-nations-legal-fight-big-tobacco-courts">Bloomberg Foundation</a> funded its legal costs.</p>
<p>Faced with increasing numbers of ISDS cases, India, South Africa and Indonesia have <a href="https://www.citizen.org/sites/default/files/pcgtw_fdi-inflows-from-bit-termination_0.pdf">cancelled</a> ISDS arrangements without negative impacts on investment. </p>
<p>The EU is <a href="https://www.politico.eu/article/juncker-proposes-fast-tracking-eu-trade-deals/">excluding ISDS from its current deals</a>, including the <a href="https://www.pm.gov.au/media/press-conference-minister-trade-tourism-and-investment-and-eu-trade-commissioner">EU Australia FTA</a> now being negotiated, but is pursuing longer-term but equally <a href="https://drive.google.com/file/d/1s-bTcSJBRw1ShnQKGaxR8TSJ2TPd1Mrs/view">controversial</a> proposals for a multilateral investment court. The US and Canada have excluded ISDS from the revised <a href="https://www.iisd.org/library/usmca-investors">North America Free Trade Agreement</a>.</p>
<p>On Tuesday this week Australia and Hong Kong signed a <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/a-hkfta/a-hkfta-text/Pages/default.aspx">free trade agreement</a> and a new <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/a-hkfta/Pages/the-investment-agreement-text.aspx">investment agreement</a>, that will continue to include ISDS. </p>
<p>The government claims that it has more safeguards for changes to public health laws than the old one that it replaces. It specifically excludes tobacco regulation and regulation relating to Medicare, the Pharmaceutical Benefits Scheme, the Therapeutic Goods Administration and the Gene Technology regulator. </p>
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Read more:
<a href="https://theconversation.com/canada-has-an-isds-clause-with-the-us-it-has-faced-35-challenges-is-this-australias-future-48757">Canada has an ISDS clause with the US. It has faced 35 challenges. Is this Australia's future?</a>
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<p>But the need for those specific exceptions suggests that the general safeguards for public interest regulations are ineffective. They wouldn’t prevent cases being brought against Australia over energy or climate change regulations or changes in industrial relations laws.</p>
<p>Australia should exclude ISDS from current trade negotiations, and remove it from existing agreements. The Coalition government still supports ISDS, but Labor has pledged to outlaw it and remove it from the deals we have, as have the Greens and Centre Alliance. </p>
<p>It will take continued community pressure to ensure that actually happens if the government changes in the coming election.</p><img src="https://counter.theconversation.com/content/114279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald is an honorary Research Fellow at the University of Sydney and the honorary Convener of the Australian Fair Trade and Investment Network of community organisations.</span></em></p>Australia comprehensively defeated the tobacco giant, but is left with a multi million dollar bill.Patricia Ranald, Research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1134782019-03-13T06:54:50Z2019-03-13T06:54:50ZWhy wait for the Brexit fog to clear? Australian, British and multinational businesses are moving on<figure><img src="https://images.theconversation.com/files/263573/original/file-20190313-86703-dkdmfc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It'll be a while until what's happened becomes clear. Enterprises and other governments can't afford to wait.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Now that the British Parliament has <a href="https://www.abc.net.au/news/2019-03-13/brexit-uk-parliament-votes-down-latest-deal-from-theresa-may/10892228">rejected the revised Brexit deal</a>, all parties involved realise that uncertainties are here to stay. </p>
<p>The only certainty at this stage is that British politicians are about to vote on whether they prefer to leave the European Union without a deal at all, at <a href="https://www.abc.net.au/news/2019-03-13/brexit-uk-parliament-votes-down-latest-deal-from-theresa-may/10892228">6 am Thursday, Australian Eastern Daylight time</a>.</p>
<p>The world is watching, and the EU has shown a slow yet rather formidable capacity (and patience) to support Brexit – that is, to de-integrate constructively and peacefully.</p>
<p>The future for Britain and what will be the remaining 27 member states is unclear.</p>
<p>Others aren’t waiting for it to become clear. </p>
<h2>Multinationals aren’t waiting</h2>
<p>Many corporations, as well as small and medium-sized enterprises and suppliers, have been preparing for Brexit (many for a “hard Brexit”) for some time. </p>
<p>That’s because, as the global financial crisis showed all too clearly, uncertainty leads to consumers cutting back on spending, businesses streamlining, closing or at least partially relocating; and financial markets demanding greater risk premia to lend.</p>
<p>Multinationals with operations in the UK are highly exposed to increasing costs, rising backlogs and uncertainties about whether they can move goods across borders. British firms, and those dependent on the British market, are warehousing extensively, and are relocating the non-essential assets offshore in mainland Europe as much as possible.</p>
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Read more:
<a href="https://theconversation.com/theresa-may-loses-another-brexit-vote-is-it-time-she-just-gave-up-113294">Theresa May loses another Brexit vote – is it time she just gave up?</a>
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<p>Nissan has announced it will not build its new sports utility vehicles in England, Honda is closing its UK operations, while Credit Suisse, Goldman Sachs, JPMorgan, Morgan Stanley, and Citigroup and HSBC have moved ownership of European subsidiaries and/or assets from London to remaining EU countries. Bloomberg and Panasonic are moving to Amsterdam. Airbus is likely to pull out of the United Kingdom and replace its UK suppliers. Companies such as the British airline Flybmi are collapsing. </p>
<p>The Economist recently referred to the current phenomenon as “<a href="https://www.economist.com/leaders/2019/01/24/the-steam-has-gone-out-of-globalisation">slowbalisation</a>”.</p>
<h2>Australia will negotiate with both</h2>
<p>The EU is meanwhile negotiating a free trade agreement with Australia. </p>
<p>Its provisions focus on expediting the movement, release and clearance of goods, including goods in transit at customs, and the removal of non-tariff barriers, including raw milk cheese standards and conformity to the EU’s geographical indications and with the World Trade Organisation’s Agreement on Trade-Related Aspects of Intellectual Property Rights which has been signed by the EU but not not Australia.</p>
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Read more:
<a href="https://theconversation.com/post-brexit-australias-best-option-is-a-trade-pact-with-eu-61676">Post-Brexit, Australia's best option is a trade pact with EU</a>
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<p>Brexit will not allow the UK to benefit from the terms Australia negotiates with the EU. Negotiations for a separate UK-Australia agreement are expected to start soon, but only after Britain’s exit from the EU is formalised. </p>
<p>In the meantime, Brexit has already redefined the international business strategy of Australian firms that have traditionally accessed the EU Single Market through the UK, forcing them to opening alternative or additional offices in mainland Europe. </p>
<p>Will Australia be in a more powerful negotiating position with the UK than with the EU? Probably. Our 27 years of economic growth puts us in an excellent bargaining position; our forthcoming agreement with the EU and with major countries, including China and Indonesia and the Trans-Pacific Partnership, even more so.</p>
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Read more:
<a href="https://theconversation.com/trade-data-shows-australia-can-get-more-out-of-a-deal-with-the-eu-than-the-uk-73523">Trade data shows Australia can get more out of a deal with the EU than the UK</a>
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<p>As the UK struggles to clear the fog over its future, there will be 71 trade agreements it enjoyed as part of the EU that it will need to review, renegotiating treaties within a world that is watching the UK’s deliberate disintegration of the most its most integrated and harmonised market with concerned, if bemused, interest.</p>
<p>The world is pondering what could have brought the British people to vote for Brexit despite what we now know was a crucial lack of information and a lack of any plan for how to do it. </p>
<p>Britain will have learned a lot of from the exercise. But by the time it has, much of the rest of the world will have moved on.</p><img src="https://counter.theconversation.com/content/113478/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gabriele Suder is affiliated with and works for The International CEO Forum. This article is a personal opinion piece and does not reflect the organization's or any company's opinion.</span></em></p>It’s not at all certain what’ll happen, so business is taking no chances.Gabriele Suder, Professorial Fellow, University of Melbourne & Director, International CEO Forum, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1124882019-02-26T11:41:00Z2019-02-26T11:41:00ZWTO offers Trump a solution to enforcing a trade deal with a China that breaks promises<p><a href="https://www.bloomberg.com/news/articles/2019-02-24/trump-extends-china-tariff-truce-after-substantial-progress?srnd=premium">Optimism is growing</a> that China and the U.S. will be able reach a deal to end the year-old trade war, with President Donald Trump extending his March 2 deadline. </p>
<p>One of the <a href="https://www.nytimes.com/2019/02/12/business/us-china-trade-talks.html">biggest stumbling blocks</a> between the two countries has been a lack of trust, a key to <a href="https://www.pon.harvard.edu/daily/dealmaking-aily/dealmaking-negotiations-how-to-build-trust-at-the-bargaining-table/">any successful negotiation</a>. The Trump administration <a href="https://www.bloomberg.com/news/articles/2019-02-24/trump-extends-china-tariff-truce-after-substantial-progress?srnd=premium">has insisted</a> it will make a strong enforcement mechanism part of any deal. But what might that look like? </p>
<p>As a trade economist, I believe the answer to the trust conundrum lies in learning from an international body the <a href="https://www.bbc.com/news/world-us-canada-45364150">president disdains</a>: the World Trade Organization. </p>
<h2>Empty words?</h2>
<p>From the American perspective, a key issue is that in the past the Chinese have <a href="https://itif.org/publications/2015/09/17/false-promises-yawning-gap-between-china%E2%80%99s-wto-commitments-and-practices">made all sorts of promises</a> to address U.S. concerns that they later reneged on. Or, China has taken so long to act that when it finally did it made little difference. </p>
<p>Several examples of Chinese promises going unkept readily come to mind. </p>
<p>When China joined the World Trade Organization in 2001, <a href="http://news.bbc.co.uk/2/hi/business/1702241.stm">it was given “developing country” status</a>. This <a href="http://www.eastasiaforum.org/2019/01/21/chinas-developing-country-status-in-the-wto-time-for-an-upgrade/">allowed China to levy high tariffs</a> on imports from the U.S. and Europe even as it benefited from low duties on its exports. </p>
<p>The <a href="https://itif.org/publications/2015/09/17/false-promises-yawning-gap-between-china%E2%80%99s-wto-commitments-and-practices">understanding at that time</a> was that as its economy grew, China would gradually adopt market-based economic principles and commit itself to the basic tenets of liberalized trade and globalization. But this has not happened. </p>
<p>Sometime after China joined the WTO, the <a href="https://qz.com/938648/if-us-trade-with-china-is-so-unfair-why-is-gm-the-best-selling-car-there/">country imposed a 21 percent to 30 percent tariff</a> on cars. It was only this past December, and under pressure because of the current trade talks, that the Chinese finally <a href="https://www.cnn.com/2018/12/14/business/china-us-auto-tariffs/index.html">agreed to temporarily reduce</a> the tariff to 15 percent. In contrast, the corresponding U.S. tariff on Chinese auto imports has long been 2.5 percent. </p>
<p>More generally, also after becoming a WTO member, China <a href="https://www.innovationfiles.org/top-9-false-promises-that-china-made-in-joining-the-world-trade-organization">promised to open up</a> its banking, telecommunications and electronic payment processing sectors. But action in these areas has either <a href="https://www.nytimes.com/2019/02/12/business/us-china-trade-talks.html?emc=edit_th_190213&nl=todaysheadlines&nlid=253946410213">been non-existent or half-hearted</a>. </p>
<p>Even now, the Chinese telecommunications industry <a href="https://www.nytimes.com/2019/02/12/business/us-china-trade-talks.html">remains very much under government control</a>, and the government <a href="https://www.nytimes.com/2018/08/06/technology/china-generation-blocked-internet.html">has effectively precluded</a> Facebook and Google from offering their services in China. </p>
<p>Concerns about the reliability of the Chinese are not limited to economic and technological matters. To see this, note that on a state visit to the U.S. in 2015, President Xi Jinping <a href="https://www.reuters.com/article/us-usa-china-pacific/xi-denies-china-turning-artificial-islands-into-military-bases-idUSKCN0RP1ZH20150925">promised not to militarize</a> the artificial islands on disputed reefs that the Chinese were building in the South China Sea. </p>
<p>However, we <a href="https://www.economist.com/asia/2018/06/21/china-has-militarised-the-south-china-sea-and-got-away-with-it">now have clear evidence</a> that he has done exactly what he promised he would not do. </p>
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<span class="caption">Chinese and U.S. negotiators chat before sitting down for formal talks.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/China-US-Trade-Talks/601606d295b3441d87ddad9fb3ba0419/4/0">AP Photo/Mark Schiefelbein</a></span>
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<h2>Holding China’s feet to the fire</h2>
<p>Given all this, I believe it would be rather naïve on the part of the U.S. to agree to any Chinese promises in the current trade talks without also building a robust enforcement mechanism into any deal. </p>
<p>Indeed, the negotiators themselves seem to understand this, but difficulty finding a way to enforce any agreements – both past and present – <a href="https://www.nytimes.com/2019/02/12/business/us-china-trade-talks.html">is making it harder</a> to come to a deal. And that’s where the WTO and its enforcement mechanisms come in. </p>
<p>For example, China agreed to <a href="https://www.wto.org/english/news_e/pres01_e/pr243_e.htm">just such a mechanism</a> with its WTO ascension. This enforcement rule permitted a nation to automatically levy tariffs on certain Chinese goods and services if that country’s domestic market was hurt by those same exports. Unfortunately, like most WTO rules, this rule had a finite life and was allowed to lapse at the end in 2013. Even though this mechanism has been infrequently used, President Barack Obama <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2010/december/united-states-prevails-wto-section-421-safeguard">took advantage of it with some success</a> in 2009 to impose tariffs on Chinese-made tires that were harming U.S. manufacturers.</p>
<p>If such an enforcement mechanism can be built into a trade deal, then the U.S. would not have to plead its case before some international body before it retaliated against the Chinese. Instead, when confronted with one or more broken promises, it would have the legal right to act unilaterally to hold China accountable. </p>
<p>That said, since the current negotiations are between two sovereign nations, the key is to devise an enforcement mechanism that is agreeable to both the U.S. and China. Only then will a resulting trade deal be self-enforcing.</p>
<p>Since the U.S. and China are both members of the WTO, another but less potent enforcement mechanism would lie in utilizing its <a href="https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm">dispute settlement mechanism</a> to address any disagreements that may arise after a deal is reached. The U.S. has <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm">had success in the past</a> in using this WTO mechanism as well to <a href="https://www.npr.org/2013/08/05/209097983/wto-sides-with-u-s-in-poultry-dispute-with-china">hold China accountable</a>. </p>
<h2>A deal worth the paper it’s printed on</h2>
<p>The venerable Chinese sage Sun Tzu <a href="https://www.goodreads.com/quotes/659546-in-the-midst-of-chaos-there-is-also-opportunity">once said</a> that “in the midst of chaos, there is also opportunity.” </p>
<p>The U.S. now has an opportunity to conclude a meaningful trade deal with China that also has enforcement built into it. Therefore, the American negotiators ought to seize this opportunity and ensure a deal isn’t backed primarily by Chinese promises. </p>
<p>Otherwise, it won’t be the last time a U.S. president fumes about unfair Chinese trading practices. </p>
<p><em>This is an updated version of an <a href="https://theconversation.com/us-china-trade-talks-will-the-chinese-keep-promises-to-stop-bad-behavior-111900">article originally published</a> on Feb. 19, 2019.</em></p><img src="https://counter.theconversation.com/content/112488/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amitrajeet A. Batabyal does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>American and Chinese trade negotiators are pushing hard to get a deal, but a major sticking point remains: ensuring China honors any promises it makes.Amitrajeet A. Batabyal, Arthur J. Gosnell Professor of Economics, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/992582018-07-06T16:42:47Z2018-07-06T16:42:47ZWe estimate China only makes $8.46 from an iPhone – and that’s why Trump’s trade war is futile<p>The Trump administration’s tariffs on China have so far targeted mostly <a href="http://www.businessinsider.com/trump-china-tariff-full-list-of-goods-products-2018-6">industrial goods</a> like aircraft engines and gas compressors. But the administration has also threatened to slap tariffs on <a href="https://www.vox.com/world/2018/6/19/17478526/trump-china-trade-war-tariff-taxes-xi-jinping">US$200 billion in other goods</a> if the dispute continues.</p>
<p>No list of all the goods that might be subject to tariffs has been released, but it would have to include consumer electronics, such as smartphones, which is the <a href="https://www.census.gov/foreign-trade/statistics/product/enduse/imports/c5700.html">largest single product category</a> in China’s exports to the U.S.</p>
<p>One well-known product that might be affected is Apple’s iPhone, which is assembled in China. When an iPhone arrives in the U.S., it is recorded as an import at its <a href="http://www.wipo.int/edocs/pubdocs/en/wipo_pub_econstat_wp_41.pdf">factory cost of about $240</a>, which is added to the massive U.S.-China bilateral trade deficit. </p>
<p>IPhone imports look like a big loss to the U.S., at least to the president, who <a href="https://www.nytimes.com/2018/06/19/business/china-trade-war-peter-navarro.html">argues</a> that “China has been taking out $500 billion a year out of our country and rebuilding China.” One estimate suggests that imports of the iPhone 7 and 7 Plus <a href="https://qz.com/1234437/the-iphone-alone-accounts-for-16-billion-of-the-us-trade-deficit-with-china/">contributed $15.7 billion</a> to last year’s trade deficit with China.</p>
<p>But, as our <a href="https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=Dedrick+Kraemer+Linden&btnG=">research</a> on the breakdown of an iPhone’s costs show, this number does not reflect the reality of how much value China actually gets from its iPhone exports – or from many of the brand-name electronics goods it ships to the U.S. and elsewhere. Thanks to the globe-spanning supply chains that run through China, trade deficits in the modern economy are not always what they seem. </p>
<p><iframe id="U1BOU" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/U1BOU/3/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Who really makes the iPhone?</h2>
<p>Let’s examine an iPhone 7 a little more closely to see how much value China is actually getting. </p>
<p>Start with the most valuable components that make up an iPhone: the touch screen display, memory chips, microprocessors and so on. They come from a mix of U.S., Japanese, Korean and Taiwanese companies, such as Intel, Sony, Samsung and Foxconn. Almost none of them are manufactured in China. Apple buys the components and has them shipped to China; then they leave China inside an iPhone.</p>
<p>So what about all of those famous factories in China with millions of workers making iPhones? The companies that own those factories, including Foxconn, are all based in Taiwan. Of the factory-cost estimate of $237.45 from IHS Markit at the time the iPhone 7 was released in late 2016, we calculate that all that’s earned in China is about $8.46, or 3.6 percent of the total. That includes a battery supplied by a Chinese company and the labor used for assembly. </p>
<p>The other $228.99 goes elsewhere. The U.S. and Japan each take a roughly $68 cut, Taiwan gets about $48, and a little under $17 goes to South Korea. And we estimate that about $283 of gross profit from the retail price – about $649 for a 32GB model when the phone debuted – goes straight to Apple’s coffers.</p>
<p>In short, China gets a lot of (low-paid) jobs, while the profits flow to other countries.</p>
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<h2>The trade balance in perspective</h2>
<p>A better way of thinking about the U.S.-China trade deficit associated with one iPhone would be to only count the value added in China, $8.50, rather than the $240 that shows up as a Chinese import to the U.S. </p>
<p>Scholars have found <a href="https://econpapers.repec.org/article/eeeinecon/v_3a86_3ay_3a2012_3ai_3a2_3ap_3a224-236.htm">similar results for the broader U.S.-China trade balance</a>, although the disparity is less extreme than in the iPhone example. Of the 2017 trade deficit of $375 billion, probably one-third actually involves inputs that came from elsewhere – including the U.S.</p>
<p>The use of China as a giant assembly floor has been good for the U.S. economy, <a href="https://www.nytimes.com/2007/04/17/business/worldbusiness/17iht-glob18.1.5316471.html">if not for U.S. factory workers</a>. By taking advantage of a vast, highly efficient global supply chain, Apple can bring new products to market at prices comparable to its competitors, most notably the Korean giant Samsung. </p>
<p>Consumers benefit from innovative products, and thousands of companies and individuals have built businesses around creating apps to sell in the App Store. Apple uses its profits to pay its armies of hardware and software engineers, marketers, executives, lawyers and Apple Store employees. And most of these jobs are in the U.S.</p>
<p>If the next round of tariffs makes the iPhone more expensive, demand will fall. Meanwhile Samsung, <a href="http://www.businesskorea.co.kr/news/articleView.html?idxno=8785">which makes over half its phones in Korea and Vietnam</a>, with a lower share of U.S. parts, will not be affected as much by a tariff on goods from China and will be able to gain market share from Apple, shifting profits and high wage jobs from the U.S. to South Korea.</p>
<p>Put another way, research has shown globalization hurt some Americans while it <a href="https://piie.com/publications/chapters_preview/3802/2iie3802.pdf">made life better for many others</a>. Putting globalization in reverse with tariffs will also create winners and losers – and there could be far more of the latter. </p>
<h2>Why not make the iPhone in America?</h2>
<p>When we discuss these topics with policymakers and the media, we’re often asked, “Why can’t Apple just make iPhones in the U.S.?” </p>
<p>The main problem is that the manufacturing side of the global electronics industry was <a href="http://pcic.merage.uci.edu/papers/2007/GlobalizationOfInnovation.pdf">moved to Asia in the 1980s and 1990s</a>. Companies like Apple have to deal with this reality. </p>
<p>As the numbers we’ve cited make clear, there’s not much value to be gained for the U.S. economy or its workers from simply assembling iPhones here from parts made in Asia. </p>
<p>While it’s possible to do so, it would take at least a few years to set it up, cost more per unit than production in Asia, and require a lot of carrots and sticks from policymakers to get the many companies involved to do so – for example, like the <a href="https://www.washingtonpost.com/news/wonk/wp/2017/09/18/scott-walker-signs-3-billion-foxconn-deal-in-wisconsin/?noredirect=on&utm_term=.d1c92b8b14d0">potential $3 billion in subsidies</a> Wisconsin gave to Foxconn to build an LCD factory there.</p>
<h2>A flawed response to the challenge from China</h2>
<p>There is, of course, plenty for the U.S. to complain about when it comes to China’s high-tech industry and policies, whether it’s the lack of intellectual property protection or <a href="http://www.scmp.com/comment/insight-opinion/article/2123957/china-vs-google-facebook-and-other-us-internet-giants-lesson">non-tariff barriers</a> that keep major tech companies such as Google and Facebook out of the huge Chinese market. There is room for much tougher and more sophisticated bargaining to address these issues.</p>
<p>But where trade is concerned, policies should reflect that manufacturing is now a global network. The World Trade Organization has already developed <a href="https://www.wto.org/english/res_e/statis_e/miwi_e/countryprofiles_e.htm">an alternate set of trade numbers</a> that shows each country’s trade in value added terms, but the administration seems to have missed the memo.</p>
<p>Trump’s trade war is based on a simplistic understanding of the trade balance. Expanding tariffs to more and more goods will weigh on U.S. consumers, workers and businesses. And there’s no guarantee that the final outcome will be good when the dispute ends.</p>
<p>This is a war that should never have been started.</p><img src="https://counter.theconversation.com/content/99258/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jason Dedrick has received funding from the Alfred P. Sloan for research that is relevant to this article. </span></em></p><p class="fine-print"><em><span>Greg Linden received funding from the Alfred P. Sloan Foundation for research related to this article. </span></em></p><p class="fine-print"><em><span>Kenneth L. Kraemer received funding from the Alfred P. Sloan Foundation for research related to this article. </span></em></p>The president launched a trade war largely on the premise of a massive trade deficit with China. A closer look at the iPhone shows why he’s wrong.Jason Dedrick, Professor of Information Studies, Syracuse UniversityGreg Linden, Research Associate, University of California, BerkeleyKenneth L. Kraemer, Research Professor of Business, University of California, IrvineLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/939182018-03-27T10:44:07Z2018-03-27T10:44:07ZTrump’s go-it-alone approach to China trade ignores WTO’s better way to win<figure><img src="https://images.theconversation.com/files/212041/original/file-20180326-188628-182xwb2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump may have launched first salvo in a trade war.</span> <span class="attribution"><span class="source">AP Photo/Ng Han Guan</span></span></figcaption></figure><p>President Donald Trump seems to be changing his tune on trade. </p>
<p>On March 8, he imposed <a href="https://theconversation.com/economic-history-shows-why-trumps-america-first-tariff-policy-is-so-dangerous-92715">across-the-board tariffs</a> on the importation of steel and aluminum, <a href="http://time.com/5192751/eu-donald-trump-steel-tariffs/">angering allies</a> and adversaries alike. Exactly two weeks later, the president launched a new salvo in what could turn into an all-out trade war, this time aimed exclusively at one country: China. </p>
<p>Why the abrupt change in strategy? And is it a good thing? </p>
<p>The answers to both questions aren’t straightforward, as <a href="http://shared.cas.gsu.edu/profile/charles-hankla-2-2/">my own experience</a> talking to American companies doing business in China can attest. </p>
<h2>A new approach</h2>
<p>The president’s originally indiscriminate steel and aluminum tariffs – of 25 percent and 10 percent respectively – <a href="https://www.vox.com/policy-and-politics/2018/3/2/17070816/trump-steel-aluminum-tariffs-businesses">received immediate pushback</a> from many quarters, including U.S. industries dependent on the metals and key trading partners such as Canada and the European Union. </p>
<p>This quickly led to <a href="https://www.nytimes.com/2018/03/22/business/us-eu-tariffs-steel-aluminum.html?action=click&contentCollection=Business%20Day&module=RelatedCoverage&region=Marginalia&pgtype=article">exemptions</a> for a host of <a href="http://money.cnn.com/2018/03/22/news/economy/steel-aluminum-tariff-exemptions/index.html">critical American allies</a>, from Canada and Europe to South Korea and Argentina, who also all happen to be among the primary <a href="https://www.trade.gov/steel/countries/pdfs/imports-us.pdf">sources</a> of U.S. metal imports. </p>
<p>Trump’s new approach, announced March 22, is to <a href="https://www.nytimes.com/2018/03/22/us/politics/trump-will-hit-china-with-trade-measures-as-white-house-exempts-allies-from-tariffs.html">single out</a> China with US$60 billion worth of tariffs on a much wider assortment of goods, with a list of specific items to be unveiled soon. This, coupled with the exemption policy, allows Trump to walk back his earlier, ill-advised policy while still acting tough on trade.</p>
<p>Most likely, the administration has come to realize that trade actions targeting China have much <a href="http://www.pewresearch.org/2010/11/09/americans-are-of-two-minds-on-trade/">more support</a> from Congress and the American public. </p>
<p>But is this form of trade protection an improvement? In theory, it could be. </p>
<p>There is no denying that China sometimes <a href="http://www.scmp.com/news/china/diplomacy-defence/article/2124075/us-eu-japan-slam-unfair-trade-practices-veiled-swipe">fails</a> to play by the <a href="https://www.cbsnews.com/news/china-unfair-trade-trump-xi-summit/">rules</a> in world trade and investment. This was driven home to me personally when I participated in a Georgia State Business School event in Atlanta some eight years ago. </p>
<p>The topic of the conference was trade and investment in China, and many of the participants were local business leaders. Most had an anecdote about experiencing intellectual property theft, rigged bidding processes and the like while operating in the country. </p>
<p>But anecdotes are not needed to make the case. The U.S. government estimates that the <a href="http://money.cnn.com/2018/03/23/technology/china-us-trump-tariffs-ip-theft/index.html">American economy loses over $200 billion</a> annually from Chinese intellectual property theft.</p>
<p>Trump’s plan to respond to this problem, however, involves the kind of unilateral retaliation - as opposed to <a href="https://www.amazon.com/Political-Economy-World-Trading-System/dp/0199553777/ref=sr_1_1?ie=UTF8&qid=1521917089&sr=8-1&keywords=political+economy+of+world+trading+system">reciprocal action</a> sanctioned by international trade law - that can lead to a trade war. In fact, there’s <a href="https://www.nytimes.com/2018/03/22/world/asia/china-trump-retaliatory-tariffs.html">some evidence</a> that a dispute is already in the works. </p>
<p>In trade wars, <a href="https://theconversation.com/trade-wars-are-good-3-past-conflicts-tell-a-very-different-story-92801">each side normally accuses the other</a> of starting the conflict. Ultimately, the level of commercial aggression spirals out of control as each partner responds to the latest protectionist measures of the other.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/212056/original/file-20180326-188628-4fzhby.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/212056/original/file-20180326-188628-4fzhby.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/212056/original/file-20180326-188628-4fzhby.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/212056/original/file-20180326-188628-4fzhby.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/212056/original/file-20180326-188628-4fzhby.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/212056/original/file-20180326-188628-4fzhby.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/212056/original/file-20180326-188628-4fzhby.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">This seems to be a sentiment the protesters share with Trump.</span>
<span class="attribution"><span class="source">AP Photo/Tatan Syuflana</span></span>
</figcaption>
</figure>
<h2>The WTO’s role</h2>
<p>The fear of uncontrolled trade wars like this led to the incorporation of a <a href="https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm">dispute settlement process</a> when the World Trade Organization was created in 1995.</p>
<p>Under this process, when one country suspects another of violating its WTO commitments, it can lodge an action with the organization’s quasi-judicial body.</p>
<p>The WTO judges then hear arguments from both countries and determine if the complaint is justified. When they believe it is, and when the defending state refuses to change its policies, the WTO adjudicators can legalize the reciprocal imposition of tariffs up to a specified threshold.</p>
<p>The beauty of this procedure is that it produces a credible judgment about which country is at fault, which in turn creates <a href="https://press.princeton.edu/titles/1322.html">reputational costs</a> for the country found to be violating its agreements. This country, if it refuses to abide by the WTO ruling, will find itself isolated internationally.</p>
<p>And if the violator has the temerity to retaliate against the WTO-legitimized sanctions, it risks undercutting its position in the world trading order. On top of that, the WTO procedure limits the scale of any trade war by putting a cap on the legal punishments to be imposed.</p>
<p>The WTO dispute settlement process has been good for the United States. Since 1995, America has brought <a href="https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm">actions</a> against 117 other WTO members, and has been on the receiving end of 136 complaints. Research shows that the U.S. tends to have <a href="https://www.bloomberg.com/news/articles/2017-03-27/trump-isn-t-a-fan-of-the-wto-but-u-s-lawyers-often-win-there">better odds of winning</a> cases at the WTO than other countries. Just recently, the United States won cases against the <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/september/wto-appellate-body-rejects-eu">European Union</a>, <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2016/february/united-states-prevails-wto-dispute">India</a>, <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/november/us-wins-wto-dispute-indonesia%E2%80%99s">Indonesia</a> and <a href="http://thehill.com/policy/finance/357437-us-wins-trade-case-over-dolphin-safe-tuna-labeling">Mexico</a>.</p>
<p>It is true that Trump <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-standing-american-innovation/">has said he plans</a> to use the WTO process to contest China’s technology transfer policy. But his <a href="https://www.nytimes.com/2018/03/23/business/trump-world-trade-organization.html">unilateral</a> imposition of $60 billion of tariffs on China risks not only a damaging trade war but also undercuts any chances for the U.S. to build the type of international <a href="http://www.atimes.com/article/kudlow-calls-trade-coalition-willing-china/">coalition</a> necessary to force real changes. </p>
<p>A U.S.-China trade war, one undertaken outside the WTO process, will be seen by other countries as a fight between two powers that are equally in the wrong. Indeed, China is <a href="https://www.reuters.com/article/us-usa-china-trade-wto/china-urges-wto-members-put-u-s-tariff-beast-back-in-the-cage-idUSKBN1H2151">already moving</a> effectively to take the high ground in the dispute.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/212058/original/file-20180326-188610-1cy6jpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/212058/original/file-20180326-188610-1cy6jpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=430&fit=crop&dpr=1 600w, https://images.theconversation.com/files/212058/original/file-20180326-188610-1cy6jpk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=430&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/212058/original/file-20180326-188610-1cy6jpk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=430&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/212058/original/file-20180326-188610-1cy6jpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=540&fit=crop&dpr=1 754w, https://images.theconversation.com/files/212058/original/file-20180326-188610-1cy6jpk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=540&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/212058/original/file-20180326-188610-1cy6jpk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=540&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The relationship has turned frosty since Presidents Xi and Trump met in July.</span>
<span class="attribution"><span class="source">Saul Loeb/Pool Photo via AP</span></span>
</figcaption>
</figure>
<h2>The real problem</h2>
<p>More to the point, Trump’s unilateral approach to China risks conflating the <a href="https://theconversation.com/why-china-is-a-leader-in-intellectual-property-and-what-the-us-has-to-do-with-it-93950">real problem of China’s intellectual property theft</a> with the broader, and more <a href="https://www.bloomberg.com/view/articles/2018-03-18/big-u-s-china-trade-deficit-is-smaller-than-it-appears">contested</a>, issue of the U.S.-China trade balance. </p>
<p>Some economists question whether the U.S. should be <a href="https://www.cfr.org/backgrounder/us-trade-deficit-how-much-does-it-matter">worried</a> about the trade balance at all, and there is also some question about the extent that unfair Chinese practices are contributing to the problem.</p>
<p>Whatever the case, tariffs <a href="https://theconversation.com/trumps-60-billion-in-china-tariffs-will-create-more-problems-than-they-solve-93897">are not going to fix</a> the <a href="https://www.weforum.org/agenda/2017/04/the-key-to-the-us-trade-deficit-lies-at-home-this-is-why">structural issues</a> contributing to the imbalance. For that, the U.S. will need to increase its competitiveness or reduce American consumption, a much taller order.</p>
<p>But, in the short run, there is another option. The U.S. could choose to retaliate against China’s unfair trade practices by first filing a complaint with the WTO and waiting for a ruling in its favor. This, along with American efforts to build an international coalition of countries affected by the same practices, would have a much greater chance of changing China’s behavior.</p>
<p>Recent <a href="https://www.bloomberg.com/news/articles/2018-03-23/eu-u-s-should-tackle-china-together-on-trade-merkel-ally">statements</a> from Europe suggest that such a coalition is possible. </p>
<p>Working within the WTO would safeguard America’s international reputation, avoid a damaging <a href="https://theconversation.com/six-signs-china-wants-to-avoid-a-trade-war-93820">trade war</a> and protect the legitimacy of global trade law. </p>
<p>The multilateral approach to this problem is clearly the right one.</p><img src="https://counter.theconversation.com/content/93918/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The $60 billion in tariffs targeting China not only risks sparking a trade war, they represent a rejection of the WTO’s much more effective way of dealing with unfair trade practices.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/922282018-02-26T10:33:03Z2018-02-26T10:33:03ZThe five alternatives to EU single market and customs union would all make UK poorer<figure><img src="https://images.theconversation.com/files/207821/original/file-20180226-140184-mlntva.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/container-ship-berthing-port-127403000?src=KpbMEHT1SPYi-uIj89nipQ-1-21">shutterstock.com</a></span></figcaption></figure><p>Concerns are intensifying over the UK’s economic future, thanks to the lack of clarity over what kind of relationship it will have with the EU after Brexit. If the UK were to leave the <a href="https://theconversation.com/should-the-uk-remain-in-the-eu-customs-union-after-brexit-63179">single market and customs union</a>, there are five obvious alternatives. </p>
<p>We looked at each of these <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2993069">in a recent study</a> and found the UK’s real GDP will drop by 2.63% if there is a shallow free trade agreement in place with the EU (akin to Canada’s). If the UK manages to also conclude a free trade agreement with the US, the effect of leaving the EU will be -2%. And an agreement with the largest Commonwealth countries will make it -1.93% worse off than staying in the EU. </p>
<p>In the case of a hard Brexit, reverting to World Trade Organisation (WTO) free trade rules, the predicted losses will grow to -4.78%. A free trade agreement with the US will reduce predicted losses to -4.13% and, alternatively, a deal with the Commonwealth countries would lessen the blow to -3.96%. </p>
<p>This will not take place abruptly. The losses will occur over a long period, but it’s clear that signing new trade agreements with other countries cannot entirely compensate for leaving the EU. We also found that the trade creation effect of the EU (where trade deals spur more trade between countries after they sign a trade agreement) gets stronger over time and has currently reached its peak. This suggests that our estimates of Brexit are quite optimistic. </p>
<h2>Global shifts in world trade</h2>
<p>Over the last century, the UK has gone from being a global trade power to an “awkward partner” in the EU, before rejecting its EU membership outright. This nationalist tendency is in contrast to the moves of many countries towards forming mega-regional trade blocs like the the <a href="https://theconversation.com/uk/topics/tpp-7972">Trans-Pacific Partnership</a> (TPP) between the US and 11 countries around the Pacific, and the 16-nation Regional Comprehensive Economic Partnership (RCEP) – and, of course, the EU.</p>
<p>Negotiating these blocks requires large-scale trade diplomacy and prolonged discussions. They take years to negotiate.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=353&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=353&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=353&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=443&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=443&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207320/original/file-20180221-132663-bvg731.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=443&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Global trade deal groups.</span>
<span class="attribution"><span class="source">Oleksandr Shepotylo and Karen Jackson</span></span>
</figcaption>
</figure>
<p>While UK policy makers have been keen to highlight the opportunities of signing new trade deals, it is becoming increasing apparent that negotiating an <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/680366/Technical_Note_-_International_Agreements_in_the_Implementation_Period_-_CLEAN.pdf">implementation period</a> to do so is an important next step. Hence, the UK Brexit secretary, David Davis, <a href="https://www.gov.uk/government/news/david-davis-teesport-speech-implementation-period-a-bridge-to-the-future-partnership-between-the-uk-eu">has called for</a> a time limited period after Brexit where the EU’s trade agreements with third countries continue to apply to the UK. </p>
<p>In other words, it is starting to become clear that <a href="https://vimeo.com/252854131">grandfathering agreements</a>, where agreements that apply to the EU would be rolled over and apply to the UK, is not quite as simple as it may have first appeared. </p>
<p>In the face of such difficulties it is somewhat predictable that the US and Commonwealth get mentioned as the light at the end of the tunnel. Certainly the Commonwealth remains as a group of member states. But re-establishing it as a trading club headed by the UK, or the UK signing a collection of bilateral trade agreements through it, may prove difficult. </p>
<p>After World War I, the UK defence of imperial preferences was seen by some as a desperate attempt to maintain a powerful position in the world-trading environment. More recently, African countries <a href="http://www.thecitizen.co.tz/News/Signing-EPA-with-Europe-is-bad--declares-Magufuli/1840340-3828048-jqq8bi/index.html">have been reticent</a> to sign up to EU trade deals amid accusations that they are a type of colonialism. Meanwhile, India is backing their “Buy in India” programme <a href="https://theconversation.com/why-britain-cannot-bank-on-india-for-post-brexit-business-66246">rather than looking to trade with the UK</a>.</p>
<h2>Five alternatives</h2>
<p>Our research highlights the losses stemming from the lower bargaining power of the UK as a standalone country, rather than as a member of a powerful trading bloc like the EU. </p>
<p>Signing free trade agreements with countries that are farther away, such as the US or Commonwealth countries (Australia, Canada, New Zealand, India, Pakistan, South Africa) cannot compensate for these losses, as some commentators suggest. But it reduces the blow by about 0.65 to 1.1%, depending on the scenario. A hard Brexit would generate losses from 4.1% to 5.3% of real GDP – that’s roughly £77 billion to £99 billion.</p>
<p><iframe id="OKLoc" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/OKLoc/3/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>Again, it’s important to recognise that these losses will not be immediate, nor will a hard Brexit cause a catastrophic decline in trade flows between the EU and UK. These are long-run forecasts and these changes would occur gradually after Brexit has taken place.</p>
<h2>The multiplier effect</h2>
<p>To understand how the effect of trade deals influence trade creation over time, we studied all free trade agreements around the world over the period 1960-2014. Several important trends emerge. First, the positive effect of a free trade agreement (or negative effect of exiting it) accumulates over several decades. Second, preferential trade agreements, in particular, the EU common market are currently having the strongest impact on trade in the European region.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=439&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=439&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=439&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=551&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=551&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207365/original/file-20180221-132654-1asqley.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=551&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Dynamics of regional trade agreements (RTA) and the EU, 1960-2014.</span>
<span class="attribution"><span class="source">Karen Jackson and Oleksandr Shepotylo</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Countries benefit from integrating into large regional trade and economic blocs. Those that do not, experience significant economic losses. Even if a country outside the bloc is a more efficient exporter, they lose out to less efficient exporters that are in the trade group. Similarly, countries in trade blocs give each other preferential treatment, causing those outside the group to decline in importance. </p>
<p>So a resurgence of the Commonwealth group as a mega-regional would be beneficial, but not to the extent that it would compensate for the losses associated with Brexit. That’s assuming it would be possible to sign a free trade agreement with the largest Commonwealth countries. A US-UK free trade agreement would also face significant political difficulties and, if realised, the benefits would not outweigh the negative effect of Brexit.</p>
<p>The UK decision to step outside the EU framework and embark on independently negotiating trade deals is a risky endeavour and likely to bring significant losses. Signing TTIP would further weaken the UK’s position. Instead, the UK would be wise to negotiate a way it can play the new mega-regional game as part of the EU bloc.</p><img src="https://counter.theconversation.com/content/92228/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Leaving the EU single market and customs union cannot be compensated for by free trade agreements with other countries.Karen Jackson, Senior Lecturer in Economics, University of WestminsterOleksandr Shepotylo, Lecturer in Econoimcs, University of BradfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/874772017-11-16T01:39:20Z2017-11-16T01:39:20ZTrump’s ‘America first’ trade policy ignores key lesson from Great Depression<figure><img src="https://images.theconversation.com/files/194885/original/file-20171115-19782-b2ncvz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump will soon learn the costs of going it alone on trade.</span> <span class="attribution"><span class="source">AP Photo/Andrew Harnik</span></span></figcaption></figure><p>President Donald Trump <a href="http://abcnews.go.com/International/wireStory/trump-asia-trade-rules-changed-watch-51131335">declared</a> his nearly two-week trip through Asia “tremendously successful,” but economic history should make us more skeptical. </p>
<p>During the trip, the president continued to promote his so-called <a href="https://theconversation.com/what-does-america-first-mean-for-american-economic-interests-71931">“America first” trade policy</a>. He is orienting the country distinctly toward protectionism and claiming that unilateralism in trade is good for America.</p>
<p>Here is the problem: President Trump’s <a href="http://www.businessinsider.com/trump-trade-policy-agenda-2017-3">approach to trade</a> seems to be based on a false understanding of how the global economy works, one that also plagued American policymakers nearly a century ago. The administration has forgotten an important lesson of the Great Depression, and <a href="http://foreignpolicy.com/2017/03/06/economists-take-aim-at-trump-trade-theory-again-peter-navarro-bilateral-multilateral-trade-deals-china-germany-national-security/">virtually all economists</a> <a href="https://www.voanews.com/a/trump-trade-policy-loser-economists-contend/3323997.html">agree</a> that this could have unfortunate consequences for the U.S. and the world. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=507&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=507&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194884/original/file-20171115-19768-8hk2wk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=507&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">If Trump puts ‘America first’ in trade, other countries will follow. And that’s bad news for everyone.</span>
<span class="attribution"><span class="source">Hadrian/Shutterstock.com</span></span>
</figcaption>
</figure>
<h2>America and the global economy</h2>
<p>Trump’s “America first” orientation <a href="http://time.com/4386335/donald-trump-trade-speech-transcript/">assumes</a> that the United States, as the world’s dominant actor, can behave freely and independently in trade. </p>
<p>Unfortunately for the administration, America’s top economic position does not shield it from the dire consequences that unilateral trade policy can provoke. The constraints on U.S. action result from the basic nature of the international economy and from America’s <a href="https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci18-1.pdf">declining dominance</a> of the world trade system. </p>
<p>It is a standard principle of economics that all individual actors exist within a system. Any action taken by one actor will likely result in a response from others. This means that wise governments, in considering which policies to adopt, must make <a href="https://www.economist.com/news/economics-brief/21705308-fifth-our-series-seminal-economic-ideas-looks-nash-equilibrium-prison">difficult calculations</a> about how their actions will interact with those of others.</p>
<p>“America first” fails to make these calculations. It disregards how America’s trading partners will respond to the new U.S. protectionism – which is also what American lawmakers ignored during the Great Depression.</p>
<h2>‘Beggar thy neighbor’</h2>
<p>Before the 1930s, America’s trade policy was generally set unilaterally by Congress – that is, without the international negotiations used today. </p>
<p>Lawmakers, already in a <a href="http://www.nber.org/papers/w2001">protectionist mood</a>, responded to the pain of the Great Depression by passing the infamous <a href="https://www.investopedia.com/terms/s/smoot-hawley-tariff-act.asp">Smoot-Hawley Tariff Act of 1930</a>, which <a href="http://www.economist.com/node/12798595">raised duties on hundreds of imports</a>.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=809&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=809&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=809&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1016&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1016&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194881/original/file-20171115-19823-b2itsw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1016&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Senator Reed Smoot co-sponsored the famous act that bears his name.</span>
<span class="attribution"><span class="source">Everett Historical/Shutterstock.com</span></span>
</figcaption>
</figure>
<p>Meant in part to ease the effects of the Depression by protecting American industry and agriculture from foreign competition, the act instead helped prolong the downturn. <a href="https://press.princeton.edu/titles/9430.html">Many U.S. trading partners reacted</a> by <a href="http://www.nber.org/chapters/c6899.pdf">raising their own tariffs</a>, which contributed <a href="http://www.mitpressjournals.org/doi/abs/10.1162/003465398557410">significantly</a> to shutting down world trade.</p>
<p>Fortunately, America and the world learned a lesson from this experience. With the <a href="http://www.nber.org/chapters/c6899.pdf">Reciprocal Trade Agreements Act of 1934</a> and its successors, which granted the president authority to reach tariff reduction agreements with foreign governments, U.S. trade policy came to be global and strategic. This new approach was institutionalized at the international level with the creation of the <a href="https://www.wto.org/english/res_e/booksp_e/agrmntseries2_gatt_e.pdf">General Agreement on Tariffs and Trade</a> in 1948 and its successor, the World Trade Organization, in 1995.</p>
<p>The basic principle of these agreements is <a href="https://theconversation.com/why-the-wto-still-matters-34624">reciprocity</a> – that each country will agree to liberalize its trade to the extent that other countries liberalize theirs. The approach uses international negotiations to <a href="https://www.jstor.org/stable/2706411?seq=1#page_scan_tab_contents">overcome protectionist political pressures</a> and recognizes that trade is a global phenomenon that generates national interdependence.</p>
<h2>Dangers of ignoring history</h2>
<p>The dangers of ignoring history are only beginning to manifest themselves, but they can be seen in several recent developments that bode ill for us all.</p>
<p>One of the Trump administration’s <a href="https://theconversation.com/how-the-tpps-demise-threatens-us-national-security-and-pax-americana-67514">first actions</a> was to withdraw the United States from the <a href="https://theconversation.com/us/topics/transpacific-partnership-1882">Trans-Pacific Partnership</a>. This agreement, which was a major initiative of the Obama administration, would have created the <a href="https://www.nytimes.com/interactive/2016/business/tpp-explained-what-is-trans-pacific-partnership.html">largest economic bloc</a> in the world by linking America’s economy with those of 11 other Pacific nations. It would also have created an American-led, liberal bulwark in Asia against any Chinese challenge to the regional economic order.</p>
<p>Withdrawing from the agreement denied American exporters enhanced access to foreign markets and was a <a href="https://www.forbes.com/sites/johnbrinkley/2017/01/24/trump-dumps-trans-pacific-partnership-sad/#4543448e75dc">gift</a> to Chinese influence in Asia. But we are only now beginning to see the longer-term repercussions of President Trump’s decision. </p>
<p>During Trump’s trip, the other 11 signatories of the original trade deal, including Japan, Australia, Canada and Mexico, <a href="http://money.cnn.com/2017/11/13/news/economy/tpp-11-without-us-what-next/index.html">agreed to move forward</a> without the U.S. This is a problem for America because it means that these countries will grant preferential market access to one another, making it harder for American companies to compete in their markets.</p>
<p>American companies are already feeling the impact of what happens when they’re left out of a trade deal. A recent <a href="https://www.nytimes.com/2017/11/12/business/trump-trade-lobster-canada.html">New York Times article</a>, for example, highlights the plight of American lobster producers whose prices are being undercut by Canadian producers in the wake of a new <a href="http://ec.europa.eu/trade/policy/in-focus/ceta/">Canada-European Union trade agreement</a>. </p>
<p>If the United States is reluctant to participate in multilateral trade agreements, other countries have every incentive to do deals that exclude and even may hurt the U.S.</p>
<p>Trump’s <a href="https://theconversation.com/trumps-threat-to-withdraw-from-nafta-may-hit-a-hurdle-the-us-constitution-81444">ongoing efforts</a> to renegotiate the North American Free Trade Agreement also pose potential dangers. The administration has a tendency to speak of renegotiation as if it can <a href="http://money.cnn.com/2017/10/11/news/economy/trump-nafta/index.html">dictate the terms</a>. But while Canada and Mexico may be more dependent on the U.S. than the U.S. is on them, an <a href="https://www.cfr.org/backgrounder/naftas-economic-impact">implosion of NAFTA would be devastating</a> for many U.S. industries that rely on North American trade. <a href="https://www.cnbc.com/2017/11/13/the-next-big-worry-for-markets-nafta-fails-and-trade-wars-erupt.html">Markets increasingly worry</a> that NAFTA may not survive the negotiations. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194882/original/file-20171115-19789-ujcuha.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Trade representatives from Canada, the U.S. and Mexico have been meeting to renegotiate NAFTA.</span>
<span class="attribution"><span class="source">AP Photo/Manuel Balce Ceneta</span></span>
</figcaption>
</figure>
<p>In addition to withdrawing from and renegotiating trade agreements, the administration has <a href="https://fivethirtyeight.com/features/trumps-trade-policies-keep-backfiring/">ramped up</a> unilateral efforts to sanction U.S. trading partners for receiving subsidies or for dumping their products on the American market. </p>
<p>Decisions to impose trade penalties risk blowback, as when sanctions on Bombardier drove the Canadian plane manufacturer into the <a href="https://fivethirtyeight.com/features/trumps-trade-policies-keep-backfiring/">arms of Airbus</a>, Boeing’s top foreign rival. The threatened imposition of sanctions on imports of solar panels may have <a href="https://www.politico.com/story/2017/09/22/solar-tariff-trump-china-trade-243021">a similar effect</a>, damaging American panel installers and encouraging foreign retaliation. </p>
<h2>Trade needs a champion</h2>
<p>President Trump assumes the U.S. can act unilaterally without consequences. </p>
<p>Economic history shows this doesn’t work. The world’s economies are far more interdependent than they were during the Great Depression, so the impact of governments all following a “my country first” trade policy – as the president said <a href="http://www.eaglenews.ph/trump-says-us-wont-tolerate-other-countries-unfair-trade-practices-anymore-to-protect-america-first/">he expected world leaders to do</a> – could have disastrous consequences. </p>
<p>Today, the international trade system America helped create, one based on open markets and classically liberal principles, is <a href="https://www.brookings.edu/research/the-twilight-of-the-liberal-world-order/">under threat</a> as never before. Yet President Trump’s “America first” approach is a total abdication of the traditional U.S. role as its defender. And in fact, the president is doing his best to <a href="https://www.nytimes.com/2017/10/31/business/economy/trump-trade.html?_r=0">undermine that system</a>. </p>
<p>In the final analysis, the Trump administration is reverting to a policy that is dangerous for the U.S. economy and for the international system. </p>
<p>If the U.S. abdicates, China may be the only country that can take the reins. The question is, what would that mean for the current system of open and free markets?</p><img src="https://counter.theconversation.com/content/87477/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charles Hankla does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>American lawmakers in the 1930s learned the hard way what happens when a country raises tariffs and makes other unilateral trade decisions.Charles Hankla, Associate Professor of Political Science, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/837302017-09-28T16:05:54Z2017-09-28T16:05:54ZTrade deals, labour conditions and the gap between talk and action<figure><img src="https://images.theconversation.com/files/187962/original/file-20170928-1488-1ed0aq2.jpg?ixlib=rb-1.1.0&rect=101%2C1211%2C2613%2C1745&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/lots-shipping-containers-singapore-industrial-port-683548813?src=2pVlGGqLzhx7kn6bi_fYWA-1-29">joyfull/Shutterstock</a></span></figcaption></figure><p>The intersection between trade and labour is a topic that has attracted much attention over the past 12 months. From Brexit to the presidential elections in the US, politicians have sought to exploit the notion that trade – and in particular trade liberalisation – produces negative effects on labour standards and conditions. </p>
<p>Of course, trade liberalisation produces winners and losers. A number of national industries <a href="https://www.oecd.org/els/emp/36780847.pdf">have suffered</a> as a result of increased global competition. There are also the concern that as global mobility in goods, services and capital increases, low labour standards in exporting countries may undermine higher labour standards in importing countries eventually leading to a “race to the bottom”. </p>
<p>In reality, empirical evidence supporting the race to the bottom theory remains, at best, ambiguous. There is no clear evidence that <a href="https://basepub.dauphine.fr/bitstream/handle/123456789/255/2ECFE995d01.pdf?sequence=2">low labour costs</a> significantly enhance <a href="https://www.oecd.org/site/tadicite/50288535.pdf">export performance</a> or foreign investment. Labour costs <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1564-913X.2002.tb00230.x/abstract">tend not to be decisive factors</a> in foreign direct investment decisions compared to other issues such a labour productivity and political stability.</p>
<p>The narrative, however, is strong. The idea that trade liberalisation negatively affects employment standards in domestic markets is one that holds a particular resonance with the public, and it’s no surprise that politicians keep coming back to it. It is no surprise either that the interaction between trade agreements and labour has occupied trade negotiators, policy analysts and academics alike for the better part of the last 30 years. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/187964/original/file-20170928-1491-1gppr4y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/187964/original/file-20170928-1491-1gppr4y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/187964/original/file-20170928-1491-1gppr4y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/187964/original/file-20170928-1491-1gppr4y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/187964/original/file-20170928-1491-1gppr4y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/187964/original/file-20170928-1491-1gppr4y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/187964/original/file-20170928-1491-1gppr4y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/187964/original/file-20170928-1491-1gppr4y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Race to the bottom for work conditions?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hot-work-steel-makers-412613719?src=nCrc3J_e6K2s84nqwAhuxg-4-31">Deniz Toprak/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Getting better?</h2>
<p>The central issue here is whether trade agreements can or should be used to improve labour rights and social conditions globally. Those <a href="https://ustr.gov/sites/default/files/TPP-Chapter-Summary-Labour-1.pdf">that are in favour</a> – mostly rich, developed economies – argue, despite evidence to the contrary, that promoting labour standards through trade addresses concerns over a race to the bottom. The theory goes that companies are more likely to move their activities to countries where labour costs are low, something that leads to job losses at home and the temptation to reduce labour standards in order to keep such jobs. </p>
<p>Equally, <a href="https://escarpmentpress.org/globallabour/article/download/2401/2427">some have argued</a> that there is a moral duty to use trade agreements to improve the plight of workers abroad. But this has historically been rejected by a significant number of developing countries who have also bought into the notion that low labour standards can provide a competitive advantage in trade. They view <a href="http://ecdpm.org/great-insights/trade-and-human-rights/human-rights-eu-india-fta-viable-option/">links drawn between trade and labour</a> as protectionist mechanisms designed to remove one of the few advantages held by developing countries in global markets. </p>
<p>Attempts to introduce labour standards within the <a href="https://www.ictsd.org/downloads/2011/12/trade-agreements-and-their-relation-to-labour-standards.pdf">rules of the World Trade Organisation</a> have thus consistently been rejected. However, links between trade and labour have been implemented in bilateral and regional trade agreements pursued by major economies such as the EU and the US.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/187965/original/file-20170928-22252-g696gv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/187965/original/file-20170928-22252-g696gv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/187965/original/file-20170928-22252-g696gv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=283&fit=crop&dpr=1 600w, https://images.theconversation.com/files/187965/original/file-20170928-22252-g696gv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=283&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/187965/original/file-20170928-22252-g696gv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=283&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/187965/original/file-20170928-22252-g696gv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=356&fit=crop&dpr=1 754w, https://images.theconversation.com/files/187965/original/file-20170928-22252-g696gv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=356&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/187965/original/file-20170928-22252-g696gv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=356&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Failing to put the blocks in place?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/united-states-europe-economic-political-relationship-717835864?src=ErnyqC12YD3qu7jys75Qvw-1-13">tostphoto/Shutterstock</a></span>
</figcaption>
</figure>
<p>Both seek to justify labour provisions by putting forward values-based arguments. The US says the protection of worker rights in free trade agreements (FTAs) is <a href="https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-chapter-chapter-negotiating-4">a core value</a>, while the EU says such provisions are a key component <a href="http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf">of its values-based agenda</a>. </p>
<h2>Enforcement</h2>
<p>The agreements negotiated by the EU and the US follow a fairly similar approach. Both use these deals to require countries to comply with core <a href="http://www.ilo.org/declaration/lang--en/index.htm">International Labour Organisation (ILO) standards</a>. That stops those countries – for example, Colombia, Peru and South Korea – from amending or failing to enforce domestic labour standards to gain a competitive advantage in trade or investment. </p>
<p>So, do these agreements end up improving labour rights and conditions in the territories of EU and US trade partners? Well, the US has had some success getting its trading partners to undertake significant domestic labour law reforms prior to the entry into force of US FTAs. </p>
<p>The <a href="https://ustr.gov/trade-agreements/free-trade-agreements/colombia-fta/final-text">US-Colombia FTA</a>
is a good example. The US decided not to ratify the agreement until it was satisfied that Colombia had adopted a number of reforms, from improvements to enforcement of labour laws to the protection of trade union officials and the criminalisation of anti-union acts. </p>
<p>A signed FTA with the biggest economy in the world is effective bait – but the post-ratification record of these FTAs is far less impressive. The US Government Accountability Office <a href="https://www.gao.gov/assets/670/666787.pdf">shows that</a> the implementation of labour standards requirements included in US FTAs has been deficient. This is in part due to the lack of enforcement – <a href="https://ustr.gov/issue-areas/labor/bilateral-and-regional-trade-agreements/guatemala-submission-under-cafta-dr">only one arbitration ruling</a> has been delivered in relation to a labour violation under a US FTA. But there has also been a lack of funds and resources allocated to monitoring. </p>
<p>At least US agreements allow it to impose trade sanctions. Under European Union FTAs, labour provisions are exempt from dispute settlement: hard enforcement mechanisms are not available if the trading partner decides not to comply.</p>
<p>That might explain why the impact of EU FTAs on labour standards has been arguably even more limited. The EU has had to rely on monitoring and friendly cooperation to make sure trading partners comply with any labour provisions. </p>
<p><a href="http://ecdpm.org/great-insights/shifts-trade-development/labour-standards-eu-free-trade-agreements-working-towards-end/">The available evidence</a> <a href="http://www.oefse.at/fileadmin/content/Downloads/tradeconference/MarxBrechtBrando_Labour_Rights_in_EU-Colombia_Agreement.pdf">suggests that</a> the impact has been limited because of inefficient monitoring and engagement from the EU with the relevant authorities and civil society organisations on the ground. </p>
<p>The criticisms have stung. The EU has recently put forward proposals <a href="http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf">to improve effectiveness</a>, but the impression that emerges right now is of a disconnect between rhetoric and action. Both the EU and the US have sought to package FTAs as tools to promote labour standards and protect workers. Yet, both have failed to develop the capacity to make it work.</p>
<p><em>This article has been published as part of the World Economic Forum series, <a href="https://www.weforum.org/focus/the-state-of-trade">The State of Trade</a>.</em></p><img src="https://counter.theconversation.com/content/83730/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Billy Melo Araujo is the recipient of a British Academy British Academy/Leverhulme Small Research Grant (SG143078) - "Sustainable Development in EU FTAs: A tool for the promotion of development goals or disguised protectionism?"</span></em></p>Major nations make labour rights a key part of trade deals. But what happens next?Billy Melo Araujo, Lecturer in EU and International Economic Law, Queen's University BelfastLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/776682017-05-15T01:18:39Z2017-05-15T01:18:39ZTrump’s trade policy is unlikely to deliver big wins for US workers<figure><img src="https://images.theconversation.com/files/169235/original/file-20170514-3675-1fnc4bl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Commerce Secretary Wilbur Ross, sitting at the president's right, announced the China trade deal.</span> <span class="attribution"><span class="source">Carolyn Kaster/AP Photo</span></span></figcaption></figure><p>The Trump administration recently notched two wins for its international trade strategy, hailing both as big gains for U.S. workers.</p>
<p>The first was the confirmation of <a href="http://thehill.com/policy/finance/332977-lighthizer-confirmed-as-chief-trade-negotiator">Robert Lighthizer</a> on May 11 as U.S. trade representative (USTR). This was a key step toward President Donald Trump’s vow to renegotiate NAFTA. </p>
<p>That same day, the White House announced progress in <a href="http://abcnews.go.com/Politics/wireStory/china-us-reach-agreement-beef-poultry-natural-gas-47361624">opening up the Chinese market</a> for <a href="http://www.reuters.com/article/us-usa-china-trade-idUSKBN188088">U.S. card payment service companies</a>, such as Visa, as well as American beef producers. </p>
<p>While both of these events represent positive if small steps forward, they also symbolize the administration’s problematic approach to trade: The U.S. will pursue bilateral deals, like the one with China, at the expense of multilateral pacts such as NAFTA. </p>
<p>As an economist studying international trade, I’m skeptical that incremental, bilateral negotiations will reap significant rewards for American workers, particularly the kind <a href="http://money.cnn.com/2017/01/20/news/economy/donald-trump-jobs-wages/">Trump has promised</a>.</p>
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<h2>A push for bilateralism</h2>
<p>One of Lighthizer’s first duties as USTR will be to renegotiate NAFTA with the aim of delivering the president’s <a href="http://www.cnbc.com/2017/04/30/trump-says-hell-kill-nafta-if-hes-not-able-to-renegotiate-a-better-deal.html">“better deal</a>.” </p>
<p>Senators confirmed Lighthizer by an 82-14 vote, suggesting that there is bipartisan support for Trump’s preference for bilateral deals over multilateral ones. And Lighthizer is in many ways the ideal candidate for the job. </p>
<p>As deputy U.S. trade representative under President Ronald Reagan in the 1980s, he helped negotiate <a href="https://crawford.anu.edu.au/pdf/pep/pep-310.pdf">bilateral agreements</a> to restrict Japanese imports and open up their markets to U.S. businesses. These deals were seen at the time as important victories for U.S. manufacturers, demonstrating the value of a USTR committed to bilateral negotiations in order to secure strong protections for American businesses. </p>
<p>Today, China is the new Japan: a rapidly growing, manufacturing-oriented economy that threatens the global economic status quo. As a battle-tested free-trade skeptic, Lighthizer <a href="https://www.bloomberg.com/politics/articles/2017-05-11/lighthizer-approval-as-u-s-trade-chief-clears-way-for-nafta-redo">should be an effective advocate</a> for the protectionist policies that the Trump administration has championed and is likely to do so following the bilateral blueprint he used under Reagan.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=484&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=484&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=484&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=608&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=608&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169234/original/file-20170514-3664-vxxbfu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=608&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Robert Lighthizer, center, easily won Senate confirmation thanks to bipartisan support, including from Republican Orrin Hatch, right, and Democrat Ron Wyden.</span>
<span class="attribution"><span class="source">Manuel Balce Ceneta/AP Photo</span></span>
</figcaption>
</figure>
<h2>Reasons for skepticism</h2>
<p>But whether a revised NAFTA or any new bilateral agreement negotiated by Lighthizer ends up being good for U.S. workers remains to be seen, and we should be skeptical. </p>
<p>The China deal consisted of a reaffirmation of a September agreement to allow U.S. beef producers access to Chinese markets, which Secretary of Commerce Wilbur Ross hailed as “<a href="https://www.nytimes.com/2017/05/11/business/us-china-trade-deals.html">very big news</a>.” </p>
<p>But while the news was big in terms of how much beef may be sold to China in coming years, it is unlikely to do much for U.S. workers. U.S. beef production directly employs <a href="http://siccode.com/en/codes/naics/112111/beef-cattle-ranching-farming">fewer than 4,000</a> workers and indirectly employs perhaps <a href="http://siccode.com/en/naicscodes/1121/cattle-ranching-and-farming">upward of 65,000</a>, numbers so small as to be irrelevant. </p>
<p>In addition, the administration completed a deal that will allow U.S. payment transaction companies to operate in China. But again, these companies employ merely <a href="https://www.census.gov/data/tables/2014/econ/susb/2014-susb-annual.html">130,000 U.S. workers</a>. To put that into perspective, the net number of jobs created every month in the U.S. (the difference between jobs created and jobs destroyed) is <a href="https://www.linkedin.com/pulse/americas-job-churning-machine-andrew-chamberlain">around 200,000</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169231/original/file-20170514-3672-ubmv7o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A new deal will open up China to U.S. beef.</span>
<span class="attribution"><span class="source">Mark Schiefelbein/AP Photo</span></span>
</figcaption>
</figure>
<h2>Not an ideal negotiating strategy</h2>
<p>The irony is that, despite the Trump administration’s focus on the jobs impact of trade agreements, bilateral deals are less likely to have a big impact on workers. This is because these agreements tend to be a boon for some businesses – those for whom the new market is important – while having only indirect effects on others. </p>
<p>As a result, powerful companies with influential lobbying arms are better able to promote their interests within this type of setting, and the limited scale of the negotiations means that these businesses’ interests often come at the expense of others. Thus, less influential industries, and their workers, lose out. For instance, the U.S. still faces <a href="https://ustr.gov/sites/default/files/2013%20NTE%20China%20Final.pdf">high Chinese trade barriers</a> on insurance products, a sector that employs over 2.3 million U.S. workers.</p>
<p>In fact, this is <a href="https://theconversation.com/multilateral-regional-bilateral-which-agreement-is-best-19664">one of the primary arguments</a> for wide-ranging, multilateral trade negotiations of the type that the Trump administration <a href="http://www.reuters.com/article/us-usa-trump-wto-idUSKBN16832U">dislikes</a>. Though such negotiations also have downsides, when deal-making involves multiple countries and many industries, it becomes less likely that any single interest group will prevail at the expense of others. </p>
<p>In other words, agreements such as those that led to the World Trade Organization, which Trump derides, were <a href="https://www.wto.org/english/thewto_e/whatis_e/tif_e/understanding_e.pdf">specifically designed</a> to overcome this kind of corruption of the political process that allows narrow, powerful corporate interests to buy their way into the negotiation process.</p>
<h2>Eye on the ball</h2>
<p>There is also a large cost to abandoning or significantly revising multilateral trade accords like NAFTA. </p>
<p>While NAFTA has undoubtedly led to the <a href="http://knowledge.wharton.upenn.edu/article/naftas-impact-u-s-economy-facts/">availability of cheaper products</a> for U.S. consumers, it has simultaneously been <a href="https://www.news.virginia.edu/content/qa-uva-economists-study-identifies-naftas-winners-and-losers">bad for many U.S. workers</a>. However, in this case the harm has already been done and any significant disruption of the existing agreement would be costly, both economically and politically. </p>
<p>For instance, about <a href="https://www.rita.dot.gov/bts/press_releases/bts020_13">60 percent</a> of NAFTA trade goes by truck, a sector that employs <a href="http://www.alltrucking.com/faq/truck-drivers-in-the-usa/">3.5 million</a> U.S. workers. So a disruption to NAFTA supply chains would clearly have severe economic consequences for truck drivers. </p>
<p>It is undeniably good for the U.S. to sell more beef and payment transaction services to the Chinese. And renegotiating NAFTA could be welfare improving for all involved if done right. But attempts to negotiate specific deals that impact narrow interest groups rarely lead to large overall gains for workers. </p>
<p>The key will be whether this populist president can keep his eye on the ball and what really matters – the American worker – and not get distracted by the lure of corporate rent-seekers.</p><img src="https://counter.theconversation.com/content/77668/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Greg Wright does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Trump administration’s new deal with China, which won’t benefit many workers, shows the pitfalls of pursuing bilateral agreements at the expense of multilateral ones like NAFTA.Greg Wright, Assistant Professor of Economics, University of California, MercedLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/713592017-01-17T17:09:08Z2017-01-17T17:09:08ZHow to read Theresa May’s Brexit speech<p>Almost seven months after Britain voted to leave the European Union, the country’s prime minister, Theresa May, has finally given some much needed clarity on how Brexit will happen. Or has she?</p>
<p>May cast an optimistic tone on the vote to leave as she made a <a href="http://www.telegraph.co.uk/news/2017/01/17/theresa-mays-brexit-speech-full/">long-awaited speech</a> in London, characterising Brexit as an outward-looking, internationalist view as expressed by the British people. But in doing so, she jettisoned many of the things which the UK has wholeheartledly supported during its membership of the bloc. It was a driving force behind establishing the single market, for example. Even David Cameron’s pre-referendum vision for Europe incorporated further integration in the field of services.</p>
<p>Much of the speech was destined for a domestic audience. May was telling UK voters that she has interpreted their desire to control immigration as more important than attempting to remain in the single market, in full or in part, no matter what the cost. So the UK will leave the single market and customs union, and instead seek to strike a “free trade” deal and “partnership” with the EU as the “best friend and neighbour”. </p>
<p>But extolling the virtues of free trade, while firmly committing to leaving the world’s largest free trade bloc is a strange juxtaposition. The same might be said of claiming that “migrants” from the EU need to be reduced but that the UK is open to the world. Saying the British people “want to travel to, study in, trade with countries not just in Europe but beyond the borders of our continent” is all very well, except that reciprocal rights are only available to “the brightest and the best”.</p>
<p>All this might play well for a domestic audience, but it hardly seems likely that, beyond the new US administration, governments around the world will jump at the chance for lengthy, protracted negotiations with the UK. Although the speech identified other areas of the world where agreements could be sought, no timeline was given. As anyone who has examined the process of free trade agreements knows, “quick deals” which satisfy all parties are few and far between.</p>
<h2>A bold gamble</h2>
<p>May’s commitment to a vote before both houses of parliament suggests that she expects to lose the case currently being considered by the UK <a href="https://theconversation.com/brexit-in-the-supreme-court-heres-what-it-all-means-69738">supreme court</a>. But there is no clarity on what happens if either (or both) houses vote down the deal. And her decision to give her speech outside parliament has denied MPs the right to question her directly on this point – at least for now. </p>
<p>For European Union member states, the speech is likely to be welcomed as a clearer indication of the approach the UK government is taking. And indeed, the PM’s tone suggested she sees the UK and EU as equal partners in Brexit negotiations.</p>
<p>However, she also announced that the UK’s “vast” financial contributions to the EU are definitely to come to an end. The implication here is that the UK has not benefited from European integration and that the EU has prevented the UK achieving a “global” status. That is likely to be met with incredulity in many capitals, given the UK’s influence over the development of the single market and longstanding rebate.</p>
<p>There were also threats to shift the UK towards a different “economic model”, which could mean turning the UK into a tax haven, drawing investment away from Europe. May is also leaning heavily on the UK as a leader in security and intelligence as she squares up to European negotiators. And the <a href="https://www.theguardian.com/politics/2017/jan/17/deal-citizens-rights-full-eu-theresa-may-brexit-referendum">continued obfuscation</a> over the fate of EU citizens already living in the UK means their future is still on the table as a bargaining chip. But May is potentially overplaying her hand here. She may be setting out a position on which she cannot deliver. Delivering may mean making some very difficult domestic choices that could cost her at the ballot box in the future.</p>
<p>But the PM seems to be conveying the message that no deal with the EU would be better than one which leaves the UK “half in, half-out”. This is a significant step from the pre-referendum position, when it was widely assumed (and partly on the basis of the last Conservative manifesto) that membership of the single market was paramount. Even so, several minutes on from this comment, she indicated areas where there could continue to be “elements” of the single market in place in the UK, notably (and unsurprisingly) “the freedom to provide financial services across national borders”.</p>
<p>The risks here to the PM, and Britain, are two-fold. First, any agreement with the rest of the EU must necessarily entail the agreement of the EU institutions as well as EU member states. Therefore, no matter how determined the PM is to set the agenda and terms of the ambitious partnership that she envisages, an agreement could be thwarted by any number of factors outside of her control.</p>
<p>Second, the logic of the EU agreeing to a new partnership assumes that there will be a strong economic impetus on both sides to find a way forward. But warning that it would be “an act of calamitous self-harm” on the part of the EU to pursue a punitive deal misreads the importance of the integration process as a whole for many decision-makers in the EU. Though the PM is right that many in Britain have seen the EU through an economic prism, this is not a view necessarily shared elsewhere. </p>
<p>If the past year tells us anything, it is that nothing is certain in politics. So while the prime minister’s speech suggests what she will try to do, there is still a way to go before it actually happens. Only when the negotiations begin in earnest will we see whether May’s assessment of what Britain wants will materialise.</p><img src="https://counter.theconversation.com/content/71359/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul James Cardwell has received funding from the Economic and Social Research Council as part of the UK in a Changing Europe initiative. This article does not reflect the views of the research councils.</span></em></p>The UK prime minister is squaring up to European negotiators in pledging a hard Brexit. But is she overplaying her hand?Paul James Cardwell, Reader in EU External Relations Law, University of SheffieldLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/678002016-10-28T07:43:59Z2016-10-28T07:43:59ZCETA: was Brexit, rather than the Walloons, behind trade deal stutter?<figure><img src="https://images.theconversation.com/files/143513/original/image-20161027-11236-zuj8l4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>Canada’s trade deal with the EU, CETA, appears to be <a href="http://www.bbc.co.uk/news/world-europe-37788882">back on track</a>. It has overcome its latest stumbling block, <a href="https://theconversation.com/who-are-the-walloons-and-why-are-they-blocking-europes-free-trade-deal-with-canada-67718">a veto by the Belgian region of Wallonia</a>, and must now be approved by the other 27 EU members.</p>
<p>CETA’s rollercoaster ride will no doubt be used by both Brexiteers and Remainers to support their pre-existing narratives. For Brexiteers, the EU’s struggle to agree a trade deal with Canada will be further proof that the UK is better off outside the EU. For those who oppose Britain leaving the EU, difficulties in finalising the Canada-EU trade agreement will likely be seen as proof of how difficult the UK will find it to negotiate a satisfactory trade agreement with the rest of the EU within the two-year time window that would follow Article 50 notification.</p>
<p>We have a different view. Based on international relations theory, we interpret the EU’s dealing with Canada as making it clear to Britain that negotiating a free trade agreement will be very long and difficult. It has raised the expected price of Brexit. CETA and the Canadian Trade Minister are merely collateral damage. </p>
<h2>Sending signals</h2>
<p>There is a <a href="https://www.jstor.org/stable/2010405?seq=1#page_scan_tab_contents">vast</a> <a href="http://slantchev.ucsd.edu/courses/pdf/powell-is2003v27n4.pdf">literature</a> in international relations on the themes of deterrence and signalling. This refers to how states interact and try to negotiate their interests.</p>
<p>The most famous of these is <a href="http://www.worldcat.org/oclc/20089122">“mutually assured destruction”</a>. This was the theory developed in the Cold War that the threat of a nuclear strike was enough to prevent the other side from striking, as it would lead to the annihilation of both sides. Although this particular theory of deterrence is not terribly relevant to understanding trade negotiations between capitalist democracies, a softer form of deterrence and signalling is at work. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/143503/original/image-20161027-11260-1byee8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/143503/original/image-20161027-11260-1byee8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=476&fit=crop&dpr=1 600w, https://images.theconversation.com/files/143503/original/image-20161027-11260-1byee8v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=476&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/143503/original/image-20161027-11260-1byee8v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=476&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/143503/original/image-20161027-11260-1byee8v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=599&fit=crop&dpr=1 754w, https://images.theconversation.com/files/143503/original/image-20161027-11260-1byee8v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=599&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/143503/original/image-20161027-11260-1byee8v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=599&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Madness.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-245974603/stock-photo-the-dog-shot-military-personnel-observing-a-21-kiloton-atomic-test-6500-soldiers-participated-in-exercises-coordinated-with-the-nuclear-tests-of-the-buster-jangle-series-nov-1-1951.html?src=s6Wl8UQvXJuvCY-m27rXlA-1-16">Everett Historical / from shutterstock.com</a></span>
</figcaption>
</figure>
<p>Credible commitments are a crucial part of deterrence. This is not to say that the European Commission in Brussels instructed the regional government of Wallonia to put up resistance to CETA, with a view to deterring the UK from leaving the single market. But the timing of its decision to declare CETA a <a href="http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7492">so-called “mixed agreement”</a> – and give Wallonia the power to reject the deal – supports the idea that it was trying to signal to the British government that negotiating a post-Brexit EU-UK trade deal would be far from straightforward. And, in so doing, it may be hoping to deter the UK from exiting the single market or the EU.</p>
<p>Had the EU opted for an unmixed agreement, it would have only required the approval of the EU parliament, a process involving a far smaller number of potential vetoes. This was <a href="http://www.europarl.europa.eu/RegData/etudes/ATAG/2016/586597/EPRS_ATA(2016)586597_EN.pdf">highly debated</a> throughout the first half of 2016. Then, on July 5, not long after the UK’s referendum vote, <a href="http://europa.eu/rapid/press-release_IP-16-2371_en.htm">a press release from Jean-Claude Junker</a>, president of the European Commission, announced that the CETA agreement would be considered a “mixed one” and therefore require the approval of all EU nations – and, as in the case of Belgium, sub-national legislatures as well. </p>
<p>In choosing to declare CETA to be a mixed agreement, the European Commission must have been aware that many of the veto points across the continent were controlled by politicians increasingly aware of the rise of anti-globalisation and anti-trade sentiment <a href="http://www.nytimes.com/2016/09/18/opinion/sunday/put-globalization-to-work-for-democracies.html?_r=0">in public opinion throughout the developed world</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/143501/original/image-20161027-32322-17bryvu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/143501/original/image-20161027-32322-17bryvu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/143501/original/image-20161027-32322-17bryvu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/143501/original/image-20161027-32322-17bryvu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/143501/original/image-20161027-32322-17bryvu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/143501/original/image-20161027-32322-17bryvu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/143501/original/image-20161027-32322-17bryvu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Happier times: Canada’s trade minister Chrystia Freeland and European Parliament president, Martin Schulz, in April 2016.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/photosmartinschulz/26629921906">Martin Schulz/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>This is something that Canada’s international trade minister, <a href="http://pm.gc.ca/eng/minister/honourable-chrystia-freeland">Chrystia Freeland</a>, has been aware of. She travelled extensively around Europe, meeting with various people with influence or control over these veto points. For instance, she attended a <a href="http://ipolitics.ca/2016/09/19/germanys-social-democrats-vote-to-support-ceta/">conference of Germany’s left-leaning, Social Democratic Party</a>, addressing their concerns and getting them to greenlight the agreement. </p>
<h2>Messaging London, not Ottawa</h2>
<p>Some Canadians were, of course, somewhat taken aback by the European Commission’s eleventh hour decision to change the ratification procedure, especially since Canada’s federal government had long ago completed the arduous task of securing consent to CETA <a href="http://www.cbc.ca/news/canada/newfoundland-labrador/ceta-fishery-fund-letters-1.3803878">from Canada’s own sub-national governments, the provinces</a>. Two highly respected Canadian academics, <a href="https://www.mcgill.ca/law/about/profs/de-mestral-armand">Armand de Mestral</a> and <a href="https://www.cigionline.org/person/markus-gehring">Markus Gehrin</a>, <a href="http://www.theglobeandmail.com/report-on-business/rob-commentary/eu-should-have-told-canada-years-ago-it-was-moving-the-ceta-goal-posts/article32463376/">declared</a> that the “EU should have told Canada years ago it was moving the CETA goal posts” by deeming the agreement a mixed one. </p>
<p>What some observers in Canada may have been missing was that the very recent decision to declare CETA a mixed agreement was about sending a message to London, not Ottawa. In our view, the Canadians shouldn’t take the aftermath of the European Commission’s July decision personally – it’s not about them, it’s really about Brexit.</p>
<p>So how should the UK respond to this signal that’s been sent up by the European Commission? It is clear that, going forward, any trade agreement between the UK and the EU will be a mixed agreement. Since the UK appears to be intent on leaving the EU and the single market, it may need to start thinking about how it can address the concerns of veto holders throughout the EU. At the very least, a Chrystia Freeland-style charm offensive may be in order – although this may strain the human resources of the UK’s brand new <a href="https://www.gov.uk/government/organisations/department-for-exiting-the-european-union">department for exiting the European Union</a>.</p><img src="https://counter.theconversation.com/content/67800/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The way that the EU dealt with its CETA trade deal with Canada makes it clear to Britain that negotiating a free trade agreement will be very long and difficult.Andrew Smith, Senior Lecturer in International Business, University of LiverpoolMichael Cole, Lecturer in Organisation and Management, University of LiverpoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/640262016-08-31T08:16:14Z2016-08-31T08:16:14ZAfrica stands to benefit from new trade deals and, possibly, from Brexit<figure><img src="https://images.theconversation.com/files/135935/original/image-20160830-28235-13br06r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">African trade and economic integration is set for growth</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The last few months have seen some significant developments for African trade and integration. These advances come at a crucial time for African countries, which have been particularly <a href="http://www.brookings.edu/blogs/africa-in-focus/posts/2016/06/21-africa-brexit-trade-aid-economy-sow-sy">hard hit</a> by the slump in commodity prices, China’s economic downturn, and higher external borrowing costs. This has resulted in slower GDP growth than expected, currency fluctuations and reduced investment – particularly in resource-rich countries.</p>
<p>New dynamics are emerging as a result of two major developments: first, a set of agreements between regional African blocs and the European Union, as well as between African countries themselves. Second, Brexit may change the thrust of African trade with both the EU and Britain. </p>
<p>Combined, they are likely to have some positive economic implications for Africa.</p>
<p>Intra-African trade has <a href="http://www.uneca.org/sites/default/files/uploaded-documents/RITD/2015/CRCI-Oct2015/intra-african_trade_and_africa_regional_integration_index.pdf">comprised about 15%</a> of Africa’s total trade over the last decade. This compares with intra-regional trade rates of, for example, 17% in South and Central America, and 62% in Asia. African exports to the EU have <a href="http://ec.europa.eu/eurostat/statistics-explained/index.php/Africa-EU_-_key_statistical_indicators">increased substantially</a> in recent years, from €85 billion in 2004 to more than €150 billion in 2014.</p>
<p>The recent trade and integration developments should raise economic activity and competitiveness in non-extractive sectors, leading to higher GDP growth and greater economic diversification. They are intended to boost intra-African trade, particularly in goods, and may increase African trade with the EU and Britain. </p>
<h2>Trade to drive economic integration</h2>
<p>In June, African leaders signed the <a href="http://www.bbc.co.uk/news/world-africa-33076917">Tripartite Free Trade Area agreement</a>. This has created a free-trade zone stretching from Cape Town to Cairo, covering 26 countries and representing almost half of African Union member states. </p>
<p>The agreement unites three existing trade blocs – the Southern African Development Community, the East Africa Community, and the Common Market for Eastern and Southern Africa. <a href="http://www.brookings.edu/blogs/africa-in-focus/posts/2015/08/26-regional-integration-arrangements-africa-de-melo">At least half</a> of the member states are expected to ratify the tripartite agreement within the coming year, enabling implementation to begin.</p>
<p>The tripartite agreement promises to remove trade barriers within this extended region and increase market size and economic activity. Critically, it will reduce the cost of goods traded within the affected zones. It is a key achievement in the <a href="http://www.ictsd.org/bridges-news/bridges-africa/news/the-tripartite-free-trade-area-agreement-a-milestone-for-africa%E2%80%99s">rationalisation</a> of Africa’s trade agreement landscape. </p>
<p>Not all member countries will benefit equally from the agreement. Notably, countries with smaller economies and limited goods export capacity, such as Rwanda, may lose out to stronger regional economies where production centres may <a href="http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=2266&context=ilj">consolidate</a>, such as South Africa. </p>
<p>Since member states will be required to remove protectionism from domestic industries, infant industries are likely to struggle to compete unprotected in the free trade zone. This may hamper industrialisation efforts in smaller economies.</p>
<p>A notable weakness is that the tripartite agreement does not cover trade in services, such as legal, accounting and IT services. Services represent <a href="http://www.brookings.edu/blogs/africa-in-focus/posts/2015/08/26-regional-integration-arrangements-africa-de-melo">more than 50%</a> of exports in value-added terms and has been the <a href="http:the//www.voxeu.org/sites/default/files/file/Global%20Trade%20Slowdown_nocover.pdf">largest contributor</a> to GDP in 35 African countries.</p>
<p>Achieving greater integration through implementation of the tripartite agreement <a href="http://news.xinhuanet.com/english/2016-06/17/c_135443004.htm">will require considerable investments</a> in improving infrastructure and connectivity across member states. </p>
<p>This is essential to reduce <a href="http://siteresources.worldbank.org/INTRANETTRADE/Resources/Internal-Training/Portugal-Perez_Wilson_Trade_Costs_Africa_paper.pdf">transaction costs</a>, which remain disproportionately high across much of Africa. It costs more in time and money to import and export containers of goods in sub-Saharan Africa than any other region. For example, it takes US$2,567 and 37 days to import a container in sub-Saharan Africa, compared to US$1,612 and 19 days in Latin America and the <a href="http://www.uneca.org/sites/default/files/PublicationFiles/trade_facilitation_eng.pdf">Caribbean</a>. </p>
<p>The tripartite agreement is expected to form the basis of the Continental Free Trade Area negotiations, which are due to be completed by October 2017.</p>
<p>The continental agreement aims to join the 15 countries of Economic Community of West African States to the tripartite free trade area. Africa’s economic powerhouses of Kenya, South Africa, Nigeria and Egypt recently pledged to <a href="http://www.standardmedia.co.ke/article/2000213714/kenya-signs-partnership-to-speed-up-intra-africa-trade">consolidate their efforts</a> in pushing for the finalisation of these negotiations. </p>
<h2>Taking advantage of Brexit</h2>
<p>The Southern African Development Community signed a new economic partnership agreement with the EU in June. This is to facilitate trade between some of the region’s member states (Botswana, Lesotho, Mozambique, Namibia, South Africa, and Swaziland) and the EU. This deal was signed shortly before Britain voted to leave the EU.</p>
<p>The EU agreement with the southern African bloc appeared to <a href="http://trade.ec.europa.eu/doclib/docs/2014/october/tradoc_152818.pdf">yield a fairer deal</a> compared to previous agreements. For example, flexible rules of origin were adopted, allowing for partial processing in more than one of the included southern African countries. This will contribute significantly to strengthening regional value chains.</p>
<p>In addition, for the first time, the Southern African Development Community agreement prohibits the EU from using agricultural export subsidies. This might ease constraints on African farmers’ competitiveness. </p>
<p>While the Common Agricultural Policy has already undergone much reform, removal of the remaining protectionist provisions is likely boost GDP and reduce poverty in Africa, as shown in a <a href="http://www.etsg.org/ETSG2014/Papers/382.pdf">case study on Uganda</a>.</p>
<p>Pressure may be mounting for the EU to extend similar (or better) terms for the East African Community. A broadly similar revised EU agreement has been negotiated recently but its signing was recently <a href="http://www.newtimes.co.rw/section/article/2016-07-18/201812/">delayed</a>. Tanzania demanded a moment of pause citing turmoil in the EU after the Brexit vote. </p>
<p>It is too early to be certain, but this may be the first sign of African countries using Brexit to renegotiate and leverage fairer trade terms with the EU.</p>
<p>When Brexit finally takes effect, Britain will have no valid agreements with either African trade blocs or individual countries. New agreements with Britain will need to be negotiated. This may be a costly exercise for African countries but can be made easier by negotiating as regional blocs. </p>
<p>Britain’s immediate concern will be trade negotiations with the EU and other large trading partners. African trade blocs are therefore unlikely to be addressed for some time, and the uncertainty created by this delay may be damaging to African exporters. This lack of clarity could be mitigated by an early signal from Britain as to its planned stance.</p>
<h2>Brexit will have both positive and negative effects</h2>
<p>On the negative side, British consumer demand for imports from Africa could drop as the pound weakens and the British economy goes into a mild, Brexit-induced <a href="https://www.theguardian.com/business/2016/jul/19/imf-cuts-uk-growth-forecasts-following-brexit-vote">recession</a>. African countries more integrated into global markets will be most affected, notably South Africa, Kenya, and Nigeria. </p>
<p>On the positive side, Brexit could possibly result in fairer trade deals for Africa, both with Britain and the EU. </p>
<p>But until Britain’s post-Brexit trade policy is established, it is not possible to assess how progressive it may be. A weakened EU may be <a href="http://edition.cnn.com/2016/07/01/africa/brexit-africa/">forced to compromise</a> more, enabling African countries to secure fairer deals. </p>
<p>Despite some deficiencies with the trade blocs and agreements, these developments have the potential to significantly expand trade and economic growth in Africa. They may increase competition and strengthen regional value chains. Further gains will also be achieved if the free-trade zones are expanded to cover trade in services.</p><img src="https://counter.theconversation.com/content/64026/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Logan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The African trade and integration spaces are seeing significant improvements and gathering even more momentum in the face of Brexit. Sarah Logan looks at the driving factors.Sarah Logan, Economist, International Growth CentreLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/623632016-07-15T09:56:13Z2016-07-15T09:56:13ZFour options for UK trade after Brexit<figure><img src="https://images.theconversation.com/files/130408/original/image-20160713-12362-esjnb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>With Brexit on the horizon, the UK must decide what kind of trade relationship it should craft with the European Union. The cases of Norway, Switzerland, Canada and other members of the WTO offer inspiration. All have varying degrees of access to the single European market, and particular rights and obligations. So how do they differ?</p>
<h2>1. Norway</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/130398/original/image-20160713-12392-1hzvmkd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130398/original/image-20160713-12392-1hzvmkd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130398/original/image-20160713-12392-1hzvmkd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130398/original/image-20160713-12392-1hzvmkd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130398/original/image-20160713-12392-1hzvmkd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130398/original/image-20160713-12392-1hzvmkd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130398/original/image-20160713-12392-1hzvmkd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Fishing freedom.</span>
<span class="attribution"><span class="source">samot from www.shutterstock.com</span></span>
</figcaption>
</figure>
<p><strong>Single market access? Yes.</strong></p>
<p><strong>Freedom of movement? Yes.</strong> </p>
<p><strong>EU budget contributions? Yes: around €512m each year.</strong></p>
<p>Norway is a member of the European Economic Area, which comprises EU member states, plus Iceland and Lichtenstein. Within the EEA, Norway participates in the EU’s single market, and, as such, adopts around 70 to 75% of EU legislation. This means all single market legislation other than that pertaining to fisheries and agriculture. </p>
<p>Such access to the single market excludes participation in the political union and in the institutional mechanisms of the EU – including the policymaking process. </p>
<p>Participating in the single market also means accepting the EU principles of the freedom of movement of goods, services, capital and labour. As such, EU citizens can move freely to Norway and vice-versa. </p>
<p>Norway has also chosen to participate in the Schengen area of passport-free movement and the EU’s “Dublin rules” for dealing with asylum claims. This is not a requirement of EEA membership, however.</p>
<p>In order to participate in the single market and various other EU programmes, Norway makes a contribution based on a proportion of its GDP (in the same way that EU member states do). This amounts to <a href="http://www.eu-norway.org/eu/Financial-contribution/#.V4iqJlJGRdc">€447m annually</a> for the 2014-2020 period.</p>
<p>The EEA agreement also includes a commitment to improving cohesion within the EEA, which are directed at the group’s poorest states. In accordance with this, Norway makes a contribution of €391m in total over the 2014-2020 period. </p>
<h2>2. Switzerland</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/130399/original/image-20160713-12353-1an6qgh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130399/original/image-20160713-12353-1an6qgh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130399/original/image-20160713-12353-1an6qgh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130399/original/image-20160713-12353-1an6qgh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130399/original/image-20160713-12353-1an6qgh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130399/original/image-20160713-12353-1an6qgh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130399/original/image-20160713-12353-1an6qgh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Swiss.</span>
<span class="attribution"><span class="source">Fedor Selivanov from www.shutterstock.com</span></span>
</figcaption>
</figure>
<p><strong>Single market access? Partial – subject to the agreements in place.</strong> </p>
<p><strong>Freedom of movement? Yes.</strong></p>
<p><strong>EU budget contributions? Yes: around €420m a year.</strong> </p>
<p>In a referendum in 2014, the Swiss electorate opted not to become part of the EEA. Switzerland’s relationship with the EU is therefore not regulated by the EEA agreement, but by a complex web of more than a hundred agreements. These have been negotiated since 1972. </p>
<p>A bundle of agreements in 1999 guaranteed Switzerland access to the single market. This meant free trade in agriculture, removed technical trade barriers, and gave it access to public procurement projects. It also includes the free movement of people – so any EU citizen can move to Switzerland.</p>
<p>Another bundle of agreements in 2004 guaranteed Switzerland participation in more EU programmes, covering the media, the environment and efforts to combat fraud and tax evasion. It also included Swiss participation in the Schengen area. In 2010 another agreement was signed to guarantee Swiss participation in EU education, youth and professional training programmes. </p>
<p>One area where Switzerland lacks full access is in financial services. Swiss banks lack the passporting rights that authorise them to offer services across the single market. To operate within the EU, they need to open a subsidiary in an EU member state. </p>
<p>For the access it does have and to participate in various EU programmes, Switzerland pays <a href="http://researchbriefings.parliament.uk/ResearchBriefing/Summary/RP13-42#fullreport">contributions to the EU budget</a>. It also contributes to the EU’s cohesion funds to reduce economic and social disparities in new EU member states.</p>
<p>As well as taking a long time to negotiate, Switzerland’s bilateral agreements with the EU are subject to change. As and when the EU makes changes to its rules and regulations, new agreements are required to keep up with them.</p>
<p>Or the Swiss may decide they want to change one aspect of one of their agreements. In a 2014 referendum, for example, the Swiss electorate voted to restrict immigration into the country. This calls into question the existing agreement on the free movement of people between the EU and Switzerland, which will have a knock-on effect on other areas of Swiss-EU relations. </p>
<h2>3. WTO-only</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/130401/original/image-20160713-12386-1fu7v7t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/130401/original/image-20160713-12386-1fu7v7t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/130401/original/image-20160713-12386-1fu7v7t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/130401/original/image-20160713-12386-1fu7v7t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/130401/original/image-20160713-12386-1fu7v7t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/130401/original/image-20160713-12386-1fu7v7t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/130401/original/image-20160713-12386-1fu7v7t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">WTO.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/world_trade_organization/4999622562">World Trade Organisation</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p><strong>Single market access? No.</strong></p>
<p><strong>Freedom of movement? No.</strong></p>
<p><strong>EU budget contributions? None.</strong></p>
<p>Trading according to the rules of the World Trade Organisation (WTO) is the UK’s default option, if it does not secure a trade deal with the EU. </p>
<p>The WTO has done a great deal to lower the use of tariffs on goods across the globe through its multilateral deals. But some are still in place.</p>
<p>Countries trading with the EU under WTO rules will face tariffs for agricultural products <a href="https://www.wto.org/english/thewto_e/countries_e/european_communities_e.htm">and for vehicles</a>. For instance, motor vehicles exported from the UK to the EU would be subject to a 9.8% tariff, increasing their price. Aluminium would face a 6% tariff, and agricultural products an average of over 10%. </p>
<p>Non-tariff barriers also obstruct trade. These are essentially standards and regulations. They can be anything from the forms needed to export goods, to rules about what pesticides are allowed on fruits and which are not. In order to sell goods and services in a state, exporters and service providers must conform with its rules.</p>
<p>So, under a WTO-only trade model, you have to demonstrate compliance with EU regulations for products entering the EU (unless you have an agreement recognising your standards and practices). </p>
<p>In a WTO-only relationship with the EU, the UK’s finance industry would lose its passporting rights, meaning banks would need to open branches in the EU to operate there. There will also be no provision for mutual recognition of professional qualifications (for example for architects, lawyers, accountants) or of each other’s regulatory bodies. </p>
<p>Access to the market of government procurement (such as big infrastructure construction projects) will also be more restricted. This is a significant market, with public authorities in the EU spending around <a href="http://ec.europa.eu/growth/single-market/public-procurement_en">14% of GDP</a> on the purchase of services, works and supplies.</p>
<h2>4. Canada</h2>
<p><strong>Single market access? No. But better than WTO-only access.</strong> </p>
<p><strong>Freedom of movement? No.</strong></p>
<p><strong>EU budget contributions? None.</strong></p>
<p>Over decades, the EU has built a network of preferential trade agreements with states around the world. Canada recently signed one called a <a href="http://ec.europa.eu/trade/policy/in-focus/ceta/">Comprehensive Economic and Trade Agreement (CETA)</a>. </p>
<p>Once ratified, Canada will gain better access to the EU market than when it simply had a WTO relationship with the union. But it will not have full access to the single market and so will not have full freedom of movement, nor does it contribute to the EU budget.</p>
<p>CETA will eliminate tariffs <a href="http://trade.ec.europa.eu/doclib/docs/2014/december/tradoc_152982.pdf">on most goods</a> being traded between the EU and Canada. This includes 100% of tariffs on industrial and fisheries products, and just over 90% of tariffs on agricultural products. Products still subject to tariffs include dairy, eggs, chicken and turkey meat, however. </p>
<p>The agreement does not include financial passporting rights, though. And while it is more open to facilitating the recognition qualifications to facilitate movement of professionals providing services across borders, it does not provide the automatic recognition that the single market does. However, increasingly trade agreements include arrangements to help the movement of service providers – including people – across borders to provide a service on a temporary basis.</p>
<p>The real benefit will come from a reduction of non-tariff barriers (such as simplified customs procedures), and improved access to each other’s public procurement and services markets (legal, environmental and financial services). </p>
<p>In terms of dealing with regulatory blocks to trade in new preferential trade agreements, this is done by each side agreeing to recognise the other’s standards or one side adopting the other’s, adopting international standards, or jointly creating new ones. For example, the ongoing negotiations between the EU and the US for a free trade agreement (<a href="http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip">TTIP</a>), explicitly aim at regulatory convergence between the parties. This is largely why it is taking so long. </p>
<p>Agreements, as Canada’s does, can also include rules regulating investment, market access for foreign investors and mechanisms to resolve disputes between investors and states. All of this can have a significant impact on domestic regulation and will require a significant amount of negotiating.</p><img src="https://counter.theconversation.com/content/62363/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Maria Garcia has received funding from the ESRC and ERC.</span></em></p>Norway, Switzerland, Canada and a WTO-only trade relationship are are the obvious options for the UK post-Brexit.Maria Garcia, Senior Lecturer in International Relations, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/603042016-06-23T10:04:55Z2016-06-23T10:04:55ZWhy progressives should rescue the TPP trade deal<p>The Trans-Pacific Partnership (TPP) is under siege, with presidential candidates on both sides of the aisle voicing increasingly protectionist positions. As the general election gets into full swing this fall, the anti-trade rhetoric promises to reach fever pitch, taking down TPP in the process. </p>
<p>While the growing hostility among conservatives <a href="https://theconversation.com/can-free-trade-and-tpp-survive-rise-of-the-new-right-56241">has come as a surprise</a> to many, attacks by liberals have barely raised an eyebrow since <a href="http://www.gallup.com/poll/181886/majority-opportunity-foreign-trade.aspx">they are generally more critical</a> of free trade.</p>
<p>Progressives, however, are making a mistake in rejecting the 12-country trade accord. As an economist who specializes in trade and trade agreements – and as a progressive who believes in the importance of environmental protection, workers’ rights and shared prosperity – I believe the TPP presents a rare opportunity to rewrite key rules on global trade for the better. </p>
<p>The TPP is less about tariffs and more about creating a coherent global code of conduct for how firms do business in the world. Done right, the agreement would bring important new policy priorities to the negotiating table. It would be a shame to let this chance pass us by. </p>
<h2>Skepticism and surprise</h2>
<p>As late as last summer, there was ample reason to be skeptical of the then still-secret agreement. </p>
<p><a href="http://www.newsweek.com/what-tpp-trade-deal-342449">Many doubted</a> that the negotiations would protect workers’ rights and the environment, without letting multinationals write the rules of the game. Perhaps surprisingly, the final agreement largely delivers on its progressive promises, with solid labor and environmental protections that are unprecedented in a major trade deal. </p>
<p>The TPP’s new rules would achieve a high-water mark in global efforts to abolish child labor and gender discrimination, protect collective bargaining worldwide, curb trade in endangered species and conserve critical marine resources. Even the much lambasted “investor-state” provisions would modestly walk back existing rules, in favor of national governments over foreign firms. </p>
<p>It is therefore surprising that many of the nation’s leading progressive politicians continue to speak out against the pact. </p>
<p>Bernie Sanders has <a href="http://www.sanders.senate.gov/newsroom/recent-business/sanders-trade-deal-a-disaster">decried the TPP</a> as a “disastrous trade agreement designed to protect the interests of the largest multinational corporations at the expense of workers, consumers, the environment and the foundations of American democracy.” </p>
<p>Hillary Clinton – who initially supported the pact – <a href="https://www.hillaryclinton.com/briefing/statements/2015/10/07/trans-pacific-partnership/">faults the agreement</a> for disproportionately benefiting pharmaceutical companies and costing American jobs. Elizabeth Warren <a href="https://www.washingtonpost.com/opinions/kill-the-dispute-settlement-language-in-the-trans-pacific-partnership/2015/02/25/ec7705a2-bd1e-11e4-b274-e5209a3bc9a9_story.html">has voiced sharp opposition</a> to the provision that allows companies to mount legal challenges to sovereign nations.</p>
<p>To be clear: There are legitimate concerns. But it is not enough for progressive leaders to raise alarms. Americans need serious, sober consideration of exactly what the TPP is – and what it is not – in order to understand whether its benefits outweigh its costs. </p>
<p>And at its core, the TPP is about applying a consistent set of standards to global supply chains, rules that reflect American – and progressive – values. </p>
<h2>A progressive rulebook</h2>
<p>Trade today is <a href="http://voxeu.org/article/how-much-value-added-traded">far more complex</a> than ever before. Nearly every product that touches our lives has been conceived, designed and assembled in multiple countries, tracing sinuous and sometimes murky paths that consumers have neither the time nor the information to unravel. </p>
<p>No matter how vigilant and well-intentioned customers may be, there is no way to opt out of global commerce and the <a href="http://www.nytimes.com/2013/12/23/world/asia/bangladeshi-factory-owners-charged-in-fatal-fire.html">sometimes-questionable</a> practices it embodies. </p>
<p>The TPP is an attempt to address this modern dilemma, using free trade with the U.S. and other major markets as an incentive for signatory nations to follow a basic global code of conduct. Crucially, the TPP’s rules would be enforced through a <a href="https://ustr.gov/sites/default/files/TPP-Chapter-Summary-Dispute-Settlement.pdf">dispute settlement panel</a> that aspires to be transparent and expeditious.</p>
<p>This “deep” agreement approach is in sharp contrast to the status quo of “shallow” trade agreements, which effectively take a pass on addressing difficult but vital environmental and labor issues, consumer protections and transparency measures that allow small business to compete in world markets. Deep agreements are also <a href="http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=9494515&fileId=S1474745614000408">increasingly important</a> for firm success – and thus the overall health of communities and workers – as global supply chains <a href="http://voxeu.org/article/wto-20-thinking-ahead-global-trade-governance">reshape the contours of international commerce</a> in the 21st century.</p>
<p>The TPP’s promise of a new progressive rule book – one that includes enforceable agreements against child labor and workplace discrimination, measures to punish illegal logging and trade in protected species, and protections against consumer fraud – would mark a substantial step forward in the progressive policy agenda on the global stage. </p>
<h2>Finding the right focus</h2>
<p>There is no doubt that by cutting tariffs, the TPP will cost some jobs, even as it creates others. And in relatively wealthy countries like the U.S., the burden of job losses will likely be borne disproportionately by <a href="https://www.aeaweb.org/articles?id=10.1257/aer.103.6.2121">those workers already struggling</a> from earlier waves of import competition and technological change. </p>
<p>But continuing mechanization and inevitable changes in what America is best at making will cause far more job displacement than proposed tariff cuts ever could, especially from the U.S.’ already very low tariff rates. Refusing to sign the TPP won’t stop these ongoing and seismic shifts in the global workforce. Serious pro-worker policy proposals needs to begin by acknowledging this truth. </p>
<p>Squabbling over a (relative) handful of specific job losses in the TPP only delays an increasingly urgent national conversation about inequality, good jobs and opportunity. American workers would be far better served if progressives focused instead on implementing comprehensive improvements in education, job search and relocation allowances, and income support that help everyone cope with rapidly evolving labor markets. </p>
<h2>Shaping trade’s future</h2>
<p>The TPP is not a referendum on globalization. It does not swing open the doors to foreign imports. Nor is it a triumph of corporations over people. It is barely even a trade agreement in the traditional “tariff-cutting” sense. Rather, it is about what we want global trade to look like in the future. </p>
<p>It is an agreement that aspires for a better way of doing business in the world. If ratified, the TPP would bring enforceable, progressive standards of conduct into as-yet unpoliced policy areas like labor and the environment that are currently the Wild West of global trade. Add in the well-recognized benefits of improved customs transparency and improved market access, and the benefits of the accord are substantial. </p>
<p>The agreement is not perfect – intellectual property rules are unarguably a compromise, and disciplines on rule-breaking behavior by firms or governments could be stronger – but we need to be pragmatic. </p>
<p>Renegotiating the agreement – which took seven years to hammer out – is simply too risky. There is a very real prospect that our trading partners would refuse. And if the TPP fails, there is every reason to expect that China would write the rules instead, with a far less progressive agenda. </p>
<p>No, the TPP is not perfect, but it is the best deal we are likely to get, and it is certainly better than nothing.</p><img src="https://counter.theconversation.com/content/60304/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Emily J. Blanchard does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Leading progressives including Elizabeth Warren and Bernie Sanders have been very vocal in opposing the Trans-Pacific Partnership. Here’s why they should get on board.Emily J. Blanchard, Associate Professor, Dartmouth CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/607422016-06-15T10:08:32Z2016-06-15T10:08:32ZBritain could be a key global player if it stays in the EU<figure><img src="https://images.theconversation.com/files/126216/original/image-20160611-29216-l4mdir.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Even after weeks of campaigning, both sides of the referendum campaign have focused entirely on the short-term impacts of the debate. But the question really has to be where Britain will be in ten or 20 years from now.</p>
<p>Britain is actually on the brink of becoming the most powerful nation on the planet. But it has to remain in the EU to realise the ambition. </p>
<p>Before Brexit looked like a real possibility, the <a href="http://www.cebr.com/welt-2/">Centre for Economics and Business Research</a> predicted that the British economy would overtake Germany’s as the largest in Europe by the 2030s.</p>
<p>Its population is set to rise above 70m by 2030, while Germany’s is likely to shrink. The British population will also be younger.</p>
<p>A separate <a href="http://www.hsbc.com/%7E/media/HSBC-com/about-hsbc/advertising/pdfs/the-world-in-2050">report</a> by HSBC predicts that by 2050 the total number of working people in the UK will increase by 5-10%, while Germany’s working population will shrink by a massive 29%. There will be more workers in Britain adding to its growing economy.</p>
<p>If these predictions come true, the European power map would look significantly different. </p>
<p>Most power within the EU resides with the <a href="https://theconversation.com/inside-the-eu-a-beginners-guide-to-brussels-59553">Council of the European Union</a> which is made up of the Council of Ministers and the European Parliament. Collectively, these bodies pass the EU laws that affect the UK. Currently, there are 751 MEPs in the European Parliament. As the most populous member of the EU, Germany has the most MEPS of any member state at 96. </p>
<p>Germany also has the largest GDP within the EU. Both its population and economic power mean that Germany’s dominance over EU policy has been decisive. It was Germany that brokered the <a href="https://next.ft.com/content/c7093540-4646-11e5-b3b2-1672f710807b">rescue deal</a> between the EU and Greece. Germany negotiated the recent <a href="http://www.ft.com/cms/s/f6c982ec-e54e-11e5-ac45-5c039e797d1c,Authorised=false.html?siteedition=uk&_i_location=http%253A%252F%252Fwww.ft.com%252Fcms%252Fs%252F0%252Ff6c982ec-e54e-11e5-ac45-5c039e797d1c.html%253Fsiteedition%253Duk&_i_referer=http%253A%252F%252Fwww.bbc.co.uk%252Fb7632b5308275b73c20c8094cbb26546&classification=conditional_standard&iab=barrier-app#axzz42O6LHjo4">migration deal</a> with Turkey in order to mitigate the migration crisis, and it was instrumental in granting special opt-outs during David Cameron’s recent negotiations on the terms of the UK’s EU membership.</p>
<p>It’s no wonder <a href="http://www.bbc.co.uk/news/world-europe-23709337">Angela Merkel</a> is consistently listed by <a href="http://www.forbes.com/powerful-people/gallery">Forbes Magazine</a> as one of the world’s top three most powerful people.</p>
<h2>Britain rises</h2>
<p>There is good reason to believe that the UK, and its prime minister, would begin to take on a similar role within the Council of the European Union if its population and economy overtook Germany’s. But two other factors would potentially cement the UK’s place at the heart of the EU.</p>
<p>First, London would be likely to retain its position as a global “command centre”, having the advantage of its geographical location and central time zone, combined with a diverse international demographic and highly educated population.<br>
London’s position as an international financial centre is pivotal to Europe’s future economic success. More <a href="http://www.standard.co.uk/business/business-news/london-is-pick-of-europe-for-world-s-biggest-companies-for-headquarters-9238130.html">European companies</a> have their headquarters there than anywhere else in Europe. London has a large continental European population – French citizens alone are thought to number <a href="http://www.bbc.co.uk/news/magazine-18234930">300,000</a>.</p>
<p>Second, the UK’s relationship with the US strengthens its bargaining power within the EU. The US has recently pushed for trade deals in Asia to sustain its economic growth. But as China and other emerging economies continue to grow, the international economic influence of the US will inevitably wane. During this period of decline it is likely to seek closer ties with the EU to sustain its ideological and economic strength. </p>
<p>The move towards the <a href="http://www.independent.co.uk/voices/comment/what-is-ttip-and-six-reasons-why-the-answer-should-scare-you-9779688.html">Transatlantic Trade and Investment Partnership</a> between the EU and the US signals the beginning of this endeavour.</p>
<p>By carefully managing negotiations on this deal, the UK could strategically position itself as the gatekeeper between US and EU interests. Such a position would make the British PM the powerbroker between two economic giants. It is only together that the US and EU can continue to dominate global economic, social and political policy.</p>
<p>Collectively, a growing population, economic strength, an established international workforce and a special relationship with the US will mean the UK – as part of the EU – would become one of the most powerful countries in the world. Whether this renewed position as a global superpower is a positive for global affairs is of course, a different matter. </p>
<h2>Island nation</h2>
<p>Alternatively, Britain can withdraw from the EU and and give up any chance of influencing international politics and shaping economic policy. As Britain floats away from its European partners it would cease to be of much relevance to the US, which would seek new relations with other European nations. </p>
<p>And as emerging economies such as India and Brazil forge ahead, Britain will soon drop off the radars of other large trading partners, including China, which would inevitably focus its attentions on those parts of the world that will bring it the greatest prosperity. Britain’s political and economic global influence, though not obsolete, would be more or less relegated to the pages of the history books.</p>
<p>Viewed in these terms, Britain’s retreat from the EU might seem disastrous – at least for its global influence. Yet a vote to leave need not be so dystopic. Its destiny as a small island nation may be better suited to regional negotiations and bilateral agreements based on self-interest.</p>
<p>Rather than basing future prosperity on global economic power, Britain could move towards an entirely new system of growth. It could focus not on economic output and militaristic might as markers of national pride, but on greater social equality, equity in wealth distribution and improved standards of living for everyone. Free from EU interference and its commitments to neo-liberal markets, the UK would be able to invest in an advanced economy which seeks to both protect and enhance the well-being of its workers. This, however, is probably not the future envisaged by the current government, nor by the leading figures in the Leave camp.</p>
<p>Voters have a stark choice to make. Are they happy for Britain to forge a new place in the world absent of global influence? Or do they want to be part of a country that remains at the centre of international economic development? Do they want to be part of a global effort to advocate human rights? Do they see Britain’s future as a global centre for advancing knowledge, research and enterprise? If so, Britain will have to remain within the EU.</p><img src="https://counter.theconversation.com/content/60742/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Walters does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The choice is stark: take a leading role in a powerful block or give up the chance to shape international politics.Mark Walters, Reader in Law, University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/506632015-11-25T04:36:56Z2015-11-25T04:36:56ZWhy South Africa needs the US for its agricultural trade<figure><img src="https://images.theconversation.com/files/102798/original/image-20151123-18255-1zndxw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The dispute between South Africa and the US over poultry products could harm relations between the two countries. </span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Relations between the US and South Africa have hit another low in a series of trade disputes that go as far back as <a href="http://www.bilaterals.org/?-US-SACU">2003</a>. While strengthening its relations with other countries, the US has threatened to suspend South Africa from its preferential trade programme for Africa due to its failure to comply with the latest terms of the African Growth Opportunities <a href="https://www.whitehouse.gov/the-press-office/2015/11/05/letter-president-suspension-application-duty-free-treatment-all-agoa">Act</a> (AGOA).</p>
<p>AGOA enables preferential access to the US market for African countries that meet specific criteria. The US extended these benefits to 2025 for South African products while restrictions on US poultry imports were <a href="http://agoa.info/about-agoa.html">relaxed</a>.</p>
<p>In South Africa’s defence for not complying, there were outstanding issues relating to sanitary and phyto-sanitary (animal health) measures to be considered following an outbreak of H5 Virus, or bird flu, in <a href="http://www.cdc.gov/flu/avianflu/h5/">21 US states</a>.</p>
<p>Lately veterinary authorities of the two countries have signed another agreement that will <a href="https://www.thedti.gov.za/editmedia.jsp?id=3579">allow</a> poultry imports into South Africa from the unaffected states. This agreement is expected to defuse a potentially volatile situation and the US poultry imports will start coming into South Africa early in 2016. </p>
<p>The US has been an important trade partner for many years - in the lead up to South Africa’s democracy and afterwards. But this has changed. The US accounted for 13% of South African imports and 10% of exports in 1996. It was the second most important trading partner. But by 2014 the US had been overtaken by China as its share declined for both imports and exports to 7%.</p>
<p>Nevertheless the US is still one of the country’s top five main trading <a href="http://www.sars.gov.za/ClientSegments/Customs-Excise/Trade-Statistics/Pages/default.aspx">partners</a>. And it is clear that the US has an interest in South Africa as it is by far its leading market in <a href="http://agoa.info/data/total-trade.html">sub-Saharan Africa</a>. </p>
<h2>Why AGOA matters</h2>
<p>AGOA offers diversification opportunities for agricultural products. It also provides access to an alternative and highly competitive market. These two factors - diversification and an alternative market - are important in the light of highly volatile markets and fast changing global demands. They help reduce the risk of market volatility.</p>
<p>South African products benefiting from AGOA include avocados, wines, nuts and citrus. The US is the most or second most important market destination for these products.</p>
<p>Since AGOA was inacted in 2000, exports of these products to the US has grown annually. These exports help industries such as citrus which employ more than 80 000 people directly, 40 000 indirectly and a further 100 000 in peak <a href="http://www.financialmail.co.za/opinion/2014/07/04/on-my-mind-jobs-need-export-juice">season</a>. The wine industry employs more 300 000 people directly and <a href="http://www.wosa.co.za/The-Industry/Statistics/World-Statistics/">indirectly</a>.</p>
<p>The US also serves as a benchmark for global competitiveness in many areas. It makes it easy to sell products into other countries once they have been accepted by the US.</p>
<p>South Africa needs the US market for job creation as well as revenue generation. It is therefore important that the current trade disputes are resolved. The situation must be approached with a long term and broader view. </p>
<p>After all, trade relations are always complicated. Similar to other relations, they need to be maintained, nurtured and disputes need to be resolved.</p>
<h2>Complicated and growing global trade</h2>
<p>The US-South Africa case shows how complicated global trade can be. Agreements are there to facilitate trade and to ensure products get favourable treatment in foreign markets. But the world trading system is complex, costly, burdensome and time consuming. </p>
<p>In 1990 the value of global trade was $1.3 trillion. By <a href="http://comtrade.un.org/data/">2014</a> it had increased to $17.1 trillion. Agricultural products contribute about 10% of this global trade. </p>
<p>The World Trade Organisation regulates global exchange of goods and services at a <a href="https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm">general level</a>. But it is the responsibility of governments to simplify the system for companies that wish to participate in global markets.</p>
<p>Trade agreements serve as contracts under which trade will take place between members. In the process of moving products from one country to another, many regulations, border posts, insurance, inspections, ports, logistical arrangements and other issues are involved. These can complicate or facilitate trade, depending on the existence of trade agreement.</p>
<h2>Types of trade agreements</h2>
<p>Different types of agreements are signed to deal with the exchange of goods and to make products competitive. These differ by the level of complexity, ambition or integration involved. They include economic unions, which represent a high level of agreement. This allows or simplifies the movement of people and goods. It also includes the harmonisation of economic and monetary policies between members. The EU is an example of one such agreement.</p>
<p>In a customs union members have the same trade policies, tariffs and commit to moving towards common trade goals. Examples include the Southern African Customs <a href="http://www.sacu.int/show.php?id=471">Union</a> and East African <a href="http://www.eac.int/index.php?option=com_content&view=article&id=1&Itemid=5">Community</a>.</p>
<p>Then there are free trade areas which allow duty-free movement of goods for most traded goods.</p>
<p>Preferential trade agreements such as AGOA are not negotiated, but granted by one partner. They are unilateral and non-reciprocal grants, usually offered by a developed partner to a developing or least developed country to enhance economic development through trade participation. </p>
<h2>New US trade agreements that will affect South Africa</h2>
<p>The US is currently negotiating two main trade agreements involving goods and services. These are the Trans-Pacific Partnership (TPP) involving 11 countries in the <a href="https://ustr.gov/tpp/overview-of-the-TPP">Pacific Rim</a> and the Transatlantic Trade and Investment Partnership with the 28 members of <a href="https://ustr.gov/ttip">the EU</a>. Agricultural products are included in both negotiations. </p>
<p>The negotiations will influence global trade and specifically South African trade. If concluded, the TPP will represent about 40% of global GDP and more than 30% of <a href="http://www.nytimes.com/2015/10/06/business/international/the-trans-pacific-partnership-trade-deal-explained.html?_r=0">world trade</a>. Once these negotiations are concluded, there will be direct and indirect effects on South African trade. </p>
<p>This is because some countries involved in the US negotiations have trade agreements with South Africa, such as the EU members. US and South African products will then compete in the EU market on terms that may be favourable to the US. Others, including Chile, are competitors to South Africa in the US market.</p><img src="https://counter.theconversation.com/content/50663/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mmatlou Kalaba receives funding from National Reserach Foundation. </span></em></p>South Africa’s agricultural sector has benefited handsomely from the US’s preferential trade agreements. It is important that the current dispute is resolved speedily.Mmatlou Kalaba, Lecturer in Agricultural Economics, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.