The event of the week, as far as the US is concerned, is Democratic presidential contender Elizabeth Warren’s trade policy plan, picked over at length by the sages of global governance.
As they stand, the policies would be quite easy to implement, in the sense that they would essentially prevent the US signing any more trade deals. By ignoring the past decade or two of developments in trade, notably the rise of digital commerce and tech, they would also ensure the US left other governments to regulate actually-existing globalisation.
Ms Warren’s plan would have been a coherent, if controversial, direction for trade policy in the early 1990s. Now, it would essentially mean the US logging out of trade issues and turning its attention elsewhere.
The plan, laced with predictable criticism of big corporations, lays out an improbable list of preconditions — standards on labour, the environment, human rights, religious freedom, fossil fuel subsidies, etc — to be met by other countries before the US would sign trade deals with them.
Otherwise, it is chiefly notable for what it omits. China gets a single passing mention. There is nothing on World Trade Organization reform, except exempting green regulations from legal challenge. The terms “data”, “digital”, “privacy” and “national security” do not appear.
The one potentially useful suggestion is to reduce the secrecy of US trade negotiations, which reached bizarre heights under the Trans-Pacific Partnership. The EU has already done this to some extent and found it helpful in credibly establishing red lines.
The question remains: do we take Ms Warren literally or merely seriously? Democratic presidential candidates — and Republicans — often take aggressively trade-sceptical positions in the general election as well as the primaries, only to ditch them once in office. On paper, Barack Obama also tried to up-end business as usual, promising during the 2008 campaign to renegotiate Nafta to strengthen the labour and environmental provisions. Few in the trade world really believed this — not least because campaign staff reportedly told Canada not to take the threat too seriously.
After a couple of years of treading water on trade, Mr Obama’s idea of renegotiating Nafta ended up meaning folding Canada and Mexico into the TPP, which he inherited from the George W Bush administration. The labour and environmental provisions were not hugely onerous and the expenditure of time, effort and political capital focused more on traditional mercantilist interests such as patent protection for the pharmaceutical industry. People voted for Mr Obama, but the export-oriented US trade representative’s machine eventually took over.
If Free Trade had to guess what would happen if President Warren got into office on this platform, it would go like this.
She would attach a long list of conditions to signing new trade deals, with the result that none got done. The sum of her approach to digital trade and data would be to push tech antitrust and perhaps data regulation in the US under the (reasonable in this case) argument of protecting the privacy of American citizens. The impasse over WTO dispute settlement might get unblocked, or it might just carry on with the EU-Canada workaround.
Things wouldn’t be catastrophic, at least in the short term. The president wouldn’t go around trying to re-engineer global supply chains with WTO-illegal executive actions. The policy would basically mean maintaining the status quo, and a return to the first couple of years under Mr Obama.
And the way would be open for China and the EU to battle over setting the rules for globalisation as we know it.
Wild idea could help sheep farmers hit by Brexit
Latest in the series of unintended yet entirely foreseeable consequences of the UK government’s Brexit policy: bailing out farmers who would be cut out of the EU market by high tariffs in case of a no-deal exit. Predictably it is the sheep farmers in particular who would need a lot of help. They export a lot to the EU but aren’t competitive with Australian or New Zealand sheep meat on world markets. Buying up their output would probably be within the UK’s proposed WTO subsidy limits, but the optics of leaving the EU only to go back to 1980s-style EEC meat mountains isn’t a good one.
Still, it might also prove an opportunity for the government, assuming it still believes this, to push ahead with former environment secretary Michael Gove’s idea to shift farm subsidies from agriculture to protecting the environment. Could Brexit see rewilding of hill-farming areas, as some environmentalists want? Perhaps it’s a long shot, but if we are casting around for any conceivable positive outcome of Brexit, this could be it.
Elizabeth Warren’s plan has certainly helped elevate trade to a top-tier economic issue in the 2020 US presidential race, and has offered a clear sign that should a Democrat unseat Donald Trump next year, there is no guarantee of a reversal in Washington’s protectionism, writes Free Trade co-author James Politi.
Other primary campaign pronouncements point in that direction as well. Democratic frontrunner Joe Biden has essentially disavowed the Trans-Pacific Partnership agreement that he endorsed and championed as Barack Obama’s vice-president, and said he would renegotiate the deal. On the flipside, Kamala Harris, another top Democratic contender, lashed out at Mr Trump’s tariffs on China.
Officials in Beijing, Tokyo and Brussels will increasingly be tempted to avoid engaging with Mr Trump, in the hope that they can weather the storm until his successor takes office. It is not hard to imagine they will get a more predictable face in the White House, if the Democratic challenger wins, but they won’t necessarily get one who is more open on trade.
The number: 1
US Federal Reserve interest rate cuts since the global financial crisis after its 25 basis point reduction on Wednesday.
● The Brexit-related fall in sterling is not helping the UK’s economy (FT)
● Twitter thread from Politico’s chief EU tech correspondent on the UK’s likely problems with data transfer after a no-deal Brexit (Twitter)
● US-China trade talks wrap up with no progress (South China Morning Post)
● The Japan-South Korea trade spat is inflicting damage on both economies (Nikkei Asian Review)