Why the world needs a plan for better trade

We have to start by admitting that there is a problem with the old model of globalisation, writes Rana Foroohar. Photo / Getty Images

OPINION:

The global trade system these days seems ever more like an unsuccessful 12-step programme. The first step is to admit that there's a problem. Unfortunately, few stakeholders seem willing to say it. The rare exception is the US trade representative Katherine Tai, who, just a few days ago, called for an end to wilful blindness to the failings in the current global trade paradigm.

"We cannot just go back to the world in 2015 and pretend like these things didn't happen," she said at an appearance at an innovation conference in Munich.

She was referring to populist responses — including Brexit and the election of Donald Trump as US president in 2016 — to status quo globalisation and trade liberalisation. But she also had in mind the issues of supply chain resilience and differing political values exemplified by both the pandemic and the war in Ukraine.

"I think a number of things have happened," Tai said, "that cause me to wonder whether this vision for globalisation leading us to a better, more secure world has run its course and if we don't need a course correction to move us forward."

Let's be clear: neither Tai nor the Biden administration more generally are channelling a "make America great again" vibe here. Indeed, Biden called MAGA supporters the most dangerous political faction in the US last week in response to the leaked Supreme Court text on abortion rights.

Global trade liberalisation for its own sake has reached a limit; and there needs to be a new balance struck

But the US is openly saying what politicians and the public in many countries silently think: the World Trade Organization is broken; global trade liberalisation for its own sake has reached a limit; and there needs to be a new balance struck between international trade and domestic politics.

If you look beyond the rhetoric, this truth is at the core of nearly every big trade story of the moment. Consider that more than two years from the beginning of the pandemic, and a year on from the White House announcing its support for a so-called Trips intellectual property waiver on Covid-19 vaccines, the world is still waiting for an agreed-on text, not to mention resources, that would allow poor countries to start circumventing intellectual property barriers to create their own vaccines.

Some of this is about pharmaceutical lobbying on both sides of the Atlantic, and some of it is about the spaghetti bowl of international intellectual property interests. The WTO secretariat is trying to push through an agreement (that some think won't make a difference) in advance of the 12th ministerial conference scheduled for June. But both the virus — and politics — are moving too fast. Even if the WTO were able to orchestrate a meaningful agreement on a waiver, the virus itself is likely to have mutated before the world can receive updated vaccines.

All of which underscores the need for a newer, better, faster way to resolve trade disputes — every country wants WTO reform but, of course, on different issues — in particular around intellectual property, which is where the vast majority of global wealth resides.

Some of the more contentious transatlantic issues around digital trade, data protections, patents and other sorts of intellectual property rights were meant to be ironed out by the US-European Union Trade and Technology Council, which will be meeting in Paris in a week. Given that both the US and Europe have big but different horses in the race towards the internet of things (American tech platforms versus European industrial companies), the TTC was supposed to be a place to start figuring out who gets what part of the digital wealth pie in the future.

But the TTC's own bandwidth is now being devoted to the fallout from the war in Ukraine and what the US and Europe should do to create more resilience in energy and supply chains.

We can expect much of the conversation to be taken up with discussions about what further sanctions or export controls should be placed on Russia, how to delink crucial supply chains from the region, and how to proceed with alternative energy production. Plans for our digital future will be subsumed by emergency measures on the war at hand.

Meanwhile, within the US, there is continued wrangling over the merging of the House Competes Act and Senate Innovation and Competition Act, both of which are meant to address resilience within the industrial commons in the wake of the pandemic. Semiconductor subsidies aside, the Senate bill is neoliberal business as usual. The House, on the other hand, emphasises rebuilding domestic manufacturing, as well as focusing more on the environment and labour standards.

All this comes as the White House is under pressure to rethink Trump-era tariffs on China.

To use another 12-step metaphor, it would be nice if all the wrangling could simply be turned over to a higher power. But that's the problem — there isn't one (including the WTO) that has shown itself capable of managing the breakdown of the global trade paradigm.

Indeed, we are still struggling with step one — acknowledging the problem. As Tai puts it, globalisation 2.0 must "take into account more than just efficiency" and not simply encourage the free flow of capital and trade liberalisation as an end in and of itself.

The problem is how, and where, to negotiate the shape of our new post-neoliberal era.

Written by: Rana Foroohar
© Financial Times