CEO Coriolis Technologies
The last week of March will be one of the most important weeks for trade in a long time. But think again if you think this is because the UK may, or may not, have a way forward on Brexit by the end of the week. Rather, this is an important week for trade because it will confirm that trade has become strategic.
What does this mean? Strategic Trade is trade deployed for reasons of national interests in a national security and military sense, as well as for economic or social reasons. It is the practical consequence of the rhetorical weaponisation of trade and its growing importance will be evident this week with three key events.
First, China’s President Xi is in Europe. He visits Italy this week to move forward discussions on Italy’s formal integration into the Belt and Road Initiative (BRI). Italy’s financial crisis is well-known and, as the ECB reduces its purchases of Italian debt from 50% in 2017 to around 15% in 2019, Italy will need to look elsewhere to bridge the gap. In taking this bilateral approach, Italy has potentially weakened the coordinated, and multilateral, negotiations that President Macron, with President Juncker and Chancellor Merkel, will be wanting to promote when they meet President Xi later in the week.
Second, and with a similar impact on global trade institutions, the US Trade Representative, Robert Lighthizer and Treasury Secretary, Steve Mnuchin, will travel to Beijing to continue their trade negotiations. These negotiations are at a difficult phase. They have become deadlocked around the agreement’s enforcement mechanisms to ensure that China’s promises are implemented. Effectively any agreement creates new enforcement and dispute settlement structures outside of the WTO and adds to a global picture of weakening multilateral institutions.
Third, US EXIM meets at the end of the week in Washington. EXIM is an export credit agency that fills the finance gaps between private provision of trade finance and what the market needs. ECAs are a front line in national strategies to deliver export-led growth: effectively the mechanisms through which nations implement their Strategic Trade domestically.
The US has been the champion of national comparative advantage targeting its trade deficits and aiming to end unfair trade practices globally. Ironically perhaps, despite the Make America Great agenda, the EXIM bank has not had a quorate Board since 2015 and is awaiting its reauthorisation in September. Meanwhile, and by way of contrast, China’s ECA, Sinosure, provides finance to the Made in China 2025 and to the BRI in amounts that are estimated at “hundreds of billions of dollars”.
Where does this leave the UK? Other nations and trading blocs are developing their thinking to capture the dual challenges first of a shifting global trade landscape institutionally and technologically, and second of an increasingly tense foreign policy environment, even between trade and military allies. Yet the last industrial strategy was published in November 2017, and although post-referendum there is an enhanced role for the UK’s ECA, UK Export Finance, the Industrial Strategy itself mentions the word “trade” 12 times, with some just referring to the Trade Union Congress; the section on Exports is on page 174 and talks about opportunities post Brexit of new trade deals. This is perhaps unsurprising – the EU has driven the UK’s trade since the UK first joined the Common Market. But in a world where trade is strategic and linked so closely to national security, this is at best woeful and at worst fatal to the UK’s future standing in the world.
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