A weak WTO will damage the planet more than it hurts free trade

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Well, you can’t blame me for the multiple things that went wrong at the WTO ministerial in Abu Dhabi last week. As you may recall, in last week’s newsletter I temporarily ditched Grouchy WTO-Bashing Alan for Perky WTO-Cheerleading Alan, a move which had several long-standing friends and contacts asking me if I was quite all right as I wandered around the conference centre. Today, I revert to something closer to type and look at the aftermath of the talks. IMHO the only substantial positive was a grudging continuation of the moratorium on ecommerce tariffs — aka countries promising not to punch themselves in the face for another two years — plus the talks not actually collapsing. Today’s main piece is on what ought to be discussed in the WTO right now and isn’t. Charted waters is on Brexit still being a bad idea.

The gap where green trade should be

The main missing subject in Abu Dhabi, of course, was the environment in general and climate change in particular. It was a real shame that the agreement restraining fisheries subsidies made in 2022 didn’t expand further at this meeting. (I’m not just saying that because the fisheries campaigners are among the sparkier ones you’ll meet on the trade policy circuit and have a great line in piscine lapel pins, pictured.)

Protecting fish stocks was a new and promising development, a WTO deal that focused on environmental global public goods rather than just increasing commercial market access. The main blockage continued to be — you’ll never guess — India, arguing for large loopholes in the rules for its fishers. There were some pretty chaotic and poignant scenes towards the end of the meeting. A group of Pacific island nations (their position eloquently articulated by Manoa Kamikamica, Fiji’s deputy prime minister) were visibly distraught that the fisheries deal did not progress. Kamikamica thanked a long list of advanced and lower-income economies for supporting the extension of the deal, including the US, EU and China, but pointedly not India.

New Delhi continues to obstruct large parts of the WTO agenda. Piyush Goyal, India’s ebullient commerce minister, was quoted by India’s Financial Express yesterday pretty bluntly saying India didn’t actually have any offensive (that is, export) interests in the WTO.

I would say this of course, since I was part of it, but I found the FT’s interview with Goyal (mainly conducted by my colleague Andy Bounds) particularly striking. A mini-industry of bureaucrats and think-tank pointy-heads has been working for years on how to use the WTO to tackle climate change. (A particular shout-out here to the work of the diligent and much-admired WTO deputy director-general Jean-Marie Paugam.) But India has said a flat no to the whole idea, even blocking the suggestion of non-binding deliberative discussions at the WTO on the environment.

A bunch of other low and middle-income countries had the courage to make a statement calling for the WTO to address the environment, but it’s unlikely to shift the Indian veto. India is pretty brutal about protecting its interests. Last week it forced Thailand to withdraw its ambassador after comments she made about Indian grain stockpiling driving up international food prices. Soi-disant Global South solidarity (told you so) at its finest there: I wonder if Thailand will be invited to India’s next Voices of the Global South summit.

Goyal is obviously right that there’s a lot of hypocrisy from rich countries, particularly not delivering the climate finance promised as part of the 2015 Paris agreement. But we are where we are. Tackling climate change and the environment more generally should be an imperative that multilateral trade policy is nonetheless apparently going to ignore.

Businesses are doing it for themselves

Evidently bureaucrats aren’t going to do much to help world trade survive, at least at a multilateral level. (I was right about that too.) It will have to rely on the momentum from (1) international businesses and (2) free-trading countries doing what they can.

As it happens, the business folks’ conversations were among the livelier and more interesting at the ministerial. They were pretty despairing of governments but actually quite optimistic that value networks would cope with geopolitical stress pretty well.

There was, of course, an example, handily sited just across the Arabian peninsula. The Red Sea blockages have been occurring for nearly three months now and yet global trade has signally failed to grind to a halt.

One of Trade Secrets’ favourite doomsayer-defiers, University of St Gallen professor Simon Evenett, has just published a paper based on conversations with 13 senior executives from international businesses. Apart from noting that execs define “geopolitics” in a bunch of ways, some of them less existential than the typical media usage, it also found they had discovered a variety of ways to combat it and could improve their performance further.

With regard to governments, it’s true that not much can get much done at the WTO so long as too few big countries are committing to it. It’s not just India. The US’s focus on the institution is accurately summed up by Katherine Tai, the US trade representative, leaving the ministerial meeting early.

But the US is an outlier in its gut dislike of globalisation, despite what you hear in Washington about the widespread international backlash against free trade. Even India has signed some bilateral deals, albeit pretty thin ones.

A lot of Asia-Pacific countries really want the US to be driving liberalisation in the region. But in its absence they will do it themselves, signing up to deals with China or agreements such as CPTPP, and continuing to encourage foreign direct investment.

While in Abu Dhabi I talked to Tengku Zafrul Abdul Aziz, the Malaysian trade minister, about whether the anti-globalisation backlash had reached the politics of small open economies such as his. (The Malaysian prime minister Anwar Ibrahim told the FT recently that his country would not be forced to choose between good relations with China and with the US.)

Zafrul said: “In parliament, I think there are more questions on this. So if you want to use that as a reflection or barometer of people raising concerns, the answer is yes. Whether it’s big enough an issue that it can bring down government or change our policy direction from being an open economy, the answer is no.”

My conclusion: hard-nosed transactionalism from companies and smaller free-trading countries is what’s keeping globalisation alive. That’s just as well, because someone has to do it.

Charted waters

Does it keep needing to be explained that Brexit was a bad idea for trade? Apparently it does, to some. So: the FT has calculated that UK goods trade has had its fastest five-year fall on record, and is heavily underperforming other advanced economies. Brexit was a bad idea for trade.

Trade links

The St Louis Federal Reserve looks at the effect of the Red Sea disruptions on the world economy.

The European Centre for International Political Economy examines how Huawei has weathered the storm of US sanctions and other challenges.

The Wall Street Journal looks at how it’s harder than it looks for Asian manufacturers to onshore high-tech production in the US.

The FT’s Unhedged newsletter interviews the Peterson Institute’s Adam Posen about how resilient the world economy has been.

Joe Biden has warned that Chinese smart cars could be a security threat if they control large parts of the US market.

Trade Secrets is edited by Jonathan Moules