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Hi there from Washington, where it’s US election day! Today we bring you what might be the final note on the last moves of President Donald Trump’s trade war — although, of course, even if Republicans lose the election, they remain in office until January. There may well be further trade moves to report on.
Our main note covers last week’s move by the US to block the ascension of Ngozi Okonjo-Iweala to the top job of the World Trade Organization, and asks: what next for the global rules-based trading order? The result, as you’ve guessed, depends on the outcome of the election, but even then the answer is not clear. Our Policy watch takes in a move by the US announced late on Friday to remove some tariff preferences for Thai imports, while our chart of the day looks at China’s coal addiction.
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Washington has signalled it prefers South Korea’s Yoo Myung-hee for top job
We at Trade Secrets have been comprehensively covering the runners and riders to take on the top job at the WTO. But in what might be a swan song for Donald Trump’s trade war, the smooth bureaucracy of the multilateral trading body has once again been thwarted by Washington.
Last week, the US threw a spanner in the works by refusing to align itself with the other 160-odd members and support former Nigerian finance minister Ngozi Okonjo-Iweala for the top job. The result? At present, it’s impossible for Okonjo-Iweala to proceed — the new director-general must have the consensus backing of all members.
What does the US want? US trade representative Robert Lighthizer stands out among top Trump officials in Washington — he’s widely considered to be a smart and strategic operator who really knows trade inside out. He has a commitment to a certain idea of how global trade should work, and he does not waver from that. He is not a free trader, he wants to protect certain domestic industries — particularly in manufacturing — and he’s happy to use old and unorthodox trade tools baked into US trade law to achieve his ends.
All of which makes this move by the US more confusing. To try to figure out Lighthizer’s game plan here, let’s take a look at what happens next. The members of the WTO now come together on November 9, by which time we should know the result of the US presidential election. If Trump wins, and Lighthizer retains his position of power, we have a vacuum at the top of the WTO until a new leader that the US likes is appointed.
Blocked: former Nigerian finance minister Ngozi Okonjo-Iweala © Fabrice Coffrini/AFP/Getty
The US is among the loudest of voices calling for reform of several elements of the WTO, including fixing the appellate body and beefing up the tools available to it to deal with non-market economies like China. To carry out those reforms, the WTO needs a director-general. It is not in the interests of the US to not have a solid director-general in place. Nor is it possible — politically and diplomatically — for all of the other countries to just acquiesce and give the US what it alone wants in the context of a multilateral institution. And so we have a stalemate of Washington’s making.
Washington has signalled it prefers South Korea’s Yoo Myung-hee. The trade minister is well known to US officials from back in 2006 when they renegotiated a free trade deal with South Korea, and appears to have been viewed fondly by Trump administration officials since — at least in part for her position on developing-country statuses.
One of the main trade-related bugbears of the US is the use of developing-country status in trade negotiations by countries the US does not consider to be developing economies. Holding a developing-economy status gives countries special trade privileges under global trade rules, allowing them to keep up tariffs and other trade barriers to help domestic industries. China is Washington’s poster child for this offence, but Singapore, Qatar, the United Arab Emirates and South Korea were all attacked by the US over it in summer 2019. Shortly afterwards, Seoul gave up its preferential trade treatment, a move welcomed by the US.
People in the USTR’s hallways may not have forgotten Yoo’s involvement in that move. In the past week, Clete Willems, a former Trump official, said Yoo was considered to have shown “a tremendous amount of leadership in really pushing Korea to essentially relinquish developing country status”. Her willingness to tackle that pet issue of the US has earned her a lot of admirers in Washington.
But other countries mostly back the other candidate. If the US does not back down, the WTO is left dysfunctional. Currently it is being run by a coalition of four deputy directors-general acting in an interim role. As Jennifer Hillman, a former WTO official, puts it, that has for now “kept the trains running on time” — but those placed in a caretaking position do not have the authority to reform the organisation.
WTO officials will be hoping they can sit on their hands and wait for Democratic challenger Joe Biden to sweep to power. But it is not certain that he would back Okonjo-Iweala. When Trade Secrets asked the Biden campaign whom they planned to support if their candidate was elected, they declined to comment.
If Trump wins? The stalemate continues, and reform seems increasingly impossible. WTO members years ago failed to agree on a new director-general, and so split the four-year term between two candidates. But Hillman points out that two years is not long enough in the top job to make a great deal of change — and that, usually, if a country backed a particular candidate, it would work behind the scenes to build a consensus for them.
The best-case scenario for a swift appointment of a new WTO boss, then, is that Biden is elected and that his team agrees with the consensus of the other members. If that doesn’t happen? It’s a very dark future for the WTO.
Charted waters
China’s president Xi Jinping has set a deadline of 2060 to be “net-zero” for emissions but new coal-fired power plants keep springing up. At a time when the world is sifting away from coal — and Beijing has indicated that it will eventually do the same — China still accounts for the vast majority of newly commissioned projects globally.
“Coal is just so important in China from an energy supply and security point of view, and local governments don’t believe it is possible to get rid of coal immediately,” says Yang Yingxia, a senior fellow at the Boston University Institute for Sustainable Energy. “I don’t think the Chinese government has a crystal-clear sense of how to get to carbon neutrality by 2060.”
Policy watch
A worker offloads pineapples from a truck in Thailand. The US has suspended tariff-free access to its markets for more than $800m of Thai products © Brent Lewin/Bloomberg
Late last Friday evening, the US suspended tariff-free access to its markets for more than $800m of Thai products, including frozen melons and mangoes, artichokes and assorted spices, claiming that Thailand had not provided market access for US pork products.
The US removed the list of Thai imports from its Generalised System of Preferences programme — which allows duty-free entry into the US for products from certain countries — effective from the end of December.
The amount removed by the US from the tariff exemption programme represents about one-sixth of Thai imports into the US, the US trade representative’s office said in a statement.
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