There have been three pieces of good news in recent weeks for those who support global economic openness. Two of them, from the US, stand out amid the largely discouraging list the Peterson Institute has compiled of the trade actions taken in the first 100-plus days of the Trump administration. The third came from Europe on Tuesday.
There have been three pieces of good news in recent weeks for those who support global economic openness. Two of them, from the US, stand out amid the largely discouraging list the Peterson Institute has compiled of the trade actions taken in the first 100-plus days of the Trump administration. The third came from Europe on Tuesday.
The first is that Donald Trump stepped back from the edge of withdrawing from Nafta. That is a good thing even if the decision-making process suggests little sign of deliberation. On the Economist magazine’s telling, pro-Nafta White House officials contacted the leaders of Canada and Mexico, as well as the US agriculture secretary, urging them to get in touch with Trump (“Right now!”) to talk him out of withdrawing.
The second is the liberalisation of trade in a few select sectors agreed between Washington and Beijing. Martin Wolf explains the details, from beef to bonds, of an agreement that is modest but meaningful. It is also conventional, which is something to prize from this most unconventional of US administrations. And above all, it is unmistakably an act of trade liberalisation, not one of erecting barriers. This suggests that among the two types of protectionism I have described before - restricting imports or boosting exports - Trump is partial to the latter. That is better for the world trading system.
But by far the most important event was a European Court of Justice ruling on the EU’s trade deal with Singapore, and the precedent it sets for future trade negotiations. The ECJ had to decide whether agreeing the deal is an “exclusive competence” of the European Commission, in which case it could be decided by Brussels with a qualified majority of member states, or remain a matter for each state to endorse nationally. The court ruled that most of the deal can be decided at the EU level, but that two sets of issues - relating to portfolio investment and the resolution of disputes between cross-border investors and host governments - remain a member state competence (and so require unanimity among governments).
This is excellent news for two reasons. First, it greatly improves the EU’s ability to conclude trade deals so long as these exclude the two member state competences. That is to say, complex trade deals but without an investment component are now much more realistic. That bodes well for the EU-Japan deal nearing conclusion, and more generally for Europe’s much-needed contribution to continued global trade integration. (But by giving more power to Brussels, the precedent could bode ill for Britain’s prospects in the Brexit negotiations, as the commission is not one of its closest friends in the EU.)
Second, one of the parts that the ECJ declared the member states’ prerogative - settlement of investor-state disputes - is best left out of trade treaties altogether. As the FT editorial on the ruling argues, there is no need to give investors other forums than normal national courts.
Brussels should simply give up on either old-style secret arbitration or its newfangled investment courts altogether. Nothing will be lost, and one burning controversy over trade openness will be doused.
Straws in the wind, perhaps, but signs nonetheless that rumours of the death of globalisation have so far been much exaggerated.
