Bewildered is not the right term. But here is an example. Many different speakers addressed the issue of trade financing. They wanted to know why trade financing is still handled today like it was hundreds of years ago, with physical letters of credit demanded in a world that otherwise seems to get by with the push of a button. Instead, speakers wanted to talk about the digitization of financing or even about the use of blockchain. I’m not certain about this of course, since we had no officials in the room to ask. But based on my experience with a variety of Asian governments, I’m guessing that many (and certainly not all) would have had no idea what digitization of financing even means, let alone what a blockchain is or what it does or how it might apply to trade. None of the business speakers ever bothered to explain these concepts. Nor did anyone really address the practical obstacles that might be preventing the adoption of such concepts to trade today.
The TPP11 Choice in a World of Increasing FTA Complexity
The split viewpoints on TPP11 are replicated in nearly every TPP country. Businesses, consumer groups and politicians are grappling with an agreement negotiated in one context (a deal that included 12 members) and trying to decide if it still makes sense to proceed in another (an agreement with 11). The choice, however, is not really between doing a TPP11 deal or not doing the TPP11 and the status quo prior to launching the TPP negotiations. The choice is really between moving ahead with the TPP11 or not in the context of a continuing changing trade environment. It is this last point that is often overlooked. The trade world has not stood still since 2010 when the TPP negotiations got underway. Indeed, it continues to evolve even after the TPP talks wrapped up in late 2015.
The New US Policy is Disruption: Implications for Asia
In short, evidence of last week’s US engagement in NAFTA, KORUS and 301 all provide a much clearer window into the extent of American disruptive trade policy. While some staff members will be trying to hold the pieces together, it is not obvious how well they will fare when led by a President that views unpredictability as a key strength and does not place a high value on maintaining the global trading system. For Asia, it will be difficult to rely on the United States in trade. This is not to say that the US will simply disengage. It is that the Americans will behave in ways that may not have been experienced in the past. They will be less willing to defend the global trading system and more willing to take unprecedented risks to tackle what they view as unfair trade practices. These challenges will be handled unilaterally, if necessary.
Update: The 301 Trade "War" Countdown Has Started With China
The United States has now moved one step closer to dusting off a Cold War trade relic and applying it to China. In authorizing US Trade Representative (USTR) Robert Lighthizer to investigate whether to self-initiate a Section 301 case against China for alleged unfair trade practices, we have started down a path first traveled in the 1970s and 1980s. This will give rise to a dangerous trend that could rapidly shake the very system of global rules that have worked well for most firms for decades. While there appears to be strong pressure from different quarters to Washington to “do something,” it is not at all clear that many understand the power of 301 to destroy the trading system now.
You Can Indeed Lose What You Never Had
The start of a piece in yesterday’s TheStreet summarized a common viewpoint on the US withdrawal from the Trans-Pacific Partnership (TPP) trade agreement, when it said: “You can’t lose what you never had…” In fact, you can. It is becoming increasingly obvious that American companies are losing ground. The damage is two-fold—the United States has chosen to sit out from the TPP and it is also not benefiting from the range of trade deals that crisscross Asia, giving preferences to competitors in the region in key markets. Adam Behsudi nicely showed this week in Politico how international trade agreements are directly affecting farmers from one county in Iowa.