April 06.04.2012th, XNUMX - The daily water fight
USA against China, Europe against USA: The world gets entangled in trade wars. Are they threatening our prosperity?
Barack Obama has just set up a new administration in Washington. It will be called the Trade Enforcement Center, a trade enforcement office, and support American companies doing business around the world. When business partners break American interests, officials are set to sound the alarm, and the president quickly organizes the resistance. Right now, US exporters are exposed to all sorts of "unfair practices," says Obama.
In fact, there has not been so much dispute between the trading nations in a long time. Only at the weekend, the US Trade Representative Ron Kirk protested to the World Trade Organization (WTO) in Geneva: The European Union still subsidizes its aircraft manufacturer Airbus despite several complaints and judgments. A committee of inquiry in Washington should ever think about possible sanctions.
Earlier, in mid-March, the US, the EU, and Japan went to the WTO and sued China for restricting exports of key commodities (rare earths). On the other hand, the Chinese sold far too many solar systems at dumping prices, the Americans also said - and imposed punitive tariffs on the collectors made in China.
Policymakers and trade strategists from all over the world have begun to change their mindset. People flirt again with protectionism. Sometimes you complain about too much export and sometimes too little, sometimes about unfair subsidies and another time about distorting taxes. The reasons are different, but the trend is clear: the world is arguing about trade, and the mood is getting more irritating.
A few weeks ago, the bosses of major European airlines Airbus, Lufthansa, MTU Aero Engines and Air Berlin warned against an era of "major trade disputes". Trade wars are eroding and they themselves are caught between the fronts: since the EU has set its sights on forcing foreign airlines to pay climate protection charges, China, Russia and 24 have threatened further states with retaliation. Beijing is already considering the cancellation of a major order for A380 aircraft, Moscow consider the withdrawal of overflight, take-off and landing licenses for European airlines.
Whenever the election campaign is raging in any important country, it has recently started beating trade. In France, Nicolas Sarkozy demanded an Acheter Européen program, and in the US, Barack Obama said while visiting a car factory: "I do not like stuff that is produced there (in China) and then sold here. The things are to be produced here and sold there. "Put together, Rolf Langhammer from the Kiel Institute for the World Economy judges, that is" quite a sharp poison cocktail ".
Trade experts from UK and Swiss think tank Global Trade Alert have found that 2012 has had three times more market protection measures than liberalization. The leaders in setting new trade barriers are the emerging economies. Argentina is ahead with 192's new import-limiting rules, with Russia just behind it with 172, with China and Brazil hardly timid.
Restrictions range from simple tariffs, quotas and import bans, to subsidies for domestic industry, to detailed safety and production regulations that make it particularly easy for domestic companies to meet their needs and foreign ones. Often it is very targeted against competitors from the rich world: Argentina, for example, lately launched on the 30 anniversary of the Falklands War, an import restriction specifically for goods from the UK.
A decade ago, such behavior would generally have been outlawed. At that time, the world was almost unanimous that a freely organized world trade uses all. The more of it, the better. Right after the 11 attacks. September 2001 even considered this as a recipe for world improvement. As a sign of hope and as an impetus for more prosperity, the negotiations on a new free trade agreement began in the Qatari coastal city of Doha. Tariffs should continue to fall globally and trade barriers fall, as had always happened in such rounds of trade, and this time, quite new types of trade barriers should also be on the table.
It was an ambitious dream: especially poorer countries should reach the markets of the rich easier. The EU and US should reduce their agricultural subsidies so that African producers could sell their goods there. Environmental and social standards should be included in the treaties. Copyrights for media or software should be better protected. The protection of rights to innovations, such as novel medicines, should also be improved, but without denying poor people access to medicines. Fair rules for all, was the goal. No one would be disadvantaged anymore, the very poor would even be preferred.
And today? At the beginning of the year, British Prime Minister David Cameron made his first public statement at the meeting of the world elite in Davos: the Doha Round can no longer be saved. So soon humanity will no longer conclude a global trade agreement.
Too many topics, too many strong players: Brazil, India and China have become major economic powers and want better deals than before. By contrast, the old industrialized countries are struggling with the financial crisis and rising unemployment and are barely willing to make concessions. In doing so, they confirm the developing countries' suspicions that the West has never really meant market access for poorer countries.
The only question is: Is the failure of the Doha Round so bad? After all, world trade continues to flourish despite everything. Larger masses of goods are being shipped around the world, flown through the skies and traded across borders than ever before. Plus five percent last year alone - and there are no predictions for a serious reversal in the trend.
Stopping negotiations and new trade disputes? Perhaps they will simply be part of it in the future, becoming a kind of daily water battle, and the container ships will continue to operate anyway. After new rules and in new directions. That just does not quite fit in with the old world, where the WTO and its predecessor were conceived.
From the end of the Second World War to the early 1970s, world trade was almost entirely determined by a handful of major industrial nations, including the US, Germany and later Japan. Although spices, cotton, rubber or ores were sourced from the South, the trade in tires and cars, engines and machinery was determined by the North.
Even 1990 looked different from the world. The tiger states of East Asia had joined the great trading nations. In the year 2010, the world had already changed again: Now China was the second largest exporter in the world, just after the USA. And from Brazil to South Africa, well-known partners came up with new muscles.
Away with the trade restrictions, that was the old approach. But that was just one reason why world trade so dramatically increased. At least as important were the advances in transport technology, such as loading facilities in ports or in air freight. Similarly, new computer, communication and management techniques that increasingly allowed planning of resources and production across continents, time zones and cultural areas.
The result was - figuratively speaking - production lines that spanned the world. Transport costs played hardly any role, so companies dismantled the production in the finest limbs and soon had every production step done where it was cheapest or best. "Made in the world," says WTO boss Pascal Lamy.
But as beautiful as this story is, it too is too simple. Earlier this year, the International Monetary Fund in Washington published a study on changing patterns of trade around the world. It makes some old ideas falter. After all, it is not just the international corporations that decide what is produced in which part of the world. The suppliers of these corporations have their own heads, for their part outsource production steps to other locations, and buy raw materials abroad at their own discretion. And lo and behold, the result is not a flat world at all, free of any geography, of any historical or cultural preference. Rather the opposite: "The expansion of world trade was accompanied by a growing regional concentration," write the IMF researchers.
Trade between the major regional blocs - Asia, with its major economic centers of China and Japan, Europe, the US and its neighbors in North and South - has not grown so impressively in recent decades. Its share in global value creation was 1980 as well as 2009 quite exactly twelve percent.
By contrast, trade within these regions has exploded. He has changed too. First, Japan and the Asian tiger states outsourced many jobs to China; then China in turn postponed work to Vietnam or its East Asian neighbors, and over that time, suppliers took over increasing parts of the value chain. They also produced highly complicated things that required more advanced engineering and education.
One thing was different than you always imagined. The once-growing, predominantly regional trade and production relationships proved to be astonishingly tenacious, even if the naked figures spoke against it - if, for example, exchange rates or labor costs actually spoke in favor of a new shift in production.
The trade links of the emerging economies with each other are correspondingly stable, especially in their respective neighborhoods. So the big virtual production lines of the world do not span the whole planet, but often only a certain part.
The economic trend is politically reinforced. While the negotiations on a new round of WTO are going nowhere and protectionists are speaking, another type of free trade agreement has come back into fashion. Emerging and developing countries in Asia and Latin America have recently completed a total of 2004 regional free trade agreements since 13. And the development continues: Russian President Vladimir Putin recently proposed a "Eurasian Union" for the former Soviet states.
Over the years, there has also been a plethora of trade agreements between two countries or regions - such as between the US and Morocco or the EU and South Korea. But it is the regional agreements that are massively changing the structure of world trade.
All this goes against the ideals of the World Trade Organization WTO. "We are dividing the global economy here," warns Jagdish Bhagwati, the famous trade expert from Columbia University in New York.
The thought leader of the WTO says that it is quite another matter whether the world concludes a treaty or only a few countries agree. The signatories, although from now on enjoyed fewer trade barriers among themselves, but all others would be relatively disadvantaged in the future. This will steer the trade in arbitrary ways and end up costing all humanity some prosperity.
Worst of all is when scarce goods such as oil or copper are merely traded for political reasons - and no longer where they can be used most productively from the market logic. But Bhagwati, the warrior-hearted economist, is also coping with the current trend: "A true multilateral solution is out of the question at the moment. Will we be able to revive her someday? Who knows!"
Protagonists of the old trading world like Bhagwati are worried for another reason. They fear that with a publicly sealed failure of the Doha Round, the whole institution of the WTO will be called into question. But when it comes to the WTO, its role as an international arbitration body for trade disputes is eliminated - which could mean a lot of political anger beyond trade policy. If the professional mediators in Geneva fail, the commercial disputes escalate faster. This is one of the reasons why some experts find the new row between China and America, the dispute between Boeing and Airbus or the Argentine-British quarrel unusually dangerous for the future of the trade.
Some of the strongest proponents of the old system are not in the US or Europe, but in developing countries, which have been particularly poor. There are no illusions: it is well known that the WTO and its world trade rounds have long been dominated by rich countries. But it is also known there that without them, one would be even more exposed to the interests of the old and the new industrialized countries. Many African countries have recently experienced this in their negotiations with the EU when it comes to bilateral trade agreements:
The so-called European partnership agreements force Africans to lower their tariffs, including agricultural products. It was only in February that former Tanzanian President Benjamin Mkapa warned that these agreements destroyed local markets. The Geneva-based South Center, an advisory body for developing countries, concluded at the end of 2011 that the pacts with Europe would bring "more loss than profit" to the affected African countries. For example, Europeans are calling for these tariff reductions without abandoning the massive and distorting subsidization of their domestic agriculture.
The US is no better than Europe. For years, the so-called Cotton-4, the African cotton producers Benin, Mali, Burkina Faso and Chad, have protested in vain against the Americans' unfair subsidies for their domestic producers.
The Tanzanian WTO ambassador to Geneva, Charles Mutalemwa, mourns the old world and says he still sees much potential for his country in multilateral negotiations. The bottom line is in Geneva probably still a little fairer for the poorest. But on this point, the new world of trade is hardly different from the old one: no one listens to people like Mutalemwa. The representatives of very poor countries have never had much say.
(Time online)
