This year we decided to try something new with TKE and launched our very first podcast, ‘Trade Knowledge Matters’. When we first had the idea, we hadn’t anticipated the upheavals that would affect us all this year. Creating this medium for us has been quite the adventure and encouraged each of us to step out of our comfort zones and I have to say, it is a journey worth embarking on. As we approach our second season, I thought it reasonable to reflect on some of the fantastic insights we have gained over the last few months from our distinguished guests.
Make Trade, Not War.
On our very first episode, we explored with David Skilling the consequences of Russia’s war in Ukraine on the governance of world trade and international economic relations. With the world economy still suffering from the aftershocks of the COVID-19 pandemic, Russia’s invasion of Ukraine seems to have just added more fuel to a fire. David argued that infact both the pandemic and the Russian invasion served as catalysts for trends and concerns that have been simmering in the background. Key issues among these was how to square the economic efficiencies of globally unbundled value chains, on one hand, and the loss of control over them at a time of increasing geopolitical and strategic rivalry. David argued that where we have got to, now means:
- A loss of faith in the idea that trade integration will increase political convergence and reduce geopolitical rivalry. This has now been overtaken by a presumption of increased rivalry, with the new question being how to manage interdependencies such as global value chains that can be economically beneficial but also create exposures.
- An approach to globalization based around clubs of like-minded countries, and notions such as “friend-shoring” and diversifying value chains.
- With multilateralism in strife, countries are likely to need to enter into deep economic and trade agreements. For the UK, its relationship with the EU will continue to be a key issue.
The UK has a big to-do list on trade policy.
Prof. Winters picked up on this last point about the relationship between the UK and EU. Size and proximity still dominate other factors when it comes to trade and so for the UK, there could be no wishing away the importance of its relationship to the EU. He also made the point that with the UK striking deals with a range of countries, there will be some important trade-offs to negotiate, particularly at the nexus between trade and regulations. The challenge for the UK is that it is currently handling trade policy in a back-to-front manner. It is busy negotiating trade agreements without having really defined its overall national trade strategy and how trade can increase UK living standards. And this makes it hard to work out trade-offs that arise in negotiations.
In this episode, Prof. Winters also highlighted the importance of inclusive trade policy and talked us through his recent work with the Centre for Inclusive Trade Policy. Inclusion in trade policy has long been a neglected issue, or at best a secondary one. Economists thought that, because trade was beneficial in aggregate, all discrepancies between groups of winners and losers could be sorted out by assuming redistribution would happen through other forms of policy. Not only was that assumption not warranted but, simplistic thinking about inclusion has been overwhelmed by the fact that;
- Pre-existing differences e.g., in regional productivity affects who gets to take part in trade, and
- The importance of regulatory issues in trade deals makes these deals harder to negotiate and makes distributional and equity issues much thornier.
Hence, the inclusive trade policy emphasizes the need for a more bottom-up approach to policy-making. The episode offered much food for thought as we rethink our approaches to trade policy.
What future for the WTO and multilateralism?
Both our previous speakers had flagged how current trade tensions were putting a strain on multilateralism and the WTO. In our third podcast, we spoke to Dr. Patrick Low and Mr. Ramirez Hernandez on the issues facing the WTO in the run-up to the 12th Ministerial Conference. The current gridlock facing trade’s “governing body” has tied its hand, at a time when it needs to respond to increasingly complex issues: digitization, sustainability, increased interdependence, and the clear vulnerabilities of global supply value chains to external shocks. The main challenge is to recover the WTO’s functions as a forum for negotiating and enforcing trade rules. Under the Doha Round, arguably the rule-making function was compromised by setting too high ambitious objectives for liberalizing market access. The inability to negotiate rules increased the pressure to complete “gaps” through dispute settlement, which in turn is partly responsible for its willful crippling by certain members. The high-profile nature of Ministerial Conferences means that they only seem successful when expectations are set very low. This also overshadows some of the essential, less glamourous functions of the WTO, notably its committee work on technical regulations which have been effective at diffusing trade tensions.
Untangling trade and climate change
An obvious area where the WTO rule book faces significant challenges is at the intersection between trade and climate policies. Cop-27, which will take place at the end of this year, is when countries need to turn the commitments, they made under the Glasgow Climate Pact into concrete action. If this is to happen, trade policy will need to play its role, as both Matthew Bell and Emily Lydgate pointed out in our fourth podcast. There are various trade policy challenges that need to be met as well. Countries are increasingly relying on industrial subsidies to green their economies, and this can create trade disputes, especially as the trade rule book on subsidies needs updating. Measures like border tax adjustment measures could also create tensions, though as Dr. Lydgate pointed out, these mechanisms could also be a vehicle for regulatory cooperation on emissions between countries. The creation of climate clubs could also provide a means of harnessing trade to climate ambitions. From a UK perspective, one of the issues was that in the absence of a green trade strategy, the UK risked letting its partners define terms in bilateral negotiations.
Asia: the happening place for trade
In our final episode of the season, we turned our gaze to Asia. Asia is the “happening place” for trade. As Dr. Elms put it, if you want to understand trade “sit in Asia and watch it happen”. One of the important consequences of the centrality of trade to Asia is that countries can sit together despite their shared tensions and conflicts to develop policies that benefit trade in and for Asia. The Regional Comprehensive Economic Partnership, which involves China, the ASEAN nations, Australia and New Zealand is a good example of this. RCEP is less ambitious than the CPTPP. The CPTPP can be enhanced if both the UK and China join. That China may accede while the USA shows no intention of doing so is ironic given that the Trans-Pacific Partnership, which became the CPTPP after the USA withdrew, was intended by the USA as mechanism for crafting global trade rules without China.
China is itself at a crucial juncture in its trade policy. Dr Shingal highlights that China’s dual circulation policy aims to reduce its reliance on imports and increase internal investments, especially in the tech-intensive industry. This may prove detrimental to countries that are key exporters to China such as Japan, South Korea and others. China is also focused on domestic demand and its work with the Belt-Road Initiative. The other important question is how India will navigate current trends in trade policy. With India, Dr Shingal notes that the country is being more proactive with its trade politics and building relationships, signaled by its actions during the 12th Ministerial Conference that occurred in June. However, despite being keener to engage with more open trade, the country still maintains protectionist stances on some policy areas. Both Dr. Elms and Dr. Shingal thought that India had missed out on an opportunity to deepen regulatory reform through accession to RCEP but they were both hopeful that India might reconsider and join soon.
Our first series of podcasts showed us that both trade, and the way we think about trade is changing rapidly has profound implications for governments, businesses and civil society. We will pick on these themes in season II, we will look more closely at the role digitalization and AI are playing in trade, more on sustainability, the US and UK trade relationship, trade and development, and a lot more besides.
Finally, thank to you all our distinguished guests and to you, our audience. We look forward to your continued support as we work towards our second season. We would also like to more participation from our listeners so please send in questions, share with us topics that could be interesting, subscribe and review our podcast wherever you listen. Thank you again and join us for our second season this fall.
P.S. Comment below your favorite episode or favorite insight you have gained from the first season.
Listen to our first season here;
Related Articles to podcast episodes;
- Far Out, Down Under: Some Lessons from Australia for UK Trade Policy Post-Brexit
- The Times, They Are A-Changin’
- Miraculous Catch or Struggling to Stay Afloat? Early Thoughts on the WTO’s 12th Ministerial Conference.
- Trade and Climate Change – Five Points to Consider
- Rethinking trade’s relationship to the fight against climate change
- How international trade can help tackle climate change
- Impact of Russia’s invasion of Ukraine on the markets: EU response
- The impact of sanctions on UK trade with Russia: June 2022