Issue of the week: a new era for trade?
President-elect Joe Biden has vowed to reset the “rules of the road” on global trade. Is he guilty of wishful thinking?
Global dealmakers seem to have got the spring back in their step, said Ortenca Aliaj and James Fontanella-Khan in the FT. New hopes of a vaccine and a return to US political stability have emboldened many to “revisit proposed mergers and acquisitions”. On Monday alone, companies across the globe announced nearly $40bn of deals – clear evidence that CEOs are “looking to tap cheap debt or use cash stored away during the crisis to carry out strategic M&A”. The US election may set global trade back on the path to normality, said David Lawder on Reuters. President-elect Biden has vowed to negotiate with allies to set the “rules of the road” on trade, “instead of having China and others dictate outcomes because they’re the only game in town”.
Unfortunately, Biden’s words coincided with a Chinese triumph, said The New York Times: the creation of “one of the world’s largest regional free-trade agreements”, involving China and 14 other nations, including local heavyweights Japan, South Korea and Australia. The agreement – known as the Regional Comprehensive Economic Partnership (RCEP) – is currently “limited” in scope. “Still, it carries considerable symbolic heft.” It covers 30% of the global economy and 30% of the global population – and the US is nowhere in sight. This marks another setback for America’s influence in the region after President Trump quit the rival 12-country Trans-Pacific Partnership (TPP) trade pact in 2017. That was part of a US “retreat” from “sweeping trade deals” which Biden, who helped to negotiate the TPP while vice-president, might seek to remedy. But the damage may already be done.
Like Trump, Biden is “no fan of China”, said Philip Aldrick in The Times. The original TPP was designed to “drag the region into Washington’s regulatory ambit”. Biden’s new “China reset” is likely to be a “Trump-Obama hybrid” – keeping tariffs in place “while reviving the Obama administration’s internationalist efforts to encircle and isolate Beijing”. To apply pressure, he’s expected to repair relations with European allies, starting by scrapping tariffs on EU imports. It is, of course, “much easier for the president-elect to talk about re-establishing US leadership” than it will actually be to deliver it, said Gideon Rachman in the FT. But the truth – unpalatable to many Americans – is that “the US is not as powerful as it once was”. Biden may find it hard to persuade his fellow citizens that the country can “benefit from international engagement without automatically taking the leadership role”. But at least it will “no longer be actively destroying global institutions”. That is reason enough for huge relief.