The US Government’s threat to hobble the World Trade Organisation (WTO) by refusing to approve appointments to its appeals court is a characteristically Trumpian manoeuvre. The President’s unique style may encourage optimism that trade conflicts will revert to the status quo once he leaves office. However, structural factors make it unlikely that rules-based trade cooperation will ever snap back to pre-2016 norms.
Donald Trump has convinced his base that “trade wars are good, and easy to win,” diminishing calls by Republican elites to defend free trade on American terms. The US’s protectionist turn and China’s technological rise have bound trade access to contentious issues including regulatory standards, industrial policies and national security, pushing the EU into a similarly assertive stance. More disruptively, the incoming EU Commission plans a carbon border tax to protect its decarbonising economies. Back in the US, the ascendant Democratic primary candidate Elizabeth Warren has advocated a similar measure under a broader programme of “Economic Patriotism”, wielding American market access to enforce tougher standards on human rights and climate change.
Elsewhere, the nationalist projects of populist leaders across emerging markets are inherently hostile to any trade détente. These leaders are unwilling to sacrifice development for environmental concerns at the urging of rich industrialised nations. The shift of economic gravity towards instinctively protectionist China and the global south has diminished the leverage of the former champions of free trade, inviting resistance to any new onslaught of US or EU policies.
In the long term, the inexorable climate crisis will intensify pressure for coordinated trade policies to address it, but demands for sovereignty that inhibit cooperation will continue to strain the authority of the mechanisms governing global trade. Without the Atlantic-led consensus, the global trade system will, therefore, continue to face existential challenges, whoever occupies the Oval Office.
This article first appeared in the Axco Flashpoints newsletter, which provides monthly analysis on emerging risks and geopolitics from our Global Risk Intelligence and Data (GRID) team. You can sign up at https://www.axcoinfo.com/axco-flashpoints-signup.aspx