Why Globalization Will Outlive Trump

01.12.2016

On Thursday, December 1, the Valdai Discussion Club conference hall hosted a panel discussion titled “Prospects of Globalization and Regionalization in the Donald Trump Era”, coupled with the presentation of the Valdai Paper "Prospects for the Transatlantic Trade and Investment Partnership Vis à Vis Russia’s Interests".  

At the outset, Dmitry Suslov, a Valdai Club programme director, postulated that agreements on the Trans-Pacific Partnership, Trans-Atlantic Trade and Investment Partnership and the current round of the World Trade Organization have failed, with the election of Donald Trump as US President triggering the process of de-globalization.

The Valdai Paper’s author, Sergey Afontsev, Head of the Economic Theory Department at the Primakov National Research Institute of World Economy and International Relations (IMEMO) of the Russian Academy of Sciences, began the discussion by analysing the economic consequences of the new trade deals. He pointed out that these include certain novelties in the sphere of economic regulation of mega-regional agreements and global economic governance.

According to Afontsev, the new norms proposed by the TPP deal will remain in place, even if the deal itself will be a failure. For example, many norms and standards worked out as part of the TPP are already being discussed as a potential template for the Eurasian Economic Union and future international and global trade negotiations.

The scholar added that no crisis of the WTO exists: all the agreements signed continue to be observed and there are no mass violations. Negotiations also help the WTO regulatory base to evolve into a “WTO+” format, including additional commitments within the WTO, which go further than the current agreements.

“Indeed, the Obama administration has heavily invested in the deal. But this also means a weakness, because when you sign an economic deal under the slogan ‘We won’t let China dictate the norms of international trade and we’ll write them ourselves,’ a natural question arises: what are you ready to pay for such an initiative?” Afontsev said.

Alexey Portansky, Professor at the Higher School of Economics’ World Economy Department and senior fellow at the IMEMO Institute’s Sector for the Foreign Economic Policy, discussed the political aspects of the TPP and TTIP projects. He pointed out that the TTIP was the first to fail, while the TPP was ratified by several countries.

The reason why the TTIP failed was that it was negotiated by equal partners, the United States and the European Union. Meanwhile, the US was the only major player to take part in the TPP negotiations, alongside a number of smaller countries.

Portansky added that ideas put forward by Donald Trump during his campaign would hardly ever materialize. The draconic dues he proposed to introduce on goods from Mexico and China would directly violate the WTO norms, while the refusal to advance the TPP would mean to give up on economic and geopolitical leadership promoted by Obama.

According to Portansky, Russia is falling behind on trade deals. Although a free trade zone with China remains a good opportunity for Moscow, Russia missed the chance to join the TPP and the Regional Comprehensive Economic Partnership.

Responding to Dmitry Suslov’s question on the widespread criticism of trade deals, Sergey Afontsev said that many of the opponents’ arguments are pure rhetoric. He added that the EU regulatory norms and standards are not applied to third countries. And, although most countries apply them in their agreements on trade with the EU, Russia has been able to avoid this.

While discussing Suslov’s question on the need in mega-regional blocs, Portansky said that if capital cannot find profit and new markets via the WTO, it will find other ways. These include Trade in Services Agreement (TiSA) and Information Technology Agreement, in which Russia also participates, and agreements on global value added chains.

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