Globalization Got Stuck In the 20th Century.

Here's What It Should Look Like In The 21st

Century

Despite the best efforts of the global policymakers, we are eight years removed from
the global financial crisis and still haven’t enjoyed the broad-based rebound we need
to create a world that is safe and more prosperous.  Yes, the stimulus provided by the
central banks helped stabilize the Western economies, but where’s the catalyst that
gets us back to the robust growth we enjoyed in prior decades?

We don’t need to look far because the catalyst exists in the shipping containers
coming in and out of a port near you. Simply put, the easiest way to expand the global
economy is to expand global trade.

Yes, free trade has come under criticism in the West from populists who blame trade
for every lost factory job. In reality, trade took fewer jobs than automation, a force
much harder to reverse. So while trade has made for an easy scapegoat, the reality is
that cross-border commerce has played an unheralded role in producing the inclusive
global prosperity we’ve enjoyed over the past 60 years.

Study after study has proven that trade played a large role over the past half-century
in boosting employment, incomes and life spans — as well as associated declines in
poverty, child and slave labor and even military conflicts.  One study of 40 economies
also found that trade increased the purchasing power of lower-income households by
about two-thirds, as the poor spend more on heavily traded goods like food and
clothing.

That evidence to the contrary, the criticisms aren’t likely to go away.  And if advocates
of free trade were honest, we’d admit that the global trading system hasn’t kept up
with the changes in global commerce. We’d also acknowledge that the long-term
benefits have been substantial on a macroeconomic level — but the short-term losses
have been felt on a more personal level.

To win over the critics, global trade needs a major reboot. Here are four areas where
we can start:

Reform The WTO

Since its inception in 1995, the World Trading Organization has faced its share of
criticism: cases take too long and too many countries ignore the notification rules,
just to name two.  But it’s easy to forget that before its founding, the world trading
system was perceived as a club controlled by the world’s biggest economies, one that
resisted any change to the status quo.  The creation of the WTO accelerated the
liberalization of trade and gave countries, big and small, a dispute settlement system
guided by law, not power.  As a result, more countries have been willing to bring their
grievances to the WTO.

The WTO isn’t perfect, but the global trading system needs a strong governing body
at its core. And the WTO’s rule-based system provides the predictability and
accountability that businesses need before they will invest.  Given that, the WTO
should be reformed, not replaced.  The first step would be for the WTO to reform the
transparency and notification system, and speed up the dispute settlement process.
Bring Trade Laws Into The Digital And Service Eras

Whether regional, global or bilateral, many of today’s trade agreements were written
in an era where manufacturing drove the global economy.  Today, the service
industry is a much bigger force — and services such as information technology,
logistics, architecture, law and accounting now trade easily across borders.

What’s more, many forms of commerce — including retail — are now going digital. By
2020, cross-border e-commerce is expected to hit nearly $1 trillion, but trade
regulations haven’t kept pace.  Only 20 percent of regional trade agreements address
such e-commerce issues as transparency, data protection and paperless trading —
and it’s imperative that trade laws catch up to the times.

Streamline Customs

While tariffs get the most attention, what really inflates the cost of trading are non-
tariff measures such as needless customs inefficiencies and the quotas, licensing and
local-content laws designed to protect domestic producers.  The Trade Facilitation
Agreement ratified in early 2017 could help cut the red tape and bureaucracy that
needlessly increase the cost of trading.

If implemented wisely, the TFA could cut trading costs by up to 15 percent,

facilitating a $1 trillion expansion in global trade.  But this will require policymakers
everywhere to act in good faith as they enact these customs reforms.  And that will
require free trade proponents like us to push governments around the world to do the
right thing.

Make Trade More Inclusive

If there’s any valid criticism of the existing trading system, it’s that trade creates
winners and losers in the short term. So even if trade has been overwhelmingly
positive over the long run, we need to give more consideration to the workers
displaced by trade or technology efficiencies — and to the small businesses who could
trade more. The truth is, a trading system is sustainable only if everyone shares in the
benefits.  Therefore, we must ensure that trade is more inclusive and helps support
sustainable development.

Governments also must create better safety nets for the workers who lose their jobs to
trade flows or technology. What that assistance looks like will vary by country, given
the cultural differences that exist around the world.  In some countries, this
assistance can subsidize the cost of retraining workers through classes or on-the-job
apprenticeships. In others, it can include wage and health insurance, and even special
assistance to affected businesses and farmers.  Countries should tailor these
approaches to their social policies, but the WTO and the business community can
promote best practices.

Over the past decade, regional or even bilateral trade agreements have become more
popular — a reflection of the difficulties in finding consensus among the 164 nations
who belong to the WTO. But for trade to drive global growth — and for that growth to
be shared more widely — governments, businesses, NGOs and others must make a
concerted effort to work together.
Those of us who advocate for trade understand the economic benefits of allowing
goods and services to flow freely across borders.  A 21st century trading system also
will enable governments to improve environmental standards and labor standards.
But before we can make the case for global trade, we must make a convincing
argument that a 21st century trading world calls for a 21 st century policy environment,
in which free trade benefits everyone.

By David Abney, chairman and chief executive officer, UPS, USA; Forbes, Jan
17, 2018
Free Trade Zone in Context of Growing Russia Egypt Ties
Anna Borshchevskaya Contributori
Aug 25, 2017, 11:55am 1,518 views #Foreign Affairs
Russia and Egypt will hold an intergovernmental commission meeting on trade and
economic cooperation in September. Russian foreign minister Sergei Lavrov hopes
the meeting will advance bilateral discussion about an industrial trade zone in East
Port Said at Suez Canal and expects negotiations between Egypt and the Russia-led
Eurasian Economic Union to begin after one to three months of consultations.
Lavrov's comments came after a meeting in Moscow on August 21 with his Egyptian
counterpart Sameh Shoukry that focused on a number of bilateral cooperation issues. 
These discussions are the latest signal to the West that Russia is expanding its
influence in the Middle East.
There is no denying the recent growth of Russia-Egypt ties. Bilateral trade had
reached $5.5 billion in 2014, almost double the previous year, according to Russian
trade statistics.  The two countries held their first joint naval drills in June 2015,
and joint military exercises in October 2016. Reportedly, Moscow had deployed
special forces to Egypt on the Libyan border in March of this year, which signaled
Russia's growing role in Libya with Egypt's  blessing. Cairo has also come
to accept Moscow's position in Syria, in support of Bashar al-Assad. Putin certainly
won't criticize Egyptian president Abdel Fattah al-Sisi on human rights.
Military cooperation with Moscow matters to Cairo. US arms deals don't allow for
secondary sales-- what Egypt buys has to stay in Egypt. No such strings come with
Kremlin arms deals, and in the context of crony Egyptian capitalism arms deals with
Russia can appear more attractive. Some of Moscow's weapons are better suited for
Egypt's needs than American ones, and from an Egyptian perspective, a Russian
MIG-29 is also simply easier to maintain than an American aircraft.
The Kremlin also seeks to increase economic ties with Egypt through trade and
energy projects. Here it is bound to encounter greater difficulties. Enter the trade
zone. The Russian press is touting its benefits. Earlier this month one publication said 
it is "the first major industrial cluster in the far abroad since the Soviet Union times."
Others highlight that the zone will be an important base for Russian investment into
African and Middle Eastern markets. Russian Deputy Industry and Trade Minister
Georgy Kalamanov said in July of this year, "Africa is currently in the spotlight, it is a
serious market worth fighting for." He urged Russian companies to return to "Soviet
practices of tapping African markets," as paraphrased by TASS. Few details are
available about what markets are involved, but Russia's Economic Union focuses on
energy, weaponry, agriculture, and raw materials; thus, the trade zone will likely
focus on these sectors.
If the trade zone eventually does materialize, it is bound to disappoint, at least from an
economic perspective. Russia-Egypt talks of a trade zone go back at least six years.
They suspended in 2011 but resumed in March 2014, days after Russian President
Vladimir Putin annexed Crimea from Ukraine. The West had quickly responded with
sanctions against Putin's aggression. In retaliation Putin banned certain Western food
products, and turned East. Negotiations froze again in late 2015, when a Russian
passenger jet exploded in October that year after it left the Sharm El Sheikh
International Airport. ISIS took credit for the attack. But in February 2016, the two
countries signed a memorandum of understanding on the industrial trade zone, and
talks picked up again, culminating in most recent discussions.
The Russian economy is showing modest signs of improvement for the first time in
years.  The World Bank forecasts  slightly less than 1.5 percent growth between 2017-
2019, for two reasons: rising oil prices and macroeconomic stability. Indeed, as
Russia economist Anders Aslund, senior fellow at the Atlantic Council told me earlier
this month, Macroeconomic stability [in Russia] is complete.  There no current
account problems, inflation is down to 4 percent, and unemployment is at 5 percent.
"The problem," he said, "is that there's no dynamics. Russia is not engaged in any
meaningful reform." Indeed,  crony capitalism dominates Russia. This current
situation suggests that the economy won't be collapsing any time soon, but it also
won't improve significantly. Russia was never particularly good on trade policy
anywhere, and absent meaningful reform there is no reason to think it will behave
differently with Egypt.
Egypt is facing its own economic problems. Crony capitalism and corruption also
dominate, while the military plays a major role in the economy, which means
decisions are made not based on efficiency but opaque wishes of certain military
officials. Egypt has massive debts, and the IMF is pressuring Cairo to resolve balance
of payment issues. Putting two declining economies together is not going to generate
growth. "The trade zone likely will not deliver the advertised results and, in the end,
will do almost nothing to justify the political and fiscal capital expended in the effort,"
Egypt expert Robert Rook, director of interdisciplinary studies and a professor of
history at Towson University, told me this month.
Egyptian economy is roughly $336 billion, about a quarter of Russia's $1.3 trillion
economy. Yet Egypt's population is growing. It is slightly under 100 million now, the
majority under forty. Demographers predict the country's population will reach 150
million by 2050. Meanwhile, Russia's 144 million population is aging and declining,
while Russia's most talented are leaving the country.  Demographers  project Russia's
population will fall to about 121-113 million by 2050. In this context it is difficult to
see how Russia or Egypt will provide the necessary infrastructure or create enough
jobs to make the trade zone a success.
Beneath the surface, tensions occasionally arise between Moscow and Cairo. Egypt is
the largest buyer of Russian wheat, yet several months ago Cairo temporarily
boycotted this crop under the pretext of protecting its own crops and citing zero
tolerance for ergot fungus common to wheat. International standards allow for a
minute portion of ergot, and Russian wheat is in compliance with these requirements.
The real reason most likely has been Cairo's frustration with Moscow's policies. For
instance, before the downing of the Russia jet in October 2015, Egypt was among top
two most popular destination for Russian tourists. That tourist flow has suspended and
Cairo is eager for them to return. Moscow insisted that its own security specialists
inspect Egyptian airports before flights from Moscow can resume, which insulted
Cairo. Moreover, after several inspections, Russian inspectors found Egyptian airports
dissatisfactory, much to Cairo's chagrin, and it seems unlikely that Russian tourists
will return to Egypt in the nearest future, despite much talk to the contrary.
But don't dismiss the trade zone entirely. Should it materialize, agriculture (mainly
wheat) and military sectors still stand to benefit, even if the zone won't be an overall
economic success. Moreover, the zone may bring political benefits to both Moscow
and Cairo even, especially in the overall context of growing Russia-Egypt ties. For
years Moscow has taken advantage of the downturn in US-Egyptian relations and
stepped in to fill the vacuum.  Sisi will continue to seek ways to work with Putin, and
send a message to the West that he has other options, even as Putin occasionally
slights him. After all, Egypt will still need to buy wheat.
To be sure, there will always be limits to what Moscow can do for Egypt. "Many of
the challenges Egypt faces internally require the country to make major shifts in its
internal security and economic policies," Brian Katulis, Middle East expert and senior
dellow at the Center for American Progress told me in an email. Moreover, Russia has
no capacity to replace the US, and Cairo will continue to see the US as its main
strategic partner. But Putin doesn't need to replace the US to inflict damage to US
interests.
 
Global Trade: Looking At the Big Picture
StratforContributori
Feb 13, 2018, 11:15am #Economy
This article was originally published at Stratfor.com.
By Mark Fleming-Williams
 Global trade is in flux after the United States has made clear that it is no
longer willing to take the lead.
 While the United States wants to shake up international commerce, China
wants to preserve the status quo, and Europe wants to continue on the post-
war path.
 The divergent interests of other countries and blocs, including China, Japan
and the European Union, will make substantial alignment without the United
States difficult.

Global trade policy is undergoing its first major shift since 1995, and that change could
represent the largest evolution in international commerce since World War II. Over the past
eight months Stratfor has been publishing a series of Trade Profiles to help clarify the
motivations of the largest competitors in the world economy as they try to navigate this
changing environment. With the series complete, now is a good time to take stock and reflect
on the picture that these profiles form when they are combined.

The global trading system we know today was largely crafted by the United States in the
aftermath of World War II. In the decades after the war, the United States and Europe joined
hands to gradually liberalize their economies, taking peers such as Japan along for the ride.
The tariffs on goods gradually fell away as the General Agreement on Tariffs and Trade
(GATT) led on to the creation of the World Trade Organization (WTO). The globalized world
that then emerged provided a strong foundation for rapid, manufacturing-led growth in such
countries as China, which acceded to the U.S.-led institutions once they had grown large
enough.

But then the WTO stalled. With a more diverse membership, it could no longer reach a
consensus on how to move the conversation on international trade forward, and trade
liberalization failed to keep pace with the developments of the modern economy. As Western
economies developed such areas as services and digital commerce, rules at the WTO -- strong
on the trade of goods but weak on services -- were left behind. No longer able to advance on a
multilateral front, like-minded countries began negotiating trade pacts in smaller groups, such
as the Trans-Pacific Partnership (TPP), which was designed to be the model for a
comprehensive modern trade agreement, and the fledgling Trade in Services Agreement
(TISA), intended to liberalize that sector among member countries. The WTO remained,
largely as an enforcer of rules involving the trade of goods, while countries hoped the
regional pacts could be signed and ultimately expanded to the whole world. This is the status
quo that is now being challenged.

And that challenge is coming from the United States. The world's largest economy is chafing
against the ties that bind it by directly questioning the system. It is challenging the WTO itself
by refusing to approve judges for the appellate body that handles trade disputes, while also
invoking unilateral trade remedy procedures that have not been used since the 1980s. In 2017
the United States withdrew from TPP, and it began to renegotiate its trade deals with Canada
and Mexico (the North American Free Trade Agreement) and with South Korea (United
States-Korea Free Trade Agreement). The United States' stated desire is to return to a world
of bilateralism, where deals are negotiated between two countries instead of many; this is a
world that would suit the larger competitors to the detriment of the smaller. The United States'
role in the global system is the source of its dissatisfaction. Since 1945 it has been at the
center of the wheel of the global economy. Its currency is accepted for trade around the
world, and it is the center of gravity in an increasingly borderless system. These have caused
investment to flood in and helped to create a consistent trade deficit helped along by a
consumerist boom. And foreign investment in the United States now exceeds U.S. investment
overseas by $8 billion. These are the facts of life for a country in the United States' position,
but they lead the United States to periodically buck against its bonds. And that action puts the
whole system at risk.

To see the primary source of U.S. dissatisfaction, look across the Pacific Ocean at China. The
world's second-largest economy has taken full advantage of the trade infrastructure put in
place by the United States and the European Union, and it has used it as a platform to achieve
breakneck growth over the past several decades. WTO membership has allowed China to
build a global factory, which takes in materials largely from the developing world and
assembles them into products that it sells to developed markets. And with no tariff barriers to
hide behind, those markets struggle to defend against the influx. The lack of global rules on
such modern trade topics as services and non-tariff barriers suits China well. Because of its
historical suffering at the hands of foreign powers, the Middle Kingdom prizes control and
sovereignty above all, and it is particularly wary of any interference with its laws and
governance. Trade liberalization with goods largely involves the reduction of tariffs at the
border, while liberalization with services involves issues inside the border. A world where the
trade in goods is liberalized (allowing China to export its products) and the trade in services is
not (letting China keep maximum control) is thus perfect for the Chinese. As a result, China is
highly motivated to maintain the status quo and defend the WTO, but it is wary of progress
and "modern comprehensive trade deals," such as the TPP.

Meanwhile, the European Union is still following the track that it shared with the United
States. With a modern, developed economy, the bloc wants agreements with its major trading
partners that cover such areas as services and the digital economy. Since its creation, the
European Union has seen itself as a normative beacon for other countries to follow, and as
such, it wishes to set global standards in trade that will be adopted around the world. Thus,
looking at the three major hubs in the global trading system, the United States is seeking a
shake-up and potentially regression, China is struggling to preserve the status quo, and
Europe is pushing to keep moving forward.

Japan, as well, has been undergoing a transition in recent years. In the decades after World
War II, it was often a reluctant liberalizer on the global stage. With a model representing
something of a proto-China, it prioritized the export of goods and staunchly resisted any
attempts to reform Japanese laws or regulations, helping it protect its weak services sector.
But recently there has been a shift. Outflanked by South Korea in key trading markets and
increasingly aware of China's rise on its own flank, Japan has decided to join the global
conversation. With that Chinese threat in mind, it is particularly motivated to remain as close
to the United States as possible. And Japan and Europe have both been keeping the free trade
dream alive by pursuing as many large and comprehensive trade pacts as possible, including a
large trade deal between them in 2017. The European Union has also signed a pact with
Vietnam and has expedited negotiations with Australia, Mexico and one of South America's
trade blocs, Mercosur (Common Market of the South). Japan for its part has been
instrumental in keeping the TPP (now the CPTPP, or Comprehensive and Progressive
Agreement for Trans-Pacific Partnership) alive after the U.S. withdrawal, and it hopes that the
United States can be persuaded to rejoin later.

The United Kingdom faces a daunting challenge. It is about to leave the relative comfort of
the European Union, which receives 43 percent of its exports and is the source of 54 percent
of its imports, and make its way in the outside world. With a sizable overall trade deficit, the
world's fifth-largest economy may find it easy to strike trade deals with manufacturing
exporters, but in the export of services, where it is strongest, the United Kingdom will find its
domestic companies are guaranteed little protection abroad by WTO rules. A post-Brexit
United Kingdom is thus likely to end up joining the group of countries -- including Japan and
the European Union -- that are actively signing comprehensive trade agreements and looking
to modernize global trade standards to better reflect their economic needs.

India faces a different kind of challenge. With a million workers entering its economy every
month, India must find jobs for them all. It would ideally like to do this by creating a
manufacturing industry in the manner of China and Japan before it, but that aspiration faces
many infrastructural, political and geographical constraints. India's strength is in services, and
it remains weak in agriculture and manufacturing. As a result, it is poorly positioned for the
current global trading system in which goods trade is liberalized and services face barriers,
and it has long been a difficult and protectionist voice in multilateral negotiations. India will
thus be looking with increasing urgency for ways to reduce barriers to its services exports,
often by negotiating bilateral pacts. But with the liberalization of the trade in goods often
being the starting point in any negotiation, it will be held back by its innate protectionism.

World trade is in flux. The United States is making clear that it no longer sees itself as the
leader, but that does not mean a new chief will emerge. China and the European Union, the
two possible contenders, have differing views on how to proceed, meaning that it is unlikely
that two of the world's three economic hubs can align as the European Union and the United
States did for so many years. And the one regional pact that has momentum -- the CPTPP --
includes neither the European Union nor China. China's equivalent pet project, the Regional
Comprehensive Economic Partnership (RCEP), looks hamstrung by the divergent interests of
its members. It contains China, which is averse to services liberalization; India, which only
wants to discuss services liberalization; Japan; and Australia, which would like to
discuss comprehensive goods and services liberalization in the manner of the CPTPP. With
the United States no longer willing to lead on world trade, the field it leaves behind looks
disparate and diverse, with many different countries pursuing their own interests and
priorities. As the world shakes out, Stratfor's Trade Profiles series will help to show what
these interests are, and it will act as a guide to understanding the reshaping of the global
system.

This article was originally published by Stratfor Worldview, a leading geopolitical

intelligence platform and advisory firm based in Austin, Texas.