FAIRNESS AND THE GRAMMAR OF TRADE POLITICS:

You trade unfairly.

He is a protectionist."

The inaugural World Trade Symposium was a two-day event, organized by The Financial Times and Misys, and held in London on June 7 and 8.  It was a star-studded event, with luminaries like Pascal Lamy, Bob Zoellick, and Anabel Gonzalez.*  Roberto Azevêdo, the Director-General of the World Trade Organization, gave the keynote address, and that was the source for today's featured quote. 

	Director-General Roberto Azevedo at the WTO WTO Photo

Mr. Azevêdo touched on a number of things in this relatively short London speech: the state of world trade, the rhetoric of trade, WTO accomplishments, regional and bilateral agreements, Brexit, and the people of trade policy.  We can't do justice to any of them, but we shall touch briefly on each.

Politics and Rhetoric.  Today's featured quote was part of Mr. Azevêdo's discussion of the politics of trade, which opened - we have reversed the order here - with the unassailable observation that:

And the conviction that:

A few paragraphs on, this led to the barbed but amusing reference to "fairness" in trade as an irregular verb.

The State of World Trade.  "Trade growth has been hit hard by low global demand," Mr. Azevêdo said, "as developed countries come very slowly out of recession, and emerging economies mature."  He noted that the volume of global trade grew by just 2.8 percent in 2015, and said he expected the rate for 2016 to be about the same.  The average since 1990 has been 5 percent - much higher. 

The WTO chief did not attempt to quantify the effects of 21st century protectionist measures.  He did say, however, that of those which were put in place after October 2008 - and notified to the WTO - only 25 percent were subsequently removed. 

On the flip side, globalization is alive and well, which is to say that the value-chain driven global economy isn't changing course, as evidenced by the continuing increase of trade in component parts.

WTO Accomplishments.  Mr. Azevêdo mentioned several, highlighting especially the achievements of the Bali and Nairobi ministerials (2013 and 2015 respectively).  We shall mention just two: the Trade Facilitation Agreement, which came out of the Bali Ministerial, and the Information Technology Agreement from the Nairobi Ministerial.

The Trade Facilitation Agreement is not yet operational.  It covers all 162 WTO members and needs to be ratified by 108 before it can enter into force.  The process may be slow, but it is moving along, and the potential payoff is enormous.  As Mr. Azevêdo explained: "It could reduce average trade costs by over 14% globally - which would be a bigger impact than if we could eliminate every single tariff around the world."
 
The Expansion of the Information Technology Agreement is smaller.  It's a plurilateral agreement with only 29 WTO members at present, but the trade volumes is large, covering some $1.3 trillion in annual trade .  And it is ready to go.  The first tariff cuts under the agreement will kick in on July 1.

Regional Trade Agreements are increasing in number and were praised by Mr. Azevêdo, who declared that to be "very positive."  His caveat was that these  agreements can create challenges "when regional initiatives explore rules in areas that are not currently covered by the WTO."

Brexit.  The UK referendum on its membership in the European Union is just weeks away.  The trade implications for the vote have been a big part of the Brexit debate, and the WTO Director General did not ignore the issue.  After recognizing that this is "a sovereign decision for the British people," Mr.  Azevêdo offered a series of cautionary considerations.  One of these was that:

On People - David Ricardo and Others.  No single concept is more closely associated with the phenomenal growth in global trade over the last 100-plus years than that of comparative advantage.  Mr. Azevêdo paid homage to its author, David Ricardo (1772-1823), at the outset of his London speech, saying:
"His [Ricardo's] insight seemed to provide the classic pro-trade argument.  And while it has often been challenged, it has shaped our perception of trade ever since."

This is where we express the few qualifications or quarrels we have with the Director-General's important remarks.  We have none with his listing of the WTO's accomplishments.  Rather we think he has done an amazing job in a difficult period for the WTO.

Regional Agreements. As for his assessment of regional trade agreements, we think Mr. Azevêdo's assessment may have been a little over generous.  For the United States, the most important regional agreement at the moment is TPP, the Trans-Pacific Partnership Agreement.  Your editor has previously expressed his strong view that TPP needs to be ratified and implemented as soon as possible.  Nevertheless, there are downsides to TPP and other regional agreements beyond simply rules outside the WTO context.  Take tariffs.  In the Doha Round, it was really only the developing countries who had to worry about "preference erosion."  In the new world of bilaterals, everybody does.

Brexit.  We confess we were somewhat disappointed in the Director-General's handling of this very tough issue.  We don't know how the vote will go on the 23rd of June.  No one does.  Our view, however, is that, whatever the outcome, those with relevant responsibilities should be focused on making the best of the result.   To do that, one needs to take into account not only the UK's vulnerabilities but also its strength.  It is not simply an exporter.  It is also an importer. Indeed, it is a country with a large trade deficit.  That's a liability if you're a mercantilist, but otherwise it is a strength.  It's called buying power.   It stretches credulity to believe that those in the EU and elsewhere who sell into the UK would want to see the return of more onerous trading terms any more than would the British themselves.  

Ricardo et al.  Obviously, Brexit is one of those issues on which people can and do disagree - strongly.  Economists, like lawyers, are always disagreeing, and one of history's more engaging, more interesting long running debates was the one between the Reverend Thomas Robert Malthus (too many people, too little food) and the stockbroker David Ricardo.  They were friends, good friends.  Malthus once said of Ricardo, "I never loved anybody out of my own family so much."  Yet what struck us even more than that sentiment was this fragment of a letter from David Ricardo to his friend, Robert Malthus:

In today's environment, especially, that thought is every bit as important as what Ricardo said about cloth and wine, England and Portugal.

Azevedo at the World Trade Symposium is a link to the text of this June 7 speech by the WTO Director-General.

The Symposium takes to the website of the World Trade Symposium.

The Worldly Philosophers by Robert Heilbroner includes a fine discussion of the relationship between Thomas Robert Malthus and David Ricardo and is the source of the quotations from those early British economists in the Comment Section above.  The link takes you to the Amazon page for this book.

*These names are all well known to the readers of these pages. For the record: