Russia’s stronger transatlantic ties
Apr 02 2014
How serious is this? But first, why should anyone based in south Asia — or anywhere else — care? Business executives, in particular, should take note. For the foreseeable future big trade deals at the WTO aren’t on the cards. So the major trading powers started trying to cut deals among themselves, their negotiators whipping themselves into a frenzy to close deals and give the edge to their nation’s firms. India is only involved in one of these mega-negotiations — one that includes China, which, if it ever came to pass, would probably strike fear into many a south Asian boardroom. If many of these mega-deals get signed, it’s pretty likely that India (and plenty of others) won’t be included.
Much of the momentum behind these mega trade-negotiations, however, was lost earlier in the year when influential US congressional officials wouldn’t vote on proposals to make approving trade deals easier. In the trade world, preferential access to the US market is the ultimate prize. Without the prospect of it, motivating pro-trade forces in the US’ trading partners becomes harder. Not surprisingly, then, recent months have seen the Japanese balk at American demands for unpopular reforms.
Crimea’s annexation has given a shot in the arm to proponents of mega-deal. Opportunists argued that Russian leverage over Europe would shrivel if the US exported energy to the EU. Under US law, energy exports are only possible if the US has a free trade agreement in place, giving some Europeans another reason to tout EU-US trade talks which, until now, have faced a series of setbacks.
This is a serious case of old wine in new bottles. There’s a long tradition of foreign policy considerations shaping trade talks — and not necessarily for the good. It’s appropriate that this article is being published in south Asia, the part of the world economy with the lowest levels of intra-regional trade. Why is that? Precisely because, until recently, strained diplomatic relations have made impossible serious trade deals between India and its neighbours.
Critics might counter that now foreign policy and trade goals could be met in a transatlantic deal. That may be true, but what guarantee is there that the diplomatic winds won’t change direction? Should Putin be replaced by a less threatening Russian leader, European access to cheap American gas becomes less of a priority, undermining the recent geopolitical rationale for transatlantic trade talks. Foreign policy support for trade deals is a fair-weather friend.
Plus signing a trade deal is a one-off event and provides no guarantee of future cooperation. American experience here is instructive. They signed their first full free trade agreement with Israel in 1985. As successive US diplomats have found, that deal hasn’t made it any easier to persuade governments in Jerusalem to go along with US peace initiatives in West Asia. This sobering experience should give pause to any European hoping that a transatlantic trade deal would presage a return to post war cooperation with Washington. Trade deals don’t lock in foreign policy cooperation.
Digging deeper, why would the US give up a major energy cost advantage over a trading partner whose firms compete with American rivals all over the globe? What extra would the EU be prepared to offer the US in trade talks to compensate for higher US energy prices, that would inevitably be arise if plenty of American oil and gas were shipped across the Atlantic? The Americans aren’t daft — only the fear of a foreign policy catastrophe would persuade the US to give up such a significant advantage, that some credible analysts reckon is already partially reversing offshoring and bringing jobs back home. President Obama seems to have cottoned on —in his recent trip to Brussels, he suggested Europeans drill their own shale gas rather than importing it from abroad. The bottom line here is that a trade deal isn’t the only solution to Europe’s energy needs.
That foreign and trade policy are bedfellows is, all too often, a fact of life. Those seeking to open markets abroad — and the firms that are counting on them —should be wary of the siren call of foreign policy. Getting trade deals done is hard enough as it is.
(The writer is a professor of international trade and economic
development at University of St Gallen, Switzerland)