World Economic Forum Hears Hopes And Fears: Too Early To Predict Trade War

It is too early to push the panic button with regard to the rise of protectionism under new US President Donald Trump, David Cote, CEO of US multinational Honeywell, said on a panel discussion at the World Economic Forum today in Davos.

“Do I really think we are going backwards? I don’t really know yet,” said Cote, answering questions on what he expects to happen to free trade under Trump. Cote said while with people working in companies like him, what they thought, said and did was the same, that was not true for politicians. And an update on NAFTA and talks to China, he argued, would in fact be beneficial.

UPS Chairman and CEO David Abney joined Cote in the effort to assure WEF participants about the outlook for trade with the United States. “We would have liked TPP to be approved, but to overreact to specific incidents now would just cause further concern,” Abney said, adding, “I cannot predict, but I don’t think there will be a trade war.”

In line with a major agenda item this year in Davos, Abney also underlined that industry must do more “to help people that got dislocated” through the closure of companies to get prepared for new jobs. Inequality and unequal distribution of gains of globalization has made it to the top of the WEF agenda in 2017.

Beijing Will Not Tweet Back for Now

Despite the declared optimism of US business leaders, Min Zhu, president of China’s National Institute of Financial Research, was not at all reassured. He said hoped to meet the new president sometime to explain how he saw the situation. “I am concerned, I have to say,” Zhu said.

Were Trump to follow through with pronouncements and raise tariffs on Chinese imports as high as 45 percent across all sectors, it would result in cutting the US GDP growth in half and GDP growth in China by one third, Zhu asserted. The Chinese economy expert warned that no room for negotiation remains when a US president announces rigid measures at three o’clock in the morning on Twitter. Asked by the moderator from the Financial Times if Beijing would tweet back, Zhu declined.

European Shopping Tour for More Trade Deals

EU Trade Commissioner Cecilia Malmstroem outlined the path for negotiations between the European Union and the United Kingdom, once the UK has formally invoked Article 50 starting its official withdrawal from the internal market and, possibly, the customs union. The UK would be number 18 on the list of trade deals under negotiation with the EU, Malmstroem said. The Community is currently negotiating with 17 countries and regions, with another 5 or 6 bilaterals and multilaterals to be in the starting gates.

While she made clear that negotiations are done in parallel – “it is not that we first take Manhattan and then we take Berlin. We do not tick them off one after another” – all trade negotiations take some time. “That is because they are very complex. It is not that they are only about tariffs, they are about sustainability, about services, sometimes about taxes and more. It is a way to shape globalization.”

No mention at all was made by Malmstroem today of the EU-US trade deal, the Trans-Atlantic Trade and Investment Partnership (TTIP). Malmstroem and departing US Trade Representative Michael Froman in their rather sober status quo summary this week also did not set any dates or give any outlook on next steps.

Instead, the TTIP report includes an impressive list of open issues, including: “how to structure commitments on data flows that will reinforce the essential electronic commerce and digital infrastructure of our economic relationship while respecting legitimate concerns about protecting privacy; how best to promote transparent, open, and secure energy markets; and how to reconcile differences in our approaches to trademarks, generic names, and geographical indications,” and many more.

British Prime Minister Theresa May on the other hand this morning told the WEF audience she is “pleased that we have already started discussions on future trade ties with countries like Australia, New Zealand and India.”

Besides, countries including China, Brazil, and the Gulf States have already expressed their interest in striking trade deals with the UK, May said.

While May was adamant to present her country as “truly global Britain” post-Brexit, Malmstroem in the evening debate pointed to numbers. Even post-Brexit, the 27-member EU is one of the biggest exporters and importers in the world and a well sought-after trading partner.

Roberto Azevêdo, secretary general of the World Trade Organization, said the WTO is building on the bilateral and multilateral trade deals. “It is making work in Geneva easier,” he said.

He also warned in viewing the storms around the inauguration of Donald Trump “We should not talk ourselves into a trade war.” Trade ministers from many countries also are gathering for side meetings. One on digital trade took place this morning.