The Evolving Global Trade Landscape
The global trade landscape has been rapidly evolving, influenced by a multitude of factors such as geopolitical shifts, technological advancements, and recent global events like the COVID-19 pandemic. This has led to a shift in traditional trade relations and the forging of new alliances and partnerships. The United States, for instance, has broadened its approach to its trading partners, no longer solely focusing on trade concessions but seeking to deepen military ties and strengthen overall partnerships.
The World Trade Organization (WTO), established in 1995, has served as the bedrock of the global trading system, implementing rules designed to uphold the agreed trade concessions among nations. This led to the liberalization of various markets, including agriculture, and the enforcement of food safety standards. The 1990s and 2000s witnessed a deepening of trade relations, resulting in the formation of free trade zones like the ASEAN free trade area, and numerous preferential trade agreements.
Mega Trade Deals and Shifting Power Dynamics
Mega trade deals have also emerged in the past decade, reshaping the global trade landscape. The Trans-Pacific Partnership (TPP), driven by US leadership, represented half of the world economy, leading many countries in the region to desire inclusion. However, the withdrawal of the US from the TPP under the Trump administration signaled a rethink of its trade relations.
In contrast, China, the US’s economic rival in East Asia, led the establishment of the Regional Comprehensive Economic Partnership (RCEP), another mega trade deal. However, the onset of the COVID-19 pandemic slowed down global trade, pushing countries towards more inward-looking policies, thus affecting China’s economy alongside her trading partners.
The Shift from Free Trade to Fair Trade
With the election of President Biden, expectations were high for a resurrection of the TPP agreement and a reassertion of US economic leadership in East Asia. However, the paradigm shifted from free trade to fair trade. This shift was driven by concerns about the impact of globalization on domestic economies, particularly the “hollowing” of the US industrial base and the growing inequality within the country.
According to Jake Sullivan, the US National Security Adviser, the premise that economic integration would result in more responsible and open nations has not always been realized. As a result, the US is adopting a more pragmatic and inclusive approach towards international relations, aiming to address the economic weaknesses exposed by decades of globalization while simultaneously addressing challenges like climate change and geopolitical competition.
The Importance of Abiding by Trade Rules
The state visit of President BBM to the US signifies the realization of this new US paradigm. The world is now faced with the reality that simple trade agreements may no longer suffice, and that trading partners must abide by the established rules. To promote global economic integration, it may be necessary to expand the capability of trading nations to engage in trade, address climate change challenges, ensure that the benefits of global trade are spread widely, and maintain world peace.
Addressing Domestic Issues for Effective Trade
Similar to the Biden administration, countries like the Philippines must reconsider their approach to global trade relations. Trade should not be a palliative to problems that originate from structural weaknesses within domestic economies. For instance, the Philippines’ agricultural sector’s contribution to economic growth has lagged behind, leading to rural poverty and food shortages. These issues can be attributed to structural problems, such as the fragmentation of farmlands and lack of access to capital. Without addressing these issues, the potential benefits of trade agreements like RCEP or ATIGA in food and agricultural trade may not be fully realized.