The way in which the world’s most advanced economies understand and attempt to order global trade policy underwent a quiet revolution over the weekend.
The German spa town of Baden-Baden hosted the annual meeting of the G20 at a critical and sensitive time. China has started to talk the talk on free trade, even if it is a way off from walking the walk, while President Trump won the US election in part because of a commitment to protectionist policies.
Meanwhile, the imminent triggering of Article 50 has raised a vast array of questions over the kind of trading arrangements the UK will seek to pursue.
Across Europe, populist movements are threatening the establishment and the established way of doing things. It was against this backdrop that the G20 dropped an anti-protectionist commitment from its communique after opposition from the US.
It was hoped that the efforts of Germany in particular, a major exporter, would temper US intransigence, but in the words of German finance minister Wolfgang Schauble, G20 members were unable “to force partners to go along with wording with which they don’t agree.”
Gabriel Felbermayr, an economist with the IFO in Germany said that the G20’s failure to formally reject protectionism is “a clear breach of tradition” meaning “now everything is possible”. He went on to predict a weakening of the World Trade Organization as protectionist sentiment gathers momentum. Britain’s approach to this new environment will be crucial.
For some, the Brexit process (and forging of new trading relations with Europe and the wider world) is a salvage operation: making the most of a bad situation.
For others, such as former trade negotiator Shanker Singham (an interview with whom featured in Friday’s paper) Brexit is an opportunity to reach for a bigger prize. Singham, along with a growing number of parliamentarians, believes that the UK must lead in the world as an advocate and practitioner of free trade and trade liberalisation.
We must meet the rise of protectionist policies by becoming a global champion of free trade’s benefits and virtues.
The global mood music may not be playing to this tune, but it is essential that the UK and EU economies do all they can to remain open to each other.