Saturday, March 2, 2024

POLITICO Nightly: Pour one out for global trade

 


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BY GAVIN BADE

Director-General of the World Trade Organization Ngozi Okonjo-Iweala addresses delegates during a session on fisheries subsidies during the 13th WTO Ministerial Conference in Abu Dhabi.

Director-General of the World Trade Organization Ngozi Okonjo-Iweala addresses delegates during a session on fisheries subsidies during the 13th WTO Ministerial Conference in Abu Dhabi on Feb. 26, 2024. | Giuseppe Cacace/AFP via Getty Images

SWAN SONG — This week, world leaders hammered another nail in the coffin of global free trade — perhaps the final one for its central institution, the World Trade Organization.

At the annual ministerial meeting of the WTO this week, world nations failed to reach agreement on any of the major commercial irritants that have put the very existence of the global trading body at risk. From global overfishing to farm subsidies and the structure of the WTO itself, world nations will walk away from Abu Dhabi with little to show for their days — and many sleepless nights — of negotiations.

World leaders did manage to ward off an unexpected total catastrophe, agreeing at the 11th hour to continue prohibiting tariffs on digital transactions, thereby avoiding new fees on countless online business dealings. But the failure to move any new free trade initiatives forward in the face of rising right-wing populism around the world is being regarded as a major blow to the global trading system set up after the (first) Cold War.

“Countries are fighting very, very hard just to maintain the status quo when it comes to free trade,” said Kelly Ann Shaw, a WTO negotiator during the Obama administration who also served as senior White House economic aide in the Trump administration. “So, this [meeting] is not a good sign in terms of the future of the WTO.”

Stagnation is exactly the outcome that supporters of the global trade body feared. On Wednesday, as negotiators struggled to keep the WTO from slipping into irrelevancy, Director General Ngozi Okonjo-Iweala warned the very legitimacy of the rules-based world trading system is at risk.

“The biggest issue at stake is the system itself,” she warned in a speech to business officials.

“We are at an inflection point. Will we continue to have a reasonably open, integrated and global economy, or will we move toward an increasingly fragmented and divided one?”

The answer — at least for now — appears to be the latter.

Before the meetings, world nations had hoped to at least reach a deal to curb global overfishing, with one diplomat telling POLITICO failure on that issue would be a “tragedy.” They had also hoped to reach a deal on farm subsidies, and some (non-U.S.) nations were pushing for a deal to reestablish the WTO’s dispute settlement mechanism that has been defunct since Washington put a blockade on new judges back in 2019.

They’ll jet out of Abu Dhabi with none of those issues resolved. And there’s plenty of blame to go around.

Western nations lay most culpability at the feet of India, which derailed multiple issue negotiations by insisting that agricultural stockpiling programs — which buy food at above-market prices — would be accepted by other nations before they agreed on any other issues. One Western negotiator called India’s demands “deplorable” to Reuters.

But India isn’t the only nation jealously guarding a protectionist policy. Almost every nation has a nationalistic economic policy — or a few — that they want to preserve in spite of WTO rules, which generally prohibit nations from favoring domestic firms over foreign competition. The U.S. has Biden’s Inflation Reduction Act and its America-first tax credits for clean energy factories. The EU has plans for tariffs on high-carbon goods, and China has a litany of industrial subsidies that have powered its economic success story, but would be prohibited in more developed nations.

“There’s a broad trend of countries looking to embrace a greater focus on their domestic economies at the expense of trade,” said Peter Harrell, the former senior director for international economics on Biden’s National Security Council. “Because the agriculture issues were on the table, India’s ag stockpiling program was front and center, but lots of other countries have been embracing protectionist measures as well.”

Policies like those were hard enough to abandon 25 years ago when global liberalism was ascendent and the WTO was being set up. But now, with populists in the U.S., EU and elsewhere ready to slam any international cooperation as a globalist sellout, getting nations to unravel nationalistic policies has become harder than ever.

“Clearly the politics of opening markets has gotten quite challenging around the world over the past 5 or 6 years and I don’t see evidence that is likely to change over the next few,” said Harrell. “The fact that we are in this global political climate that is more and more skeptical of opening markets meant it was always going to be extremely challenging for [the WTO meetings] to yield substantial accomplishments.”

If that political climate continues, trade veterans in both parties expect that the WTO will continue its yearslong slide into irrelevancy, and international commerce will be determined more by might-makes-right than comparative advantage.

But that’s a big if. This year’s elections — in the U.S. and elsewhere — will have a big influence on what’s to come.

“If Biden is re-elected, he would like a rules-based order, but an order in which the rules allow more industrial subsidies for things like green energy and whatnot,” said Harrell. “Whereas, I think if Trump comes back, you will very clearly see a desire out of Washington to promote not only a more protectionist set of policies writ large, but a more power-based negotiating dynamic.”

But it’s not just the U.S., he added. “Look at Europe: Germany’s got elections, France has elections. Whether they will want to update rules or whether they will simply seek their own kind of power-dynamic negotiations, I think will depend on the outcomes of those elections as well.”

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com . Or contact tonight’s authors at gbade@politico.com or on X (formerly known as Twitter) at @GavinBade .

 

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WHAT'D I MISS?

— Some Jan. 6 sentences were improperly enhanced, appeals court rules: federal appeals court panel ruled today that Jan. 6 defendants who obstructed Congress’ work had their sentences improperly lengthened by judges who determined that they had interfered with the “administration of justice.” The decision could force district court judges in Washington, D.C. to recalculate, and perhaps reduce, the sentences for a slew of Jan. 6 rioters convicted of felony obstruction for their roles in the attack on the Capitol that threatened the transfer of power three years ago.

— Trump floats possible support for 15-week abortion ban: Donald Trump floated possible support for a 15-week limit on abortion in a Fox News interview on Thursday night, though the former president’s campaign wouldn’t elaborate on his plans. Trump, who is coasting to the GOP presidential nomination, has been consistently cautious about advocating for any specific abortion policy during his campaign. But during an interview on Fox at the Southern border, he said he’s heard a lot about a post-15-week ban.

— CDC loosens Covid isolation guidance: The longstanding recommendation that people isolate for five days after testing positive for Covid-19 is no more. Today, the Centers for Disease Control and Prevention announced that someone who has been fever free without medication for 24 hours and whose symptoms are improving may return to school or work . Those who return to their regular activities should wear a mask for five days, according to the guidance. The guidance for Covid now aligns with RSV and the flu and comes amid a marked decrease in Covid-related hospitalizations and deaths, and as many people tell officials they don’t bother to test when ill.

NIGHTLY ROAD TO 2024

HALEY’S FLOW — Republican presidential candidate Nikki Haley said today that she raised $12 million in February , reports the Associated Press, a haul that will likely allow her to remain in the Republican primary against former President Donald Trump past next week’s Super Tuesday — even though she can’t point to an upcoming state where she expects to beat him.

The former ambassador to the United Nations noted that she outraised Trump in January and insisted that the donations have continued to flow despite her not having a long-term plan to challenge — or even really dent — the former president’s commanding lead in the primary.

DR. JILL ON THE TRAIL — First lady Jill Biden warned today that returning Donald Trump to the White House would threaten women who already have watched the former president’s Supreme Court picks nix a federal right to abortion services, writes the Associated Press. Trump has “spent a lifetime tearing us down and devaluing our existence,” she said in Atlanta, where she launched a multistate battleground tour to highlight President Joe Biden’s reelection campaign outreach program aimed at women.

MUM ON THE MIDDLE EAST — In the nearly five months since Hamas terrorists invaded Israel on Oct. 7, igniting the most divisive foreign policy crisis of the Biden presidency, Donald J. Trump has said noticeably little about the subject , reports the New York Times.

He criticized Prime Minister Benjamin Netanyahu of Israel, before quickly retreating to more standard expressions of support for the country. And he has made blustery claims that the invasion never would have happened had he been president. But his overall approach has been laissez-faire.

Mr. Trump’s hands-off approach to the bloody Middle East conflict reflects the profound anti-interventionist shift he has brought about in the Republican Party over the past eight years and has been colored by his feelings about Mr. Netanyahu, whom he may never forgive for congratulating President Biden for his 2020 victory.

AROUND THE WORLD

A Jordanian military aircraft (not pictured) drops humanitarian aid over Rafah and Khan Yunis in the skies of the southern Gaza Strip.

A Jordanian military aircraft drops humanitarian aid over Rafah and Khan Yunis in the skies of the southern Gaza Strip on Feb. 27, 2024. | Said Khatib/AFP via Getty Images

AIRDROP COMING — The U.S. will airdrop humanitarian aid into Gaza in the coming days, amid tense negotiations for a pause in the fighting between Israel and Hamas, President Joe Biden announced today.

The mission is designed to increase the flow of humanitarian assistance into Gaza as Palestinians struggle to get food, water, medicine and other aid during the Israel-Hamas war in the enclave, POLITICO reports.

Biden, who made the announcement alongside Italian Prime Minister Giorgia Meloni, complained that Israel didn’t allow enough aid to enter Gaza.

Speaking of the airdrops, Biden said, “we’re going to pull out every stop we can.” The president also occasionally said “Ukraine” when he meant to say “Gaza” regarding the location of the airdrops.

THE WASHINGTON WHISPERER — Former Canadian prime minister Brian Mulroney, a giant of Canadian politics, has died at 84 .

The bilingual and gregarious leader made his biggest mark in foreign policy in the 1980s, tying the United States and Canadian economies closer together through the establishment of the North American Free Trade Agreement which Mexico would later join, POLITICO writes.

The 18th prime minister was a fierce friend of a series of U.S. presidents. His death leaves Ottawa minus its go-to counsel as Canada braces for another bumpy ride with Donald Trump’s potential return to Washington.

PUTIN’S BLUFFING — NATO’s No. 2 official said Russian President Vladimir Putin’s nuclear threat is currently just “psychological intimidation.”

Putin issued the warning Thursday as French President Emmanuel Macron stood by his message that the West could not rule out sending troops to help Ukraine fend off Putin’s full-scale invasion. "This really threatens a conflict with nuclear weapons," Putin said.

NATO Deputy Secretary-General Mircea Geoană characterized Putin’s nuclear saber-rattling as “a discourse that delves into the logic of psychological intimidation rather than real intentions,” in an interview with Spanish newspaper El País published today.

He added, “We do not see any imminent threat of Russia using these weapons. But these statements are in themselves very dangerous, because they erode trust. Russia knows the consequences of taking such a step.”

 

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NIGHTLY NUMBER

125,000

The number of high-income earners who have not filed tax returns dating back to 2017 , according to the IRS. The agency plans to send noncompliance letters to these “non-filers” as part of a larger directive from Treasury Secretary Janet Yellen to go after tax cheats.

RADAR SWEEP

SUCCESS IN FAILURE Most venture capital-backed startups — in fact, around 75 percent — fail. As the theory in the industry goes, that’s the price of doing business; for all the projects that fail, some investments hit huge and make millions or billions of dollars, as well as careers. But now, in an ironic twist of fate, there’s a new cottage industry that venture wants to get their hands on: startups that specialize in helping to wind down or shut down other startups . If a VC-backed startup is succeeding or failing, they’ll come out ahead with ownership of shutting down their failures, according to the thinking. Mary Ann Azevedo reports for TechCrunch on the funny twist that shows just how much startups around the country are now relying on VC money — and just how much VCs keep managing to escape failures while continuing to make money.

PARTING IMAGE

On this date in 1986: A bouquet of flowers is laid down at the pool of blood on the pavement where Swedish Prime Minister Olof Palme was assassinated shortly before midnight in Stockholm.

On this date in 1986: A bouquet of flowers is laid down at the pool of blood on the pavement where Swedish Prime Minister Olof Palme was assassinated shortly before midnight in Stockholm. | Borje Thuresson/AP

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