Global Trade Outlook for 2019

Panel Overview & Context

• Trade has shifted from a niche issue to a mainstream political and public concern, characterized by increased media coverage and social media engagement (#MIGlobal).
• Key drivers of current trade disruption include Brexit, the renegotiation of NAFTA into USMCA, the US withdrawal from the Trans-Pacific Partnership (TPP), and escalating trade tensions with China.
• The panel highlights a disconnect between the diffused, long-term benefits of trade (consumer choice, lower costs) and the localized, immediate pain of job losses and factory closures.

Communication & Political Challenges

• Ron Kirk (Former USTR): Admitted that trade supporters "failed miserably" in communication; politics incentivizes blaming trade for lost jobs rather than acknowledging broader economic shifts.
• Janice Charette (High Commissioner, Canada): Noted that Canadians are 64% dependent on trade, yet communication remains a challenge due to complex jargon (e.g., "green boxes," "amber boxes") and the commingling of trade issues with technological automation.
• Ben Digby (CBI): Stressed that the general public and even businesses often lack understanding of specific agreements (e.g., TTIP) and prefer tangible business solutions over abstract policy acronyms.
• Gil Kaplan (US Commerce): Argued that the issue extends beyond communication; the US $566 billion trade deficit and perceived unfair Chinese practices (IP theft, technology transfer) create genuine legitimacy issues that must be addressed before benefits can be promoted.

USMCA & North American Trade

• USMCA Status: Viewed by US officials as a "paradigm" for future agreements, featuring improved intellectual property rights, 10-year data protection, expanded dairy access for Canada, and stricter automotive rules of origin.
• Canadian Sentiment: Canada views the USMCA as essential for its "existential economic relationship" with the US and Mexico, though it retains trade-offs regarding auto manufacturing rules.
• Internal Trade Barriers: Canada continues to face significant non-tariff barriers in its internal market (e.g., inter-provincial wine transport) which lag behind progress in external trade agreements.
• Competitiveness Concerns: Critics argue that strict domestic content rules in the USMCA may disadvantage globally active firms compared to competitors operating under more liberal multilateral frameworks.

Brexit & UK-EU Relations

• Uncertainty: The panel anticipates that the full implications of Brexit will not be known until negotiations conclude after March 2019, with the "Brexit process" likely lasting 3-5 years post-withdrawal.
• Business Impact: UK firms face significant uncertainty regarding regulatory divergence and rules of origin, with many lacking the expertise to navigate the new trade landscape.
• Future Agreements: Canada aims to maintain a seamless transition to a new Canada-UK trade agreement if a no-deal Brexit occurs, while the US hopes to eventually secure a bilateral free trade agreement with the UK.

China & US-China Trade Tensions

• Negotiation Stance: The US has established a 90-day period for negotiations with China following a G20 agreement, with a focus on halting intellectual property theft and forced technology transfer.
• Tariff Strategy: Gil Kaplan defended steel and aluminum tariffs (Section 232) as necessary for maintaining national security industrial capacity (targeting 80% utilization), though the application of tariffs to automobiles remains under investigation.
• Strategic Disagreement: Panelists noted that while there is broad agreement on China's problematic practices, there is debate over whether unilateral US action is more effective than multilateral WTO engagement or coordinated pressure with allies.
• Corporate Dilemma: Global firms (e.g., General Motors) face conflicting pressures: the necessity of manufacturing in China to access its massive 30-million-car market versus the risks of tariffs and IP theft.
• Opportunity Cost: Critics lamented that the US withdrawal from TPP removed a mechanism that could have enforced high-standard trade rules on China had it joined the pact.

WTO Reform & Future Outlook

• Institutional Crisis: The WTO is viewed as increasingly ineffective, particularly regarding its dispute settlement mechanism, which is not functioning to the satisfaction of any major player.
• Reform Initiatives: Canada chaired a meeting of interested nations in Ottawa to discuss immediate WTO reforms, focusing on revitalizing negotiations and fixing dispute resolution.
• Structural Shifts: The global economic center of gravity is shifting from North America/Europe to Asia, necessitating a modernization of Bretton Woods institutions to account for a world where not all members are liberal democracies.
• Forward-Looking Predictions:
  • Brexit: No-deal scenarios are discouraged; a negotiated arrangement is preferred to avoid business disruption.
  • US-China: Panelists expressed cautious optimism that tariff pressures and economic pain will eventually force a resolution or further negotiations before the 90-day window closes.
  • Global Trade: The trend toward bilateralism (USMCA, UK-EU, etc.) is accelerating, potentially creating a "spaghetti bowl" of regulations that complicates trade for small and medium-sized enterprises.