Free trade areas

Geo-economics was defined by its intellectual godfather, Edward Luttwak, as a contest defined by the grammar of commerce but the logic of war. Today, one of the most pernicious tools in this global contest is the evolving role of government in a market economy. It was one thing to fight the battle of communism v. capitalism. It is quite another to fail to recognize today’s competition is increasingly over the rules, norms and tools of state involvement in capitalism itself.

For decades, the US led global economic order largely advocated the position that the economic role of government should be limited. Ideally, governments should set the ground rules for investment and commerce via just laws and regulations and enforce them fairly both domestically and internationally. Beyond that, let the free market rule. Read more

Two behemoths of the global economy finally reach a deal to resolve a trade dispute that has rumbled on for a decade. Good news, right? No. The settlement of Brazil’s WTO case against the US over cotton subsidies, announced last week, raises the profoundly disturbing possibility that yet another part of the multilateral governance of trade is now being undermined.

The issue dates from 2004, when Brazil won a famous victory at the WTO’s dispute settlement process against US subsidies to cotton farmers, the first big victory for an emerging market country. The arbitration panel authorised Brazil to retaliate with trade restrictions totalling $830m. Washington dragged out the case by every means possible – first appealing against the decision, then wrongly claiming it had changed its subsidies to comply with the ruling, then saying that the matter could only be dealt with in the multilateral so-called “Doha round”, and then finally and absurdly, paying Brazilian cotton farmers nearly $150m per year in protection money from 2010 onwards to avert trade sanctions. Read more

Some things in life happen often enough that they take on a reassuring familiarity. Germany win the World Cup. Belgium struggles to form a government. And India throws stones at a deal at the World Trade Organisation.

Having already in effect pushed the demolition button on the Doha round of world trade talks in 2008, India is now being obstreperous over a tiny part of the deal that managed to crawl out of the wreckage – a “trade facilitation” agreement supposedly making it easier to do business across borders. It has threatened to block the agreement over a completely unrelated issue of particular interest to itself, a commitment to “food security” which will in effect hand Delhi yet another tool to enforce agricultural protectionism. Indeed, it was over a similar issue that hopes for Doha as a comprehensive deal died in 2008.

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Peru's Ollanta Humala, Chile's Sebastián Piñera, Colombia's Juan Manuel Santos, Mexico's Enrique Peña Nieto and Costa Rica's Laura Chinchilla in Cartagena, Colombia

Peru's Ollanta Humala, Chile's Sebastián Piñera, Colombia's Juan Manuel Santos, Mexico's Enrique Peña Nieto and Costa Rica's Laura Chinchilla in Cartagena, Colombia

It’s all about free trade. The Pacific Alliance, a growing bloc in Latin America that stands among the world’s 10 largest economies, sealed a deal on Monday to eliminate tariffs on 92 per cent of goods and services in a move that distances it further from some of its more protectionist neighbours.

“I don’t think there has been an integration process that has taken decisions so fast as the Pacific Alliance has done,” Colombia’s President, Juan Manuel Santos, told beyondbrics. Read more

When Gao Hucheng, China’s minister of commerce unveiled the Shanghai free-trade zone (FTZ) in a low-key inauguration ceremony on September 29, those who had been overexcited by the prospect were tempered, and those who were afraid of it felt relieved – at least for the time being.

Why? The lack of big names at the event. Read more

Wine night in Nanning

When Luca Famiglietti, a 45-year-old Italian wine supplier, first came to China in 1995, he never thought he would end up selling wine from his motherland in Qinzhou Port, Guangxi province two decades later.

But despite the allure of richer trade areas, Qinzhou, China’s sixth “free-trade port”, is emerging as a trade hub for the poorer southwestern Chinese region, including the provinces of Guangxi, Yunnan and Guizhou. Read more

And beyond that, you can see New Zealand

Taiwan has sealed an important free trade agreement with New Zealand – the two countries have no formal diplomatic relationship. It’s a big precedent for an island that almost no nation formally recognises.

New Zealand and Taiwan have agreed to start phasing out tariffs under the deal, signed on Wednesday. It will help boost Kiwi food exporters, but its greatest significance is the political boost it gives Taipei, which often finds its political interactions with other nations stifled by Chinese interference. Read more

By Peter Hakim and Sergio Muñoz Bata

Latin Americans still like and admire President Obama, yet they no longer expect much from him. He mostly ignored the region in his first term, and never mentioned it during his re-election campaign. Sure, immigration reform is on his agenda, but only because both Republicans and Democrats are now intimidated by Latino political clout. It may be that Latin America requires only sporadic attention – like when an earthquake devastates Haiti, or a political crisis undoes Honduras or Paraguay, or an economy collapses somewhere.

But at least two of the region’s 33 countries demand a more strategic approach. Read more

China’s exports of machinery and transport equipment will increase more than threefold in the ten years to 2020, as emerging economies in the Asia Pacific shift to producing higher value-added goods. The region’s other big exporters will also see big gains, including South Korea, Thailand and Indonesia. Read more

The African Union summit last month sounded the rallying call for intra-African trade as the key driver for economic growth on the continent, and called for the creation of a free-trade area. Now this week the World Bank has released a report on exactly that subject.

The stakes are high: the World Bank forecasts that economic slowdown in the eurozone could shave Africa’s growth by up to 1.3 percentage points this year. Africa is “losing out on billions of dollars in potential trade earnings every year”. So what’s the verdict? Can Africa make a free-trade area happen? Read more