Argentina lurches from one madness to another

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Welcome to trade secrets. After being in the grip of one self-destructive economic ideology for nearly a century, Argentina has clearly decided to take a chance on another. Yesterday he was elected president Javier Milei, who wants to dollarize the economy when he does not have the dollars to do so, and ravage the size of the state. This is without mentioning its unpleasant associations And reprehensible eccentricities in other areas. How a country manages to go straight from Peronism to reactionary anarcho-capitalism without ever dabbling in boring old liberal social democracy is a wonder to behold.

Given that Milei has stated that he wants to withdraw from Mercosur, this certainly adds some spice to the EU’s desire to withdraw from Mercosur. finalize the ratification of its trade agreement with the South American bloc over the coming weeks. Brussels is trying to achieve this by December 6, the date on which Brazil cedes the presidency of Mercosur to Paraguay. Milei will be sworn in on December 10. Ladies and gentlemen, place your bets please!

The rest of today’s bulletin examines Washington moving further away from its ambitions to set trade rules in the Asia-Pacific region and considers whether Britain’s Labor opposition makes more sense on trade policy than the Conservative government. Charted waters is on the decline of the dollar.

Such a terrible trade deal! And such small portions!

If a virtually blank sheet of paper falls into the Pacific Ocean, does it make a sound? Last week’s meeting of the Asia-Pacific group of Apec primarily served as a venue for the Joe Biden-Xi Jinping bilateral meeting, during which Biden was bizarrely criticized for telling the obvious truth and noting that Xi is a dictator. Any further hope of substance disappeared when, the White House having already taken the digital bits of the Indo-Pacific Economic Framework (IPEF) agreements he advocates in the region, Democrats in Congress completely blocked Ipef’s commercial initiativeciting familiar objections about the lack of protection of labor standards.

This isn’t exactly the worst tragedy to befall the global trading system since the Smoot-Hawley tariff. I’ve said it in the past IPEF is more of a reconstitution of the Trans-Pacific Partnership (TPP) than a real trade agreement, without new market access.

But it turns out that there is one aspect – digital and data – that seems to vaguely interest some of the American partners in the Asia-Pacific region. There is a Web of digital offers already in place in the region and it would be logical for the United States to join. This would mean that Washington would make up the ground lost after its withdrawal from the CPTPP, which created provisions secure the free cross-border movement of data. Countries like Indonesia might also have been able to use the Ipef framework to strike a critical minerals deal with the United States, which closely monitors the country’s nickel exports.

Given the loss of credibility with America’s allies in the Asia-Pacific region, it honestly would have been better not to try IPEF in the first place. What lessons can be learned from putting the framework on hold?

First: the toxicity of trade deals in Washington, and particularly on Capitol Hill, extends to things that aren’t even trade deals and don’t necessarily are (opinions differ) must go through Congress anyway.

Second: The administration has created unrealistic expectations about the possible effects of trade deals. Repeatedly call your trade policy “worker-centered” and unions and their friends in Congress will launch into this whole thing like a wildcat strike. Labor standards provisions will be too weak for them, while complex and intrusive for trading partners. It also makes what should be a simple agreement with the EU on critical minerals.

British Labor Party: better tactics but still imperfect strategy

Be careful, when it comes to signing useless pieces of paper, few countries can touch the UK. Conservative ministers like to accept non-binding memorandums of understanding (MoUs) with individual US states and claiming these are Brexit dividends (They are not) which mean something economically (they don’t, see Article 11 here). The latest Conservative to use MOUs as a campaign prop is corporate secretary Kemi Badenoch, aspiring Conservative Party leader (she has a chance), who traveled to Florida last week to sign a piece of paper with a few warm words on it next to it fellow anti-woke warrior Florida Governor Ron DeSantis wants to become President of the United States (no chance).

According to opinion polls, by next year it will be the Labor government’s turn to try to lead a post-Brexit British trade policy. Last week, Kemi Badenoch’s counterpart, the new shadow business secretary, Jonathan Reynolds, gave a well detailed speech on the subject.

The positives: he correctly identified some of the problems with the government’s current approach: pursuing a wide range of deals (see MoUs) for the sake of it, not listening properly to businesses or outside experts, not not focusing enough on areas that would particularly benefit the UK.

The problem: his solutions are not very realistic. They are quite similar to this (actually very good) report from the Resolution Foundation think tank earlier this year, proposing that the UK strike more flexible deals on issues such as mutual recognition and digital trade, which would directly benefit UK exporters in the services sector.

It’s a good idea, but there really aren’t any substantive, binding, stand-alone mutual recognition agreements. They generally only operate as part of a broader, denser economic relationship, such as that between Australia and New Zealand. Trans-Tasmanian arrangements or, uh, the EU single market. Why would the UK’s trading partners enter into separate agreements that would so obviously play into Britain’s comparative advantage in services? As for data and digital, any agreement will be constrained by the need to maintain the finding adequacy of EU data.

However constructive the government in charge may be, the logic of prioritizing ever closer economic integration with the EU over tinkering with deals with other countries remains. If it is true, as Reynolds says, that “Brexit is a settled issue” and Labor will not seek to re-enter the single market or customs union, his approach promises smarter tactics and, hopefully , fewer meaningless photo ops, but not a fundamentally better solution. strategy.

Charted waters

Following last week’s trade secrets column on the strange absence of a currency war, further evidence that the dollar is behaving as a normal currency should, weakening as it becomes clearer that inflation in the United States is on the way down and that interest rates will follow at some point.

Commercial links

Increases in wages relative to prices mean that cost of a Thanksgiving dinner in the United States in terms of weekly earnings is at its second lowest level on record.

A great article from Andy Bounds, colleague at FT Brussels on how some in the EU (certainly Karel De Gucht, trade commissioner at the time) think the bloc didn’t wage a trade war early and hard enough against Chinese solar panels a decade ago and should now be faster and harder on electric vehicles.

Good news in the transatlantic negotiations, as Washington would like extend the impasse on steel and aluminum with Brussels for another two years. (I discussed before this This is the least bad option.) Let’s hear it for the complicated solutions that keep the global trade show on the road.

Ruchir Sharma, chairman of Rockefeller International, states in the FT that China’s rise as an economic superpower could be reversed.

The South China Morning Post describes how US semiconductor export restrictions are enforced. harm Alibaba and Tencent.

American academic Dan Drezner argues that economic interdependence and “economic governance” are weapons. become subjects of serious scientific debate.

Trade Secrets is published by Jonathan Moules