Wartime World Trade: Fragmentation Thrice Over
→ Three wars curse the world today, each has fragmented world trade, and bereft of global leadership, fragmentation should be expected for the foreseeable future.
‘Fragmentation’. The Shorter Oxford English Dictionary teaches this noun connotes the “breaking or separating into fragments,” and “separation into parts which form new individuals or units.”
Global trade amidst three wars – Russia’s violent war against Ukraine, America’s trade war against China, and the world’s health war against Covid-19 – is fragmented.
Russia’s invasion of Ukraine separates much of the world from Vladimir Putin and his allies. America has not united the Indo-Pacific region with a vision for collaborative commercial intercourse. The World Trade Organization has yet to unify around pandemic measures. Absent great statesmanship (India, here’s another chance), wartime trade will not be defragmented anytime soon.
First Fragmentation: Russia’s Violent War Against Ukraine
What Pope Francis rightly calls a “macabre regression of humanity” that makes him “suffer and cry” also has “barbarously bombed” international trade practice and theory.
Once upon a time, after the Jan. 1, 1995, birth of the WTO, what mattered to businesses, governments, and consumers, and thus what their lawyers practiced, was enhancing market access for goods, services, and foreign direct and portfolio investment, litigating anti-dumping, countervailing duty, and safeguard remedies, and protecting intellectual property rights. WTO treaties, plus free trade agreements, integrated these specialties into a mosaic.
Now the mosaic has just two pieces: navigating sanctions against Russia as well as China, Iran, and North Korea; and policing supply chains to root out forced labor from the likes of China and Malaysia. Forget about negotiating synergistic win-win wealth-generating deals for clients. Now, trade practice is splintered into zero-sum games of avoiding criminal and / or civil penalties for breaching US Treasury Department measures against Specially Designated Nationals like oligarchs and Russian state entities and Commerce Department export controls on pretty much anything with dual civilian-military use .
Theory, as in peace-through trade, is broken, too.
US President Franklin Delano Roosevelt’s administration energetically gathered the splinters of Depression-era world trade using the Reciprocal Trade Agreements Act of 1934, with the idea that cross-border commercial intercourse could help reflect trade, and perhaps engender economic interdependence to disincentivise conflict. Then, amidst the Second World War, FDR and British Prime Minister Winston Churchill chalked out the 1941 Atlantic Charter, which contained the seeds for the 1947 General Agreement on Tariffs and Trade.
Oil and natural gas traversed from Russia to the European Union for decades.
Surely, neither would decouple from this mutually beneficial embrace?
For half a century, Germans knew double dependency by the rubric of Eastern politics (eastern policy, ieengagement with the Soviet Union), and accepted its “guiding rationale” wasWalk through trade, ”Or“ change through trade. ” Germany and its EU partners embraced the Nord Stream II pipeline.
Russian soldiers have poured into an EU friend, Ukraine, threatens another, Moldova, so the EU is poised to embargo Russian oil by year-end. Oh, well. On April 27, Russia turned off the spigot for two EU members, Poland and Bulgaria, when they balked at Russian demands to pay for hydrocarbons in rubles, contrary to their energy supply contracts. Pulitzer Prize winner Daniel Yergin puts it well: the war “has pulverized” Russia’s brand as a “reliable supplier.”
What about the theory financial interdependence might minimize conflict risk?
Funds crisscrossed borders, with Russian payment messages accounting for 1.5% of SWIFT’s daily 40 million messages. In late February, Russia became the second nation after Iran to be banished from that system. Russia, India, and China are trying to cobble ruble, rupee, and yuan splinters into bilateral payments mechanisms. Good luck, Iran tried.
→ Three wars curse the world today, each has fragmented world trade, and bereft of global leadership, fragmentation should be expected for the foreseeable future. ‘Fragmentation’. The Shorter Oxford English Dictionary teaches this noun connotes the “breaking or separating into fragments,” and “separation into parts which form new individuals or units.” Global trade amidst three…