Day by day, the coalition against Vladimir Putin conducts a high-speed experiment to build and deploy a toolkit of trade and economic measures against a belligerent state. On Tuesday, the EU, whose speed and unity continues to drastically exceed expectations, tightened its sanctions to include restrictions on dealings with Russian state-owned companies and bans on the export of luxury goods to that country.
Although drawing conclusions about the future at this point is a bit like anticipating the Bretton Woods conference in the weeks following Pearl Harbor, it is natural to think about how this could permanently change the way the global economy, trade and energy are governed. Especially if the sanctions actually dislodge Putin (unlikely) or force him into a ceasefire that looks like a failure (slightly more likely), an international political framework will have been created that could be transformed for more sustainable and creative. There are, however, a host of significant hurdles to getting there.
First, the EU’s willingness to take on a larger, principled geopolitical role has not been tested outside of Ukraine. Building consensus around sanctions, arms sales, willingness to absorb energy shocks, and generosity toward refugees is much easier for a predominantly Christian white country aspiring to membership in the EU. The much harsher treatment of African, Middle Eastern and Asian refugees and migrants arriving at EU borders suggests that Europe’s commitment to universal values is selective.
Moreover, as the late US President George HW Bush knew from personal experience, the successful conduct of a war does not guarantee re-election after it. Domestic politics will continue to strongly delineate the possibilities of cooperative American trade policies. Ukraine may be the kind of military operation and exercise in political art that Joe Biden has been preparing for for decades, but he is getting poor marks in the polls for economic policy. The American public is apparently do not log in the sanctions against Russia which they support with the inflation which they do not like.
Accordingly, it is optimistic to think that the United States is on the verge of becoming entirely multilateral or even alliance-based in trade and abandoning its obsessions with reshoring in general, manufacturing in particular and steel. specifically. You hope at least that coalition building against Ukraine can be replicated in managing supply chains with allies — “friendshoring,” to use the squeaky neologism. But the administration maintains restrictions on steel imports, including from the EU, and the White House and its whisperers keep pushing a “green steel” club in a form that, to many in Brussels, looks like half-hearted protectionism.
In the short term, the war and the actions of the rich world exposed the flaws in existing institutions. Whether or not you agree with Russia’s denial of most-favoured-nation status at the World Trade Organization (on the whole, I don’t), the conflict has inevitably undermined the ability to function of the institution. There is encouraging news this week of a possible compromise on a patent waiver for Covid vaccines, but negotiations on other issues have more or less stalled. No one really wants to sit around a table with the Russian ambassador and discuss e-commerce rules.
In this context, it looked like a mistake for a group of wealthy countries this week to issue a report that was almost purely political statement at the WTO condemning Russia’s invasion, with just a passing reference to Belarus’ bid to join the institution. No emerging market joined the intervention, except a few in Eastern Europe (Moldova, Albania, Montenegro, the last two of which are members of NATO). The declaration will have no practical effect but will further encourage the idea that the WTO is a place to form camps and strike poses, not to negotiate agreements.
Of course, the pole of influence that will separate any system of governance is China. The more a new alliance or organization emerges aimed at isolating or punishing China (as with the US green steel plan), the more it will push Beijing towards sympathy with Moscow, or at least away from the US and Europe. EU. China’s economy is far too large and intertwined in the global trading system to be sanctioned as Russia’s has been.
It is unrealistic to expect emerging markets to overwhelmingly choose a Euro-American political-economic camp over a Chinese camp. the UN resolution condemning the invasion, although passed by an overwhelming majority, received significant abstentions in Africa and Asia, including India and South Africa as well as China itself. This is not a new cold war, or if it is then half the developing world will want to be in a new non-aligned movement.
The coalition against the invasion has done a remarkable job in this situation, although public support may decline if the war drags on for months and high energy prices undermine living standards. But that doesn’t mean he’s created a global governance apparatus that can easily be implemented elsewhere.
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