India’s WTO veto marks end of global trade deals

Economic growth

SHARE THIS STORY

Deflation Jul13The Cycle of Deflation has taken another lurch forward.  The reason was India’s decision to veto last year’s Bali deal to streamline customs procedures.  Almost certainly, this will prove the dying effort of the World Trade Organisation, which sponsored the proposal.

The blog is particularly sad at this outcome.  It has always believed that free trade provides the best possible basis for improving global living standards.

The problem, of course, is that compromise becomes increasingly difficult as the economic outlook worsens:

Thus WTO’s ‘Doha Round’ began in 2001 in Doha, and has since gone nowhere.

It was hoped in Bali that a small deal, allowing everyone to benefit from easier customs procedures, might restore momentum.  But India refused to agree this without guarantees that it could continue with its food subsidies.

This of course, is an unrelated issue.  But it is very important to the new Modi government, anxious to be seen as champions of the poor.  Thus India’s Trade Minister argued:

We cannot wait endlessly in a state of uncertainty while the WTO engages in an academic debate on the subject of food security. Issues of development and food security are critical to a vast swath of humanity and cannot be sacrificed to mercantilist considerations”.

Other major global trade deals look equally unlikely to deliver real progress:

The reason is simple – politicians are failing to spell out potential benefits and are instead leading from behind.

Thus as the blog warned back in February, protectionism is gaining ground around the world.  As the chart suggests, we have moved through the period of devaluation and have now arrived at the period of competitive devaluation, where everyone tries to out-compete their rivals.

This process began more than a decade ago, when companies and policymakers failed to recognise that demand would inevitably slow as global populations aged, and the Boomers joined the New Old 55+ generation.  Even today, major expansions are underway in many industries, regardless of the fact that demand growth is already very weak.

Once the money is spent, countries will close their borders to protect jobs.  Only then, when too late, will we all look back and wonder what we could have done differently.

PREVIOUS POST

China’s waning stimulus spells trouble for the world’s biggest car market

14/08/2014

The Cycle of Deflation has taken another lurch forward.  The reason was India&#...

Learn more
NEXT POST

The Great Unwinding of policymaker stimulus has begun

18/08/2014

The Cycle of Deflation has taken another lurch forward.  The reason was India&#...

Learn more
More posts
BASF’s second profit warning highlights scale of the downturn now underway
09/12/2018

The chemical industry is easily the best leading indicator for the global economy.  And thanks to K...

Read
Chemistry & the Economy: 2019 Outlook
04/12/2018

There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and th...

Read
Brexit moves from ‘Snakes and Ladders’ to cricket
02/12/2018

The Brexit debate had appeared to be a simple game of Snakes & Ladders till now.  The Leave cam...

Read
Asian downturn worsens, bringing global recession nearer
25/11/2018

The chemical industry is the best leading indicator for the global economy.  And my visit to Singap...

Read
Your ‘A-Z Guide’ to the Brexit Negotiations
18/11/2018

“The UK is now facing a national crisis”, according to Margaret Thatcher’s former ...

Read
Chemical output signals trouble for global economy
04/11/2018

A petrochemical plant on the outskirts of Shanghai. Chinese chemical industry production has been ne...

Read
Budgeting for the end of “Business as Usual”
28/10/2018

Companies and investors are starting to finalise their plans for the coming year.  Many are assumin...

Read
“What could possibly go wrong?”
21/10/2018

I well remember the questions a year ago, after I published my annual Budget Outlook, ‘Budgeti...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more