Warm RCEPtion

The meaning of RCEP, the world’s biggest trade agreement

It is unambitious in scope but marks a win for China and a setback for India and America


THE PROCESS has been as agonising as the name is clunky. But the 15 Asian countries that on November 15th signed the Regional Comprehensive Economic Partnership (RCEP) in a virtual ceremony in Hanoi can at least congratulate themselves on breaking some records. 

RCEP is the world’s largest plurilateral trade agreement. It would have been bigger still had India not withdrawn a year ago. After eight years of what Malaysia’s trade minister, Mohamed Azmin Ali, called “negotiating with blood, sweat and tears″, the remaining countries have achieved a victory for regional co-operation at a time when covid-19 has ravaged the global economy.

Yet opinions vary wildly as to the significance of that achievement. Some see RCEP as so unambitious as to be largely symbolic. Others see it as an important building block in a new world order, in which China calls the shots all over Asia.

The truth lies somewhere in between. RCEP does not herald a dramatic liberalisation of Asian trade. Its origins are as a kind of tidying-up exercise: joining together in one overarching compact the various free-trade agreements (FTAs) between the ten-member Association of South-East Asian Nations (ASEAN) and several other countries in the Asia-Pacific: Australia, China, Japan, New Zealand and South Korea.

India withdrew because of worries its domestic industry would be swamped by Chinese imports. That removed the main logjam standing in the way of an agreement. But, since India would have been the third-biggest RCEP economy, and is party to very few bilateral trade agreements, its departure also deprived the agreement of some of its main market-opening benefits. 

The door has still been left open for India to join, but in the past year its relations with China have deteriorated on a number of fronts. Liu Zongyi, a Chinese academic writing in a Communist Party tabloid, Global Times, gloated that India has missed “its last chance to integrate into the globalisation process”.

RCEP’s membership overlaps with that of another big regional trade pact, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). 

That deal, which was signed in 2018 by 11 countries, was originally called the Trans-Pacific Partnership and was meant to include America, only for Donald Trump to pull out as soon as he took office. 

When the two agreements were under negotiation, American officials would snootily dismiss RCEP as an inferior, 20th-century-style pact, focused on tariffs and rudimentary trade-facilitation measures, in contrast to the TPP, with its coverage of areas such as environmental and labour standards, and rules for state-owned enterprises.

It is true that RCEP is less ambitious, as would be expected of an agreement whose signatories range from the very rich, such as Japan and Singapore, to the very poor, such as Laos and Myanmar. 

It eliminates, by one estimate, about 90% of tariffs, but only over a period of 20 years after coming into effect (which will require all 15 countries to ratify it). 

Its coverage of services is patchy and it hardly touches agriculture. Japan, for example, will maintain high import duties on some “politically sensitive” agricultural products (rice, wheat, beef and pork, dairy and sugar), which are cut under the TPP.

But RCEP does break new ground in harmonising the disparate rules-of-origin provisions in ASEAN’s various FTAs, and setting regional-content rules so that intermediate goods can be sourced from any of the 15 countries. As a result RCEP is expected to have a noticeable economic impact. 

A paper from the Peterson Institute for International Economics by Peter Petri and Michael Plummer cites modelling showing that it will raise global GDP in 2030 by an annual $186bn (compared with a gain of $147bn from the CPTPP). It says the benefits will be especially large for China, Japan and South Korea. 

It will also boost efforts by those three countries to reach their own trilateral FTA, which has been under negotiation for as long as RCEP and is bogged down in political recriminations.

China will gain in other ways, too. In joining its first plurilateral trade agreement, it can present itself as committed to trade liberalisation at a time when America seems relatively disengaged from the region, and when it is still pursuing a trade war with China. 

Li Keqiang, China’s prime minister, revelled in the signing, calling RCEP “a victory of multilateralism and free trade” and, more lyrically, “a ray of light and hope amid the clouds”.

It will accentuate a regional tilt in China’s trade. A pattern dominated by supply chains for manufactured goods that stretched across various Asian countries before being exported to the West is changing. In the first half of this year, ASEAN overtook the European Union as China’s biggest trading partner, according to the Institute of International Finance, a Washington-based financial-industry association.

In ASEAN, at whose virtual summit RCEP was signed, the agreement will be taken as a vindication of its slow, incremental approach to negotiations in everything from trade to the South China Sea. But in the long term, some of its members also worry about a drift into a world in which China’s economic, political and military might dominate Asia. For that reason, many in ASEAN will hope that under Joe Biden, 

America will re-engage more energetically with the region. That, after all, was why the Obama administration pursued the TPP so doggedly. Yet it seems unlikely that Mr Biden will try to bring America into the successor agreement. He has many other battles to fight. 

Asia will continue to be remade by China’s growing heft and by America’s comparative neglect.

Big Tech collaborates to conquer

Google, Apple and other Silicon Valley groups have a history of teaming up to lock in market dominance

Rana Foroohar

   © Matt Kenyon


It’s finally happening. The US Department of Justice has taken on the antitrust case of our time, accusing Google of illegally protecting its 92 per cent share of the global search market. 

Key evidence includes deals cut with Apple and other Big Tech groups to lock-in the search engine as the default option across devices and platforms. The DoJ is alleging that Google and Apple teamed up to maintain dominance. 

That makes perfect sense to me as there’s a paper trail of behaviour going back over a decade to suggest exactly that.

Consider the 2011 class action lawsuit that laid out in documents how, in 2007, Apple founder Steve Jobs (then the company’s chief executive) called Google to complain that a recruiter was trying to hire one of his software engineers.

Eric Schmidt (Google CEO at the time) then emailed his company’s human resources department saying, “I believe we have a policy of no recruiting from Apple . . . Can you get this stopped and let me know why this is happening? 

I will need to send a response back to Apple quickly.” Mr Schmidt added that he would respond “verbally, since I don’t want to create a paper trail over which we can be sued later.”

It turned out that a group of large tech companies had put in place “no call” agreements to avoid having their top talent poached by one other. Numerous antitrust lawyers, and both Republican and Democratic Congressional aides, have pointed out to me that employment cartels are the sort of thing that people can be sent to jail for. 

But Barack Obama’s administration settled without seeking a penalty. Google, Apple and other groups implicated in the scandal, including Adobe and Intel, later agreed to pay $415m in damages to 64,000 employees in a settlement.

Remember that scene from The Godfather when the big five mob families are dividing up the geographical and sectoral pie? The relationship among the Big Tech giants has always reminded me of that. 

When critics complain that there’s too little competition in the field, the leaders of these companies often reply that they are, in fact, competing very, very hard — against each other. But both the new DoJ case and a damning report issued by the House of Representatives Judiciary subcommittee this month allege they are more likely to be helping one another maintain dominant positions in individual areas.

This exercise in back scratching is expensive, but clearly worth it to the companies. Google alone shelled out a fifth of its global net income to Apple to guarantee that its search engine would be the default on all Apple devices. Google needs Apple. 

But the more Apple relies on services for revenues — as they are less easy for competitors to turn into a commodity than devices — the more Apple needs Google. As a senior Apple employee wrote to a Google counterpart in 2018, “Our vision is that we work as if we are one company.”

It’s “an ecosystem of mutual benefit,” says Columbia University law professor Lina Khan, who helped draft the House report. To me, this ecosystem mirrors the industrial trusts at the turn of the 20th century in which oil, steel and railroad tycoons often worked together to protect their interests.

Those trusts were broken up using lawsuits based on the 1890 Sherman antitrust act, which the DoJ also employed when it tried to penalise Microsoft for abusing its dominance in PCs. It won at trial, lost on appeal and then settled. 

It is now using the same law to try to prevent Google from inking distribution deals with competitors, favouring its own products in searches, and restricting websites that use its AdSense advertising platform from also using competing services.

Kent Walker, Google’s chief counsel, and Mr Schmidt are teeing up the usual arguments about the consumer “harm” that will result should Google be forced to change its practices. “There’s a difference between dominance and excellence,” says Mr Schmidt.

But dominance and excellence feed each other. Google’s size creates barriers to competitors on both the “supply and demand” sides, as the UK Competition and Markets Authority report on online platforms put it in July. One example is “web crawling”, the algorithmic trawling of the internet for the most relevant web pages. Google was the first to do it, and its success helped lock in its dominance.

Now, it is too costly for any other search engine provider except Microsoft to even attempt to compete at scale. Because too many crawlers can crash websites, major webpage owners block all but a few of them. All this results in more clicks, better algorithms and increased market share for Google.

What’s the solution? Some ideas include changing default settings to allow more competition, forcing Google to spin off its Android operating system, creating independent crawlers, and/or making the data and algorithms behind Google’s success public. That would, in essence, turn the company into exactly what railroad and telecom monopolies ultimately became — regulated utilities.

Google’s founders made a similar recommendation in the original Stanford University paper that they wrote on search in 1998. Quite presciently, they wrote that conflicts of interest in a large-scale private search engine would necessitate having a “competitive search engine that is transparent and in the academic realm”. I’m all for it. You can’t be excellent — or not evil, to cite Google’s original motto — without being fair.

A harvest of grievance

What a drive through Argentina’s breadbasket reveals

Anger at the government is intense in the country’s interior


Lorry-drivers at a roadside grill near Vicuña Mackenna, a small town in central Argentina, looked on appreciatively as Jorge Gutiérrez rode up bareback on a young stallion, doffed his blue boina (gaucho hat) and sat down to join them for lunch. 

“Normally a gaucho has little, or nada, in common with truckers,” he said, wiping sweat from his brow with a red scarf as he tucked into a flame-grilled matambre, or flank steak, so rare that it was almost the hue of that scarf. 

“But now we agree this pandemic is creating a disaster.” Aldo, a middle-aged trucker with a youthful ponytail and the body of a prize-fighter, interjected: “My friend, all of us will be buried by this crisis if it goes on much longer.”

Discontent is louder in Buenos Aires, the capital, and other big cities, where large protests have taken place since July. But it is just as intense in the agricultural interior. 

That part of the country was never going to be friendly towards Alberto Fernández, the Peronist president. He was elected a year ago, with Cristina Fernández de Kirchner, a populist former president, as his running-mate. Córdoba, the province where Vicuña Mackenna is located (see map), voted strongly in favour of Mauricio Macri, the conservative incumbent who lost. 

The province, like most of the others along the route of this correspondent’s road trip in September westwards from the capital, is bound to pose problems for Mr Fernández’s Front for All coalition in crucial mid-term elections due in October next year.

He imposed one of the world’s longest and strictest lockdowns. In addition to shutting borders and shops it impedes internal travel. 

To drive from Buenos Aires to the campo required permission from the central government. At a roadblock on the border between Santa Fe and Córdoba, police demanded evidence of a negative covid-19 test taken within 48 hours.


Such measures have not suppressed the disease. On October 19th Argentina recorded its millionth case. It is among the ten countries with the highest cumulative caseloads. 

In terms of deaths as a share of the population, it ranks just outside the top ten. 

Whereas early in the pandemic nine-tenths of new cases were in the capital, half are now in the interior. Córdoba, Mendoza and Santa Fe, with a fifth of Argentina’s 45m people, have reported more than a third of new cases in the past fortnight.

The lockdown has weighed heavily on the economy. The IMF expects it to contract by 11.8% this year, compared with 8.1% for South America as a whole. 

Next year it is expected to grow by just 4.9%. Despite price controls, the inflation rate exceeds 36%. 

That is partly because the Central Bank is printing money to finance the budget deficit, which is forecast to be higher than 10% of GDP this year. More than half of children are below the official poverty line. 

“This is an economy imploding,” says Federico Sturzenegger, a former president of the Central Bank. “The pandemic has become an excuse to avoid tough decisions.”

The toughest would be to devalue the peso, which would boost exports, including of the grains that grow in central Argentina, and preserve scarce foreign exchange. But it would drive inflation still higher. 

The government’s policy is to control the currency’s descent. It is officially valued at 78.3 to the dollar. On the black market the peso has slumped to 181. 

Rather than devalue to the level set by the market, in September the government introduced fresh currency controls to restrain demand for dollars. These have dismayed businesspeople and failed to stem the decline in the country’s reserves. 

Economists believe the Central Bank’s net liquid reserves are close to zero.

To hold down domestic prices and fill its coffers, the government has levied punishing taxes on exporters. One landowner, whose family has grown soya, wheat and maize near Vicuña Mackenna for generations, fumes at a 33% tax on farm exports. 

His goal is to survive the country’s impending “meltdown”. After this conversation the government temporarily reduced export taxes on soyabeans. That seems unlikely to improve the landowner’s mood.

According to a recent opinion poll conducted by Reale Dallatorre, 65% of people in Córdoba and 54% in Santa Fe believe that the national government discriminates against them because they oppose the Peronists. 

In Córdoba 40% of respondents said they favoured secession, a “stunning” finding, said the pollster. Nationally, the president’s approval rating has dropped from the 80s at the start of the pandemic to 43% by late October.

San Luis, west of Córdoba, is friendlier towards the central government. Its governor, Alberto José Rodríguez Saá, is a scion of a Peronist family. A brother was Argentina’s president for a week during an economic crisis in 2001. San Luis’s 508,000 people are accustomed to support from the federal government, especially when Peronists are in charge, which is most of the time. 

Yet just outside the capital city Marta, a young mother, sees little to like in its handling of the pandemic. The lockdown cost her her job at a clothes shop. “Our president talks about protecting our jobs, our health, and putting food on the table,” she says as she plays with her three children. 

“We don’t see any of that.” A police escort hurried visitors out of the province, “to prevent you infecting us”, said an officer.

In wine-growing Mendoza, which requires visitors to present national- and provincial-government permits before entering, attitudes towards the government in Buenos Aires harden. 

There separatist sentiment has a spokesman in Alfredo Cornejo, a former governor who is now a congressman and leads the opposition Radical Party. In June he called for “Mendoexit”. 

Mendoza, along with Córdoba and Santa Fe, could be an “economic engine-room”, he says. (Currently they produce a fifth of Argentina’s gdp.) But separation, Mr Cornejo admits, will not happen any time soon. Argentina’s constitution outlaws it.

Mr Fernández’s advisers deny that Argentina’s plight is as dire as people in the breadbasket believe it to be. “Collapse? 

Out of the question,” says one. 

The government is striving to boost confidence and attract investment in dollars. It is cutting or capping export taxes for minerals, oil and some industrial goods as well as farm products. 

It plans to renegotiate its $44bn debt to the IMF, a sequel to its deal on $65bn of debt owed to private bondholders. 

Mr Fernández has revived the idea of a “social pact” with businesses, trade unions and civil-society groups to reduce inflation and make labour law less rigid.

Reassurances from Buenos Aires mean little in the interior. In Córdoba an old farmhand in a face-mask closes gates on a herd of Aberdeen Angus cows as a young trucker looks on, smoking a cigarette. 

“Do we need a government to make the most of everything we have, as a country?” the gaucho wonders. His sigh is the answer. 

The trucker nods. At one in their sense of alienation, they tap elbows.

How Egypt Lost Its Leadership of the Arab World

The country has gone a long way since its rise as a champion of Arab nationalism.

By: Hilal Khashan


For centuries, Egypt had positioned itself as a leader of the Arab world. Even before the rise of Gamal Abdel Nasser, Egypt’s second president and a major proponent of pan-Arabism, Egyptian leaders sought to unite Arabs from across the Middle East and North Africa. 

But in recent years, the country has lost its place as the champion of Arab nationalism as it grows increasingly inwardly focused.

Egypt’s Rise

Egypt’s rise as the leader of the Arab world began in the early 19th century with an army officer and Ottoman governor named Muhammad Ali. After the British forced Napoleon out of Egypt in 1801, the Ottoman Empire sent Muhammad Ali, who was a military commander in the Balkans, to Egypt to rein in the Mamluks, who had dominated Egypt a few centuries prior. 

Four years later, he declared himself viceroy of Egypt and ordered his son, Ibrahim Pasha, to create a dynasty for him. Not being ethnically Arab themselves, they believed that the Arab language would define the boundaries of their new state.

Ibrahim defeated the Ottoman army in 1832 in the Battle of Homs, in central Syria, and again in 1839 in the Battle of Nizip, in modern-day southeastern Turkey. However, the intervention of European powers halted his advance. 

In the 1840 Convention of London, they convinced him to abandon his territorial ambitions while recognizing his father’s dynastic rule over Egypt – which lasted until a military coup in 1952 overthrew Ibrahim’s grandson, King Farouk, who rose to the throne in 1937.

Egypt Under Muhammad Ali Dynasty, 1805-1914


Farouk entertained the idea of leading the Arabs, especially after the establishment of the Cairo-based Arab League in 1945. But his main rivals, Jordanian King Abdullah I and Iraqi Prime Minister Nuri al-Said, also wanted to create an Arab state that would include Syria, Jordan and Iraq. 

He realized that the endeavor would not succeed unless he could achieve a military victory against Israel. The opportunity came on May 14, 1948, when David Ben-Gurion announced the creation of the state of Israel and, later that same day, Farouk launched an assault on the newly formed state, against his army commanders’ advice. 

But defeat in the first Arab-Israeli war tarnished Farouk’s image and, in addition to rampant state corruption and domestic unrest, set the stage for his ouster in the 1952 coup organized by the Free Officers Movement.

The coup ushered in Egypt’s first president, Mohammad Naguib, who was himself deposed just two years later by another leader of the Free Officers Movement, Gamal Abdel Nasser, who then declared himself premier. 

Nasser understood that championing Arab nationalism and assuming a tough stand against Israel were key parts in Egypt’s modernization. He supported the national liberation movements in Asia and Africa and joined the Non-Alignment Movement as a founding member in 1961. 

He initially embraced building relations with the U.S. through his dealings with CIA officer Kermit Roosevelt Jr., who saw pan-Arabism as a benign alternative to communism, which preoccupied President Dwight Eisenhower’s administration.

However, Nasser’s unpredictability and fiery anti-Western discourse concerned Washington. The U.S. denied his requests for arms, essentially to appease Britain, which saw Nasser as a threat. Nasser also declined to join the U.S.-backed, anti-Soviet Middle East Defense Organization, a military alliance formed in 1955 by Iran, Iraq, Pakistan, Turkey and the United Kingdom as the Baghdad Pact. 

The U.S. ultimately failed to temper Nasser’s worldview, during a tumultuous time in the Cold War. Frustrated by his decision to sign an arms deal with Czechoslovakia in 1955, the U.S. withdrew its financing of the Aswan Dam project. The damage to U.S.-Egyptian relations seemed irreparable. 

Eisenhower’s opposition to the 1956 invasion of Egypt by Israel, France and the U.K. – ostensibly because Nasser nationalized the Suez Canal – had little impact on Nasser, who then sought to capitalize on his political gains, despite his military losses. He became the uncontested champion of Arab nationalism and, in 1958, created the United Arab Republic, a political union between Egypt and Syria.

The union crumbled, however, following a military coup in Damascus in 1961. After initially sending in paratroopers to suppress the rebellion, Nasser decided to call off the operation. His reluctance to use force to defeat the coup weakened his pan-Arab credentials. 

To make up for his failure to salvage the union with Syria, he decided to deploy troops to Yemen to stabilize its new republican regime after the 1962 coup. Nasser’s venture into Yemen proved disastrous for Egypt on all accounts. 

The five-year war drained Egypt’s meager financial resources, stalled its economic development, strained its relations with the U.S. and divided Arabs.

Nasser’s brief interlude of cooperation with President John F. Kennedy’s administration gave way to hostility and suspicion when Lyndon B. Johnson became president in 1963. Egypt’s dependence on U.S. wheat supplies, which in 1962 amounted to more than half its consumption, did not prevent Nasser from taking issue with Johnson’s foreign policy. 

He viewed the US. Senate’s decision to withhold aid to anti-American states as directed against him – even though it wasn’t. He also viewed Johnson’s offer in 1967 to give Egypt a reduced wheat aid package worth $55 million as hostile. 

Undeterred by his setbacks in Syria and Yemen, Nasser persuaded Libya’s King Idris Sanusi against renewing the U.S. Wheelus air base contract, condemned what he called the U.S.’ pseudo colonial Congo policy, and supported the Vietcong in the Vietnam War – moves that the Johnson administration saw as a bridge too far. 

To add insult to injury, in 1964, rioters burned down the Kennedy Library in Cairo, and a few days later, Egyptian forces shot down a plane owned by a Texan businessman and personal friend of Johnson.

Decline of Egypt’s Leadership

The rise of the Fatah Movement and its raids in Israel beginning in January 1965 further threatened Nasser’s image as a pan-Arab leader. In public, he committed himself to returning refugees to Palestine. In reality, however, he opposed going to war against Israel because he knew he would lose.

On the 25th anniversary of the Battle of El Alamein, British Field Marshal Bernard Montgomery visited Egypt a few days before the Six-Day War and told senior Egyptian officers that they stood no chance in a war against Israel. 

After the Soviets provided Nasser with false intelligence indicating Israel was massing troops on the Syrian border, Nasser ignored warnings from his own senior officer that the reports were false and sent troops to the Israeli border anyway. 

When a senior officer reminded the chief of staff of the Egyptian Armed Forces that the military was not ready for war, he replied that the deployment was merely a demonstration of force.

Nasser committed a gross miscalculation in 1967 by sending the army to Sinai without expecting war. He tried to restore the public’s confidence in him by closing the Straits of Tiran to Israeli shipping, assuming that Johnson would not want to risk a regional war and would act to defuse the situation, as Eisenhower did in 1960 following Nasser’s mobilization of two Sinai divisions to the Israeli border to deter Israel from attacking Syria. 

In 1960, however, Egyptian-Soviet relations were strained because of Nasser’s ban of the Syrian Communist Party following the formation of the United Arab Republic, which was welcome news in Washington. 

In 1967, tensions between Nasser and Johnson were high, and Johnson chose not to stop Israel from launching the first strike.

Islands Controlling Red Sea Access


Shift to Egyptian Nationalism

Israel’s spectacular victory in 1967 tarnished Nasser’s image. After Egypt accepted a cease-fire on June 8, 1967, Egyptian radio stations stopped playing pan-Arab music and instead played Egyptian patriotic songs, a shift that turned out to be permanent and reflected a fundamental inward-looking policy shift.

After Nasser died in 1970 from a heart attack at the age of 52, his successor, Anwar Sadat, faced opposition from Egypt’s leftists who wanted to control him, Islamists who tried to bring down the regime, and the Soviets, who were reluctant to provide him with offensive military hardware to cross the Suez Canal. 

He pushed the two superpowers to address Israel’s occupation of Sinai more seriously but concluded that neither would come to Egypt’s defense. He then broke with the rest of the Arab world by signing the Camp David Accords with Israel in 1978. The next year, the Arab League suspended Egypt’s membership and relocated its headquarters to Tunis.

In 1981, Islamic militants assassinated Sadat during a military parade. His vice president, Hosni Mubarak, found himself too preoccupied with militant Islamists, who sought to topple the state and install an Islamic order, to take on Arab issues. Mubarak restructured the economy along crony capitalist lines and created a new class of neoliberal businesspeople. 

He was focused on internal security and institutionalized Egypt’s relations with the U.S. to avoid crises. Even though Egypt lost its position as leader of the Arab world, Mubarak, a staunch Egyptian nationalist, maintained its autonomy in the regional order.

This situation changed under Abdel-Fattah el-Sissi, who became president after the ouster of Mohammed Morsi in 2013. The cash-strapped economy necessitated alignment with the United Arab Emirates and Saudi Arabia. 

El-Sissi even ceded the islands of Tiran and Sanafir, which control access to the Red Sea from the Gulf of Aqaba, to Saudi Arabia. In 2017, el-Sissi joined Riyadh and Abu Dhabi in imposing a blockade on Qatar that is still ongoing. 

Egypt has gone a long way, from a towering leader of Arabs to a follower of traditional Gulf leaders.

Globalization Needs Rebuilding, Not Just Repair

If US President Donald Trump is defeated on November 3, there will be no lack of eagerness to erase his international economic legacy. Policymakers should focus on taking care of global public goods, containing the weaponization of economic relations, and making the international system fairer.

Jean Pisani-Ferry


PARIS – A second term for US President Donald Trump would complete the demolition of the post-war international economic system. Trump’s aggressive unilateralism, chaotic trade initiatives, loathing of multilateral cooperation, and disregard for the very idea of a global commons would overpower the resilience of the web of rules and institutions that underpin globalization. 

But would a victory for Joe Biden lead to a repair of the global system – and, if so, of what kind? This is a much harder question to answer.

There will be no lack of eagerness to erase Trump’s legacy, either in the United States or internationally. But an attempt merely to restore the pre-Trump status quo would fail to address major challenges, some of which contributed to Trump’s election in 2016. 

As Adam Posen of the Peterson Institute has pointed out, the task ahead is one of rebuilding, rather than repair. It should start with a clear identification of the problems that the international system must tackle.

The first priority should be to move toward a commons-oriented system. The preservation of global public goods such as a stable climate or biodiversity was understandably ignored by the architects of the post-war international economic order, and (less understandably) was still a secondary priority in the system’s post-Cold War partial renewal. 

Policymakers focused on visible linkages through trade and capital flows, rather than on the invisible ties that bind us to a common destiny, which helps to explain why the rules and institutions governing the latter are still much weaker.

Biden’s intention to rejoin unconditionally the 2015 Paris climate agreement is to be welcomed, but it will not by itself turn the accord into an ambitious, enforceable program. 

The large number of players and the strong temptation to let others shoulder the burden make preserving the global commons notoriously hard. Even in the area of health, solutions to date do not measure up to the challenge.

Climate action is critical. Absent an elusive global consensus, efforts will have to rely on a coalition whose members converge on hard targets and on border-adjustment mechanisms applicable to trade with third countries. Implementation will be fraught with difficulties. 

Success will require agreeing on which trade measures are acceptable and which are just covert protectionism. That is a high bar to reach. 

Having already indicated its intention to introduce a border adjustment, the European Union is on the front line here. This is a major responsibility.

The second priority is to make the global economic system as rivalry-proof as possible. 

Regardless of who wins the US presidential election on November 3, great-power competition between the US and China will continue to dominate international relations. But the Cold War analogy is misleading, because today’s protagonists are major economic partners. 

Whereas the Soviet Union’s share of US imports never exceeded a fraction of a percentage point, China currently accounts for 18%. Die-hard US advocates of decoupling wrongly view further Chinese development as a national security threat and want to end this interdependence in an attempt to halt China’s economic rise. 

As the Peterson Institute’s Nicholas Lardy has argued, however, a general decoupling from China would be a “high-cost, low-benefit policy.”

The question, then, is how to recognize the reality of geopolitical tensions while containing their impact on global economic relations. The relevant comparison is not with the Cold War, but with the pre-1914 rivalry between Britain and Germany in the context of the first major period of globalization. 

Contemporary claims that economic ties made war unthinkable were proved wrong. But as long as states refrain from fighting a real war, a strong multilateral regime can help repress their temptation to wage it through other means.

Europe is the biggest of all bystanders. It risks suffering collateral damage from the fight between the two global giants, both of which have started bullying it. But the EU is not toothless. 

It should stand up for the rules-based international economic order and lead the fight against its weaponization. As the European Council on Foreign Relations argued in a recent report, the bloc should start by equipping itself against economic coercion.

The third priority is to strengthen safeguards for workers and citizens. Already prevailing doubts about globalization have grown as a result of the US-China trade conflict, rising inequality, and the realization that in a situation of acute stress such as the pandemic, advanced economies could struggle to procure simple equipment. 

Citizens and workers want an economic system that better protects them. 

Governments have taken note, and want to show that they care. The question is how.

The primary response should be domestic: from education and training to place-based revitalization and redistribution, there is much that governments can do, but neglected in the heyday of free-market globalization. Now is the time for new policies.

But experience has shown that few national governments can carve out a complete response without a supportive global environment. Individual countries cannot curb global corporate tax avoidance and aggressive regulatory competition by themselves. 

Policymakers globally should acknowledge that the sustainability of economic openness depends on whether its benefits are distributed in a fair way. And, as Harvard’s Dani Rodrik has long argued, the global system should both promote openness and allow room for national adaptation.

Each of the three goals – taking care of global public goods, containing the weaponization of economic relations, and making the system fairer – is challenging. Combining all of them will be daunting. Never in history were rival power centers compelled to cooperate in addressing common threats of a comparable magnitude. 

It is not hard to imagine how policymakers might use the commendable goals of avoiding carbon leakage or buttressing what Europe now calls “strategic autonomy” as pretexts for outright protectionism. 

Moreover, how will the world avoid a global economic breakup if China is simultaneously seen as a national-security threat, a reckless polluter, and a destroyer of social rights? Such challenges will severely test leaders in the years ahead.


Jean Pisani-Ferry, a senior fellow at Brussels-based think tank Bruegel and a senior non-resident fellow at the Peterson Institute for International Economics, holds the Tommaso Padoa-Schioppa chair at the European University Institute.