 The session we're going to have this afternoon is really much in tune with what we had this morning. So you should like the rhythm of it. So I don't know if any of you picked up the economists today, or yesterday actually when the new issue came out. And the cover story is about world's economy's strange new rules. And strange indeed they have become. The disruption of geopolitics that have created on the economy are patent. And for those who were last year, and Thierry mentioned it this morning in his speech, Olivier Blanchard, the former chief economist of the IMF, stressed last year how the fundamentals remained good. Record law and employment in the states, moderate inflation, and nothing should have triggered in the old world a new range of quantitative easing. And yet we're there. So today we can say at least if it's a slowdown, we know that we're in the midst of an industrial recession. PMIs are going under or reaching the 50 threshold. And the lack of certainty created by the trade war launched by Donald Trump has had its toll, as have the uncertainties linked to Brexit. Last week, the new head of the IMF, Kristalina Georgieva, issued a stern warning for her first public speech. Worldwide growth is slowing because of commercial tensions. The world economy is experiencing a synchronized slowdown, she insisted, with trade growth almost null. A global GDP will be amputated of $700 billion this year alone, which is the size of the Swiss economy. And this is occurring while the WTO is at its standstill and is in need for urgent reform. And while the United States are pursuing bilateral agreements in the hope of diminishing their own trade imbalances. Yesterday, President Trump said America had reached a partial trade deal with China that would forestall the tariff increase schedule for October 15. So we're going to discuss this with our panelists, this current climate of mistrust and its consequences on trade investment and the global economy. And we're going to also try to envision possible remedies. So for that, we have for this, with us this afternoon, Mr. Park, who is the former Minister of Trade of Korea, and that you know him well because he's been on many panels at the WPC already. The actual deputy director of the WTO, and that's a hard job. We commend you for it, Carl Browner, and a great scholar who has a lot of expertise on global economic governance, our Austrian friend, Gabriel Felbermaier. And finally, the executive vice president of one of the most important, the most important economic things in DC, but probably in the world too because there are not that many of them. It's the Peterson Institute for International Economics, and that's Marcus Noland. And unfortunately, Mr. Waranabe is not with us this afternoon. So to start, my first question was about last night when President Trump announced that they had a partial deal with China. And what was your reaction to it? Do you think it means anything? Is it good to have a little push on the brakes? Well, I think it means something, but not much because we had this kind of example already two or three times. Right after the G20 meeting in Argentina, we had a truce at that time. And then they met again in early March, and they talked about something, and then they go into another truce in May, same thing. So this time they're just delaying the extra imposition of tariff after Christmas, whatever. So it means something, but we don't have any visible agreement yet. That's my observation. That's a lot of stop-and-go, as you said. What was your reaction to it, Carl? I like the fact that the parties are talking and there seems to be some convergence, but I share the view of my neighbor. It is a little bit of a relief for a very short time. But if the big goal of the US, of the president, is to shrink the deficit that they have with China, a lot more is necessary. And I think a lot more inside the US is necessary. Gabriel? Yeah, so I think economically this is pretty much insignificant because the tariffs that have already been put in place don't go away. It's just that further escalation is avoided, and some of the things that are promised now happen anyway. So imports of pork meat, for example, into China are going up very strongly already, also from the United States, because they had to slaughter large shares of the big population because of an epidemic. And on the other hand, the US president is not very eager to have tariffs on Christmas presents. So I think under the pork story and the Christmas story, and then we have this sort of small deal, but it does nothing, also uncertainty, the big issue we discussed this morning is not going away. One could even say that this type of negotiation actually exacerbates uncertainty because it shows the back and forth and how transactional this all is and how much showbiz is. It's very much like Trump, you know, transaction showbiz, I mean we're very much into it. What about you, Marcus? Transactions and showbiz, yeah, I think these will be running themes for the next hour. One hopes that this is a first steps or something greater, but I am skeptical. Donald Trump is an avowed protectionist. He makes no bones about it. And the people who surround him do not support a liberal rules-based international order. They are not friends of the WTO. They want to see trade organized through bilateral managed trade deals. If they resemble anything, it's the European governments of the 1930s. And Donald Trump, as you mentioned, launched a series of trade wars. It is important to understand how big this is in the US context. If you simply calculate the implied, applied tariff rates on either imports from China or imports from the world as a whole, Donald Trump has basically moved the United States from the neighborhood of the EU or Japan with applied rates of less than 2%. To the neighborhood of Brazil and India. We're going to be another big emerging market with populist political leadership. The implied, applied rates on China would be more than 25%. There's huge numbers. So if you look at the specific deal last night, first of all, there's no deal. There's no text. There's not even a joint statement. The Trump administration made assertions that have not been repeated in China. So we don't know what that's about. There is a postponement of tariffs. The tariffs were supposed to go from 25% to 30%. That's been postponed. But it's not been taken off the table. And the core issues that supposedly were the justification for the trade war in the first place, intellectual property rights, forced technology transfer and so on, are not talked about. So one hopes this is the seed of something that becomes much greater, but it doesn't look like much. One last thing about show biz. This also has to be understood in the context of the impeachment effort underway in the United States right now. Trump's support among the farmers is eroding. He has been hurt badly by the Chinese retaliation on soybeans, as well as not only on pork from China, but the fact that he pulled the United States out of TPP. So the United States producers faced big trade diversion problems in the Japanese market on pork. So an audience like this needs to expect over the next year or so, not just in the trade area, but foreign policy area, that as the impeachment process ramps up, President Trump is going to be increasingly desperate to change the conversation in the United States and have some sort of positive or some sort of victory he can point to. And so he's going to take something like this, which appears to be nothing, and turn it into, you know, we're making progress with China, and the rest of the country is here as well. Expect comments on trade and other foreign policy issues that may bear no resemblance to reality that are being driven by domestic political messaging. Okay, so I guess we all agree that last night we have a French expression for that. It's called la poudreuse. I don't know how you say it in English, but it sounds well in French, just for the show. So let's start with the assessment of damages, because this trade war has been going on for some time now, and it has caused a lot of difficulties. The head of the IMF was saying that GDP growth is slowing down, but commercial growth is slowing down. So, Mr. Rark, what do you see as the first damages of this trade war already? And we'll go back to the reasons afterwards. Yes, damages are, at the beginning, it looks like very insignificant. But as time goes by, especially by the view of economists, this negative effect of cross-retaliations is spreading rapidly into the whole, you know, of the U.S. economy, of course, China also. So more direct damages between U.S. and China. I think in the case of China, of course, the exporters, producers of export items which are heading to the United States are hurt, most hurt. According to my simple calculation, out of total China's export, 19% are going to the United States. It's not a small number. So the exporters are hurt very much. These exporters include not only Chinese, but also other foreign companies, too. In the case of the United States, as Marcus pointed out, of course, the consumers and the users of goods imported from China, and also U.S. farmers who are exporting agricultural products to China. So in terms of some small numbers, out of total U.S. imports, 22%, almost 22% are coming from China. It's a big number. So that's why I'm saying consumers and producers are hurting. And also the farmers, I think I heard also 17% of total agricultural export of U.S. is going to China. So overall, these two countries, we know that clearly they are hurting. And these days, many researchers are analyzing more specific results. And the Korea, for example, Korea, Dr. Sago mentioned this morning, but China and United States as Korea's number one and number two training partner. So Korea is caught by these two big giants. And according to the WTO reports, for the first seven months, from January to July this year, Korea's export reduced by almost 9%, 8.6%, something like that. This is the worst record among top 10 world exporting countries. So we are really hurt. And what about our export to China? Similar period, we lost almost 17% reduction compared to the same period of previous year. So Korea is really hurt. And also if you look at the details, mostly the parts and components and equipment producers who are exporting to China, they are really hurt because our exports, our export, almost 79% are those kind of items. So I can give you some example of damages. Yeah, that's pretty impressive figures. This morning, around the roundtable, you were moderating, Gabriel. One of the consequences was so on FDI, direct investments. Can you tell us, or whoever wants to, about the effect that trade war has on that because of the uncertainty it creates? Exactly. I mean, if you look at the big macroeconomic aggregates, investments is by far the most volatile. And it reacts most to news or to, you know, change the information and also to uncertainty. You can postpone investment, but you can't postpone consumption so much when people need to eat and so on. And so this procrastination is what matters so much now as Uli Yibnogsha explained this morning. If you look at Korea, another striking feature of the Korean economy right now is how much investment is suffering. So it's been negative for the last quarters, I think three or four quarters already. And that simply reflects the fact that if you don't know what the markets are in the future, whether there are tariffs or not tariffs, what can you do as an entrepreneur? You can only wait. What you can also do, and that's the counterargument, and that is valid, for example, for the United States, if there is a large net importing market like the United States and you face as an exporter from Europe, you face uncertainty about the market access conditions, about the tariffs, then the only hats you have is actually to produce more in the United States. And if you talk to the German car manufacturers what they do, what do they do is as well, we need to restructure our operations in the United States. So it's relocation of factories? Yes, but they don't invest more because, you know, they traditionally also produce their SUVs in Spartanburg, let's say, for the Chinese market, and that market is going down, so it's going closed off. So there is two things, so there's procrastination and then there is investment redirection into large markets where you can hedge, where you can use investment as a hedge. And so theoretically, the effect on investment is ambiguous, but if you look, if you go through simple models, the direct effect on procrastination effect is much larger, so it's not good for investment. Marcus, you want to add something? Sure. So we know that since the United States initiated these tariff wars, the Treasury has collected about $36 billion in tariff revenue from the Special Protection, so that's a fact. We have economic models that are now coming out where people are trying to model the effects of this, and the results they're coming up with while negative are not particularly large. And there's reasons to believe that those models are underestimating the effects for two reasons. The first one is the one Olivier spoke about this morning, which is we just have, we have a really hard time capturing in our model fundamental policy uncertainty and hence the impact on investment. So that we know. The second thing which Olivier didn't mention is supply chains. When Donald Trump was running for president in the summer of 2016, my institution did a project where we tried to model the trade policy proposals of the two major candidates. And in the case of Trump, we took his statements at face value and we were trying to figure out how to model them. We ended up talking to some of our corporate supporters and had some really interesting conversations with them, and I'm not going to name the firm, but we had a conversation with one that went something like this. Okay, if Donald Trump puts a 30% tariff on Mexico, which is what he was threatening to do, and we estimate or we assess that it's not going to last more than six months, we'll just wait it out and we'll lose X billion dollars a month. If it's going to last more than six months, then we have to get out of Mexico. Now, if we're going to shut down activities in Mexico, where are we going to start them again? And the corporate leadership found out they did not understand their own supply chains to actually make their contingency plans. They had to drill down to the level of individual product line managers. And in the case of this firm, they decided, well, a lot of that production in Mexico would be moved to Singapore. Well, to make room in Singapore, we're going to have to move things out of Singapore. And some of that's going to go to China. Some of it was going to go to Central Europe, not the Czech Republic. So you had a situation in which a threatened action against Mexico could end up with increased production in the Czech Republic. There is no way any economist using a model and publicly available data is going to come up with that result. And so we know this stuff is bad, but our models are not good at capturing some of the basic channels through which these types of policies operate. Okay, both of you and then Carl. You're totally right, Marcus. But what this does is it gives huge incentives to us economists. And there's a lot of research now on how to incorporate supply chains into models. And that's the good thing about Donald Trump. It creates a lot of variance in the data and it creates a lot of things that we thought are not worthwhile investigating. And now we think we need really to understand those old-fashioned items like tariffs. That's the only positive that I have. We should give Donald Trump and Boris Johnson the Nobel Prize in Economics for the stimulation of new research. They're actually doing good for your profession. I only wanted to point out the 37 billion that the Treasury collected, they collected from the American consumer. They did not collect it from the Chinese or from anybody they collect. I see your hand movement. I know your studies on it. You say that there is a benefit because the Chinese lowered their prices. But the fact remains that 37 billion were collected from the American consumers. Can I add one more thing about investment, international investment? It's not my research area, but as a journalistic kind of opinions from other people. Because of the Obama's period, the U.S. emphasized so-called remaking America. And also Trump says, America's first kind of policies providing a lot of incentives to the U.S. companies who are operating abroad, please come back to the U.S. Has that happened? That's what I'm saying. I don't have any statistics about recent years, from 2010 to 2016, A.T. Kearney actually calculated cumulative numbers by that six years period. More than 800 firms returned back to the U.S. They are talking about this issue as so-called reshoring rather than foreign investment. That could happen. I visited Taipei before I came here. I was doing the same thing. Lots of companies were operating in China. They returned to Taiwan. But, of course, government is providing a lot of incentives. So in other words, under this uncertain kind of world trade environment, and also government is really pursuing so-called inward-looking trade policies, then maybe investment will be reduced, which could have gone to other parts of the world. It's interesting what you were saying about the dismantling of the value chain because there was a report from the World Bank about last week, actually, asking for more globalization. Saying that globalization had been the way to take countries out of poverty. And if you start breaking the value chains, you're going to put them back where they were, or you're not going to help everybody rising. Do you agree with that opinion? Yes, absolutely. So I think the multilateral order that we have, let's say, until 2010 or so, produced convergence. The period of hyper globalization, as some say, led to the great convergence. And in a world where power dominates and where international rules are no longer taken for granted, can be changed all the time, all the uncertainty, these are small countries most. And the largest countries have big, uniform, single markets, least. So it's maybe not a surprise that the country with the largest single market in the United States is doing this. But we should expect that this breakdown of multilateral order hurts the poor, smallest countries most to the extent that they are not able to organize themselves. And if you look at initiatives like the African continental free trade area, that could counterbalance that. But if that's not going on, then we'll see this convergence process stopped. And actually, there's already science for that. Because trade growth has become very weak. We are not getting the stimulus from trade to those economists as we used to. Carl? Yeah, I wanted to point out that the value chains are, of course, disturbed by tariffs, but they are also very strongly disturbed by rules of origin. The new agreement, the USMCA, is one of the examples where you have rules of origin that I would call perverted. And they have real effect on also what can be sourced. I had a meeting with Bosch and Bosch has set up a huge data center in Vietnam where they want to optimize the components that they deliver to other producers in order to make sure that the rules of origin are met. This is highly complex and is getting more complex. Yes. So one of the characteristics, so Trump is a protectionist, so one of the characteristics of the renegotiation or the negotiations of these trade deals is they move them away from free trade. So in the case of the United States Korea deal, we moved it away from free trade by extending the periods of liberalization. In the case of the agreement that we have with Canada and Mexico, we did it through rules of origin and other measures such that we call it NAFTA 0.8 because it's actually pulling you away from free trade. And you see the same sorts of things going on now with respect to some of these other deals as well. I was wondering, yeah, just I'm going to ask my question, you can answer it. I want to add Karl's point. More specifically, USMCA has a clause saying that if you want to use USMCA, in other words, you have to export automobile by paying no tariff, you must produce your output with 35 to 40% of the local content should be produced by the laborers whose hourly income is above very, very specific. That means Mexican hourly wage is very low. You must import from the United States, for example, those parts and components to produce something and export back to the United States. Which is a little stupid because the idea was to raise salaries. We added a little anecdote from research. I've done some work on rules of origin and what we can find there is that almost always rules of origin have no real economic justification. They are usually meant to be there to avoid bilateral preferential trade agreements that third countries don't benefit from the trade preferences. But we know there is some... It's a defense mechanism, isn't it? Yes, but in most cases, there is no danger of the so-called trade deflection anyway because it's costly to transport goods and because the tariff structure is not such that it makes this deflection very profitable. There are some countries like in the US that are clearly protectionist, but I would say that almost all rules of origin are hundreds of pages also in EU trade agreements. It's a lot of stuff and most of it has no rationale. Well, the French care a lot about it. We can't trade deflection, it wouldn't happen. Yes, I know. Or cheese or wine, we like to protect it. Yes, well, there are other... There are the GIs that protect these food items. There is legitimate case for rules of origin to avoid trade deflection, but there is no economic basis for that, very rarely. So what then remains is really just the protectionist element and that has been the case for the last 30 years. Now the Trump administration is playing it very hard on that, but it's not a new feature. The EU knows that quite as well and if you look at those rules of origin, how detailed they are, sometimes it's really ridiculous and that's true also, for example, in the EU-Korea trade agreement. It's not something that we can claim the current US administration alone. But I'm curious, how do you view the revision of those trade deals? Is this the fool's game? Is it a way to put that more protectionism because you say it's taking away free trade? I mean, all those negotiations, Japan, Korea, I mean, Mexico, Canada, how do you view them? Are they sufficient? They're supposed to bring norms at a certain level. I mean, they're supposed to bring some good at some areas or you don't find them useful at all. For the case of Korea-U.S. FTA revision, Mark was already told nothing much, but one thing we could have gained a lot from that chorus FTA because the original agreement says from 2021 25 percent tariff on pickup truck will be gone. But through these re-negotiations this 2021 is extended to 2041. So, you know, we don't produce and export anything in a pickup truck yet to U.S. but we lost a lot of potential because of that. Benefits out of this kind of re-negotiations. So we are moving away from more free trade. Marcus and then Carl. So, the NAFTA agreement was 25 years old and there was all kinds of things like digital commerce that really didn't even exist when it was negotiated. So you could make the argument that it was sort of like an old house that needed some refurbishing and if you had had the kind of government that existed in the United States for the previous three generations what would have come out of that process would have been far from perfect but it would have been a kind of rational attempt to bring the rules more into alignment with the actual way commerce was operating. And you could but what happened was that effort a lot of it was focused on the Trans-Pacific partnership because it was simply a bigger deal. Canada and Mexico were already members so when we got TPP we would basically be sort of cleaning the now really mixing metaphors but we would sort of be cleaning the whole house. When Trump pulled us out of TPP that caused the trade diversion problems I alluded to earlier with respect to say pork in the Japanese market but it also meant that we had to now do those things within the context of NAFTA and a government that wanted to fix up those things probably could have done a better job but this government is fundamentally protectionist so it used that opportunity to do things like alter rules of origin that had the effect of making that agreement pulling the agreement away from free trade rather than moving it ever closer. I only wanted to add that I think that the EU in its efforts to conclude bilateral trade agreements genuinely wants to open markets and there are new issues beyond tariffs all what is happening in the trades in the services sector this is all liberalizing. There is a lot of opposition to trade deals in Europe today and in France especially the population doesn't understand them and it's a hard thing to explain nowadays why it would be good eventually level playing field it's not working people are not buying it anymore. I think in Europe it has a different issue than in other places in Europe it's about the fear to lose influence on standards and the fear that there is no democratic legitimacy in the changes and the secrecy of it too and of course distributional concerns I think what we have seen over the last 30 years or so certainly during the period of hyper-globalization is an increase in inequality sometimes very clearly measured in the United States not that obvious like in Germany since 2005 numbers are not actually moving anymore but perceived inequality has gone up quite a lot and if you look at the research that exists of populism there seems to be a link and many believe that the trade openness opening up trade exacerbates that problem it creates losers and there is a very strong opposition particularly to allow these losses to occur in periods of political fragility I think that is maybe in Europe the most important argument right now many would believe that the Merkel's agreement is actually a good thing it actually helped us make him abide by the Paris agreement for example but the fragility the political fragility within Europe would create users that would then support populist parties and wreak havoc in ways that we don't want I have one more thing I mean your argument like a free trade is not welcomed by France or EU I think this is a traditional issue I taught international trade for many many years but when I come to the part of political economy trade policy gains from trade all over the people whole population whole industry but loss of the difficulty out of market opening is concentrating on certain sectors that they can unite themselves and make a demonstration they can do lots of other things so politicians looking at these two sides who politician will take which part protectionist policy stance is much better for their election so now you mentioned about losers politicians comes in then populist just before going back to you Marcus I'd like to welcome you thank you for being here and we were talking about free trade agreements and I know you have a great experience on the Japanese trade agreement and it would be nice for you to share with us what you think we were talking about convergence of economies it's not exactly your point of view if you might tell us what you felt about the renegotiation between US and Japan may I make an intervention now sorry to be late I thought that this session will start at 4pm that was wrong 4 to 5.30 by the way it's not a whole presentation we're just going back and forth just answer through this question and they will answer to others afterwards there's a positive side and negative side of this most recent Japan-U.S. trade agreement first of all from Japanese perspective it was quite good agreement because we could avoid the imposition of 25% duties on Japanese cars to be imported to the United States from Japan so that's one thing and negative side is that this will reduce the chances opportunities for United States to come back to the TPP so that's the kind of negative side do you think it's a good thing oh a bad thing altogether that's fine but kind of negative side is that since the United States has been looking for Japanese agriculture market now United States got some access improved access US agriculture products to Japanese market so that will reduce opportunities for United States to come back to TPP original TPP that is TPP-12 so Marcus Nolan who's sitting next to you was disagreeing on the terrorists maybe he can explain why so I do not believe that this agreement spares Japan from the section 232 case on automobiles tariff Prime Minister Abe wanted that but he hasn't gotten it what the two sides have said is that there is a phase one of the negotiation which has been announced which is a limited number of tariff cuts or tariff cuts on a limited number of sectors but the key point is it actually doesn't do that it doesn't spare the Japanese automobile industry now there's going to be a phase two of the negotiation and perhaps at that point we'll extract that commitment but it hasn't thus far and the other thing I would just make a minor point in the previous discussion we were discussing the US Mexico Canada agreement as though it existed it's been negotiated but the legislation hasn't been passed in the United States and the issue we face now is that the House of Representatives is controlled by the Democratic Party Speaker Nancy Pelosi if you just went and polled the congressman you smack or whatever you want to call it could probably pass the House of Representatives but Pelosi wants to keep in kind of in step with whoever the eventual Democratic presidential nominee is going to be if it looks like that's going to be Joe Biden or somebody like Beto O'Rourke who have pretty moderate views on trade the legislation can move forward but if it looks like it's going to be Bernie Sanders or Elizabeth Warren she's going to hold back on that legislation and we've negotiated agreement but the United States hasn't actually passed the implementing legislation Gabriel you want to ask something? There is additional collateral damage that might come from the EU-US agreement and that is the WTO once again because of its Article 24 that actually says that free trade agreement should cover substantially all trade so if you just pick what is easy for you and leave the rest then that might be violating Article 24 and no there's the US administration certainly not but we thought the Japanese would actually care and in that sense that's a negative on that agreement at least in my view It doesn't cover substantially all trade and it doesn't take the tariffs to zero either one Well actually I worked as an economic affairs officer at the WTO secretariat some time ago dealing with Article 24 and actually after the EU around negotiations you have more precise term in terms of say for instance those FTA or Customs Union agreement should be concluded within the reasonable period of time and that has been defined as 10 years so you see maybe this agreement will come into force but in 10 years time that's considered to be reasonable lengths of time so if both Japan and the United States can agree to reach a higher level of coverage of this agreement that will be fine with WTO That's interesting I think it should be very comforting for you because you see how the rules of WTO matter at the same time we know there is a problem with governance and a lot of ills can we talk a little bit about it because we see a lot of disruption on worldwide state on trade and WTO is not efficient in regulating it so let's talk about the governance the ills of this institution and also we'll try to talk about its remedies but who wants the first shot on the WTO? Carl, he's the one I pick up where we were the basic rule of the WTO is the most favorite nation principle so you have to afford the same good treatment that you offer to one of the 164 members to all the other members and the free trade agreements are actually an exemption from it there are an exemption in that you can offer your partner more favorable treatment than you offer the rest and the justification for allowing this exemption is that you have to cover essentially all trade and we have a committee that deliberates on the notified free trade agreements and it never produces a result that has a critical outcome for the parties because there is not the courage for it so it lacks political college of the institution? yeah it lacks teeth they speak about the agreement the secretariat writes a factual report could actually make it very visible that it does not cover essentially all trade and then the parties not the parties the members discuss but there is no consequence before we move to the multilateral trading system I want to go back to section 232 on autos I think USTR gave options to President Trump he extended his decision for six months so these six months will come sometime in November given the fact that we see Trump is very unpredictable so by that time whether he can extend some more months or he can declare something so we Koreans are also concerned about the final decision to be made by Trump on section 232 on autos the advantage of the free trade agreement between the US and Japan was just now described as avoiding a negative it should actually create a positive but it's only avoiding a negative this is not what it's all about those at least against the spirit of article 24 which says that parties engaging in preferential trade agreement should actually lower their tariffs and if that's not happening the fact that the opposite is happening and the rules of origin that is certainly not in the spirit of the article but if we're talking about the WTO I think it's very easy to blame the WTO but who is the WTO it's a member it's a member driven organization and when we comment about it we often forget that we blame the WTO that WTO is inefficient it doesn't enforce its rules etc etc but then it's just the sum of its 164 members and then everyone including the Europeans at least pay lip service yes Mr. Watanabe and then Marcus Hillman well thank you very much one additional comment on this Japan-US recent agreement on Japan-US trade deal one of the major sort of misgivings of this agreement is the fact that the United States could not offer the zero-duty treatment on the parts of the parts and components for car industries that the United States offered in TPP-12 that was concluded in October 2015 so you see the entire the passenger car duty is 2.5% even in a TPP-12 agreement you know the there was the phasing out of 2.5% duties over 25 years but instead for the car parts and components Japan got more than 87% of the tariff lines dealing with the car parts have been subject to zero-duty it's immediate duty elimination in October 2015 so that is the thing that we couldn't get and that is the major sort of misgivings I would thought, thank you and Vardis you wanted to add something yeah so the WTO has all sorts of problems but the WTO is only as good as its membership and I want to re-emphasize the point I made at the outset which is that for 80 years the United States government came out a open liberal rules-based trade system wasn't always effective didn't always adhere to its own norms but it was basically supportive of that kind of system that changed in 2016 we now have government that would be perfectly happy to watch the WTO strangle by simply not appointing appellate judges and so the question is why what changed in the United States and is it aberrant and can we expect a reversion to the norm or is this the future because if this is the future then it really poses a different set of questions for the system there is a growing body of scholarly analysis in the United States that tries to explain the shift I've done some of it Jeff Frieden who's sitting out in the audience has done some of it some of it is voter preference some of it is done using analyzing county level voting patterns some of it is experimental and the lessons that seem to be emerging from that work are actually quite disturbing the turn towards protectionism in the United States seems to be based on a pernicious sense of victimhood and a victimhood in two different channels one is usual everybody in this room import competing sectors especially declining industries are getting hurt by imports they want protection and if you look at the Trump administration a lot of the people in it or his advisors are people who were owners or managers in declining industrial sectors of the U.S. economy but the other one is at the individual level and what it seems is very much driven by or associated with white identity politics or racism and it's the notion that a growing anxiety among part of the white population in the United States about loss of group status loss of their ability to control the system for their own benefits at the individual level and then that is reinforced by a sense among the elites who have these ideas of declining U.S. status at the international level and the fact that China is both regarded as an economic and geopolitical rival means that that is where you get the focus on China so looking towards the future obviously an electoral strategy that emphasizes anger in the white population is demographically a losing hand in the long run whether it can work in 2020 or not if Trump is able to avoid impeachment and does get re-elected then I think the second term it will be Katie Barr the door on the kind of issues that we're discussing. Can you tell us what that means exactly? It means close down because catastrophe is happening if the Democrats win that's no nirvana because while the Democrats and these are not just my opinion there's a lot of data to support this are much more positively inclined towards international cooperation their views on trade are not necessarily liberal and if you got certain candidates and certain people you could get a pretty reasonable trade policy but if you get some of the others it could be quite challenging as well so the political economy in the United States future outcomes range from kind of okay to disaster That's very comforting Gabriel you wanted to add something and then Mr. Tart I just wanted to say that there is certainly this international US centered discussion about the white grumpy man but there's also when the Republicans and the Democrats converge there's also this strategic issue with China so when China entered into the WTO in 2001 no one really envisaged that in a period of 15 years or so they would be able to challenge the United States by having an economy that is almost as big and growing twice as fast I think that is there is and this strategic discussion will not stop and it will not stop when there is a different person in the White House and it also has implications for Europe of course because we too must ask ourselves we have seen this session here today about the values and democracy these are important components too in this discussion and it also lends to very much optimism because that strategic struggle which is not just a power military, economic power is also about values that won't go away Mr. Mark I want to remind you that we are very sorry to talk about WTO in Marrakech because in 1994 Marrakech had a meeting to produce WTO now we talk about WTO in fact 7 years ago I visited Rabat to have a bilateral ministers meeting and then they asked me where do you want to go after Rabat so I want to see Marrakech because Marrakech is the place who produced the WTO we came here and tried to find which hotel hosted this minister conference I forgot the name but huge hotel huge hotel and some hotel manager came down and explained about the hotel so I said do you know this place we have a meeting for WTO he asked me what is WTO so there is no no plug so in any case it's a good time you're here to give it the right but I'm also very pessimistic for future I'm sorry Mr Browner is here I see we have 15 minutes left so we're going to talk a little bit about the settlement problem with the WTO and then we'll open up for questions I want to say that the US has been the positive leader for more than 70 years in trade policy starting before the gut and they have used trade policy as an element of their foreign policy as an instrument of peace policy and if the US takes this role that you have described just now this does not solve the real issue because it only deals with the external elements that are the challenges for the US the real challenges are inside the US the problem is America is not great anymore America was great they could behave in the way they behaved as positive leaders and to make America great again is not happening via external conflicts and it comes back to this grand old white people you were talking about who liked Trump and expressed that but somewhere America has been expected is on this appointing judges for the WTO because it's the only to settle their differences and we know that this part of the organization is really at a standstill and in December if no judge is appointed it's gone instead so what can we do about this long silence this problem has started in 2017 and I think the efforts to resolve the issue have started pretty late right now we are having a group of countries that are under the leadership of the New Zealand ambassador trying to tackle issues on a technical level and here I would come to the one of the elements of the title of our meeting this afternoon trust one could try to rebuild trust by solving a few of the technical issues and one has to get the Europeans and the Americans talking to one another because I think the Europeans have made some very good proposals picking up all the grievances of the Americans one by one without saying that they share the concern but they offer some approach to it but the Americans are not yet reaching and I must say my suspicion is they have other issues they are dealing with China they are dealing with USMCA and the WTO is a third priority for them at this point in time okay well that's not very complicated so we have some questions here we're going to ask for the mics and of course so there's one here one here and some two over there so if you can bring the mics please here Mr. Guifa and then there are two more over there thank you I'm asking all the panel what do you think will be the influence of the fact that today on globalization on the fact that today matter of fact anybody can buy anything through the web and pay with bitcoin or with all the other bitcoins all the other coins which all exist which mean the meaning of today of globalization is much less because everybody can buy anything from whatever he wants what do you think it will be the world is changing and I don't know if the governments are taking consideration the fact that matter of fact now even speaking about banks or facebook making his own bank apple open his own car currency you can pay you circumvent all the systems what will be the influence in general globalization do you think that governments should if they would they should discuss any changing any changes in globalization because of the fact they have no control anymore of anything was going between countries shadow trade yeah so there's been a long history now of thinking in the WTO or in Brussels or in Washington to rewrite trade law to take into account those new channels of distribution for example e-commerce or these emerging technologies but we have not made any progress there and there's something that I think is very important in this entire globalization discussion to remember that policies matter, tariffs matter but over history what has driven globalization much more than tariffs has been technology has been the invention of the steamship has been the containerization of international transportation has been the automation of logistics so this is more important than tariffs and so if you talk about the future of globalization this would be probably made as much by technology as by politicians Mr. Vart you mentioned about new phenomena but WTO they started so-called Doha round from 2001 until now we didn't do anything we couldn't do anything we tried but we didn't do anything but because of that we cannot accommodate to the new development in the world economy but the thing is WTO's decision making mechanism among 164 countries they only decide based on consensus as long as one country is objecting to some idea we don't do anything so WTO has been extremely outdated I agree with you but in the future without changing this decision making mechanism we cannot do anything that's very clear so a question here Carl and then the question go ahead it's not outed one should not fool oneself having a few reforms wouldn't help at all when you don't have the willingness to cooperate you can design but if you have no willingness to cooperate it doesn't work what Mr. Marx says is completely correct but in addition to what he observes we now have a number of working groups on issues like e-commerce investment facilitation on small and medium size enterprises on domestic regulation for services which are no longer aiming for consensus but which are run by a limited group of countries between 56 and 85 who are aiming at designing rules and do it in such a way that late commerce could join but they do not want to be stopped by those who have no positive agenda so things are happening it is not all gloomy okay so next question well thanks to the panelists thanks to you Virginie I think there is more bad news I am the one who believes that things are not going to get better regardless of what might be the outcome of the election for one or two reasons first of all I agree that it is probably very difficult to get some sort of agreement between China and the US before the US election the Chinese may be also hoping that things would be better with the next administration so they are not necessarily in a rush to sign something but I would like to take one or two very short examples it was in Canada early October last year when the USMCA was approved by Canada and one of the thing that was on the Canadian media not the fake news from the US the Canadian media and they were saying that one of the reason why Trump was happy with this agreement was that for Wisconsin there was an increase of 5% and the milk product that could be exported to Canada that was something that could be used during the campaign to say I've done something for these people that you were talking about who are feeling that free trade and globalization is not working to their best interest the second remark that I wanted to make is it's not just trade it's also market access and I agree with you again Marcus when you say that the important stuff is transfer of technology or intellectual property we talked about that but nothing has really happened at the same time there's been significant steps taken in the US in the Cyprus Council for Foreign Investment in the United States taken by limiting access of Chinese and other foreign interest in so-called security sensitive area and we've seen some of this and that's you know if you can't export you can always say I can make an acquisition I can set up a business abroad which give you the same market access but if at the same time you impose higher tariff and also restrict access to certain sectors of the economy things are getting much worse and the last thing I slide this agreement with you again I'm not picking on you when Trump pulled us off the TPP the TPP was never passed he pulled us from the Paris Accord the nuclear deal but the TPP was not passed and in spite of Obama at the TPA he didn't use it because at that time as you well know Bernie Sanders was against it Elizabeth Eli Clinton was against it and so on and so forth and I agree with you I mean when I look at the democratic side Warren and Sanders are going to be worse than Trump on that score okay so just two quick questions one here one here and then one here so if you don't mind going fast the question is precisely on this key factor which is the evolution of the U.S. in the coming months in two years and first so it is a question mainly targeted towards Marcus and the first question is do you consider realistic that we have a scenario in which in case of difficulties which during the campaign or beginning of a recession or stock market decline Trump will do everything possible to have a final agreement with the Chinese not a temporary one and he could be ready to sacrifice what I would call the structural part of the U.S. demands I mean technology extortion and for example IPR etc in order just to increase your Chinese U.S. exports to China and so do you think it's a scenario because I know that I heard that Lighthizer is fearing that and is ready to resign on that which will be not the first not the last to resign from this administration the second question is after the election in terms of scenarios for Trump we see very clearly the only thing one can say that is that he is now especially with trade everybody agrees on that what could you say what about the president Warren because we cannot rule out Elizabeth Warren she is really the leading candidate So two questions is he going to have a deal at all cost and what would Elizabeth Warren do Okay so the issue with Trump is could Trump in the interest of getting elected sort of sacrifice a really comprehensive structural agreement with China just to take some kind of market access deal and declare victory of course and in fact I would say he's likely to do that that's been his pattern for three years he makes grandiose statements and claims and then he settles for small deals and then tells the American public that he's done a great job I mean he did this the first deal with China was a deal that Obama negotiated and then Trump took credit for it so yes of course that's what he'll do the question is then what does he do next because the problems don't go away with respect to Elizabeth Warren she has released a very detailed proposal on trade policy it's on her website and I would just recommend you take a look at it the thing about Warren you know the way I would describe it is with Republicans you get protectionism with the Democrats you get trade with social work so yes we will have trade with you but we want to fix your human rights we want to fix your environment we want to fix your labor laws it comes with a lot of baggage and if you read Elizabeth Warren's policy proposals I personally find them disturbing because they assume a lot of capacity in developing countries that I simply don't believe is there and while she may be genuine but I see her in wanting to eliminate child labor and improve labor conditions and human rights and the environment and everything else in these countries the U.S. trade system is a complainant driven system and once you put in a law that says you know if Ghana violates some kind of labor standard then it can't get access to the United States market whatever the motivation of Elizabeth Warren and her team was that American textile producers and the textile workers unions will be hiring investigators and lawyers to go scour Ghana and find some violation of this law which then can be used to block access so you know one last plug since I plugged Elizabeth Warren this is much more important I do this stuff professionally and I can't follow it the ins and outs and what has been delayed and what has been lowered and what has been postponed and what has been brought forward my colleague Chad Bown has a completely reliable timeline that he maintains on the Peterson Institute website so if you want to know what's going on with U.S. trade policy where the current state of play is and how we got there go to pie.com and look for Chad Bown's trade timeline it is absolutely indispensable for this set of issues and we have one minute left so I'm going to choose someone and the last person is going to be you in the front because you haven't talked at all since this, no no this man in front because we've heard you before if it's okay and this is the last one Professor Mashroh Senior Fellow at the Policé Center for the New South I'm going to speak in French I address my question to Mr. Carl Brunet and I know that he is very objective in the blocking of the call by the Americans almost inevitable due to the consequences is that there is no in the old OMC a reflection to return to the practice of the 4 with the working groups as an alternative even if this makes it inconvenient to return to this notion of what was happening in the olden days you were making deals irrespective of what the legal situation was now the rule of law prevails what are the thoughts on what is happening when the appeal function goes away is three fold one could make a public statement as a party and invite others to join that one will not appeal whatever case will happen for a transition period one will not appeal the European Union and Canada have set up something that is an arbitration built on article 25 of the WTO rules on dispute settlement and that resembles in the fashion that the Europeans have chosen very closely the appeal procedures in the appellate body and the third is of course that people appeal to the nirvana and then the first instance decisions cannot enter into force and people do what they want and for me this is a regression of civilization and that's going to be our last word so it's a little sad but thank you very much for all our panelists and talk about trade and WTO