For global and EU systemics to work they need more than trade flows. Or less

Here are some systemics and dynamics thoughts (written and tweeted Nov 24, 2012):

What libertarians seem to forget imo is that any group of more than 1 person constitutes a "society" or polis etc. Laws are part of explicit and informal "social contract" between members of a society/group/polis (politics comes from polis). The economy is also a dimension of a social contract when families stopped self producing everything and started trading w/ each other. Intra-polis trade between families created need for prices (even in barter trade) and thus money. But in basic intra-polis/village trade no one was really left "jobless", was mostly specialization benefits.

I am sure economic theories/models (be they of 5000 BCE or 2012 CE) worked much better in 5000 BCE! In a way, extra-polis trade (see eg explorers to "new worlds") disrupted the social/econ contracts/balances of de facto closed societies. Not to mention that lack of competition rules probably had created warlords and other oligarchs inside closed systems/cities/villages.

Why do I say probably? Cos I was not there to see for myself, at 5000 or something BCE. Were you?

Opening up and allowing trade between families in a polis came as part of social and legal contracts/laws/balance. But but inter-polis (ie inter-national) trade/exchanges were not coupled by common laws and a social/econ contract! Were they? No WTO etc.

That is still in 2012 the underpinning element of trade and other inter-state exchanges of all kinds: They fall outside national scopes. Of course so many are in favor of free trade without unification, it sort of allows them to have the cake and eat it too!! Think about it!

Trade between entities not bound together the way a country is bound together is sort of having a cake and eating it too! Sort of "dumping".

That is also part why most economic models/theories have failed. They deal in principle and de facto with closed systems. Look at GATT and the WTO: It regulates basically trade but fails to deal with many other dimensions thus systemically unbalanced. What I am saying is that trade, investment, migration and other flows need to happen within a "system". Is such system compatible with any sub-global/earth sovereignties? In other words is even trade compatible with national sovereignty since separate social contracts?

Can comparative advantage really exist in a league (competition) between 200+ national economies where there is no actual "league"? Does this mean that the world needs to become a federal political entity for "fair" trade to exist? Is it otherwise an "animal farm"? Can national social contracts exist at the same time as free trade exists? Much like libertarians who want to exploit imo the benefits of a society (econ is a social activity) w/o the "costs" of a society ... Or look at how some in the UK want to free-ride Europe and the world w/o any associated social contracts or rules! Pick and choose only!

Thus no wonder that many of the arguments used against the EU are actually prompting localism/separatism in many EU member states!To use absiloute logic, either sovereign states need to become like eg Cuba or North Korea or join together in a federal entity!!

But in any case, imo trade was, back when it started in human history, the first opener for more open systems. But that was thousands of years ago. Not in 2012! The systemics to work need more than trade flows. Or less.

The idea that one can be a sovereign state (city, national, etc) and still engage even in trade with others is imo challenged in this era!  It worked in 1200 BCE or 1400 CE or even 1949 (GATT era) etc but not in the systemics and dynamics of 2000s!

Thus it should come as no real surprise that European and US and world systemics and dynamics are out of control in the 2000s and 2012 and that globalization, regionalization (EU, UNASUR, ASEAN), nationalization (UK), localisation/separatist dynamics do co-exist in 2012!  Because systemically speaking the system is out of whack! Freedom of trade and investment cannot work systemically for long w/o full system integration.


Note: Available for research and analysis for think tanks, NGOs, civil society orgs, firms, policy makers, media, academia anywhere in world.

The UK should leave the WTO instead of the EU!

The UK's June trade balance (goods and services) from £ billion -2.9 in 2011 to -4.3 in 2012! Without services, it would be worse!

The deficit in goods trade of the UK is greater with the rest of the world than with the EU (June 2012): -5.2 vs -4.9 (£ billion, source: ONS).

Also: June UK exports to EU fell 7.2%, but to rest of the world they fell 9.6%, thus debunking the myth that the UK is better off outside the EU and focusing on trade with the non-EU rest of the world!

So maybe the UK should leave the WTO instead of the EU!

Actually, since the UK is a member of the WTO directly and via the EU's membership, the UK should stay in the EU and convince it to leave the WTO (and replace it with existing and new bilateral agreements).

Economic immigration in the era of WTO free trade

Economic immigration should be at least as free as WTO trade (among WTO members).


Another option is for economic immigration terms to be included in bilateral trade/economic agreements

The row over the uniforms and the WTO factor

My comment re "Made-in-China US Olympic uniforms spark political row" (Reuters):

China joined the WTO in December 2001. Is it time the US considers leaving the WTO? 


The EU? 


A departure of the US (and the EU?) from the WTO would not mean no trade. It would mean reliance on bilateral rather than the multilateral (ie WTO) agreements re the "rules" of trade (and possibly other economic issues and, why not, economic immigration). 

Want EU and Eurozone growth? Then ...

Markit data for Germany, France and Italy for April shiowed in all 4 surveyed post lower sales, with record decline in France. UK is recession again, based on GDP on Q4 of 2011 and Q1 of 2012. The situation in Greece, Spain, Portugal is also well known.

And while there seems to be a a shift in the dynamics of austerity (see my April 19 post), in my opinion, what the EU and the Eurozone need, for growth, is a neither Merkelian austerity nor good old Keynesian spending, but a combination of:

a) Curbing of over-legislation at national and EU levels (polynomia) and the resulting red tape that suffocates EU and Eurozone firms, especially the SMEs (exception from curbs: some sectors including the Financial one which actually needs heavier EU legislation-regulation even w/o G20 agreement)
That does not cost a lot of money, but requires lots of work.

b) Raising the trade walls of the EU by art at least a few meters. No need to go chasing growth via exports to the other 4 continents (especially given the narrow scope of WTO rules) when the EU has 500,000,000 at home and the Eurozone 330,000,000 (more than the USA). Abandon the WTO in favour of bilateral agreements with China, ASEAN, USA, Brazil or Mercosur, India, etc (agreements that include not only trade and other econ but econ immigration as well, etc)

c) Revamping of the Fiscal Coimpact, removing fixed and sclerotic targets and increase the co-operation of EU and EZ economic policies w/o transfer of sovereignty. Based on targets that are realistic given the global and European conditions.

d) Spending for growth, but wisely and within reason, probably less than you would be required without (a) and (b).
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Part of my above post I also posted as commentary to the 27 April 2012 "Plan B for the Eurozone – it's not what you might hope for" article in The Deep End of Conservative Home. 

On enterprise and legal certainty in the 2012 world

"Argentina's "unilateral and arbitrary" decision amounts to an attack on the exercise of the free enterprise and the principle of legal certainty" says a resolution adopted by The European Parliament on Friday.

The EP also says that the European Commission should use all appropriate dispute settlement tools available at the WTO and G20 to respond to Argentina's "unilateral and arbitrary" decision to expropriate the YPF energy company.

Whereas I am not taking sides because I am not aware of the full details of the specific issue that involve a private company (and a formerly private one), here are my POLICY related comments.

1) Does Cristina Elisabet Fernández de Kirchner's (Argentina's President) concept of national sovereignty vs David Cameron's one. Compare and contrast.

2) Not sure WTO rules cover such issues (as well as many other global economic ones). Is the EU asking the WTO to become an agency of global economic "governance" (compare and contrast issue with the issue of "economic governance in the Eurozone). What can G20 do or can do withiu its present and appropriate role? This case is maybe one more reason in favour  what I have been arguing re EU and US exit from the WTO and reliance on bilateral full topic agreements (covering trade, investment, economics, immigration, etc) between eg the EU and Argentina or EU and Mercosur or UNASUR.

3) Re the EP's claim that "Argentina's "unilateral and arbitrary" decision amounts to an attack on the exercise of the free enterprise and the principle of legal certainty. Are there not many many other factor that "attack" free enterprise and especially legal certainty inside the EU and the Eurozone? Such are polynomia (over-legislation) and red tape? Eg the absence of EU direct tax competency and laws?

4) I have commented before that the G20 membership is high on anti-protectionist rhetoric and low on reality,  with many and significant hidden protectionist practices and barriers to trade.

Thus, no matter who is "right" in this case, this case serves as yet another food for thought stimulus for the policy issues I raised above.

PS. I have argued that given the global dynamics it is maybe time for the EU to raise its walls (economic fortress), rely on bilateral agreements, not WTO (see China effect) and develop a common and humanist immigration policy for economic immigrants (after all, the EU27 population is ageing and needs external population boost, for reason including the viability of its Social Model). Bilateral economic agreements are a good place to include bilateral economic immigration agreements.

Eurozone: Cheap money, what cheap money?

I noticed a crossfire that took place about a month ago between the President of Brazil and the PM of Germany (see a press report by China Daily).

"Rousseff (note: President of Brazil) complained rich nations are responding to the global financial crisis with easy credit and low interest rates — and that cheap money makes its way to Brazil, which has high interest rates and a strong currency" 

Since then, the BRICS initiative has taken place, including an plan to make the Yuan a global currency.

I am reminded that one of the reasons for the failure of the Doha WTO Round has been the insistence of leading developing countries to open their markets to US and EU industrial goods, retaining the tariffs that exist (yes. WTO "free trade" is not free, it uses things such as math formulas to calculate how much each economy is allowed to retain barriers to imports).

But my main point in this post is:

What cheap money? The Eurozone's (ECB) rate is 1.00% (used to be 1%, the previous Presidency raised it to 1.5% and the new one back to 1%) but compared to the Bank of England rate (0.5%) and the US Fed's (0 to 0.25%), the Eurozone's interest rate is high!

By the way, ever wonder why the Eurozone has had to maintain a such a differential vis-a-vis the UK and the US?

BRICs, Brazil, UNASUR and the WTO

Food for thought:

Does Brazil want to help UNASUR evolve or to focus on the BRICs group?
Can it do both?

In addition, is the BRICs initiative another symptom of how irrelevant WTO how become?

EU vs WTO

Compare and contrast an EU with a WTO membersbip.

Is the WTO the "free trade area" that some, many in Britain, want the EU to be?

Is it?

Let;s assume it is.

Then why should the EU copy the WTO? Those countries that want to belong to a mere free trade are a with the minimum transfer of sovereignty have the WTO.

The EU was intended, is and will be much more than a free trade area or even a common or even a single market (a status it has not really achieved yet though, Single Market, 19 years after "1992").

The WTO though is maybe just what The City needs.

What does Germany need? What does Germany want? Analysis of the former should come before analysis of the latter. Does not seem to be the case though.

A free trade area is not the same thing as a Single Market, so ...

A free trade area is not the same thing as a Single (or Internal) Market. Thus those who cannot understand or do not wish to understand the difference should have remained in the EFTA or the rely only on the WTO (or the Commonwealth).

Instead of Merkel soliciting money from China ...

Instead of Merkel soliciting money from China, she should be proposing EU exit from WTO which China has flooded with cheap prdocts via inter alia a Yuan policy and focus on existing and new bilateral deals of the EU with other countries or free trade areas (eg Mercosur/UNASUR, ASEAN, etc)

Free what? The myth of (WTO) "free trade"

WTO trade is free-er world trade compare to some decades ago. Not free. Tariffs are allowed especially by developing countries and the BRICs plus most countries of the WTO have hidden/tricky barriers to trade (imports). Especially the pro free trade rhetoric G20!

Even a free trade area does not allow "polyamory" in trade, does it?

The other day I was having a discussion on current affairs and dynamics in Europe and the world with an economist friend. Mind you, yours truly is not an economist but an MBA with 2 more degrees (a BS and an MS in decision sciences).

During the discussion the topic of "customs unions" and "free trade areas" came up. My friend gave me a POV that has proved valuable food for thought: He argued that a customs union between let's say countries A, B and C, implies a clear intent by these three countries to trade primarily between them as opposed to a global scope in trade.

If that is true of a customs union (which is what the UK claims it joined in the 1973 EEC), a "common market" as my 50s plus barber in Brussels called the EEC back in 1992, then that is even more true of a "Single Market" (launched on 1/1/1993).

What does all this mean?

That members of the current EU, the Eurozone, even those who claim they openly want a "free trade area" Europe (UK Tories etc), have to de juris accept that all these are not compatible with a multi-lateral global free trade system (WTO, ex-GATT), that members of non only the EU but also EFTA, ASEAN, Mercosur and the emerging UNASUR must have, explicitly or at least implicitly, the will and view of trading mostly (to say the least) with their partners!

And what is more, if they do not, then they should not be a member of any such entity and rely exclusively on the WTO membership.

Thus:

a) If the UK does not want to export and import mostly within the EU27 Single Market, then it has no place in the EU
b) If Germany sees China and Russia as its key trade partners from now on, then it too has no place in the EU or its Eurozone.
and so on!

Thus, if my economist friend is right, membership in the EU or even as its old EEC or "common market" form presupposes a commitment to trade with mostly the other members (at the expense of global (WTO etc) trade).

Consider that!

Show me your consumers and then I will show you mine!

The way things are going, it seems that the US may have to leave the WTO system (same for the EU).

Leaving the WTO means relying on existing and new bilateral agreements for trade with other countries. Avoiding the plenary negotiations by the WTO 153 country members (153 includes the EU 27).

Of course leaving the WTO is not in the best interest of US & EU firms that produce cheapo in China! They may have to focus more on the US and EU internal markets respectively. especially if the BRICs and other developing economies maintain the tariffs they impose (it is consistent with WTO rules) on US and EU industrial goods.

Complicated, interesting times. The Ancient Chinese were right, they are a curse for the average person. Are the modern Chinese right, actually their government, in not fostering domestic demand? How much longer are the US and the EU (with the exception of Germany) going to be offering access to their consumers to the exporters of the rest of the rest of the world who do not (like Germany in the EU) do not reciprocate? One way to be protectionist is to raise barriers to imports, official or sneaky/unofficial ones. The other is to have public policies that discourage domestic consumption.

In today's oxymora, net importing economies/countries are more rare than exporting ones. In supply and demand terms, that makes them more "valuable" than before. Will they negotiate using this extra value?

What will make the EU's periphery competitive in the Eurozone, the EU Single Market and world markets?

Continued from: Time to rethink global trade (and save the Euro & the US economy as well as Earth)?

Many things have happened in recent days.

Yet the core issue remains:

What will make the EU's periphery competitive in the Eurozone, the EU Single Market and world markets?

And to widen the strategic question: What will make the Eurozone and the EU competitive in world markets?

Much of global trade, in spite of the fact that economies are more and more Services economies (ie the % of Services (vs industry and agriculture) in the GDP increases in recent decades), is in manufactured goods. So while the manufacturing base of most countries/economies is narrowing it is that same "niche" of the economy that economies/countries rely on for the largest part of their exports. Yes, there are internationally traded or tradable Services (as well as intangible/intellectual products), such as tourism plus banking, insurance and other services of financial genre, telecoms, but can services such as haircuts, restaurants, medical services, etc, become part of a country's exports?

Well, there are people who travel to California 1-2 times a year from Europe to get and thus technically "import" cosmetic surgery. People do travel to Asia or other countries, often funded by their own country's national health service, to receive (and thus "import") medical services (various types of operations). And a lot more services as well as intellectual products can be made into exports using online technology as well as (and more importantly) entrepreneurial creativity.

The main growth oriented idea behind the programmes that the IMF and the rest of the Troika as well as national government are implementing for Greece as well as Ireland and Portugal is to create a "devaluation" effect (called internal devaluation) without actually devaluing (since they have no currency of their own to devalue).

The idea behind devaluations is to make a country's "native" products and services (eg tourism) cheaper to foreign consumers (b2c and b2b) while making imports more expensive to "native" consumers (both b2b and b2c).

Germany's competitiveness is allegedly mostly based on the quality (and thus uniqueness) of the "complex" (as opposed to "simple") manufacturing goods it produces, to a large extent by allegedly sophisticated SMEs. Goods that people and companies are willing to buy (import) even at high prices (especially when Euro is above 1.3, 1.4 USD or even higher). Or as traditional Economics calls them, goods with demand that is inelastic to price.

But which are these types of goods (and services) that people or companies are willing to buy even when the economic climate is bad? They must have a very high utility value that makes them appealing at almost any price, ie a (very) high value to price ratio! They also have to be pretty unique, in that they are only produced by a certain country ie not replaceable by goods from another country.

Another strategy option is to be the cheapest (product/good) in the world.

In the middle, there is a strategy that tries to combine some uniqueness or value/price with some price competitiveness. Must be a huge area of the "map" of world products and services, a "crowd" where each product is trying to find its "vital" market space.

One other key factor is consistency, which is the original definition of quality. All product units have to be the same, identical, no deviations from the product characteristics. Needs reliable tools (that is why reliable tools/machinery tends to be one of the complex types of products that allegedly Germany produces and exports). Same applies to apples, oranges, even haircuts. There is no room for bad apples, literally and metaphorically, in the package or crate. If they come out of the productuve process, then they must be left out of the goods to be sold, counted off as waste or at beast sold as generic or used for some different purpose (eg make "marmalade").

Which leads to the same concept at work. Who wants workers of any kind (general staff or top execs, etc) who are brilliant one day but have off days? Even in sports that is less and less tolerated, by the systemics. A music band? Even a lover! In these types of systemics, things get very demanding and complicated. That is one reason machinery has been replacing humans for decades, and in some cases, centuries now. In other cases, humans were replaced by animals (or treated as such).

Another key factor, maybe the most overlooked one, is access. You may have the best and cheapest (!) product in the world, but unless the large wholesale and retail conglomerates are willing to take your product (in which case you may also need to produce very large quantities of it) and put at the shelves of the supermarkets of this world, then your options for reaching a market are fewer, albeit more than they used to be before the internet and e-commerce (and even E-Bay) era.

Complicated huh? Much more complicated that the simple "productivity" and "unit labor cost" concepts that lots of economic analyses and plans seem to rely on.

Which brings us to the question: How cheap must Greek, Portuguese, Irish etc labour cost (and and how salaries) become, via austerity and internal devaluation, for the Greek, Portuguese, Irish economies to be competitive? Competitive vis-a-vis whom? The other Eurozone ones? The other EU ones? The other WTO ones? To the Chinese?

To be continued ....

Global and EU systemics: Major systemic imbalances in urgent need of fixing!

I am not sure how the following model fits with traditional economic models (note: I am an MBA, decision scientist and a policy analyst, not an economist or financial analyst anyway) such as the capital - labour - land or the capital - labour - knowhow ones:

In "my" model, there are 4 factors: capital, goods, services and work. And IMO for a system, be it the EU or the USA or the world (globalisation) to work, these 4 factors must have more or less the same level of freedoms ("4 freedoms").

Also IMO, the current instabilities in the global and EU systemics are due to uneven levels of fredom between these 4 factors.

Capital has a very high level of freedom to move and relocate around the world. Capital movements have, realitively speaking, few restrictions, within the world and within the EU.

Goods have seen their freedom grow exponentially since GATT was founnded after WWII leading to the creation of the WTO in 1994. But still, the level of freedom of goods is nowwhere near "free trade". Many tariffs and quotas, especially the former exist even between the WTO membems (and within WTO rules). Even in the EU Single Market for goods, many problems still exist, especially for small firms.

Services at least the most tradeable ones, have been making progress but their freedom is nowhere similar to that of capital and goods. At WTO and at EU level. Eg in the EU many are in fear of the travelling plumber!

When it comes to work or the freedom of labour, then things are quite sad, especially at WTO/global level and even at the EU level many problems exist. Too many.

My thesis is that unless the level of freedom of all these 4 factors converges upwards, it will soon start to converge downwards (that applies to the global and to the EU "systems"). In goods, the by now admitted failure of the WTO to reach agreement in the Doha agenda, opting for an effort to conclude a lite or extra lite one instead, the backwards pressures can be seen. With a zero or low level of public debt being reconised as a key factor in sovereignty (due to the Euro crisis etc), the concept can easily be expanded to the trade balance and the CA balance. Already certain countries have been accused (by the US) of "exporting too much" (eg Germany and China). Movement of workers, free lancers and people is "near apartheid" level globally and be in for political asylum or so called economic immigration reasons, it is alas getting worse pretty much all over the world.

What is more, the economic globalisation, in the form of the freedoms of capital and trade, needs to be balanced, structurally by a global political and a global social pillar!

Else, it is structuraly unsound.

If there is no global polity (a world parliament and possibly government (eg for the WTO 153)), or at least continental-level polity, I would not exclude de-globalisation and either regionalisation or nationalisation/localisation of capital and goods freedoms (see eg "buy local" initiatives).

Or a system of 4-7 major global players (federal EU, USA, China, India plus Russia, Japan, Brazil (or UNASUR), see my recent relevant post).

It is in the good interest of capital and the finance world to encourage or at least not block the globalisation of the other factors and the creation of global political and social pillars.

That is maybe why, in a way, the financial markets seem to be pushing the EU or at least the Eurozone towards political union!!! Because a single currency and a single market need a single polity as foundation and the financial system may not be always responding to crises in rational ways, but its vision is as good as anyone's. And the prudent financiers IMO know that either the other factors gain more freedom or capital loses much of its own.

Plus, the business world, those who produce and deal in goods and services, have clear vision too. And to the extent that the finance world does not manage to be part of the solution to the imbalances, they will ally with the politicians and societies against them.

Not for the battle for midde earth though! Enough metaphorical headlines or slogans (overdone by media etc in recent months). What is going on is the world today is the ultimate real show, much more interesting and cruel than any fairy tale or show.

The humans will prevail, eventually, they always do. Ask the monarchs, the Romans, the Soviets, etc. The financial system is next, it seems, if, as a system, it does not read the signs of the times and listen to the prudent voices inside it.

Political and Trade compatibility between countries and economies and geopolitical "polyamory": The UK's case

The recent effort to conclude the 9.5 year old Doha Round of WTO world trade talks with a very lite agenda could be seen by this POV, inter alia:

Food for thought:

Are the 153 members of the WTO "trade compatible"? Is it any accident that many groups have formed within WTO as a WTO document shows (see PDF here). Other than the 27 member EU (which did not form for WTO related purposes), the other most "active" (according to the WTO doc) groups include:

* ACP (79 members, 58 of which are WTO members),

* The African group (48 members, all WTO, ie a portion of the African Union of 53 members),

* APEC (20 members, including the US, China, Japan and Mexico. some are members of ASEAN),

* Mercosur (4 South American countries, also members of the wider UNASUR "EU type" of bloc outside the WTO),

* LDCs (43 members, 31 of which are WTO members and the rest WTO observers).

What unites countries or economies is such groups (note: quite different in content, compare eg the EU with APEC)? In the case of WTO is it common interests in the negotiations? Common "adversaries"in the negotiations? Any common "philosophies" (re economics or politics or culture or some other factor)?

What unites together The Commonwealth (formerly known as the British Commonwealth) with 54 members (not a WTO group)? According to its official site: "Beyond the ties of history, language and institutions, it is the association’s values which unite its members: democracy, freedom, peace, the rule of law and opportunity for all".

Which brings me to my main discussion point in this post:

Is the UK more compatible with the other 53 Commonwealth members than it is with the other 26 EU members? Are the factors listed by it (see above) implying a "free trade area" or "economic union" or "political union" potential that is fundamentally better, for the UK, than the one with the other 26 EU members? Is the UK willing or capable of a "committed relationship" with any group of countries/economies?

In January 2011, the UK PM got together for a summit with the PMs of the 8 so called Scandic or Nordic plus Baltic countries ie Iceland, Norway, Latvia, Sweden, Finland, Denmark, Lithuania and Estonia (1) and declared that they had compatibility in areas such as their valuing of free trade (implying the other EU members do not?), see eg BBCnews' "Cameron calls for northern European alliance" . According to the BBC: "Describing himself as a "salesman for British business", Mr Cameron said he hoped the event would produce opportunities to boost trade between the UK and the Nordic and Baltic region which was worth about the same as that with France or China".

Let us also not forget the effort to keep a "special relationship" with the US.

It seems to me that what the UK's current government (and many in the past) want is to keep all their options open, in other words the geopolitical equivalent of "polyamory". In other words, there is a commitment problem or maybe syndrome.

This type of polyamory can work, provided there are enough others that wish to engage in such relationships. Eg do the other 26 in the EU wish to accommodate/tolerate the UK's unwillingness to commit to a single currency, Schengen, and what is more crucial, political "union" ("marriage")? How many of the other 26 see the EU as a mere "friends with benefits" group instead of a "marriage"?

Does the UK's unwillingness to commit contain a visible risk of winding up all alone without a partner and real friends?

Footnote: (1) Of the 1+8, 1+6 are EU members, 2 Eurozone members.

Systemics and prospects of the WTO and of a USA, EU, Russia, Canada merger!

"Doha Trade Deal Seems Likely" reports the Wall Street Journal on May 31. 2011 (must read, here).

Whether the Doha lite, or in my opinion "extra lite" agenda is agreed upon by the end of the year, or even a "zero" one (ie no deal, end of the round that started in November 2001 in Doha) I do agree with the view that the era of progress in trade multilateralism is probably over.

As I have pointed out in my posts that one can find on this blog, after the 2003 failed Cancun meeting of the WTO, many bilateral and regional trade (or more than just trade) agreements have popped up.

A few days ago (25/5), I posted on what systemics I can see developing post Doha. IMO China, India, the US, the EU (mainly) plus Japan, Russia and Brazil or UNASUR (South America's "EU" project that of course includes Brazil) will be the main "players" in the world economic "arena".

The WTO rules as they stood before the Doha Round of talks in 2001 will probably still exist (although the survival of the WTO is not a given IMO) plus whatever rules come out of the Doha lite agenda that some seem to hope to be concluded (I have my doubts, read the WSJ article for some of the reasons, aka USA, plus. as far as I know, the US Pres has no fast track powers given by Congress on concluding a deal, and if that is indeed so, it is possible that the US Congress may decide to amend (!!) any deal, thus bringing a new deal back to the WTO, etc).

Conclusions

1) Most progress in rules or deals will most likely between 2 or more of the above 4+3 main players.

2) The EU, the US, and the other main players will continue to conclude (or at least try to, see US) bilateral deals with others, in some cases group agreements, regional or not.

3) The EU needs to strengthen its position and a political union of the EU is the main such way.

More:

Here comes some thinking that some may consider sci-fi, but we shall see:

I was involved in a most interesting discussion on Twitter (aka "tweetscussion") with a very esteemed fellow tweeter, @paulstpancras) on the night of May 29 to May 30. At some point, talking of the EU, political union potential, the UK POV, I said: "Or maybe UK would be OK with EU if merged with (the) USA; 77+ states. Then (UK) could ally with Texas, Arizona, etc! :)".

"Or a circumpolar space... USA, Canada, EU, Russia ..." proposed my fellow tweeter, which was exactly what I was also thinking as another potential scenario.

Why, because in addition to covering a ring around the planet, this union would have a population size that starts to approach that of China (1.3 billion) and India (1.2 billion):

USA+CAN+EU+Russia = 0.3 + 0.03 + 0.5 + 0.14 = 0.97 billion people.

In terms of GDP (nominal (in trillion USD) 2010 estimates (Source: CIA, World Factbook)) the picture would then be:

European Union 15.9 + United States 14.6 + Canada 1.6 + Russia 1.5 = 33.6

China 5.7
India 1.4

There is an obvious imbalance between the 33.6 and China's and India's GDP but with their rapid growth the potential for more GDP balance between the three exists.

There is another reason why a USA+EU merger would have to bring in Russia too. Russia would get very itchy if the US and EU were to merge, and including it could fix that. Canada has only 30+ million inhabitants but huge natural resources.

So while one scenario is EU+USA+Russia+Canada, another is EU+USA+Russia with almost the same population as the former, 0.94 billion and 32.0 instead of 33.6 2010 trillion USD.

But is a EU+US merger scenario even a remote possibility? Well, yes and no. 2-3 years ago, when I think the US proposed a free trade deal, some in the European Parliament said, why not a "single market". Well, IMO a single market, even without a common currency, needs single laws, which brings things, again IMO, towards a single legislature, ie political union. IMO the US+EU potential will largely depend on developments in/with China.

But what about the rest of the world? Well, China+India+EU+USA+Russia = almost 3.5 billion people. That leaves out 3.4 billion people (of the 6.9 billion total in 2010). Note: Only 11 countries have population size over 100 million but there are many countries, more than 200 in the world (planet).

Since world GDP was estimated at 62.2 trillion USD in 2010, the result of this scenario would be:

EU+USA+Russia: 32.0

China 5.7

India 1.4

Rest of the world: 23.1

including in that 23.1:

Japan 5.4

Brazil 2.0
Canada 1.6
Australia 1.2
Mexico 1.0

Such a merger could prompt other countries to merge in groups, eg Japan, ASEAN & rest of Asia (with or without some of the ex-USSR states) plus Oceania, Africa, South and Central America. The world would not become a global polity, but a small number of super-countries/states (regionalisation+). Global trade talks would bring to a table reps of 4 to 6 such super-states. Not all of the world's countries would want or be included of course (and why should they, there should be room for exceptions and other approaches).

But in any case, in the complicated and perpetually changing world after 10% of the 21st century has elapsed, and the rapid growth, economic and in "power" of the BRICs as well as other developing countries, the EU has to be a single polity, it cannot continue to be a loose group of 27 countries. EU political union is a must, for the EU to be taken seriously by the rest of the world (see eg recent issues re selection of new IMF chief, the issue of a UN Security Council seat for the EU, the marginal role played by the EU as opposed to the US and China in the Copenhagen COP 15+, etc).

Re a UN seat for the EU

Should the EU get a UN seat, in general and in its Security Council?
Well by analogy to syllogisms in my recent post: What are France, the UK, Germany and Italy doing in the G8?, and since the USA has 1 seat not 50+1 in the UN, the EU27 should have only 1 seat not 27+1, in the UN Plenary and its Security Council!

The idea of the EU (and its High Rep) using ad-hoc the UK's or France's seat in the Security Council is cause for making the EU and its members a laughing stock! The EU and its 27 members should be represented by a single seat as pointed above.

The same applies, IMO, in the case of the WTO. The current situation in the G8, the WTO and other international bodies is, to say the least. absurd and this is one area that the BRICs should be making waves about, not whether a EUropean becomes again the head of the IMF. Maybe it is the proper type of trade-off.

And what makes common sense!

Eurozone systemics: At the core of the problem

Food for thought:

Can anyone deny the effects of the expensive Euro periods since 2002 on the economies, firms/companies, exports, tourism, hence competitiveness and budgets (tax revenues) of many Eurozone members (PIIGS included)?

Even these days, when the Euro is worth 1.4+ USD!

Plus consider:

1) The Euro was not decided (1991 Maastricht Treaty) with
a) China's WTO membership and Yuan policy in mind (yet intro of Euro coins & motes happened almost concurrently with China WTO entry)
b) The evolution of GATT to WTO (which took place in 1994)

One other way to maje systemics & dynamics in the Eurozone more balanced is EU exit from the WTO (the EU has many bilateral trade agreements in place to partly/selectively take the place of WTO membership).

Of course the best way for Eurozone (& EU) systemics and dynamics to find an equilibrium is EU or Eurozone or Europlus political union, as long as it is announced soon and convincingly!