And so it begins, President Trump yesterday withdrew the US from the Trans-Pacific Partnership (TPP) which had taken the Obama government two years to negotiate. The TPP included 11 other nations in a free trade agreement linking countries that account for approximately 40% of global GDP. Trump, during his campaign claimed the current TPP and NAFTA agreements were unfair to American industry, adding that workers appear to have opened the door for China to take a major role in trade within the region.
This week the who’s who of politics, economics, tech and business are gathered at the World Economic Forum in Davos. This year’s has so far been starkly different from previous summits, as the two biggest events of 2017 (so far), i.e. Brexit and the incoming less trade-friendly US administration, are against everything that Davos - the global problem-solving think-tank - stands for. This year the US shunned the annual global getaway, with no president-elect official representation.
With the Fed continuing to operate ‘under a cloud of uncertainty’ the most recent FOMC minutes from the December meeting state that the committee is find it ‘challenging to communicate to the public the likely path of the federal funds rate’. Although the Fed officials expect upside risks to US growth, resulting from potential fiscal deployment, ‘participants emphasized their considerable uncertainty about the timing, size and composition of any future fiscal and other economic policy initiatives as well as about how those policies might affect aggregate demand and supply’.
For the first time in history a Chinese president will be welcomed at the annual World Economic Forum in Davos, Switzerland. Although not formally announced, reports suggest Xi Jinping is set to attend the summit to be held at the alpine ski resort in January next year; previously Chinese premiers have attended, but never a president. With expectations that the meeting will be overshadowed by Brexit, the anti-establishment movement in Europe and the US presidential transition, we expect Mr. Xi will have a much wider stage than ever before to push China’s global influence and pro-trade stance. The China-led Asian Infrastructure Investment Bank and One Belt, One Road initiative will likely garner much attention as the US, under a Trump administration, is expected to reshape trade agreements and pull out of Obama’s TPP deal.
The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union is heralded by its supporters as being ‘a progressive agreement that will set a new standard for international trade.’ In its current form virtually all tariffs with the exception of select agricultural products would be removed.
In fact, earlier in the week Jose Manuel Garcia-Margallo, the Spanish Foreign Minister, was even advocating it as a model for Brexit stating ‘If the British insist on having the option to restrain the free movement of European workers to the United Kingdom, the only solution is the Canadian one.’ But that was before the Walloon Parliament failed to approve the deal.