A Fourth of July celebration without fireworks is not a Fourth of July and North Korea’s ruler, Kim Jong-Un, seemed to think this way early in the morning, but with a slight different idea of fun. As North Korea regime threatens the USA on July 4, US Independence Day, testing a missile ‘capable of reaching Alaska’ a new a deliberate snub to President Trump adds to their bilateral relations. This nonsense will increase the sense of military crisis in east Asia, an issue I originally wrote about in Spanish on this post a few months ago, analyzing the relation between Putin and Trump. (Actually, the words that follow after this first paragraph are a translation initially entitled ‘Putin and Trump’s World 3’).

Applying the new American nationalistic policy, which denies more payments to maintain global policies, opens a way for a more advantageous Russian situation. This implies new interesting departure points. The Kremlin is fighting to involve the United States in the political process to solve the Syrian crisis. At the same time is trying to apply the Minks Agreements over Ukraine. These would allow Russia to obtain a practical an efficient outcome over international terrorism. But, of course, when it comes to trade, profitable agreements could be reached for both parts, although different factors must be taken into account. Right now, one of the most important issues is that the current economic and financial cycle is coming to an end.

Strengthening of nuclear non-proliferation and the search for a global strategic stability solution would make possible to tackle the cybersecurity challenge. North Korea nuclear program could also be included. Corporate cooperation over Arctic development could also be raised, through energy and facilities enterprises from the USA already operating in the North of Russia. Of course, this should be done with no threats against USA NATO allies. This would also make possible to avoid weapons proliferation.

Nevertheless, under any circumstances, Russia would maintain conversations over supporting the USA policy about China’s contention. 53% of Russians maintains that the country should have a neutral position, as the Russian Public Opinion Research Center states. Strategic association and cooperation with China and other important Asian countries, like India, is part of Moscow’s Great Eurasia project, as an economic and geopolitical priority. Such movements could convey with initial main American worries turning it into an opportunity.

But there are still other issues that need to be analyzed within trading.

Active and potential trade barriers

International trade system is based upon multilateral rules under the WTO surveillance. It guarantees liberal trade order established since 1947 by the United States with GATT. This has also been its way to secure global trade, especially in the North Atlantic area under NATO surveillance and in Asia backed up by Japan and Korea. Currently both surveyors are being questioned by Trump’s Administration.

Although it is true that globalization and technology have produced in the last decades, and still will, important changes within the global trade system, EU, emerging countries and China are firmly defending the current system.

Offshoring the production of manufactured goods, which emerging economies have taken advantage of, and establishing new regional and mega regional trade agreements (TPP, CETA, TTIP, UE-MERCOSUR, UE-India, among others) in order to get a secured investment and legal frame, have been the two most important changes. The latest undervalues WTO.

Within current economic deceleration, other important episodes that threat free trade have taken place, such as the Brexit and the rise of EU antiestablishment political parties. Their origin lies within the recovery of trade and economic sovereignty, rising new borders and refusing trade, investment and immigration opening.

The USA Administration issued in March a report whit its main four point for trade strategy:

• Current multilateral trade system must be modified in order to prevent other countries to take advantage of the USA.
• Removing trade deficits.
• Establishing talks for bilateral trade agreements.
• Reindustrialization of the USA and job creation through new neomercantilism.

 

The USA have maintained and defend since the end of World War Two this liberal world order was due to geopolitical reasons to prevent the rise of communism through Western Europe. Doing so, the rest of the countries accepted the rules and the benefits.

Russian economy is being under recession for two years, mainly due to oil prices and sanctions by the USA and EU since 2014 Ukraine crisis. This has prevented Russia to access international financial markets. This 2017 is supposed to be better if oil doesn’t go below 50 USD and domestic demand rises with a stable ruble. Besides these issues, its GDP falling has stabilized.

As WTO and Eurostat point out, Russia’s main growing engine came from export, specifically oil and gas and raw aluminum. Its main imports are cars, packed medicines, repair parts, planes, helicopters and space craft equipment and computers.

EU, China, USA and Japan are the main trade Russian partners. With the USA and the European Union there is a statement battle with warnings going on since the Ukraine crisis. Nevertheless, Europe, with Germany at the top, is the main Russian surveyor, with a third of the cake, followed by China, the USA and Japan. Gas and petrol are the two most imported commodities by the EU. After Germany there are Italy, France, UK and Spain. China is the second partner out of the European block. Moscow and Pekin still have strong economic and political ties. The USA, the third business, buys gas and sells machinery and planes, as the WTO points out. Japan, the fourth partner, buys oil and sells cars and machinery.

Within Latin American boundaries, the WTO points at Brazil as Russia’s main partner, followed by Venezuela, Mexico, Argentina and Cuba.

The economic and financial cycle is ending and the possibility of a deepest world deceleration rises due to tariffs and the new USA protectionist policy. This situation could lead into a new trade and currency war, especially with China, its outcome would be the fall of world trade.