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Korea Herald
10-08-2025
- Business
- Korea Herald
[Editorial] Shifting trade rules
Decline of WTO ushers in bilateral leverage, challenging Korea's export-driven economy A quiet yet drastic shift is underway: After three decades of World Trade Organization-led multilateralism, the United States has openly declared the system unsustainable. Writing in the New York Times on Thursday, US Trade Representative Jamieson Greer portrayed the WTO as a faltering institution that compromised American industry while enabling China's state-driven economic model to thrive. This is why the world is now witnessing the so-called 'Trump Round,' a new global trade order built not on consensus but on tariffs and bilateral leverage. In Washington's narrative, the multilateral model was naive: It presumed all members would abide by rules they helped to write. Instead, a system meant to bind China into fair competition allowed it to expand market share through subsidies, export controls and opaque regulation. Years of dispute-settlement paralysis left the WTO without a functioning appellate mechanism, further eroding credibility. What has replaced it is a model of direct bargaining, with tariffs deployed both as penalty and negotiating instrument. This has significant implications for South Korea. Its post-1995 export success was built on WTO access guarantees and predictable dispute resolution. Now the playing field is tilting toward power-based negotiation. Under the emerging bilateral terms with the US, Korean exports face a 15 percent tariff, offset partly by market-access pledges in other sectors and by Korean commitments to invest in US infrastructure and advanced industries. This is not a symmetrical arrangement. Washington controls the main 'carrot' — access to the largest consumer market in the world — and the principal 'stick' of targeted tariffs. The absence of binding multilateral enforcement means concessions will depend less on legal rulings and more on political calculation in both capitals. South Korea's first task in this environment is strategic clarity. It cannot treat US market access as a permanent right; it is now a conditional privilege. Securing continued access will require not only diplomacy in Washington but a clear sense of the trade-offs that domestic industry can accept. The second task is diversification. WTO's decline removes the institutional ballast that once made trade with China, the EU and Southeast Asia relatively predictable. Seoul must deepen ties with the Association of Southeast Asian Nations and the EU, accelerate talks for joining a major Asia-Pacific free trade agreement known as the CPTPP, and pursue sector-specific agreements that spread risk. The aim is not to decouple from the US but to avoid being trapped in a single-track export dependence. Third, Korea must adapt its industrial strategy. Semiconductors remain its core export, but the risk profile has changed. In a rules-light order, sectors less exposed to punitive tariffs — such as green technologies, biotechnology and digital services — will be vital hedges. Industrial policy should now focus as much on resilience as on speed of growth. Lastly, Seoul should not surrender the principle of rules altogether. Even in a fragmented system, there is room for 'mini-lateral' or regional frameworks that preserve predictable norms. CPTPP accession, deeper engagement with the Regional Comprehensive Economic Partnership, and targeted high-standards pacts could help anchor at least part of South Korea's trade in enforceable obligations. The end of the WTO era is not the end of trade. It is the end of a certain kind of trade — one where a medium-sized economy like South Korea could rely on codified rules and impartial arbitration to protect market access. The new model prizes leverage, and those without it must find substitutes in alliances, diversification and innovation. The quiet demise of the WTO should be seen not as a collapse but as a strategic pivot. South Korea's track record of adaptation — from rapid industrialization to digital innovation — demonstrates its resilience amid profound change. The critical question now is whether it can convert this loss of certainty into a competitive edge before others seize the opportunity to define the new rules unilaterally.
Indian Express
10-08-2025
- Business
- Indian Express
The ‘Turnberry system' – what the US' new global economic order looks like
Last week, Reserve Bank of India (RBI) Governor Sanjay Malhotra touted India's 'bright prospects in the changing world order' in the medium term, adding that 'opportunities are there for the taking'. But will India be able to get its hands on any of these opportunities? Turnberry, of course, is a Trump-owned hotel and resort on the western coast of Scotland where in late July the US President and his European Commission counterpart, Ursula von der Leyen, announced their bilateral trade agreement. As part of the deal, goods from the European Union (EU) will face a tariff of 15 per cent when entering the US. However, it did not end there: by 2028, the EU will buy $750 billion of American energy products and invest $600 billion in the US. The deal has been called a 'capitulation' and humiliating for the EU. According to Julian Hinz, head of Research Center Trade Policy at Berlin-based Kiel Institute for the World Economy, it was an 'appeasement' and abandoned the World Trade Organization's (WTO) principles. 'Under WTO rules, member countries must apply the same tariffs to all other members. Deviations are only permitted under free trade agreements in which both sides reduce their tariffs to zero. The current deal clearly violates these principles and sets a dangerous precedent,' Hinz warned on July 28, adding that Trump's strategy of 'pitting other economies against each other' had only been strengthened. Greer's New York Times column, however, made no bones about abandoning the WTO and its doctrines. According to Greer, the legacy of the Bretton Woods system lived on in the form of an arrangement dominated by the WTO he said was 'untenable and unsustainable' – while the US lost industrial jobs and economic security, others did not undertake key reforms. China, meanwhile, was the winner. But now, 'reform is at hand', with the US-EU deal 'oriented toward serving concrete national interests rather than vague aspirations of multilateral institutions'. Multilateral institutions such as the WTO, World Bank, and International Monetary Fund have been criticised for decades for their policy suggestions, especially when it comes to debt-laden developing nations, as shown by the Asian financial crisis of 1997 and the European debt crisis. Momentum to meaningfully reform them has gathered pace in recent years. Greer, however, has a more US-centric world order in mind. 'It took over 50 years from that first meeting at Bretton Woods until the creation of the WTO. It has been 30 years since. Fewer than 130 days from the beginning of the Trump Round, the Turnberry system is by no means complete, but its construction is well underway,' Greer concluded, calling the current round of global trade negotiations as the 'Trump Round' of discussions – a reference to the several rounds of talks held between countries that led to the formation of the WTO at the Uruguay Round in 1994. But what exactly is the Turnberry system? Going by Greer's column, the Turnberry system involves nations aligning on economic and national security interests and rebalancing trade in a 'more sustainable direction' such that the US' manufacturing sector is back on its feet. This, he said, warrants a 'generational project to re-industrialize America'. The era of the US getting other countries to lower their trade barriers by removing the tariffs that defended its own manufacturing sector is over; in its place, the removal of foreign trade barriers is being done 'while ensuring sufficient tariff protection at home'. This system also intends to enforce these new priorities in a far more telling manner than 'drawn-out dispute settlement process'. Should the US detect non-compliance, there will be swift retribution in the form of higher tariffs – the 'formidable stick' to the 'mighty carrot' that is the opportunity to sell your goods in the 'world's most lucrative consumer market', Greer said. Clearly, the Turnberry system is one which serves only one country. The US gets its pound of flesh in the form of re-industrialisation, while foreign companies get the opportunity to have access to the world's richest consumers. Or at least that's what the US government thinks. Leading academics have repeatedly warned that Trump's tariff war will not solve the country's problems. For instance, Robert Z Lawrence of the Peterson Institute of International Economics and a professor of trade and investment at Harvard University has said it is a 'fool's errand' to make the US economy go through a massive disruption just to create a relatively small number of manufacturing jobs. Moreover, dealing with bilateral deficits individually does not balance overall trade and without policies that cut American expenditure relative to its output, Trump's tariffs will only result in the shifting of its trade deficit from targeted countries to non-targeted ones, Lawrence has argued.
Indian Express
02-08-2025
- Business
- Indian Express
What Trump is actually doing — and why India needs to press reform & reset
FOR all the disquiet in Delhi over US President Donald Trump's sugar-uncoated remarks, his rough and ready tactics on trade, there needs to be a sobering acknowledgment of two realities: one, like it or not, tough tactics often win on the street in a world that's never stopped being an unfair place; and, two, Trump has prevailed. Most mainstream economists dismissed his approach, warning that his aggressive tariff regime would spell disaster for the US economy. Yet, four months after unveiling his first tariff chart on April 2—dubbed 'Liberation Day'— and his second on Friday, Trump has gained enough ground to claim a significant victory. Like a gambler, who believes he is on a winning streak, Trump is set to roll the dice for far more sweeping changes in the post-war global financial and technological orders. The US President's bilateral negotiations are being described as the 'Trump Round' of trade talks, echoing the major rounds of GATT and WTO negotiations that shaped global commercial order. With the exception of Canada and China, most countries refrained from retaliatory tariffs. Instead, they lined up outside the White House, eager to strike deals before the extended August 1 deadline. India was among the early partners to start trade talks but failed to close a deal. While many major economies and middle powers signed agreements on Trump's terms, India now finds itself in the company of Brazil, Burma, and Switzerland facing steep US tariffs. To its credit, Delhi did recognise trade as central to Trump's second-term agenda. Prime Minister Narendra Modi's February 13 meeting with Trump produced a joint statement affirming the goal of expanding bilateral trade to $500 billion and launching time-bound trade negotiations. India negotiated in good faith and continuously. But the gap between India's negotiating brief and Trump's maximalist agenda proved too wide to bridge. Trump's growing impatience was evident in a barrage of tweets targeting India, while senior administration figures—Treasury Secretary Scott Bessent and Senator Marco Rubio—spoke publicly about the President's 'frustration' with Delhi's posture. Frustration had also defined Trump's first-term trade engagement with India. Robert Lighthizer, Trump's former US Trade Representative, recounts in his book, No Trade is Free, how difficult it was to conclude even a modest trade agreement with Delhi. He placed the blame not on India's bureaucracy, but on the entrenched interests of the Indian capitalists that fiercely guard the barriers protecting them from external competition. Lighthizer revealed he kept files on top Indian tycoons—whom he labeled 'oligarchs'—to better understand Delhi's negotiating strategy. Trump's complaint about India's 'obnoxious' non-tariff barriers rings familiar. India's neighbours have long voiced similar grievances, although a lot more politely. Yet, the deeper issue may be Delhi's underestimation of the scale and ambition of the Trump Round. Trump's goal was not merely a new bilateral deal here or there, but a systemic overhaul of the global trading order constructed after the Second World War and revamped at the turn of the millennium. On the campaign trail and in office, Trump has argued that the international trade regime has failed the American people—and must be overturned. The strategy, often dismissed as irrational, had a logic of its own. Stephen Miran, Trump's economic adviser, argued in a paper written before the presidential election that Washington could exploit the global export dependence on the US market—and allies' reliance on US security guarantees—to rewrite the rules. Miran describes the post-war free-trade order as a political construct, in which US policy sacrificed domestic industry for Cold War geopolitical goals. He proposed replacing blanket multilateralism with 'strategic pluralism,' forging separate deals with different nations based on US leverage. Before taking over at the Treasury, Bessent, too, hinted at the broader potential of tariffs—not just to reshape trade, but to pressure states on energy, currency, and strategic alignment. For Bessent, Trump's strategy was about a grand rebalancing of the global economy in America's favour. Trump has not held back. He has used tariffs for a variety of objectives. He imposed a 50% tariff on Brazil to weaken President Lula and help his rival Jair Bolsonaro. He is threatening tariffs on Indian and Chinese oil imports from Russia and using economic leverage to push BRICS countries away from their loose talk on de-dollarisation. In the last four months, three core pillars of Trump's strategy have become visible: using tariffs to narrow trade and fiscal deficits; mobilising investment to reindustrialise the US; and compelling trade partners to buy American energy and goods. Even countries with minimal trade ties to the US have had to offer something of interest to the White House. Pakistan's offering was its allegedly 'rich' oilfields. The EU, Japan, and South Korea have made sweeping pledges, including tariff concessions, major investments, and hefty American purchases. Whether these commitments are realised is another question. But they have delivered the optics of victory that Trump craves. What India offered remains unclear—but evidently, it was not enough. If Delhi was unprepared for Trump's counter-revolution in trade, it now faces an even more profound challenge: coping with a broader transformation of the global financial and technological order. Trump is targeting the foundations of the old monetary system. His administration's embrace of cryptocurrencies and stablecoins promises to reinforce the dollar's dominance over the global system and the US ability to leverage it. At the same time, Trump is aggressively deregulating artificial intelligence. At a recent AI summit in Pittsburgh, he announced a sweeping new policy to promote American AI dominance—especially over China—and pledged to invest a significant share of the revenues secured through trade negotiations into AI-driven industrial renewal. Trump's vision of American resurgence hinges less on outsourcing work and insourcing labour and more on technological innovation to restore US industrial might. In short, Trump is not just renegotiating trade. He is leading a radical overhaul of American capitalism by reshoring key elements of the supply chains, promoting a national industrial policy, and investing in tech-centric manufacturing in the United States. As India resumes trade talks with the US later this month, it must recognise this historic moment in the evolution of the global economy. Any negotiating strategy premised on maintaining the status quo at home at a time of radical change abroad will leave India more vulnerable—not just to US pressure, but to the accumulating costs of missing a long-overdue internal economic transformation. This is a moment that demands India to focus on reforming its own economy to make it globally competitive and technologically agile. India owes this to itself – and to its future. (C. Raja Mohan is a contributing editor on international affairs for The Indian Express)
