New World Order Trade Implications as Putin, Trump to Meet in Helsinki
As I predicted last week, Russian President Vladimir Putin will meet with US President Donald Trump in Helsinki. The summit will take place on July 19.
The two men will have plenty to discuss:
- The de-nuclearization of North Korea, which shares a border with Russia;
- The current status of economic sanctions imposed by the US on Russia;
- Russian concerns about the breakdown of the global trade structure and US intentions;
- The war in Syria, which has seen military engagement from NATO and Russia on opposite sides of the conflict;
- The civil war in eastern Ukraine, which both sides unofficially support from opposite sides;
- NATO’s expansion and development plans – Russia has recently reacted with anger at the increased deployment of US marines in Norway;
- Any time frame for the clearing up of these outstanding matters and the possibility of a return to normalized relations; and
- Cordial invitations for both leaders for further talks at the Kremlin and in the White House.
Concerning NAFTA, recent threats by US President Donald Trump to tear up the North America Free Trade Agreement (NAFTA) with Canada and Mexico are likely to trigger increased interest by these two countries in making free trade deals with the Moscow-backed Eurasian Economic Union.
In fact, low-level discussions concerning the possibility of a Canada-EAEU trade agreement have already been held. In April 2015, the Canada-Russia-Eurasia Business Association stated that Canadian businesses are interested in cooperation with the Eurasian Economic Union. This led to a seminar in Montreal at which the ambassadors of Russia, Belarus, Kazakhstan, and Armenia all spoke, and expressed their detailed view to the Canadian business community of the possible future cooperation between Canadian businesses and the EAEU.
In terms of Mexico, Mexican Deputy Foreign Minister, Carlos de Icaza, told students at the Russian Foreign Ministry Diplomatic Academy in June 2016 that “Russia and Mexico should focus on development of economic ties”. Hinting at a dialogue going on at a higher level, the minister emphasized the importance of establishing trade ties in between the two nations. He stated, “Our trade turnover with Russia amounts to about US$2 billion. I think that our two countries are lacking knowledge of each other. It is necessary to search for ways of building contacts in order to know in what areas we can trade.” De Icaza also met with Russian Deputy Foreign Minister Sergey Ryabkov and President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin. Mexico is interested in cooperation with the Russia-led Eurasian Economic Union (EAEU) as in an opportunity to expand presence in the region, according to the Mexican official. Mexico has also launched a special Mexico/EAEU website to promote and gauge interest in trade ties.
While at early stages, the pertinence of these discussions could become more apparent should the United States follow up on threats to leave the World Trade Organisation. If that happens, then a global scramble to replace it could well ensue. In which case, the Eurasian Economic Union, with its close ties and connections to both Moscow, Beijing, and Delhi – all representing huge and growing consumer economies – could well step in to fill the gap.
In terms of South America, Moscow has also been wooing the region as an extension of the Eurasian Economic Union globalization policy. Much of the South American-EAEU diplomacy is being conducted via Mercosur, the free trade bloc that includes Argentina, Bolivia, Brazil, Paraguay, Uruguay, and Venezuela. Associate members include Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname, while Mexico and New Zealand are observer nations. In April 2016, the Eurasian Economic Commission held a working meeting between Tigran Sargsyan, the Chairman of the Eurasian Economic Commission and the Minister of Foreign Affairs of the Argentine Republic. The parties discussed the developing relations between the Eurasian Economic Union and Argentina as well as developing closer ties between the member states of Mercosur and the EAEU. A draft agreement concerning future cooperation on trade and economic issues between the EAEU and Mercosur is currently under consideration.
These discussions, together with other bilateral talks being held, effectively cover all of South America. While no trade agreements have yet been concluded, the talks demonstrate that the potential emergence of a vast new global trade bloc is actively being promoted and considered. That many of the nations concerned in South America have close ties to both Russia and China is to the advantage of the EAEU, as is the current isolationist policy of Washington, which has wasted a huge amount of regional trust in recent years.
If this continues, then the Putin-Trump summit – which it must be noted was requested by the US, not the Russian President, could usher in a new world trade order. In the Silk Road Briefing article, “After Trump, Putin & Xi – How The New World Trade Order Could Look In 2030“, I commented that the United States under President Trump could start to commit to a series of bilateral rather than the current arrangement of multilateral deals, effectively leaving it as a trade bloc on its own. In which case, a future new trade world structure could look something like this.
The impact of this, should it occur, would see global power shift away from Washington and towards Beijing, Delhi, and Moscow. This follows the demographic rise of China, which as we have seen has emerged as a major power built on a huge population. Globally, there would be calls to reconvene a “new” G7 – Brazil, China, India, Iran, Mexico, Nigeria, and Russia. The question Donald Trump needs to ask himself (but probably won’t) while discussing trade with Vladimir Putin is whether the current view of the United States in going it alone in trade will instead facilitate a newer replacement in the form of a global trade bloc built around the instigation and wishes of Beijing and Moscow. Vladimir Putin will already be well aware of this potential. Whether Donald Trump, with his new found toy of holding surprise mano-o-mano summits and generating massive global publicity in doing so will later look back at the fading images of this era with pride or regret is something only history will tell us. But increasingly, it does appear that the trade current impetus is flowing from East to West, and not in the opposite direction.
Chris Devonshire-Ellis is Chairman of Dezan Shira & Associates, publisher of Russia Briefing. The firm provides strategic advisory,business intelligence and professional services throughout Eurasia. Please contact the practice at email@example.com or visit us at www.dezshira.com
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