Big business tries a dangerous dalliance with populist protectionists

Hello all. Some developments coming up on the political front: manoeuvrings continue over the big EU appointments while the UK government appears to be heading for deserved electoral obliteration next week. Today’s main pieces are on big business supporting Donald Trump and Marine Le Pen, the candidates’ reactionary protectionism notwithstanding. As far as I’m concerned this is the latest episode in a persistent failure by business to stick up for an open world trading system. Am I being unfair? Email me with your thoughts at alan.beattie@ft.com. Charted Waters is on the weakness of emerging market currencies.

There’s no business like WTO business

I’m going to file under “depressing but not surprising” the news that big businesses are swinging behind both Donald Trump and Marine Le Pen ahead of elections this weekend in France and in November in the US.

Repeat after me: big business is not a bulwark against the rise of the authoritarian right. Those expecting the US corporate community to rein in Trump’s assault on democracy and open trade haven’t been paying attention either to recent American history or the 20th-century European experience. US companies in particular seem pretty happy to take the immediate gratification of tax cuts and deregulation and let the broader goals of economic and political liberalism go.

The idea of business (and moderate business-friendly Republicans) finally turning on Trump after years of passivity is as likely as a charge from a cavalry of unicorns. It’s somewhat ironic that corporations have been doing tick-box exercises in ESG (environmental, social and governance) standards for years and yet fail to stand in the way of such a threat to liberal freedoms.

More generally, well before the populist threat, European and American businesses have been failing for a long time to lobby effectively for open world trade.

The rot set in decades ago in the multilateral system. Whether you like the outcome or not, the “Uruguay round” of trade talks completed in 1994 owed much to pressure from companies, especially financial services multinationals, who really understood the system and worked it. By contrast, as the World Trade Organization’s unloved so-called “Doha round” headed to collapse in the 2000s, companies became increasingly absent — except for their business associations continually sending the FT pious round-robin letters and moaning if they weren’t published.

The German employers’ federation, the BDI, didn’t bother turning up to the fateful ministerial in July 2008 where Doha collapsed. Geneva during that meeting was thronged instead with farmers’ organisations worried about seeing cuts in subsidies and tariffs and who were very happy for the round to fail.

It’s not that businesses and their associations are never constructive. The conversations among private sector attendees at the recent WTO ministerial meeting in Abu Dhabi were about the most useful interventions there, though that’s clearing an exceedingly low bar. But even when they do have something to say, businesses’ lobbying isn’t having much effect.

Of politics and preferentials

So what have businesses been asking for? To be fair, there has been more lobbying on preferential trade agreements, where progress is faster and benefits more easily identifiable. Even there, though, US companies have failed to stop toxic tradephobia seeping through Washington.

Business pressure helped push the Trans-Pacific Partnership agreement to signing stage in 2016, but could not get it through Congress before Trump came in and withdrew the US from the deal. Companies and their satraps on Capitol Hill didn’t help matters by holding the deal up on workaday issues that can’t exactly be regarded as free trade, including opposing public health protection to placate the tobacco lobby and wanting yet more IP protection for pharmaceuticals. There was little sense of the bigger issue of projecting a US model in the Asia-Pacific as a challenge to China.

We’ve now got to the stage where US trade representative Katherine Tai takes evident delight in ignoring the views of business, including an abrupt about-turn on the US policy on digital trade, infuriating the tech industry.

That said, some of the interactions with government coming out of the tech sector aren’t entirely helpful. The prospect of lower taxes and lighter tech regulation, perhaps bolstered by the persistent strain of sophomoric libertarianism in Silicon Valley’s thinking and the need to back a potential winner, has turned some parts of the traditionally strongly Democratic sector Trump’s way.

In Europe, the famously powerful German carmakers, despite supporting trade deals with muscle memory mercantilism because of their export orientation, have helped to weaken European competitiveness by lobbying for a stultifying business-as-usual model. Rather than rising to the electric vehicle challenge, the manufacturers focused on eking out gains from existing technology through pressing policymakers to delay the phaseout of petrol engines and suggesting a fanciful “e-fuels” solution instead. The result: the EU is now scrambling to manage a tricky transition to electric vehicles with a domestic car sector which has let China get miles ahead.

Charted waters

Emerging market currencies have performed poorly in the first half of the year. Slower-than-expected cuts in US interest rates and uncertainty over EM fiscal policy have conspired to drive currencies lower against the dollar.

Trade links

• China has agreed to talks with the EU to resolve the dispute over anti-subsidy tariffs on imports of Chinese electric vehicles.

• The US has published proposals for restrictions on outbound investment into China, designed to implement an executive order President Joe Biden issued last year.

• A Centre for European Reform paper looks at which subnational regions have won and lost from trade within the EU single market.

• The Economist on the misplaced nostalgia for manufacturing jobs.

• India’s heavy industry and the Indian government are growing increasingly worried about the EU’s carbon border adjustment mechanism, which could hit the country’s emissions-intensive exports hard.

Trade Secrets is edited by Harvey Nriapia today