While Trumps rhetoric is still inconsistent, his trade team has been making sensible, practical announcements

While Trump's rhetoric is still inconsistent, his trade team has been making sensible, practical announcements

Despite earlier threats of chaos, something resembling sanity seems to have hit most of the world's major trading nations during May.

At the end of last year, just about every apparel trade forecast shared one prediction: international trade in 2017 was going to change in all sorts of unpredictable ways. But what now looks most likely is that practically nothing will.

The US: Trump's team starts behaving normally

While Trump's rhetoric is still inconsistent, the key people on his trade team spent May making sensible, practical announcements about business-like proposals. Many of us might disagree with them; but they all sound like the kind of thing you'd expect from a professional opponent:

The White House team seems uninterested in border taxes. Treasury Secretary Steven Mnuchin was publicly critical throughout May of across-the-board hikes in import taxes. Trump's Republican party in Congress appeared to reject them – although there's still support for the move from a hard core in the House of Representatives. Exporters seem safe in assuming there will be no sudden rise in the cost of selling to the US this year.

NAFTA renegotiation will proceed at a conventional pace. US Trade Representative Robert Lighthizer on 17 May gave Congress the NAFTA (North American Free Trade Agreement) notification needed to start formal talks with Canada and Mexico by mid-August. But Lighthizer's letter included none of the bluster and hostility that President Trump had earlier directed at America's NAFTA partners, Canada and Mexico. The administration briefed media it expected talks to be completed by the end of 2017 – though I think they're ambitious.

China no longer seems public enemy No 1. Commerce Secretary Wilbur Ross announced on 11 May a set of trading agreements with China as evidence of the new, productive relationship between the two countries. It looks likely there will be no fundamental change in America's policies towards China for the next year or so.

But there are lots of nitty-gritty new attempts to protect US traders. Trump's team have shown great initiative in finding ways of punishing specific foreign exporters – like Canadian timber companies or Chinese steelmakers – they believe are unfairly damaging US businesses. They're also loudly lobbying the World Trade Organization to make it easier for the US to hit imports it doesn't like. However, it's unlikely this will mean any action on apparel or textiles. 

The EU: Claims of imminent collapse now look silly

The EU still has real problems, like huge youth unemployment and voter concern about open borders. But during May some of the myths about it fell apart:

National elections: anti-EU candidates trounced in national elections. The clear victory of pro-EU Emmanuel Macron in the second round of French elections on 7 May followed a similar win for pro-EU parties in earlier Dutch elections and was followed on 14 May by the collapse of the anti-EU party in Germany's most populous state. The widely-touted belief in the UK and US that the EU is disintegrating is plain political nonsense.

The EU regained its ability to do trade deals. Over the past year, deals the EU has agreed – with Canada, Vietnam and Singapore – have been taking an eternity to get confirmed. Sometimes this was because the EU required each of its 28 members to decide individually – giving each the chance to veto a deal. But a 16 May decision from the EU's top court, the European Court of Justice, has severely limited the grounds for allowing individual countries' objections.

With Japan, several SE Asian countries, and the South American Mercosur federation (Argentina, Brazil, Paraguay, Uruguay; Venezuela suspended) all actively chasing EU deals, the European Union is now by far the world's most actively pursued potential trading partner. And it's still extending concessions to poorer countries: as from 19 May, Sri Lanka has been reinstated into the EU's duty-free GSP+ programme.

Even the Trump administration has given up decrying it. For months after Trump won the US Presidency, his team kept saying they wanted to negotiate trade with countries one at a time – and that the EU was doomed to fail. However, by late April, after Angela Merkel reportedly told Trump 11 times in succession that Germany would not negotiate separately with the US, America was even talking about reviving negotiations with the EU over the Transatlantic Trade and Investment Partnership (TTIP) – which everyone thought the US had abandoned.

The Pacific: China's self-centred definition of free trade

China keeps boasting of its beliefs in free trade, and of its keenness to sign deals with more countries. But the US, EU and Japan still attack its refusal to accept restrictions on government interference with trade. They insist China's not a market economy, and should be treated accordingly at the World Trade Organisation.

China's self-centred definition of free trade isn't winning it friends – and is slowing progress on deals it's negotiating:

  • The all-Asian Regional Comprehensive Economic Partnership (RCEP). The free trade deal between 16 Asian countries including India and China, first suggested in 2012, is supposed to be finalised by the end of 2017. But the mid-May round of talks revealed little progress. China wants easier access for its goods, without restrictions on government subsidies to its traders. Its RECEP negotiation partners won't go along with that.
  • Japan, Korea, China. Thinking they would make faster progress to a free trade deal than the more cumbersome RCEP group, these three have been negotiating a free trade deal since 2012. At their twelfth round of talks in mid-April, they found it easy to attack Trump's protectionism – but harder to make any progress on their proposed deal.
  • TPP-11. In mid-May, the 11 countries previously negotiating the Trans Pacific Partnership (TPP) with the US agreed they would go ahead towards a deal with each other and without the US. Officials from TPP countries will meet again in Japan in July and bring forward proposals in November, said New Zealand's Trade Minister Todd McClay. But no suggestion of any real timetable for getting to an implemented deal.

UK: Blustering?

On 22 May, the EU announced its timetable and negotiating guidelines for Britain's exit. EU negotiators have been given a clear brief to demonstrate to the remaining 27 member states that leaving the EU will be an unpleasant experience.

They stipulate that the UK will withdraw "at the latest" by 30 March 2019. The EU's chief negotiator, Michel Barnier, said he hoped the first round of negotiations would take place the week of 19 June, after the UK's election on 8 June. 

The guidelines indicate a tough EU negotiating position on the amount the UK needs to pay to leave. But the previous day Britain's chief negotiator, David Davis, had threatened to walk away from negotiations unless Brussels dropped those demands.

Barnier dismissed the possibility of a British walk-out. Who's blustering?

Global trade pressures now saner. But are they stable?

The US is still governed by people convinced America's problems mostly stem from being too generous to foreigners over the past 25 years. The EU as an institution still doesn't accept that many of the problems plaguing its 27 committed members are the fault of flaws in the EU's design. And China keeps insisting on rights to subsidise its exporters that its trading partners don't accept.

All three are going to interfere with future grand designs for coordinating global trade – but are unlikely to create big changes in the short term.

The question mark, though, is the UK. Will the EU's determination to get tough provoke a UK walk-out – at a time Customs facilities in the UK and its EU neighbours simply can't cope with the extra demand for border inspection such a move would require? Or is this the kind of pre-negotiation threat that inevitably disappears after a few weeks' tedious discussions?

With the personnel changes, inevitable after a national election and a few weeks' news from negotiation chambers, we should be clearer by the end of June. 

Mike Flanagan is chief executive of Clothesource Sourcing Intelligence, a UK-based consultancy that provides the western apparel buying community with objective information on apparel production, trade, price competitiveness, and apparel producers in over 100 countries.