The return of protectionism will continue to manifest in trade, investment and technology relationships across the globe through the end of the year. As has been true for most of 2017, the United States will lead the charge, particularly with the renegotiation of NAFTA underway. In fact, Washington has already put forth plans outlining the ways in which bilateral trade deals should be implemented instead. It has also called for the introduction of a U.S. content requirement in certain sectors, stipulating that foreign goods must contain a given share of parts produced in the United States in order to qualify for reduced tariffs. Washington has even gone so far as to suggest an automatic sunset clause that would terminate NAFTA under certain circumstances.
Both proposals have drawn criticism from Canada and Mexico, but they also have signaled Trump's determination to significantly revise the North American pact. Despite adopting an aggressive opening stance in the talks, however, the United States will not abandon NAFTA. Instead, the three partners will eventually reach an agreement, albeit beyond the fourth quarter's end.
Over the past few months, the United States has shifted more attention toward its trade complaints with China and South Korea. As a result, disputes between Washington and both Asian nations will become more heated in the months ahead. U.S. investigations into China's technology transfer requirements and other practices related to intellectual property could lay the groundwork for sweeping action against China, including broad tariffs. However, such moves likely won’t come until next year.
The United States may not wait that long to clarify its intention to pursue a case against China through the World Trade Organization (WTO). If U.S. investigators discover that Chinese tactics are inconsistent with the bloc's rules, Washington will be compelled by both its WTO obligations and U.S. law to bring the disagreement to the organization before unilaterally imposing other punitive trade measures. On the other hand, if China's activities are found to hurt American companies in ways that are not addressed by WTO regulation, the United States will be able to more swiftly respond as it sees fit.
The United States is not the only party concerned about Beijing's strategy for acquiring Western technology, either. In September, the European Commission called for the Continent to establish more mechanisms for scrutinizing investment into strategic sectors from companies backed by states outside the European Union — a move clearly aimed at Chinese money. Italy, France and Germany have each supported this sentiment as well, fearing that the Chinese government may be using the resources of the state to encourage takeovers of European companies to "buy" the core technologies and know-how that underpin the world's modern economies. As usual, France will lead the protectionist charge within the European Union in the months ahead. But Paris' proposals will create controversy among market-oriented countries, such as Denmark, and Eastern European states, which will view with suspicion any undertaking that could rob them of Chinese investment opportunities or increase Brussels' control over their economies.
These differences of opinion, along with many others, will be on full display this quarter as Europe tackles the task of reforming the union. Now that critical elections in France and Germany have concluded, the bloc will weigh proposals to create a European Monetary Fund, boost public investment across the Continent and introduce risk-sharing measures in the eurozone. Though Berlin is willing to find common ground with Paris, Germany will spend the remainder of the year building a governing coalition at home. Even so, the debate over Europe's future that will become a defining feature of 2018 will kick off within the next three months.
Amid the resurgence of economic nationalism in the United States and parts of Europe, the rest of the world will scramble to adjust its expectations and strategies. The 11 members left standing in the Trans-Pacific Partnership will continue to hash out a pact without the United States, but there is no guarantee that they will find compromise. The group's large, developed members — Japan, Australia and Canada — are certainly eager to sign a deal, but their less-developed counterparts may demand enough concessions to precipitate the negotiations' collapse. The incipient bloc's best chance for success, then, lies in its speed, suggesting that talks could progress quickly before the year's end.
With the WTO's biennial ministerial meeting set to take place in December, countries will likely spend the months leading up to it lobbying for their pet projects. The bloc will also hold an unprecedented "mini-ministerial" meeting in October to try to firm up an agenda for the full summit in Buenos Aires. But this year's convention may not be as fruitful as some states had hoped. In light of dissent from the United States, India and South Africa earlier this year, China and Germany's hopes of reaching a comprehensive agreement on the facilitation of investment have been dashed, as has any chance of a deal to restrict agricultural subsidies. Even so, some progress on issues such as e-commerce, public stock holdings and fisheries subsidies cannot be ruled out.