Abu Dhabi, UAEMonday 30 November 2020

What the EU trade chief's resignation says about our shutdown mentality

The City of London has become a much emptier place since the Covid-19 pandemic started. Reuters
The City of London has become a much emptier place since the Covid-19 pandemic started. Reuters

The biggest story in international trade circles last week had nothing to do with how much commerce flows around the world, and that is a problem.

It wasn't about the race to be next director general of the World Trade Organisation (WTO), even though that contest is in its closing stages. It wasn't about the near 20 per cent drop in globe cargo volumes in the first half of the year, triggered by the Covid-19 lockdown. It wasn't even about the showdown between the US, China and Europe over trade and investment barriers and its ramifications, such as the negotiations over the sale of Tik Tok's international businesses.

It was about a character known as a "Big Phil" Hogan and his resignation after travelling to a golf club dinner in the far west of Ireland. Commissioner Hogan was the Brussels pointman for international trade – one of a small handful of top figures in the global economy.

I know nothing about how Mr Hogan handles a driver on the first tee. From his lumbering physique I would guess he bashes the ball a long way. In global trade he was, however, a big hitter, leading the European Union's negotiations with Robert Lighthizer, the US trade representative and the intellectual driving force behind President Donald Trump's "America First" tilt away from globalised supply chains.

Phil Hogan, the then European Commissioner for Trade, in conversation with European Commission President Ursula von der Leyen in Brussels in January. Mr Hogan resigned after he was was criticised for allegedly breaching coronavirus lockdown restrictions in his native Ireland. EPA
Phil Hogan, the then European Commissioner for Trade, in conversation with European Commission President Ursula von der Leyen in Brussels in January. Mr Hogan resigned after he was was criticised for allegedly breaching coronavirus lockdown restrictions in his native Ireland. EPA

Mr Hogan's rule violations, as he travelled around his native Ireland, were serial over the course of a week in early August.

The 80 members of the political and judicial elite, who dine together as a golf society, broke the country's ban on large gatherings and social distancing. He travelled between different homes, even going to and leaving an area observing a local lockdown to pick up some official papers. He was also stopped by the police for speaking on his mobile phone while driving.

The ensuing political scandal cost him and several other high-profile domestic political heavyweights their jobs.

Mr Hogan tried to brush off the calls for his resignation on the basis of his pivotal place in the trade wars. He was talking on the phone nearly every day to Mr Lighthizer, he pleaded. The negotiations over the package of US tariffs, such as 10 per cent on European cars, is clearly a vital challenge for Europe – and the buck stopped with Mr Hogan.

The offence caused by Mr Hogan was exacerbated by the shutdown mentality that set in among the Irish and many places elsewhere.

A study issued last week by King's College London examined the parallels between the British government's fears about a "deep shelter mentality" in 1940, as the German bombing blitz got under way during the Second World War, and the handling of the coronavirus-induced lockdown this year.

Edgar Jones, the author, observes that a deep psychological bond has formed associating the home with safety in recent months. The idea of a powerful political figure careening around the country as he pleased weighed far more heavily with people than the high-stakes resolution of trade issues.

Abdel Hamid Mamdouh, the Egyptian candidate leading the running to take over as secretary general of the WTO, has complained that the body is in systemic meltdown and no one seems to notice. One of four African and two Arab candidates to replace the incumbent Roberto Azevedo, Mr Mamdouh believes you have to go back to 1985 to find a time that the global trading system was so imperilled and in need of strong leadership.

Abdel Hamid Mamdouh, the Egyptian candidate leading the running to take over as secretary general of the WTO, has complained that the body is in systemic meltdown. AFP
Abdel Hamid Mamdouh, the Egyptian candidate leading the running to take over as secretary general of the WTO, has complained that the body is in systemic meltdown. AFP

The priorities of so many people – particularly in the developed West and in countries that together comprise the Organisation for Economic Co-operation and Development – lie firmly elsewhere. Sheltering from the coronavirus has collapsed the workplace and, with it, whole areas of life.

In London, scarcely a day goes by without pictures on social media of empty train or tube carriages during what was previously called the rush hour. People are in a deep shelter mentality and incapable of processing alternative priorities. Office districts such as the City of London or Canary Wharf are deserted, with little sense of a change in circumstances anytime soon.

In the long run, working from home will not be a seamless replacement for what went before.

A paper from Oxford Economics, a company that does global forecasting and quantitative analysis for business and government, said that working from home was straightforward while the economy was in crisis mode. However, in a dynamic, reviving economy, the evacuation of the common space does not remain sustainable.

Stay-at-home orders wiped out 20 per cent of the British economy in the first half of 2020. AFP
Stay-at-home orders wiped out 20 per cent of the British economy in the first half of 2020. AFP

The pressure of reviving business life is likely to pull many out of their homes – whether or not they want to stay away

The latest US credit card data for the week ending on August 19 showed that expenditure on travel had slumped almost 50 per cent from a year earlier. In the short term, employees save from not travelling. But how long before employers use that restructuring of the relationship to reduce remuneration to reflect lower costs?

The pressure of reviving business life is likely to pull many out of their homes – whether or not they want to stay away. The world of product launches, mergers and acquisitions, and recruitment does not lend itself to scattered and dispersed populations dealing with each other virtually.

For leaders, that will mean exhorting employees to break the habit of hunkering down. To move out and engage will be a "pushmi-pullyu" process. Perhaps it even means resuming business deals on the golf course and having dinner afterwards.

Damien McElroy is the London bureau chief of The National

Updated: August 29, 2020 02:05 PM

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