Fareed’s MHI Global Briefing ;

Has the UK Found Its Center?

Are British politics on the verge of realignment? Maybe or maybe not, but after months of shaky alliances, Brexit has finally stirred up the party structure in UK’s parliament. When eight Labour MPs defected and formed a new Independent Group, alleging anti-Semitism in Labour’s ranks, Brexit was not their primary concern—but for three Conservative MPs who’ve joined them, Brexit was the basis. One more defection would make this new, centrist group the fourth-largest bloc in parliament, Robert Shrimsley points out in the Financial Times, predicting a few more defections to it from Labour. While the new group may not change the math in Brexit voting—and could just be a “false dawn” of centrism in the UK—it means the main parties have ceded the center and Prime Minister Theresa May and Labour leader Jeremy Corbyn have failed to keep their ranks together. As for Brexit-outcome ramifications, they key question is whether these MPs, newly free to speak their minds, will call for a softer Brexit or a second referendum—which could scare up more Conservative support for May’s Brexit deal in the end,It could completely break the parliamentary arithmetic and cause the UK to stumble into a no deal. It could force a general election in which all 11 lose their seats. It’s very hard to tell. But the main takeaway from this week is that these 11 MPs were so frustrated by their own parties — for more reasons that just Brexit — that they needed to do something. And that it was now or never. They were left with no good options because, right now, politics in the UK is spiraling out of control. CNN’s Luke McGee writes.

What Trump Gets Right About Trade

The US/China trade war is alarming for the global economy, but there’s a silver lining to it, writes Mohamed A. El-Erian, chief economic adviser to the European financial-services giant Allianz. The future of trade depends on more than resolving tariff disputes; it depends on removing new obstacles, including intellectual-property theft and the forced transfer of technology—which are among the Trump administration’s chief complaints about China. While President Trump’s tariff war is a throwback, it might wind up normalizing trade in a way that helps everyone. Cooperation has failed to address trade’s new problems, and if it takes old trade weapons to fix them, then so be it. The pain of a tariff war could be real, if it resumes in March—a UN official warned of a “massive” impact earlier this month—but if negotiations can resolve things other than a bilateral trade imbalance, Trump’s tactics could end up providing a “beneficial disruption that helps reset international trade relationships and place[s] them on a firmer footing,” The US and China have a deadline of 1 March to strike a deal, or the US has said it will increase tariff rates on $200bn (£152bn) worth of Chinese goods from 10% to 25%. China hails ‘progress’ in US trade talks Will the US and China reach a trade deal? The UN Conference on Trade and Development (Unctad) has warned that there will be huge costs if the trade war escalates. “The implications are going to be massive,” Pamela Coke-Hamilton, Unctad’s head of international trade, said at a news conference. “The implications for the entire international trading system will be significantly negative.” Smaller and poorer countries would struggle to cope with the external shocks, she said. The higher cost of US-China trade would prompt companies to shift away from current east Asian supply chains. Unctad’s report estimates that east Asian producers will be hit the hardest, with a projected $160bn contraction in the region’s exports. But it warns the effects could be felt everywhere. “There’ll be currency wars and devaluation, stagflation leading to job losses and higher unemployment and more importantly, the possibility of a contagion effect, or what we call a reactionary effect, leading to a cascade of other trade distortionary measures,” Ms Coke-Hamilton said. Unexpected winners and losers The higher cost of US-China trade would prompt companies to shift away from current east Asian supply chains, but report suggests it’s unlikely that US firms would pick up that business. The study found that US firms will only pick up 6% of the $250bn in Chinese exports that are subject to US tariffs. Firms look to new factories as tariffs bite Of the approximately $85bn in US exports that are subject to China’s tariffs, only about 5% will be taken up by Chinese firms, the UN research shows. The study found that European exports will grow by $70bn, while Japan, Canada and Mexico will see exports increase by more than $20bn each. Other countries that could benefit include Australia, Brazil, India, the Philippines and Vietnam, the report said. El-Erian writes.

After ISIS, More Questions than Answers

ISIS’s territory is collapsing, but new questions have arisen, particularly in Europe, about what to do with fighters imprisoned in Syria and Iraq and those seeking to return—particularly after President Trump tweeted a threat the release “over 800” fighters if European allies won’t take them back and put them on trial. That’s just one of the thorny questions that will arise post ISIS, Ishaan Tharoor writes in The Washington Post, chief among them funding reconstruction of destroyed territory, a security vacuum, a population that may not trust Western powers after the war, and an American president more intent on getting out than stabilizing or rebuilding former ISIS territory.

How to Secure a Quadripolar World

With the Cold War order long gone, and American hegemony fading, things are only getting more complicated for US foreign policy: The challenge, now, is to contain three emerging rivals in Russia, China, and Iran—which will require a careful balance of alliances in three world regions, writes Michael Mandelbaum in Foreign Affairs. The stakes are lower than in the Cold War, but holding together those sometimes-hodgepodge alliances will be tougher—and the Western world order and nuclear nonproliferation still hang in the balance. It’s a new model for containment, one that’s emerging as domestic populism threatens American global commitment, generally, and as President Trump expresses less interest than his predecessors in coalition building and broad-scale engagement. If it’s any consolation to the American-built world order and its beneficiaries, American populism might not have taken hold of foreign-policy views, just yet: Americans’ belief that the US “has a special responsibility” to play a leading role in world affairs climbed nine points, to 75%, between 2010 and 2018, meaning there’s a chance Trump, or his successor, can maintain necessary alliances and check rising powers with the public’s support.

Discontent Finds a Peaceful Voice in France

French President Emmanuel Macron’s “grand débat”—a series of town-halls where French citizens can air grievances—seems to be working, John Lichfield observes in Politico Europe. From one event he attended (which did not feature Macron himself), it was evident that while many people are still angry at the leadership in Paris, the venting process is bringing a sense of relief, as discontent finds its voice in a forum other than street riots. As a result, the gilets-jaunes movement appears to be fading, but now Macron will have to figure out what to do with the thousands of citizen recommendations being recorded in all these sessions—and how to turn them into policy.

Fareed’s MHI