Trade
Japan’s strategic choice at the Osaka G20
Author: Shiro Armstrong, ANU
The world will be watching Osaka next week for what is shaping up to be the most important G20 summit since the leaders convened to coordinate a response to the global financial crisis. The G20 has been less effective during ‘peace’ times but make no mistake, the global trading system is now in crisis.
The world’s two largest economies and trading nations are involved in an escalating trade war that threatens a technology war and new cold war. President Trump’s America First agenda is set to tear down the multilateral rules-based trading system that the United States underwrote for the past 70 years.
The best case scenario for Beijing and Washington is a deal outside of the established multilateral rules. That carries major direct costs to other countries and risk to the rest of the global economy. Chinese purchases of US agriculture and energy will divert trade from other suppliers and buyers. The world will move to managed trade, away from freer markets, and sideline the WTO, replacing and weakening some of its core functions that hold global trade together. These developments are anathema to Australian and Asian interests.
World leaders may be left in a holding pattern waiting for Mr Trump and Mr Xi to do a deal in Osaka. If they don’t do a deal, the trade war will escalate beyond trade, spread to other countries and put the global economy at risk.
Can the rest of the world do better than be bystanders as the two major powers try to carve up the world? Japan does not want to repeat the failure of Papua New Guinea as the hosts of APEC that failed to mediate a leaders’ statement because of China–US tensions.
The Trump administration is vetoing the appointment of new judges to the WTO’s dispute settlement body’s appellate court that is down to the minimum three judges needed to function. If this situation is not resolved by December, the enforcement mechanism of the multilateral trading system ceases to function beyond existing cases. This is the system that holds countries accountable to the world trade rules and, without it, a core function of the WTO will collapse.
The WTO is far from perfect and in need of some reform. The failure to conclude the Doha Development Round negotiations which started in 2001 has meant that rules are out of date or do not exist for new areas of commerce relevant for the 21st century. Gaps in the rules have become issues of contention between the major trading powers.
The leaders of the G20 recognise the importance of reform and, for the first time, the leaders’ communique from last November in Argentina committed ‘to work together to improve a rules-based international order that is capable of effectively responding to a rapidly changing world’. A clear direction needs to be set during Osaka’s G20 summit, or else the multilateral rules-based system will be lost.
Is Prime Minister Abe and Japan up to the task of steering the global economy to steadier ground? Japanese Prime Minister Shinzo Abe stepped up to fill the vacuum in global leadership and saved the Trans-Pacific Partnership…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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