Trade
Can the Osaka G20 summit resuscitate the rules-based trading system?
Author: Fukunari Kimura, ERIA and Keio University
Economists are fretting over the trade turmoil that currently roils the world economy. Worst case scenarios are now front and centre, including the prospect of a WTO minus one (the United States or China), or perhaps even the world minus the WTO. The US–China trade war has significantly degraded the rules-based trading regime. The upcoming Osaka G20 summit over 28–29 June could send the global trade system either into intensive care or to the coroner.
We should not expect the G20 to end the turmoil. The two largest members of the G20, the United States and China, are talking past each other. One may even walk out of the meeting to make a statement over their unhappiness at discussions not going their way. At a minimum, a success at the G20 would be to forge a common position in favour of supporting international trade for inclusive and sustained growth without losing anyone along the way. Of course, on the sidelines, the United States and China may have informal meetings to make progress on their dispute. But even so, a bilateral deal that will still weaken the rules-based trading regime is likely.
In preparation for the G20, eight ministerial meetings have been held in various locations in Japan, including trade and digital ministers having their first joint meeting. What can be concluded from the 8–9 June G20 Ministerial Statement on Trade and Digital Economy agreed in Tsukuba?
The Tsukuba Ministerial Statement selected its words carefully, particularly to avoid singling out any individual country for blame. The statement does not even directly challenge rising protectionism. Instead, it states that ‘we strive to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, to keep our markets open’.
Nevertheless, the need for WTO reform was explicitly referenced. Although the United States is not blamed for blocking the appointment of judges to the WTO’s Appellate Body, the statement affirms that ‘action is necessary regarding the functioning of the dispute settlement system’. And even though China is not explicitly mentioned, the industrial subsidy issue is. Saving the WTO is particularly important for developing members of the G20. Their dependency on the non-discrimination principle is profound. But they still do not have an adequate sense of urgency over the prospect of a new trading ‘regime’ that will be dominated by power politics.
As a conceptual framework, ‘Data Free Flow with Trust’ (DFFT) is now being pushed, recognising the rising importance of data flow regulation. Targeting both domestic and cross-border data management is an important step in organising the still fragmented collection of policies in the flow of data, especially with respect to data multi-national firms. Analogous to the free trade of goods, it is logical to place the free flow of data as a starting point alongside achieving economic efficiency. Care must be taken in managing the economic and social concerns over the flow of data by introducing the proper supporting framework of policies.
This raises the question of whether economic efficiency or privacy is more important. But this is poor framing of the policy choices. Both issues are important and the dilemmas between these values must be reconciled properly. An analogy can be drawn from past experience as, for instance, in food safety standards with sanitary and phytosanitary clauses embedded into agreements in free goods trade. Cyber-security is important and should be pursued together with economic efficiency goals. By raising the profile of the free flow of data, values once seemingly at odds with economic efficiency can and should be harmonised.
It is also important to recognise the risk of market failure, particularly in global digital competition. Digital technology may generate network externalities or economies of scale. But if giant internet platforms abuse their market power, competition policy must be deployed to mitigate the harmful effects of market domination. Ultimately, large market shares by themselves are not necessarily a problem, so long as the potential for competition and further technological advancement are secure. Too often, restrictions are imposed with the hidden intention of protectionism; the logic of any policy in support of the flow of data needs to be clearly set out.
The Ministerial Statement also shows support for electronic commerce in the WTO among like-minded countries, even though not all G20 countries are…
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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