Trade
Trump’s incomplete Asia strategy
Author: Nick Bisley, La Trobe University
It took some time, but the United States has officially embraced a new approach toward Asia — the ‘Free and Open Indo-Pacific’ (FOIP) strategy. First named during US President Donald Trump’s speech at APEC in late 2017, the strategy remained little more than an idea for nearly 18 months. FOIP has finally been fleshed out through a US Department of Defense report released on 1 June as well as the actions of the United States in the region.
At first glance, the strategy looks like a slightly more muscular version of what the United States has been doing for many decades. Washington wants to retain its pre-eminent position in the region, and it aims to do so in broadly the same ways — through the pursuit of military primacy in tandem with an extensive array of better-networked alliances and strategic partnerships. This is not too far from what Hillary Clinton or Jeb Bush might have done had they won the US election in 2016.
The strategy is notable for explicating the United States’ approach to China. Washington’s China policy has long been described as ‘congagement’ — an awkward compromise in strategic thinking between engaging and containing China. But this administration plainly sees China as a threat that has to be seen off.
Given that Trump has long railed against what he thinks is the ‘free-ride’ that South Korea and Japan receive, many wondered what Trump might do with US policy in Asia. FOIP shows that, at least in its geopolitical dimensions, the United States is opting to maintain its long-term posture of primacy.
But this geopolitical strategy marks a break with the past because of its disconnect from economic policy. The stable and prosperous regional order of the past, centred around United States primacy, was made possible by strong alignment of economic and political interests. The United States played a central role not only as a keeper of the peace, but also as a key export market and source of FDI for the region.
China’s rise has re-aligned the strategic and economic interests in Asia. Most countries in the region have significantly greater trading relations with China than they do with the United States, although the United States remains a very significant source of investment. This does not mean that these countries will simply shift their allegiances from Washington to Beijing. But if Washington wants to continue to play a dominant role in Asia and to push back on China it has to recognise that its partners and allies no longer have as neatly linked interests as they had in the past.
This drove the Obama administration to make the Trans-Pacific Partnership (TPP) the centrepiece of its Asia rebalance. It was the means through which Washington was trying to reconnect the political and the economic in a world where China had become Asia’s top trading economy.
One of the very first acts of the Trump administration was to withdraw the United States from the TPP. But it is not just that the FOIP lacks an economic dimension. The crude mercantilism of Washington’s broader approach to trade in the region is discordant with the notion of a ‘free and open’ regional order.
The Trump administration is currently engaged in an escalating trade war with China. It has also placed significant tariffs on Japan, renegotiated its trade agreement with South Korea and imposed tariffs on Vietnam, a country that has been actively moving into Washington’s orbit. Washington has even mused openly about slapping tariffs on Australia.
Under this administration, trade and strategic policy operate on completely different vectors. This approach is out of step with the conceptual underpinnings of a ‘free and open’ regional order and badly misunderstands the intertwined nature of national interests in an era of globalisation.
The region now faces twin revisionist powers. China wants to re-organise the strategic order to become more Sino-centric. The United States is walking away from the positive-sum approach of the past seven decades and instead uses its economic might to drive short-term bargains in its favour.
Regional powers are trying to figure out how to respond to this twin revisionism. In the short term, they are hedging and trying to work out how long the tensions in US policy between the long-term forces of continuity and the short-term mercantilist instincts of Trump will last. The revitalisation of the TPP by regional powers shows initiative during complex times. Yet, the lesser powers remain subject to the growing turbulence…
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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