Trade
US–Japan trade and Trump’s political trophy
Author: Editorial Board, ANU
US President Donald Trump and Japanese Prime Minister Shinzo Abe inked the US–Japan Trade Agreement to much fanfare on 25 September 2019. Abe declared the deal a ‘win-win’ for both sides while Trump has emphasised that it ‘a huge victory for America’s farmers, ranchers and growers’. Yet the deal is positioned as an initial agreement in the midst of ongoing negotiations. With an estimated liberalisation rate of 60–70 per cent on a trade value basis, it falls far short of the comprehensive standards expected of bilateral accords under World Trade Organization rules. So why the rush to get a limited deal?
Trump’s need for a political trophy is motivated at least in part by the slew of crises facing his administration and the need to refocus public attention on a positive achievement.
Trump is facing impeachment inquiries by US Congress after the whistleblower complaint alleging abuse of public office. Mr Trump is said to have put pressure on Ukrainian President Volodymyr Zelensky to investigate Democratic Party presidential frontrunner Joe Biden — under the implied threat of withholding US$391 million earmarked for military aid. These revelations have seen Trump’s support decreasing with even a public opinion poll by the partisan Fox News showing a majority of respondents in favour of impeaching Trump.
The US–China trade war is wreaking havoc on US farmers. Given the peculiarities of US gerrymandering and the Electoral College system, farmers in battleground states such as Iowa, Michigan, Pennsylvania and Wisconsin were a key group that helped Trump over the line in his November 2016 electoral victory. But with his proclaimed goal of bringing back manufacturing jobs to the United States, such as in the steel and auto industries, Trump went trigger happy slapping tariffs on countries that are key US agricultural export markets, such as China, Europe, Canada and Mexico. These countries felt compelled to retaliate with tariffs of their own, and US farmers bore the brunt of the costs from the decreased competitiveness of US agricultural goods. The US–Japan Trade Agreement is intended to provide at least the appearance of some relief and Trump will hope to stave off any electoral opening the Democrats are sniffing for in the Farm Belt.
The Office of the US Trade Representative has emphasised ‘Trump’s leadership’ in securing this early agreement eliminating or reducing tariffs on ‘over 90 per cent of US food and agricultural products imported into Japan’. This includes reducing Japanese tariffs on US beef and pork exports to Japan worth US$2.9 billion, in line with the rates for competitor countries who are members of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). It further eliminates tariffs on US$4.3 billion of US foods such as nuts, berries, wine and cheese.
For its part, the United States will eliminate or reduce tariffs ‘on 42 tariff lines for agricultural imports from Japan’ valued at US$40 million in 2018, such as ‘flowers, persimmons, green tea, chewing gum, and soy sauce’ as well as some Japanese industrial goods including ‘machine tools, fasteners, steam turbines, bicycles, bicycle parts, and musical instruments’. There is also a separate agreement on digital trade aimed at securing the free transfer of data across borders and preventing tariffs on ‘digital products such as videos, music and e-books‘ covering an estimated annual US$38 billion in trade.
The US-Japan Trade Agreement is marred however by it omissions and one-sidedness. While the United States did not get everything it wanted — and tariffs will remain on LPG, aircraft, semiconductor manufacturing equipment, rice, bourbon and whiskey — most of the concessions were made by Japan.
As Aurelia George Mulgan explains in our lead article this week, despite Japan’s concessions on agriculture, nothing was done to resolve the question of tariffs on Japanese automobiles. ‘There was no abolition of existing 2.5 per cent tariffs and only a temporary stay of additional car tariffs under Section 232 of the Trade Expansion Act (the imposition of higher auto tariffs on national security grounds)’.
This raises critical questions. Why has the Abe government ‘de facto prioritised cooperation with Trump’s re-election goals while ignoring multilateral trade negotiation principles’? And why, after successfully leading the conclusion of the CPTPP and the Japan-EU Economic Partnership Agreement, has Abe undermined ‘Japan’s much-touted claim to be the flagbearer of free trade’?
The simple answer,…
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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