Trade
China trade questions confound Australia’s Indo-Pacific shift
Author: James Laurenceson, University of Technology Sydney
The ‘Indo-Pacific’, stretching from the eastern Indian Ocean to the Pacific, is the Australian government’s framing of the international environment for its foreign policy. In strategic terms, it encompasses major powers such as India, Indonesia, China, Japan and the United States — a multipolar region that is resistant to the emergence of a new and potentially unfavourable hegemon. There is an economic dimension too, with a vision of more diversified trade. High hopes are placed on India, with the Australian government releasing in 2018 its India Economic Strategy to 2035.
On the strategic front, Canberra would be mostly pleased with developments last year. In November, Australian Defence Minister Linda Reynolds made her first official visit to Japan. The measures Reynolds unveiled with her Japanese counterpart Taro Kono were designed to deepen Australia–Japan defence cooperation, explains Grant Wyeth, ‘consolidating the perception that Tokyo and Canberra now see each other as their most important and reliable security partner after their respective alliances with the United States’.
In September, Quadrilateral Security Dialogue (Quad) meetings involving Australia, Japan, the United States and India were upgraded to the ministerial level. But disappointingly, in the same month, Australia was again not invited to participate in the Indian-led Malabar naval exercise involving its three fellow Quad members, India, the United States and Japan.
It has become clear over time, and dramatically so last year, however, that the Indo-Pacific frame has limited utility in delivering Australia its hoped-for pattern of economic ties. Trade flows are driven by factors exogenous to Australia — notably markets and comparative advantage. The wishes of elected politicians and bureaucrats sitting in Canberra are largely irrelevant.
In 2012, when the Indo-Pacific was starting to make a regular appearance in official government documents, China was the destination for 27.3 per cent of Australia’s total goods exports. Among Australia’s more substantial regional trading partners, the shares of East Asia excluding China (Japan, South Korea, Hong Kong and Taiwan), Southeast Asia (Indonesia, Malaysia, Philippines, Thailand and Singapore), India and the United States were 33.3, 9.5, 4.9 and 3.8 per cent, respectively.
Despite fervent championing of the Indo-Pacific, in the 12 months leading up to October 2019, China’s share of goods exports leapt more than 10 percentage points to 37.7 per cent. But the shares of East Asia (excluding China), Southeast Asia, India and the United States all fell to 26.4, 8.8, 3.8 and 3.7 per cent, respectively.
The story is mirrored on the import side of the trade equation. In 2012, China supplied 17.3 per cent of Australia’s goods imports while East Asia (excluding China), Southeast Asia, India and the United States accounted for 13.2, 16, 1 and 11.8 per cent, respectively. In the 12 months to October 2019, China’s share surged to 25.5 per cent. The shares of East Asia (excluding China), Southeast Asia and the United States all fell to 12.9, 14.2 and 11.1 percent, respectively. Only the importance of India had risen, but to a still marginal 1.6 per cent.
The evidence is mixed on whether Indo-Pacific countries have sympathy for Australia’s preferred economic architecture, headlined by a multilateral rules-based order. Countries like Japan and Singapore have emerged as strongly like-minded, being fellow members of initiatives like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11) and the Regional Comprehensive Economic Partnership (RCEP).
In contrast, the United States has veered in the opposite direction. On his first day in office, President Trump withdrew the United States from the CPTPP’s predecessor, the Trans-Pacific Partnership (TPP). Now, US blocking actions have rendered the WTO’s Dispute Settlement Body unable to provide independent adjudication on new cases.
Developments with India are similarly dismal. Despite launching negotiations for an Australia–India Comprehensive Economic Cooperation Agreement in 2011, progress towards such a bilateral deal has stalled. And in November, India opted out when RCEP’s 15 members successfully concluded negotiations.
Last November too, Peter Varghese, the author of the Australian government’s India Economic Strategy to 2035, admitted that ‘the big end of town still doesn’t buy the India story’. Varghese’s report…
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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