Trade
Chengdu Trilateral Summit still to deliver
Author: Choong Yong Ahn, Chung-Ang University
The three leaders of China, Japan and South Korea capped off their eighth trilateral summit in December 2019 with the issuing of the Trilateral Cooperation Vision for the Next Decade in Chengdu. Their joint statement contained amicable commitments and pledges to realise a ‘free, non-discriminatory, transparent, predictable, and stable trade and investment environment’ and to keep markets open in addition to maintaining durable peace and security in the region.
Despite the summit’s rhetoric, there were insufficient action plans. But the fact that China, Japan and South Korea (CJK) engaged in an agreed-upon trilateral summit framework, and bilateral dialogues on the sidelines, was no small achievement given heightened tensions between the three countries.
South Korea and Japan have avoided a bilateral summit since tensions erupted in late 2018 over the wartime forced labour issue and has spiralled into diplomatic brinkmanship. Tourist flows between China and South Korea became constrained after the decision for South Korea and the United States to deploy the Terminal High-Altitude Area Defense (THAAD) missile defence system on South Korean territory. Historical legacies, security-related tensions and a lack of trust between China, Japan and South Korea have made efforts towards trilateral economic cooperation unpredictable.
The three countries have suffered the effects of the US–China trade war. It is uncertain how long the temporary ceasefire agreed upon in the US–China trade deal will last or what will come next.
The trade war slowed China’s annual growth rate to 6 per cent in the third quarter of 2019, the lowest since the early 1990s, while indirectly hitting South Korea and Japan. The resulting contraction of South Korean exports to China is likely to further dampen South Korea’s poor growth prospects for 2020, already at its lowest since 2008.
Japan’s exports to China for 11 months of 2019 were down by about 10 per cent compared to the same period in 2018. The economic restructuring of Japan is also suffering setbacks due to the failure of the Trans-Pacific Partnership following the United States’ exit in 2017.
It is against this backdrop that China, Japan and South Korea seek to deepen trilateral cooperation. This cooperation would lead to freer regional trade, investment and disaster management in the East Asian economic community as envisioned at the first trilateral summit in 2008.
But the three countries’ economies are greatly influenced by US economic policy. How the US–China trade war unfolds will have a significant impact on the future of China–Japan–South Korea trilateral cooperation. One way to escape the chaotic downside risk is to speed up the implementation of the Regional Comprehensive Economic Partnership (RCEP) and the ongoing China–Japan–South Korea Free Trade Agreement (CJK FTA) negotiations.
The CJK FTA was launched in 2012 and motivated by the notion of an ‘East Asian identity’. It seeks to promote intra-regional economic cooperation to mitigate the negative economic consequences of unprecedented economic crises, such as the 1997 Asian financial crisis.
The three countries also joined RCEP negotiations in 2012 with a text-based agreement inked in November 2019 after 27 rounds of negotiations with 15 signatories while India opted out. As RCEP without India would be half-baked, the fate of RCEP is uncertain. Fortunately, India has not withdrawn acrimoniously, so the door is still ajar for its signature.
Some members might feel uneasy about a China-dominant RCEP without India. China needs to be more responsive to India’s concerns to salvage the mega deal, despite its shallow and lower standard of openness compared to the Trans-Pacific Partnership. Additionally, it appears that CJK FTA progress is subject to fate of RCEP.
The CJK economies have been great beneficiaries of the liberal trade system of the past four decades and have become a global manufacturing hub by taking advantage of naturally-emerging regional value chains arising from geographical proximity and inherent manufacturing competitiveness. As long as the trilateral flow of goods is not weaponised, cross-border foreign direct investment is well protected, and tourism remains unconstrained, the three countries’ natural market value chains are likely to increase in mutual gains. It is imperative that the CJK leaders enable this to happen to live up to the spirit of trilateral common prosperity.
The CJK leaders must realise that at the root…
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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