Trade
Little Britain post-Brexit
Author: Editorial Board, ANU
The United Kingdom has exited the European Union. It has unshackled itself from European regulations and standards and in doing so has put up barriers to commerce and the free movement of people with the major economic bloc on its doorstep.
How much trade, investment and movement of people are to be allowed between the United Kingdom and Europe is yet to be negotiated. And what the British do with their newfound trade-policy and regulatory freedom is far from certain. But the uncertainty around whether Brexit will occur is over and there will be more policy bandwidth to deal with other issues.
If there’s one thing clear in international economics, it’s that gravity matters: distance and size are the strongest determinants of international trade. The closer two countries are, and the larger they are, the more they trade. Pushing against gravity will be the new norm in post-Brexit Britain as it looks afar for new trade and investment links.
The United Kingdom is smaller and weaker because of Brexit and starts negotiating with Brussels with little leverage, no matter what Prime Minister Boris Johnson says.
As David Vines reminds us in this week’s feature piece, ‘Britain wants to continue the unimpeded access to European markets which it possessed in the Single Market’. But this will only be possible if Britain subscribes to ‘the freedoms and standards coming from the Single Market’. The four freedoms are the freedom of movement of all goods, capital, services, and labour. It is difficult to see the European Union allowing Britain to pick and choose the standards and freedoms it wants without compromising the European experiment. Brussels will be careful to avoid setting a precedent for other nationalist, separatist movements across Europe.
What sort of economic agreements London can negotiate with other partners is also far from certain. It is difficult to imagine that a Britain that has shrunk itself away from its huge neighbour is going to be embracing liberal policies and openness.
Negotiating deals with the world’s two largest economies — China and the United States — will be far from easy. The United States is imposing lopsided deals on countries big and small, including damaging provisions outside of the existing rules. In some instances Washington is forcing countries to pick sides. In the new North American trade agreement, the USMCA, Canada and Mexico had to swallow a poison pill provision that says the United States can walk away from the agreement if either start negotiating with a non-market economy (read: China).
Doing a deal with China may be easier but involves agreeing to standards that are not consistent with the other deals on the UK’s agenda. Judging by the debate around the decision to allow Chinese tech-giant Huawei into the UK’s 5G telecoms network, there will be pressure from the United States and within London to limit engagement with China.
How about countries like Australia that are chomping at the bit to do a deal with its old Commonwealth master? The battle lines are becoming clear as farmers in the United Kingdom insist they will resist letting in Australian beef, sugar and lamb. And Australia will be focussed on its deal with the European Union — a much bigger prize. Sentiment and history will not count for much when vested interests dig trenches across the negotiating table.
High on the priority list is to join the Trans-Pacific Partnership agreement, minus the United States. Another should be the Regional Comprehensive Economic Partnership (RCEP) agreement. These agreements are centred in Asia, on the other side of the world. Britain will be competing with a larger Europe that continues to sign major deals in Asia and will be impeded in the battle for markets by distance and lack of size.
Many place trust and hope in a proactive, global Britain after it puts its messy divorce settlement with the European Union behind it. An agile foreign policy and open British economy would inject some much needed leadership into global affairs. But the evidence points towards a Britain that continues its retreat from globalisation and carries much less global weight.
The chances are that Britain continues to look inward except for politically-driven trade deals with like-minded countries on the other side of the world. Little wonder that a once-unthinkable united Ireland is now a possibility. And Scottish independence has regained momentum.
The British people made a huge choice in 2016 to exit the European Union. Delivering that decision…
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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