Trade
The United Kingdom’s uncertain post-Brexit economic relations with Asia
Author: David Vines, Oxford
Brexit has happened. But the United Kingdom still faces two major choices over the coming year. How will it align its domestic economy with Europe? And how will it continue its global role? The new UK government is still deeply conflicted on these choices. Only when they are made will it know how to conduct its future relations with the Asia Pacific.
A little history helps. By the end of World War II, the British Empire was still intact. But the United States demanded that the British Empire be dismembered. This happened over the next 30 years. The General Agreement on Tariffs on Trade, which became the World Trade Organization, gradually removed barriers to international trade until the Uruguay Round concluded in 1993. It wound back the preferential trade which had occurred within the British Empire. Commonwealth countries such as Australia and Canada increasingly traded with their near neighbours. The United Kingdom withdrew from Malaysia and Singapore. UK rule in India came to an end.
The United Kingdom saw its way forward in Europe. It joined the European Economic Community in 1973 and led the establishment of the European Single Market in the 1980s. Many foreign firms located themselves in the United Kingdom in order to serve the European market. The Japanese car industry established its base there for European expansion. UK firms too seized the opportunity provided by a market of 450 million people. BAE Systems and Rolls Royce, for example, have been at the centre of the aerospace industry in Europe. UK universities lead those in Europe.
But the Single Market is not just a free trade area or a customs union. It is built on four freedoms: the freedom of movement of goods, capital, services and labour. Like all freedoms, these need to be administered and protected within a governmental regulatory framework. Product, labour and environmental standards — and the freedoms on which they build — are all enforced by the European Union. The enforcement of these requirements is carried out by the European Court of Justice.
As a result, membership in the European Union required deep political compromises in the United Kingdom. Those engaged in the financial services industry, of course, regarded the free movement of capital and labour within Europe as desirable. But unskilled workers — damaged by the deindustrialisation which occurred under former prime minister Margaret Thatcher in the 1980s — did not.
Controlling migration was a central Brexit issue. Many in the United Kingdom object to the sovereignty of the European Court of Justice, given their memories of the British Empire. But these compromises were held together by the United Kingdom’s prosperity brought by membership in the European Union. They have been shattered by Brexit.
EU–UK negotiations about future trade are now beginning. The United Kingdom wants to continue the unimpeded access to European markets which it possessed in the Single Market. But the European Union asserts that it will grant this only if the United Kingdom continues to subscribe to the Single Market’s freedoms and standards.
Prime Minister Boris Johnson’s new government regards these conditions as unacceptable. His government wants to diverge from Europe in order to negotiate new openings for trade with other countries. But what will the United Kingdom actually offer other countries in future negotiations? Access to the UK market is a smaller prize than access to the EU market, which it used to offer.
Moreover, the United Kingdom will find it difficult to grant what foreign countries want. India will seek access for its labour to work in the United Kingdom as a price for allowing the United Kingdom to sell goods and services into India. Asian countries will seek better employment opportunities for their students studying in UK universities.
China may seek product standards for what it sells to the United Kingdom that conflict with those in the European Union. Australian farmers will seek access to UK beef, lamb and sugar markets. But UK farmers, which have been protected by the EU’s Common Agricultural Policy, will resist this. And, of course, the United States will seek access for its agricultural goods, produced under different standards from those which rule in the European Union.
The United Kingdom will need to resolve these issues in principle by December 2020 when the Brexit transition period is meant to end. Only then will openings emerge for negotiations about the United Kingdom’s future relations with countries in the Asia…
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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