Trade
No quick fix from Biden for Australia’s China trade woes
Author: James Laurenceson, UTS
Hopes are high that, with the Biden administration in the White House, the United States might come to Australia’s rescue as China extends its Australian trade punishment into 2021.
In December 2020, President Joe Biden’s national security advisor Jake Sullivan declared that ‘America will stand shoulder to shoulder with our ally Australia and rally fellow democracies to advance our shared security, prosperity and values’. This followed reporting in The Wall Street Journal that outgoing Trump administration officials had mooted ‘an informal alliance of Western nations to jointly retaliate when China uses its trading power to coerce countries’.
Yet a sober assessment concludes that for all the genuine goodwill among Biden’s national security team, an economic coalition of the willing will struggle.
In the world of international commerce, strategic friends can be the fiercest rivals. Just a few weeks after Sullivan hinted at solidarity, he clarified that Biden’s foreign policy would be ‘measured against a simple metric: will it make the lives of working people better, safer, easier?’
He wasn’t talking about those in the western suburbs of Sydney or on rural properties in the Barossa Valley.
When Australian wine was hit with Chinese tariffs of 200 per cent in November 2020, the US National Security Committee enthusiastically tweeted that they would be serving Australian wine at a holiday reception. But they didn’t tell Californian winemakers to stand down: Australia’s AU$1.1 billion (US$850 million) share of China’s massive imported wine market is now up for grabs.
For Australian commentators accustomed to thinking of its ‘Five Eyes’ partners as powerful military and intelligence actors, the prospect of the group moving into the economic arena is an intoxicating one. But their bargaining position is undermined by the reality of their relatively small status in many markets.
Consider coal, the latest Australian export that China has cut off. In the global thermal coal trade, Indonesia is the superpower and accounted for 41 per cent of seaborne exports in 2019. Even if miners in the United States, Canada, the United Kingdom and New Zealand refuse to supply Chinese power generators, the only response it would draw from Beijing is chuckles. In the case of coking coal, lost Australian sales to China are already being snapped up by Canadian suppliers.
One prominent Australian strategist suggested that when a country faced Chinese boycotts, ‘collaborating nations would agree to purchase the goods or provide compensation’.
Good luck to any president or prime minister wishing to explain to privately-owned companies why they must buy goods they don’t want.
Recent years have also revealed a United States that is increasingly sensitive to China’s growing power. Tariffs slapped on US$350 billion worth of Chinese imports outside of World Trade Organization rules are just one example. Another is a ballooning in the number of Chinese companies targeted by the US Department of Commerce’s ‘entity list’ — including entities determined to undertake ‘activities contrary to US national security and/or foreign policy interests’ — to now more than 300.
The obvious danger for Australia is getting bogged down with the United States in the economic equivalent of the forever wars against its largest trading partner, this time spilling treasure rather than blood.
Managing Chinese economic coercion should be a focus of policy attention in Canberra. And how best to work with strategic partners is part of that. Perhaps the most promising element is enhancing the resilience of supply chains for essential or strategically important goods and services in a way that is also cost-effective.
But when it comes to China’s targeting of Australia’s exports, the most productive approaches will lie closer to home.
Australia can start by not panicking. The total value of Australia’s goods exports to China fell by only 2 per cent last year as China proved unwilling or unable to wean itself off big-ticket items like iron ore.
Next, Australia can strive to address the source of the risk. Michael Wesley delivered a blunt assessment that ‘the place to start in reconceptualising our relationship with China is by admitting our strategy so far has failed’. Plenty of countries in the region are balancing economic interests with China and security and strategic interests with the United States. But Australia is an outlier in facing unprecedented levels of Chinese trade…
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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