Trade
Post-Brexit UK trade strategy needs to engage China
Author: Ken Heydon, LSE
The United Kingdom’s trading aspirations in Asia will not negate its dependence on the European Union, nor will they unwind the dominant economic role of China in its neighbourhood. UK trade with Asia post-Brexit needs to be accompanied by efforts to engage Beijing in the strengthening of trade rules and disciplines.
Following its departure from the European Union, the United Kingdom is intent on pursuing its ‘tilt to the Indo-Pacific’. This includes a free trade agreement (FTA) with Australia that negotiators hope will yield major gains built on shared language and legal systems.
The Australia–UK FTA is notably ambitious in the cutting-edge issues of digital trade and telecommunications, where there is a willingness to go beyond the extensive provisions in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in encouraging cross-border data flows.
London sees the Australia–UK agreement as an important step towards UK membership of the CPTPP. UK accession would send a signal to China, which remains outside that agreement and with whom the United Kingdom has fraught relations over Huawei 5G networks and Hong Kong.
UK membership of the CPTPP — reportedly supported by all current members — would also be consistent with UK Prime Minister Boris Johnson’s advocacy of a so-called D10 democratic grouping against China. This arrangement would augment the current G7’s membership with the addition of Australia, India and South Korea.
One way the CPTPP might be seen as serving UK interests in sending a message to Beijing would be by reducing, at the margin, the Asia Pacific’s economic reliance on China. CPTPP rules (the ‘diagonal cumulation’ provisions on rules of origin) could be used to treat EU components of UK products as ‘originating’ and so eligible for preferential treatment. This would help UK goods and services industries develop their existing supply chains across the European Union while trading within the CPTPP.
But here’s the rub. The focus on EU-related trade serves only to underline the importance of the United Kingdom’s trade links with Europe and the stark reality of Brexit. Though the European Union will remain the United Kingdom’s biggest trading partner, downgrading from the Single Market to an EU–UK FTA — with tough rules of origin and limited services cover — will reduce UK trade by some 20 per cent. New FTAs signed by the United Kingdom, beyond the European Union, will increase UK trade by just 5 per cent.
Among those FTAs, that with Australia will be constrained as UK businesses face increased regulatory complexity by having to remain compliant with EU ‘precautionary’ approaches to trade and public health, as well as the more science-based risk assessment of CPTPP regulations. UK farmers will similarly have to adjust to losing roughly half of their income sourced from the EU Common Agricultural Policy.
There is no denying gravity — trade volumes are linked to the size and proximity of one’s partners. So signing trade agreements exclusive of China and forging alliances against Beijing will not deny China’s role as the overriding economic force in Asia. Nor will it improve China’s poor compliance with World Trade Organization (WTO) rules.
This is not to argue against the Australia–UK FTA or UK aspirations to join the CPTPP. The gains are likely to be modest, especially because the European Union is also negotiating with Australia, eroding the value of preferential access for the United Kingdom — but there will be gains.
And the presence of a relatively liberal United Kingdom in Asia Pacific trade arrangements will make it less likely that a state-centric ‘Beijing Consensus’ will ever take hold. But the important requirement is to prevent any ‘contain China’ associations from emerging in these initiatives — they would detract from efforts to engage Beijing in strengthening multilateral trade rules.
This brings us back to the central question of digital trade and electronic commerce. Negotiations currently under way among participating WTO members on e-commerce are doubly important, offering a template for engaging China on trade rules.
First, the negotiations address issues whose importance has been accelerated by the digitalisation effects of the COVID-19 pandemic.
Second, they represent a ‘plurilateral’ initiative that does not require the elusive goal of compliance by all WTO members, while bringing the major players to the negotiating table. This involves both the United…
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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