Trade
Reconciling the rhetoric and reality of Biden’s trade policy
Author: Shihoko Goto, Wilson Center
Even as the Biden administration continues to tout cooperating with allies to ensure stability in the Indo-Pacific, the United States is unlikely to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) anytime soon.
With little appetite in Congress for the United States to sign new trade deals, US economic strategy in the region will focus on confronting Chinese challenges — efforts alongside like-minded countries that Washington will continue to lead. But this strategy might be less effective when new trade and investment partnerships are brokered without the involvement of the United States.
The first major hurdle that must be overcome to pave the way for the United States to potentially join the CPTPP will be reauthorising the Trade Promotion Authority (TPA), which expires on 1 July 2021. TPA allows the White House to submit a trade agreement for an up-or-down vote in Congress without any amendments being made and is a critical tool for negotiating new trade agreements. Without it, passing a deal as broad and ambitious as the CPTPP would be extremely challenging and overly time-consuming.
Even if a revised TPA were to be legislated in a timely manner, that still leaves the challenge of dealing with paltry Congressional appetite on both sides of the political aisle for signing on to a mega trade deal. It is hardly surprising that the latest annual Trade Policy Agenda prepared under US Trade Representative Katherine Tai states that the Biden administration will pursue a trade agenda focussed on appealing to voters that ‘will encourage domestic investment and innovation and increase economic security for American families, including through combating unfair trade practices by our trading partners’.
The focus on domestic growth is not unlike the objectives pursued by the Trump administration. Although former US president Trump’s singular focus on reducing the US trade deficit with China came under sharp criticism, his questioning of the economic gains to be made by trade deals for the average American was begrudgingly acknowledged by even those who staunchly opposed US withdrawal from the Trans-Pacific Partnership (TPP).
In fact, when it comes to trade with Asia, the Biden administration has yet to overhaul Section 232 which enabled the Trump administration to impose tariffs on steel and aluminium in the name of national security on some of Washington’s most important allies, including Japan. These tariffs remain in place despite over 300 US businesses pushing the Biden administration to terminate it immediately.
To be sure, US manufacturers are clamouring for these tariffs to be lifted not for foreign policy gain, but rather to remain competitive and to be able to source supplies from beyond US borders without paying a penalty. Still, US allies are disconcerted by Biden’s rhetoric of cooperation not aligning with US actions when it comes to economic policy. The Biden administration’s massive infrastructure and economic revitalisation spending proposals have been regarded warily in Tokyo, Seoul and elsewhere.
Putting aside the White House’s uphill task of securing congressional approval for the packages totalling US$6 trillion, growing unease persists about whether the Biden administration’s rhetoric to work together with allies will actually extend to the economic front.
Yet, the United States cannot confront the China challenge without relying on like-minded nations. Beijing is already moving to hedge against US measures that could isolate it from the global economy through its dual circulation strategy. In doing so, China is moving forward with plans to reduce its dependence on overseas markets and technology, while simultaneously boosting the reliance of emerging markets on Chinese goods and know-how. Coupled with the Belt and Road Initiative, Beijing’s goal is to build a new order centred around China, especially on the economic front.
Even if the United States does not join any comprehensive trade deals any time soon, it is imperative for Washington to demonstrate that it is willing to work together with like-minded partners for political as much as economic considerations.
For instance, a bilateral investment treaty with Taiwan would be a tremendous win for Taipei given the concessions Taiwan has already made to import US beef and pork. For Washington, it would strengthen Taiwanese voters’ support for the United States in light of ever-increasing pressure from Beijing. At the same time, it would also bolster…
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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