Trade
Global governance reform needs leadership from the developing world
Author: Editorial Board, ANU
The G7 is back. A post-Brexit ‘Global Britain’ has ambitions for an international leadership role and has coordinated a call from the Group of Seven advanced economies for reform of global rules. The United States has ceased playing spoiler in international meetings. Leadership and cooperation has been absent from the global community at a time when it’s been most needed during the COVID-19 pandemic. Its return is welcome, although matching the new rhetoric with substance will be a harder game.
There have been some lofty sounding announcements from the richest countries gathered in Cornwall but less substance to match. The commitment to donate one billion doses of COVID-19 vaccines to poorer countries falls short of what’s needed. US President Joe Biden and UK Prime Minister Boris Johnson agreed on a new ‘Atlantic Charter’ that will simply open travel up across the Atlantic. With a straight face the British are calling the package of announcements the ‘Cornwall consensus’.
The G7 is no longer as important as it used to be. That’s why the G20 was elevated to a leaders’ meeting in 2008 during the global financial crisis. The G7 accounted for 46 per cent of the global economy in nominal values prior to COVID-19. Including the non-member invitees Australia, India, South Africa and South Korea, that’s about half of global GDP. In purchasing power parity terms, the G7 is 32 per cent of the global economy and smaller than the remaining 13 G20 members.
The club of rich liberal democracies can no longer set global rules alone though it can aspire to lead an open, rules-based global economy. First, it has to practise what it preaches. The United States once again has adults in charge but its foreign policy for a middle class looks a more diplomatic version of America First. Japan preaches a ‘Free and Open Indo-Pacific’, but it initiated a highly politicised economic spat with South Korea and, together with Australia, has become more restrictive towards foreign investment. ‘Global Britain’ is smaller as it retreats from Europe and may yet exclude the City of London from the new agreement on a global minimum corporate tax rate of 15 per cent.
The Cornwall meeting over the weekend shows promise for the provision of global public goods from the rich world but global leadership requires leading by example. The commitment to stronger action on climate change is a case in point. The G7’s call for reform of the WTO is welcome but it won’t be able to write the rules alone.
In our lead article this week, Shiro Armstrong points to the less remarked APEC trade ministers’ meeting a week earlier as an example of global cooperation on trade that may be at least as consequential. Importantly in APEC ‘the emphasis differs from the G7 approach and is inclusive of developing country interests’.
The global trade rules are outdated and cover a smaller proportion of global commerce each year. After the Uruguay Round transformed the GATT into the WTO, there has been no successful multilateral round of WTO negotiations, with the Doha Development Round as good as dead. Rules are needed for trade in services, investment and the digital economy, and disciplines are needed on subsidies to fisheries, agriculture and industry.
Many in the advanced industrialised economies blame China for the current trading system being unworkable. Chinese state-owned enterprises and the protections and subsidies they receive distort competition in China, and because China is so large, these distortions affect the global economy. Like other major WTO members, China has become better at navigating, even gaming, the system.
To lay the blame on China for an outdated system where others have also played spoiler misdiagnoses the problem. Reform in China will go a way towards helping but will not save the WTO from itself. The existing rules are not enforceable since the United States vetoed the appointment of new judges to the WTO dispute settlement system. India is notorious for exercising its veto in WTO negotiations on issues like trade facilitation.
China’s accession to the WTO in 2001 fundamentally changed the country and the global trading landscape. The price it had to pay at the time was that its commitments went beyond those of existing WTO members and others acceding to the trading body.
It’s not just China but modern global commerce that has outgrown the rules. Many of the issues under contention are in areas where rules do not exist. The lack of multilateral investment rules, for…
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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