Trade
Asia is in a critical position to kick-start global trade reform
Author: Jake Read, ANU
At the G7 summit in June in Cornwall, participants recognised the need to defend and modernise the multilateral rules-based trade system and agreed to get behind urgent, wholescale trade reform. They acknowledged that the rulebook has long been out of date and that the world trade system is in need of repair.
Highlighting issues with the World Trade Organization’s (WTO) dispute settlement mechanism, the United States began an informal block on replacing retiring Appellate Body judges in 2016. That block continues to this day. Transparency in the WTO is also lacking as countries skip WTO reporting obligations and overuse Special and Differential Treatment provisions. The WTO has also been targeted for its inability to deal with market-distorting subsidies, state ownership and interventions in many economies. These system failures and others have eroded trust in the WTO.
Yet the global trade system has been overlooked as a potential instrument to deal with global challenges like COVID-19, climate change and the digital economy. Trade restrictions on medical and vaccine supplies cost lives. Other restrictions on environmental goods including wind turbines and solar panels are making emissions reductions more costly. Inconsistent national regulations on cross-border digital operations are obstructing competition, productivity and innovation in the fastest growing area of the global economy.
Problems and gaps in the trade rules such as these need to be filled through system strengthening and rules-building. The task is to build a WTO reform strategy and negotiate a way towards restoring confidence in the system. Preserving the WTO’s key established functions and defending its ability to enforce multilateral rules is one aspect of the approach to reform. The other is modernising the WTO’s framework of rules to secure its relevance.
The G7 alone cannot provide the momentum needed for such a broad undertaking, nor does it presume that it can. The recent G7 communique placed that responsibility on the G20, which will be hosted by Indonesia in 2022. Indonesia’s interests and those of other Asian countries will be crucial to any major reform strategy.
Indonesia has signalled willingness to lead in the G20, pushing the need for high-level approaches to trade system reform at the Osaka summit. As the world climbs out of the COVID-19-induced economic crisis, countries in the Asia Pacific understand that open, rules-based trade must be a major driver of international security and global recovery.
The Regional Comprehensive Economic Partnership (RCEP) agreement, initiated and carried forward by ASEAN members, including Indonesia, was a regional signal of commitment to inclusive economic cooperation. Its conclusion in the middle of a pandemic was recognition that economic hardship is prolonged without trade cooperation. RCEP was also an important exercise in plurilateralism — agreements not constrained by a need for full WTO consensus and that remain open to new entrants.
The Biden administration is standing firm on the longstanding squabbles that the United States has with the trade regime, particularly regarding China. Yet it promised renewed engagement with multilateralism and flagged interest in comprehensive trade reform at the G7. The Biden administration’s commitment to work with others on system reform will be needed to motivate reform more widely.
Countries in the Asia Pacific have both the ambition and incentive to drive a revitalisation of the global trade system. The 15 countries in the RCEP group, including five G20 members, collectively account for over 30 per cent of both global GDP and global trade. The region became a global centre of economic gravity because of its international integration under the multilateral trade order and policies of economic liberalisation. The region has also been the source of many creative solutions to international trade issues.
Negotiations are now underway among Asia Pacific countries to remove trade restrictions on vaccines and related medical goods. Regional tariff reductions on 54 lines of environmental goods were instituted through APEC in 2016. The region has also seen a number of path-breaking agreements that establish international digital economy rules between countries such as Singapore, Australia and New Zealand.
Tapping into this energy, a G20 trade system reform taskforce could help set strategic directions on structural and institutional issues. The taskforce would need to develop a reform strategy to be endorsed by the G20…
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
- Italy and China New DTA Set to Take Effect in 2025: Important Changes and Implications
- China’s New Home Prices Stabilize After 17-Month Decline Following Support Measures
- U.S. national debt is its Achilles’ heel, but China sees it as an opportunity
- Business Update: Southern Sun Reports Earnings Growth; China Stimulates Property Market – News24
- Vietnam’s Approach to China: A Balance of Cooperation and Struggle
- 2025 Schedule of Public Holidays in China
