Trade
Australia takes the scenic route back to normality and a long dry economic gully
Author: Editorial Board, ANU
Australia’s experience of the COVID-19 pandemic was, perhaps appropriately, summed up best by a comedian. ‘Australia’, said Celeste Barber in an August social media post, ‘did the hard part easy — and now we’re doing the easy part hard’.
When the pandemic arrived in 2020, Australia’s border was slammed shut and a pre-emptive lockdown was coordinated among the six states and territories that make up the Australian federation, buying them time to increase their test, trace, and isolate capacities. With millions of workers suddenly out of work, the federal government, which oversees the tax and welfare systems, scrambled to put together a wage subsidy scheme and boosted the rate of unemployment benefits.
Australia’s hard-line response was sometimes chaotic and capricious in its administration, but it met its goals even better than expected, eliminating transmission of COVID-19 throughout most of the country. With most Australians living life as normal, economic activity bounced back after a recession in the first half of 2020 — Australia’s first in almost 30 years.
In 2021, Australia was caught largely unvaccinated by the fearsome Delta variant, while still locked into a policy of suppression, if not elimination, of the virus. With its two most populous states, New South Wales and Victoria, in months-long lockdowns to control Delta outbreaks, the economy will be lucky to avoid another recession this year.
Much of the blame can be put on a baffling decision made in Canberra in the name of ‘economic sovereignty’ to delay buying imported mRNA vaccines to supplement stocks of the locally-made AstraZeneca jab. Poor official messaging (and media fear-mongering) gave many Australians an exaggerated sense of the risks of AstraZeneca’s side effects, encouraging them to hold out for imported vaccines which, when they did arrive, were the subject of national maladministration and political fistfights between different jurisdictions.
The tale of Australia’s pandemic response was in some ways quintessentially Australian: governments got the big policy calls right, then stuffed up some critical details through complacency, bureaucratic silliness, and partisan politics. These problems were on display not only in vaccine procurement, but also in some of the absurdities of lockdown enforcement and poor engagement with migrant and Indigenous communities.
At the same time, comparison with the rest of the developed Asia-Pacific provides evidence against Australian exceptionalism. Japan, Taiwan and New Zealand all made mistakes in planning their vaccine rollouts; Singapore was the outlier in that its government immediately saw that vaccine procurement was a problem best solved by throwing money at it.
In any case, Australians have had to take the scenic route towards living with the virus. Thankfully, with supply issues sorted they are now on the way to very high levels of vaccination — perfect timing, all other things being equal, for Prime Minister Scott Morrison and his centre-right Liberal–National coalition, who must face an election by May 2022.
With the pandemic and that election out of the way, whether Australia’s politicians can show leadership in addressing the ‘long-term and structural’ challenges to the country’s economic future is the big question raised by Tom Westland in our lead article this week.
Foremost among these challenges is that ‘the world is transitioning to a post-fossil fuel future and the markets for coal and gas — which together account for around a third of Australian merchandise exports — will decline drastically.’ Making up for the lost revenues from these exports ‘will require a more serious policy framed around global carbon constraints’ — a reality which Prime Minister Morrison, caught between international opprobrium and domestic political incentives to appease climate sceptics, has belatedly begun to acknowledge. The outlook for one of the biggest and most promising markets for new raw materials exports with the growth of the renewables energy economy in China is clouded by an ongoing bilateral diplomatic stoush.
The pandemic has also exposed ‘an inadequate social safety net’ that over the longer term ‘raises the costs of risk taking and entrepreneurialism’ for Australians.
Then there’s the future of Australia’s skilled migration program, a critical ingredient of pre-pandemic growth. Between the pandemic-era anxiety about the jobs market and the renewed spectre of threats from abroad (and especially…
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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