Trade
Biden’s ‘America First’ trade policy
Author: Editorial Board, ANU
Nine months into the Biden presidency, it’s becoming apparent that the US administration doesn’t have a trade policy of its own. Former president Donald Trump’s import tariffs on Chinese goods remain in place, as does his Phase One trade deal with China outside of established global trade rules. The dispute settlement system at the WTO is still unable to enforce its rules due to the United States’ blocking the appointment of Appellate Body judges.
Bereft of new ideas, US Trade Representative Katherine Tai recently doubled down on China tariffs and the Phase One trade deal. As Gary Hufbauer writes in our first feature this week: ‘Three-quarters of Tai’s actions are Lighthizer’s policies with softer edges and a smiling face’. The only new policies are the protectionist Buy American measures that limit US government procurement to domestic production. President Biden has taken that principle to heart and bought Trump’s ‘America First’ trade policies.
The United States used tariffs and the threat of higher tariffs to coerce China into a bilateral trade deal, signed in January 2020. Japan was coerced into a trade deal with the United States the year before under the threat of tariffs on automobiles. The Phase One trade deal between the United States and China moved the world’s two largest economies and trading nations decisively towards managed trade, away from free trade.
Instead of opening new Chinese markets, the deal centred on an agreement for China to purchase US$380 billion worth of American agricultural goods, manufactures and energy by the end of 2021 — without regard to the interests of competitors in the Chinese market. Large powers like China and the United States rarely consider the spillovers of their actions on smaller powers, even if they are allies. Purchase quotas of US$80 million worth of US agricultural goods means that China has to divert imports from other import suppliers. The collateral damage has fallen significantly on Australian producers, with the added insult of their being at the receiving end of the most blatant economic coercion China has unleashed on any country to date. American wine growers, barley and beef farmers as well as coal miners have displaced more competitive Australian producers in the Chinese market, at US instigation and with deliberate Chinese complicity.
At the same time, high-level officials, like Indo-Pacific tsar Kurt Campbell, claim the United States has the back of the very allies and partners that have been injured by the trade diversion resulting from managed US–China trade. As James Curran points out, asked how ‘an inherently bilateral agreement that has no regard for the multilateral consequences of how those Chinese commitments are fulfilled’ squared with her emphasis on the wellbeing of allies and other market economies, USTR Tai had no answer.
Trade coercion against Australia is but one of the long list of Chinese trade practices with which much of the global trade community has a problem. The industrial subsidies that China extends to state-owned enterprises distort markets and competition in China, and those distortions spill over into international markets. Forced technology transfer has been required of many foreign companies as the price to pay for operating in the Chinese market. There are other non-market practices in China which the Phase One trade deal with the United States is entrenching.
True, China is breaking no rules on some of these fronts, because they are areas in which there are no international rules to break. Industrial subsidies and pervasive agricultural subsidies, for example, are both yet to be disciplined by international agreement.
The rules in the WTO have not kept pace with developments in modern commerce and they need updating. But the US embrace of managed trade with China and its market-sharing approach to tech and other trade with Europe (despite reversing course on Trump’s steel and aluminium tariffs there) is not the kind of leadership that’s now needed.
Bilateral and regional agreements have tried to fill the gap. Prominent among those agreements is the Trans-Pacific Partnership (TPP) for which the United States led the negotiations, before Trump nixed the deal on day one of his presidency. The TPP was salvaged with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which created new rules for international commerce in areas where they were lacking in the WTO and opened new markets for its members. Strategically, it was…
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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