Trade
Washington still searching for a China trade policy
Author: William Reinsch, CSIS
CSIS in Washinton was privileged on 4 October to host US Trade Representative (USTR) Katherine Tai as she explained the Biden administration’s trade policy on China. We learned that Ambassador Tai has lots of tools for dealing with China — none of which she specified — and that how she proceeds will be influenced by how future discussions with her Chinese counterpart, presumably Vice Premier Liu He, proceed. The first of those occurred four days later. Ambassador Tai announced that the tariff exclusion process would resume, which it did via a USTR announcement the next day.
As for her speech, judging from the Twitterverse, most listeners were left confused. She seemed to be saying simultaneously that the United States was going to continue to press China on its non-market policies that hurt US companies and workers but that she doesn’t have great hopes for success in persuading the Chinese to change policies. That leads to the obvious question, which she did not answer — why is it embarking on a path that it does not expect to succeed?
My conclusion is that the administration’s policy, at least in the short term, will seek to enforce former US president Donald Trump’s phase one deal. This is ironic, since the question that’s asked most about the administration’s China policy is how it is different from Trump’s. The answer now appears to be not very much.
Ambassador Tai alluded to a number of areas where China had not met its phase one commitments, although she declined to name any particular ones. Friends in the business community tell me that the two biggest specific commitments that remain unmet are disputes over polysilicon and US credit card companies operating in China. And, of course, Chinese purchases of US products clearly lag behind their commitments. Since they have until the end of the year to meet their obligations, it is a bit early to announce their failure, although in some sectors, like energy, it appears impossible for them to catch up. In others, particularly agriculture, they will come closer.
There is plenty to talk about with Liu He, but the important issues like subsidies, forced technology transfer, intellectual property theft and favourable treatment for state-owned enterprises remain unaddressed. Ambassador Tai’s answer to that remains the best one — the administration is engaged in making the United States ‘run faster’ to better compete with China, not so much there but in third markets around the world where the playing field is more level.
At the same time, the United States has an important role to play in defending the rules-based trading system. China, having signed up to the rules in joining the World Trade Organization, is fair game when it cheats. The administration is also under pressure from both parties in Congress to take a hard line on China. Eventually it will have to come up with more than it has so far on the so-called ‘phase two’ issues.
That also raises the larger question of the US approach to trade in the Indo-Pacific region. Most observers here agree that the best policy would be to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Biden administration continues to resist that, largely on political grounds, but they are fighting the last war. There was substantial opposition to it in 2016 from the Democratic left, but as US relations with China have steadily worsened over the past five years, the politics have changed. Former US president Barack Obama’s argument for the Trans-Pacific Partnership (TPP) — now the CPTPP — has gained traction as a counterweight to Chinese influence.
Conveniently, there is a time-tested strategy for Democrats and trade agreements, employed by former US President Bill Clinton with NAFTA, Obama with the Korea–United States Free Trade Agreement (KORUS), and US Speaker of the House Nancy Pelosi with the United States–Mexico–Canada Agreement (USMCA). First, you declare the existing agreement inadequate, as Biden has already with the CPTPP. Then, you announce you are going to fix it, have a negotiation and change something, and then you pronounce it fixed and join.
Administration officials are acutely aware that they have no trade policy for the region and that sending an aircraft carrier through the South China Sea every few months is really no substitute. The path described above is available for the CPTPP, and it is only a matter of time before the administration realises it and starts down that road.
A complicating…
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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