Trade
Leveraging lithium and nickel stocks to boost the EV industry
In March 2023, Iran announced the discovery of a large lithium deposit, posing a challenge to Australia’s dominance in supplying China with lithium. China’s demand for lithium, driven by its electric vehicle industry, is expected to increase, creating potential opportunities for Indonesia as well. However, trade cooperation between Australia and Indonesia may be complicated by domestic politics and conflicting economic and environmental objectives. Additionally, Indonesia’s downstreaming policy, aimed at increasing domestic value added, has both positive and negative effects on the nickel industry. The withdrawal of Indonesian supply could potentially increase global prices.
Iran’s Lithium Discovery Challenges Australia’s Dominance in Chinese Market
In March 2023, the Iranian government announced the discovery of a massive lithium deposit estimated at 8.5 million tons. This significant find could potentially challenge Australia’s position as the world’s largest exporter of lithium, which China heavily relies on as its biggest consumer of the mineral. Currently, Australia exports over 90 percent of its lithium to China, fulfilling 85 percent of the country’s lithium needs. However, with Iran emerging as a new potential supplier, China’s lithium demand could be met from a different source.
Implications for Australia and Indonesia’s EV Battery Cooperation
The surge in demand for lithium, driven by the global shift towards electric vehicles (EVs), has raised concerns for countries like Indonesia, which aspires to play a key role in the EV industry. Indonesia has been actively pursuing the development of an EV program and aims to be one of the world’s top global EV battery producers by 2040. However, the country lacks sufficient lithium reserves, making collaboration with a lithium-rich country like Australia essential. Discussions about joining forces in EV battery production have taken place, but concrete developments are yet to be seen.
Challenges and Domestic Politics in Trade Cooperation
While the discovery of lithium reserves in Iran opens the possibility of reducing Australia’s reliance on China and expediting cooperation with Indonesia, domestic politics and conflicting economic and environmental objectives could complicate trade partnerships. Indonesia’s aggressive implementation of industrial policy, such as downstreaming nickel to increase domestic value-added, has led to tensions between mining exploration and profitability for downstream users, including foreign investors. Additionally, Australia may be cautious about antagonizing the United States in its trade disputes with China. These factors pose challenges to achieving trade cooperation in the EV battery industry.
Source : Leveraging lithium and nickel stocks to boost the EV industry
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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