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Trade

Trump’s incomplete Asia strategy

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US President Donald Trump meets with China

Author: Nick Bisley, La Trobe University

It took some time, but the United States has officially embraced a new approach toward Asia — the ‘Free and Open Indo-Pacific’ (FOIP) strategy. First named during US President Donald Trump’s speech at APEC in late 2017, the strategy remained little more than an idea for nearly 18 months. FOIP has finally been fleshed out through a US Department of Defense report released on 1 June as well as the actions of the United States in the region.

At first glance, the strategy looks like a slightly more muscular version of what the United States has been doing for many decades. Washington wants to retain its pre-eminent position in the region, and it aims to do so in broadly the same ways — through the pursuit of military primacy in tandem with an extensive array of better-networked alliances and strategic partnerships. This is not too far from what Hillary Clinton or Jeb Bush might have done had they won the US election in 2016.

The strategy is notable for explicating the United States’ approach to China. Washington’s China policy has long been described as ‘congagement’ — an awkward compromise in strategic thinking between engaging and containing China. But this administration plainly sees China as a threat that has to be seen off.

Given that Trump has long railed against what he thinks is the ‘free-ride’ that South Korea and Japan receive, many wondered what Trump might do with US policy in Asia. FOIP shows that, at least in its geopolitical dimensions, the United States is opting to maintain its long-term posture of primacy.

But this geopolitical strategy marks a break with the past because of its disconnect from economic policy. The stable and prosperous regional order of the past, centred around United States primacy, was made possible by strong alignment of economic and political interests. The United States played a central role not only as a keeper of the peace, but also as a key export market and source of FDI for the region.

China’s rise has re-aligned the strategic and economic interests in Asia. Most countries in the region have significantly greater trading relations with China than they do with the United States, although the United States remains a very significant source of investment. This does not mean that these countries will simply shift their allegiances from Washington to Beijing. But if Washington wants to continue to play a dominant role in Asia and to push back on China it has to recognise that its partners and allies no longer have as neatly linked interests as they had in the past.

This drove the Obama administration to make the Trans-Pacific Partnership (TPP) the centrepiece of its Asia rebalance. It was the means through which Washington was trying to reconnect the political and the economic in a world where China had become Asia’s top trading economy.

One of the very first acts of the Trump administration was to withdraw the United States from the TPP. But it is not just that the FOIP lacks an economic dimension. The crude mercantilism of Washington’s broader approach to trade in the region is discordant with the notion of a ‘free and open’ regional order.

The Trump administration is currently engaged in an escalating trade war with China. It has also placed significant tariffs on Japan, renegotiated its trade agreement with South Korea and imposed tariffs on Vietnam, a country that has been actively moving into Washington’s orbit. Washington has even mused openly about slapping tariffs on Australia.

Under this administration, trade and strategic policy operate on completely different vectors. This approach is out of step with the conceptual underpinnings of a ‘free and open’ regional order and badly misunderstands the intertwined nature of national interests in an era of globalisation.

The region now faces twin revisionist powers. China wants to re-organise the strategic order to become more Sino-centric. The United States is walking away from the positive-sum approach of the past seven decades and instead uses its economic might to drive short-term bargains in its favour.

Regional powers are trying to figure out how to respond to this twin revisionism. In the short term, they are hedging and trying to work out how long the tensions in US policy between the long-term forces of continuity and the short-term mercantilist instincts of Trump will last. The revitalisation of the TPP by regional powers shows initiative during complex times. Yet, the lesser powers remain subject to the growing turbulence…

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Trade

Fixing fragmentation in the settlement of international trade disputes

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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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WTO ministerial trading in low expectations and high stakes

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The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.

The World Trade Organisation’s 13th Ministerial Conference

The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.

Challenges in Dispute Settlement and Agricultural Trade Reform

However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.

Geopolitical Tensions and the Future of Trade Relations

The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.

Source : WTO ministerial trading in low expectations and high stakes

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Trade

Getting Vietnam’s economic growth back on track

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Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.

Vietnam’s Economic Roller Coaster

After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.

Trade Performance and Monetary Policy

Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.

Challenges and Prospects

Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.

Source : Getting Vietnam’s economic growth back on track

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