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Investing in port infrastructure for America’s post-COVID-19 recovery



The MSC Fabiola passes the San Francisco, California, waterfront as it heads to the Port of Oakland on 21 March 2012 (Photo: Aric Crabb/Oakland Tribune/MCT/ABACAPRESS.COM via Reuters).

Author: Gary Clyde Hufbauer, PIIE

US President Joe Biden’s next big legislative push is an infrastructure bill that will top US$2 trillion. The President has broadly defined ‘infrastructure’ to include schools, housing for the elderly and much else besides the classic ingredients of roads, bridges and ports. While the total price tag is huge, constituencies in both the Democratic and Republican parties will jockey for their favourite projects, so some needs will be short-changed.

Even with a price tag in the tens of billions, enlarging ports on the US West Coast should be a priority for Biden. Dozens of container ships are currently idled awaiting berths off Long Beach and Los Angeles, the two busiest and biggest West Coast ports, and many are instead routed north to Oakland and Seattle.

Sceptics may question whether such spending is justified, pointing to former president Donald Trump’s trade war with China (now embraced by Biden) and the ‘Buy American’ trend. Perhaps rhetorically, the age of globalisation has passed and with it the need for ever more shipping berths and connecting roads and rails. But the powerful economic drivers of globalisation, though tempered by nationalism and the COVID-19 pandemic, will continue to enlarge shipping volumes for at least the next decade. This includes eye-catching cost differences between the United States, Asia and Latin America, which are reinforced by factors such as technological differentials, product varieties, quality distinctions and production schedules.

The US–China trade war will alter sources of supply and ‘Buy American’ will shorten supply chains and raise prices. Yet while political obstacles can dampen trade, they cannot decouple the United States from the world economy.

Before the trade war kicked off in 2018, US imports of goods from Asia through the Long Beach and Los Angeles ports had increased steadily since 2010. On average, the volume of US purchases of Chinese goods grew by 3.6 per cent every year between 2010 and 2017. Goods supplied by Asia excluding China grew at an even faster pace, with an average growth rate of 4.8 per cent every year.

The trade war initially increased US demand for Chinese goods as companies front-loaded to avoid paying higher tariffs. But as these tariffs took effect, Chinese products began to lose their competitive advantage in the US market. The volume of US imports from China through the Long Beach and Los Angeles ports went up 6.2 per cent in 2018 before dropping 17.7 per cent in 2019. The trade war had little effect on US imports from other Asian countries, which grew 4.7 per cent in 2019 after experiencing a mild decline in 2018.

Even if Biden were to ramp up the trade war with China — for now an unlikely prospect — it would not necessarily depress shipping volumes from Asia to the West Coast ports. The AmCham China survey indicates that most businesses departing China will look to go elsewhere in Asia, not return production to North America.

COVID-19 shocked the global economy in 2020. Surprisingly, as China was the first to bring the virus under control and resume economic activity, US imports from China through Long Beach and Los Angeles grew in 2020, partially owing to the surge in demand for personal protective equipment.

As vaccines roll out in the United States and around the globe, the US economy will further recover and production capacity will rebound in other Asian countries excluding China. US imports from these countries may well return to the pre-COVID-19 level later this year and continue growing at their pre-COVID-19 pace for the rest of the decade.

Supply chain disruptions on road and rail links from West Coast ports may be partly responsible for the spectacle of container ships idled off Long Beach and Los Angeles and in San Francisco Bay. But such disruptions are likely to be resolved as truck drivers and rail crews return to work, but the more serious problem of inadequate port capacity will take longer to address.

This makes the case for massive infrastructure enlargement in Long Beach, Los Angeles and other West Coast ports. Port projects generally take longer than initial forecasts, so a legislative green light in 2021 will not translate to significant new capacity for at least three or four years. Shipping backlogs seen in news media photos today will likely persist for months, if not years. US port enlargement needs to move ahead now at full speed.

Gary Clyde Hufbauer is a Non-Resident Senior Fellow at the Peterson Institute of International Economics.

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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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WTO ministerial trading in low expectations and high stakes



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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Getting Vietnam’s economic growth back on track



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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