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Trade

Reconciling the rhetoric and reality of Biden’s trade policy

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US Trade Representative Katherine Tai smiles on Capitol Hill, in Washington, US, 28 April 2021 (Photo: Bill O'Leary/Pool via Reuters).

Author: Shihoko Goto, Wilson Center

Even as the Biden administration continues to tout cooperating with allies to ensure stability in the Indo-Pacific, the United States is unlikely to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) anytime soon.

With little appetite in Congress for the United States to sign new trade deals, US economic strategy in the region will focus on confronting Chinese challenges — efforts alongside like-minded countries that Washington will continue to lead. But this strategy might be less effective when new trade and investment partnerships are brokered without the involvement of the United States.

The first major hurdle that must be overcome to pave the way for the United States to potentially join the CPTPP will be reauthorising the Trade Promotion Authority (TPA), which expires on 1 July 2021. TPA allows the White House to submit a trade agreement for an up-or-down vote in Congress without any amendments being made and is a critical tool for negotiating new trade agreements. Without it, passing a deal as broad and ambitious as the CPTPP would be extremely challenging and overly time-consuming.

Even if a revised TPA were to be legislated in a timely manner, that still leaves the challenge of dealing with paltry Congressional appetite on both sides of the political aisle for signing on to a mega trade deal. It is hardly surprising that the latest annual Trade Policy Agenda prepared under US Trade Representative Katherine Tai states that the Biden administration will pursue a trade agenda focussed on appealing to voters that ‘will encourage domestic investment and innovation and increase economic security for American families, including through combating unfair trade practices by our trading partners’.

The focus on domestic growth is not unlike the objectives pursued by the Trump administration. Although former US president Trump’s singular focus on reducing the US trade deficit with China came under sharp criticism, his questioning of the economic gains to be made by trade deals for the average American was begrudgingly acknowledged by even those who staunchly opposed US withdrawal from the Trans-Pacific Partnership (TPP).

In fact, when it comes to trade with Asia, the Biden administration has yet to overhaul Section 232 which enabled the Trump administration to impose tariffs on steel and aluminium in the name of national security on some of Washington’s most important allies, including Japan. These tariffs remain in place despite over 300 US businesses pushing the Biden administration to terminate it immediately.

To be sure, US manufacturers are clamouring for these tariffs to be lifted not for foreign policy gain, but rather to remain competitive and to be able to source supplies from beyond US borders without paying a penalty. Still, US allies are disconcerted by Biden’s rhetoric of cooperation not aligning with US actions when it comes to economic policy. The Biden administration’s massive infrastructure and economic revitalisation spending proposals have been regarded warily in Tokyo, Seoul and elsewhere.

Putting aside the White House’s uphill task of securing congressional approval for the packages totalling US$6 trillion, growing unease persists about whether the Biden administration’s rhetoric to work together with allies will actually extend to the economic front.

Yet, the United States cannot confront the China challenge without relying on like-minded nations. Beijing is already moving to hedge against US measures that could isolate it from the global economy through its dual circulation strategy. In doing so, China is moving forward with plans to reduce its dependence on overseas markets and technology, while simultaneously boosting the reliance of emerging markets on Chinese goods and know-how. Coupled with the Belt and Road Initiative, Beijing’s goal is to build a new order centred around China, especially on the economic front.

Even if the United States does not join any comprehensive trade deals any time soon, it is imperative for Washington to demonstrate that it is willing to work together with like-minded partners for political as much as economic considerations.

For instance, a bilateral investment treaty with Taiwan would be a tremendous win for Taipei given the concessions Taiwan has already made to import US beef and pork. For Washington, it would strengthen Taiwanese voters’ support for the United States in light of ever-increasing pressure from Beijing. At the same time, it would also bolster…

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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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