Connect with us
//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js (adsbygoogle = window.adsbygoogle || []).push({});

Trade

Middle power conundrum amid US–China rivalry

Published

on

South Korean President Moon Jae-in meets with Australian PM Scott Morrison in Canberra, Australia, 13 December 2021 (PHOTO: Lukas Coch/Pool via REUTERS)

Author: Shin-wha Lee, Korea University

The international community has faced an unprecedented social and economic shock due to three ‘big bangs’ — increasing US–China strategic competition, the fourth industrial revolution and the COVID-19 crisis. These three big bangs are interrelated and pose important challenges and consequences for world trade, regional stability and the future of the liberal international order.

First, the US–China trade conflict and strategic competition that began in earnest in 2018 stemmed both from a sense of crisis within the United States about China’s unfair trade and industrial espionage and from the rapid economic growth, advanced technological development, and strengthening military power achieved through them.

Faced with an increasingly vulnerable global supply chain stemming from COVID-19, countries rushed to reorganise their supply chains to strengthen security. As the link between technology and security became more important, the US enacted a ‘Special Act on Semiconductors’ and hastened the ‘internalisation’ of the semiconductor industry. The reorganisation of China-centred global value chains is restructuring the world economy and trade. The United States and other developed countries are abandoning offshoring to China to cut costs and instead are reshoring, nearshoring or ally-shoring them. The trend of shifting value chains away from China is based on the judgement that leadership in advanced technology is the only means to maintain strategic hegemony.

Second, the pandemic confirmed that the postwar world order is unravelling. Although the global organisations and norms that have led international affairs and the economic order for the past 75 years are still in place their practical role and binding force are waning. It is unlikely that new organisations and norms will emerge to fill the gap, and the great powers show no sign of global leadership. Instead of cooperating to combat the pandemic, the United States and China aggravated mutual distrust and antagonism. The relative decline of the United States and growing international distrust of Chinese leadership has created a ‘G-Zero’ era, in which the existing global governance centred on major powers has reached its limits and there is increasing instability and uncertainty.

Third, while the United States and China both advocate multilateralism; the two nations have different strategic goals, methods and approaches to its implementation. In their strategic competition, they are each mobilising multilateralism as a tool for mutual exclusion. US President Joe Biden has criticised Donald Trump’s ‘America First’ policy and declared alliances and multilateral cooperation as his top foreign policy priority. But at the heart of Biden’s multilateralism, much like Trump’s, lies the separation and containment of China. This reflects how the United States cannot cope with the rise of China by itself. Beijing criticises Washington’s multilateral approach as ‘closed and exclusive’ and seeks to empower anti-Quad solidarity by strengthening traditional North Korea–China–Russia relations. Along with Iran, Beijing aims to construct a ‘coalition of sanctioned states’.

The accelerating US–China confrontation is forcing middle powers to re-evaluate their strategic positioning. In the international realm, middle powers protect the interests of small and medium-sized countries, providing a third ground in which to weather the storm of great power competition. Should a middle power choose either side, it risks retaliation or exclusion from the other — the limits of the strategic base and capabilities of middle powers are now clear.

Cooperation among democratic middle powers is important, because they share norms, values and rule of law to set economic and technological standards that help counter China’s unfair and predatory behaviour. However, in relations with China, there are ‘temperature differences’ among many of the United States’ middle power allies. What if they are ‘like-minded,’ but not quite ‘like-situated,’ when considering their respective national interests and priorities?

Australia, for example, cites its close relationship with United States and Europe as an important reason to move towards greater solidarity with the United States. That middle power seems determined to defend its values and norms and abandon China despite strong trade retaliations. How then to explain Germany and France, equally traditional democratic allies of the United States, and…

Source link

Continue Reading

Trade

Fixing fragmentation in the settlement of international trade disputes

Published

on

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

Continue Reading

Trade

WTO ministerial trading in low expectations and high stakes

Published

on

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

Continue Reading

Trade

Getting Vietnam’s economic growth back on track

Published

on

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

Continue Reading