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Huge uncertainties still surround US trade policy



Container ships wait off the coast of the congested Ports of Los Angeles and Long Beach in Long Beach, California, 1 October 2021 (Photo: Reuters/Alan Devall).

Author: Editorial Board, ANU

Donald Trump’s presidency signalled a decisive US retreat from free and open trade and leadership of the multilateral trading system that had fostered unprecedented trade and economic growth for over 70 years.

Trump built his political claims to high office by drawing on a deep well of resentment among middle-class Americans who’d been denied the benefits of the gains from international trade by a national system for distributing them that was inadequate and broken. And he fingered the international trading system and foreigners, especially China, as the cause of America’s own problems and neglect and walked away from the Trans-Pacific Partnership trade agreement that the Obama administration had instigated.

By the end of Trump’s term, the initiation of trade war with China had ended in a rule-breaking and damaging managed trade deal and allies and partners were subject to trade imposts on grounds of national security. The appointment of members to the appellate body of the WTO, arbiter of the international trade rules that the United States had largely crafted, was stymied by US veto. The principles of international trade that still provide the confidence and trust on which global integration has been built, nowhere more so than in the Asia Pacific region, were under US attack and the rules being flouted by the world’s two largest economies.

Settling on a new, coherent trade strategy has not been a Biden administration policy priority. Policy attention has been dominated at home by recovery from the pandemic and the big infrastructure spend and abroad by the messy withdrawal from Afghanistan and security posture towards China.

US Trade Representative Katherine Tai’s slogan of a trade policy to serve America’s middle class is just that — a political slogan that has yet to gain any policy substance. Meanwhile, America’s middle class has dwindling income ripped out of its collective pocket by the tariffs that remain on Chinese imports, as both Tai and Commerce Secretary Gina Raimondo acknowledge that decoupling from the world’s largest trader is not a viable option.

The advent of the Biden administration held promise of a return to respect for international institutions, prominent among them the WTO. It was quick to remove the logjam around the appointment of its new Director General, Ngozi Okonjo-Iweala, and mend trade relations with Europe, albeit with total disregard for multilateral rules. But the US veto on appointments to the WTO Appellate Body is still in place, Biden too has eschewed the Trans-Pacific Partnership, now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and is negotiating with China within the framework of Trump’s Phase One trade deal that disrespects multilateral trade rules in favour of bilaterally managed trade.

In our lead article this week, Gary Hufbauer and Megan Hogan say that ‘like Trump, Biden has struggled to craft an effective approach to deal with China. Multiple WTO cases have prompted China to reform individual aspects of its trade regime, but there has been no action through the WTO that’s persuaded Beijing to alter foundational features — namely forced technology transfers and subsidisation of state-owned enterprises. Trade battles have not relaxed US fears over China’s military and technology ascent’. True, there’s an agenda for global trade system reform, but the United States shows no inclination to engage on it nor to frame any overarching strategy that would deal with its trade policy woes.

The alternative is a piecemeal, ad hoc approach to building coalitions that subsume trade interests under other issues. Having mended its squabble with Europe, Biden promised at the East Asia Summit last October that he would present an Indo-Pacific economic framework for engagement with Asia this coming year.

As Hufbauer and Hogan explain, ‘meaningful engagement in the region faces a number of challenges, from both inside and outside the administration … The consequence of presidential neglect was that rather than push a single framework, Secretary of State Antony Blinken, Raimondo, and Tai each supported different and somewhat competing angles on Indo-Pacific engagement’. Access to the US market served to attract partners to the Trans-Pacific Partnership. With tariff reductions off the table, the administration is considering other incentives, such as funding capacity building, infrastructure projects, and green financing. Everything seems to be in the mix except trade…

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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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