Connect with us
// (adsbygoogle = window.adsbygoogle || []).push({});


A ‘protectionist’ United States still key to East Asia’s economy



An electronic board shows Shanghai and Shenzhen stock indexes at the Lujiazui financial district in Shanghai, China, 25 October, 2022 (Photo: Reuters/Aly Song).

Author: Tamas Meszaros, Keio University

Protectionist trade policies and the lack of an economic agenda for East and Southeast Asia have become central themes in critiques of US policy towards the region and its approach to managing US–China ‘strategic competition’.

According to these accounts, US protectionism undermines its economic draw in East Asia — and the political leverage stemming from it — at a time when it has already been eroded by rising reliance on Chinese trade, investment and regional institutions such as the Regional Comprehensive Economic Partnership (RCEP). Instead, the United States should employ open economic diplomacy, return to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and allow for greater market access for exporters from the region.

From the US perspective, limiting economic openness towards China is necessary to protect its industrial base, lessen its import reliance in critical sectors and mitigate the potential for China to weaponise interdependence. But export restrictions, punitive tariffs and industrial policies aimed at eroding the market share of Asian firms are perceived in East Asia as detrimental to the ‘rules-based international order’ and East Asian prosperity.

Yet current US policies are no worse than those pursued in the past vis-a-vis emerging East Asian economies. Persistent US trade deficits with East Asia also ensure that it remains a highly important economic partner and security guarantor in the region.

The role of free trade agreements (FTAs) in fostering trade and investment flows in East Asia has been the subject of debate for decades. Critics of East Asian regionalism have long argued that ‘looser’ integration pursued by ASEAN and its partners offers meagre economic gains. Recent empirical studies investigating the effects of regional FTAs present a mixed bag — FTAs tend to increase trade for less developed countries but have very marginal effects for middle- and high-income economies.

While the degree of liberalisation under the CPTPP is much more significant, it is not a benevolent offer of ‘free’ market access but a result of a hard bargain driven by the United States. The Indo-Pacific Economic Framework (IPEF) is similarly aimed at promoting regulations which favour the United States.

But US–East Asia trade diplomacy has often focused on protecting narrowly defined US economic interests. Trade frictions with Japan in the 1980s, ‘voluntary restrictions’ put on Taiwanese and South Korean semiconductor industries from the 1990s, the US approach to the regional solution of the Asian financial crisis and China’s contested WTO accession all attest to this.

Yet protectionism has also proven to be futile in the past. One reason for this is the robustness of China-centric regional production networks. US trade policy might weaken these, but it cannot significantly alter the economics supporting them and a US manufacturing renaissance remains highly unlikely. The potential for isolating China in manufacturing production networks is therefore limited.

Another reason has to do with consumption and savings patterns. The United States will remain a key market for the region as long as it consumes more than it produces and saves very little, while East Asian economies do the opposite. The COVID-19 pandemic reinforced this pattern as China reacted with supply-side measures promoting manufacturing, while the US raised consumption with demand-side policies. China ended up with a record trade surplus and the US with a record deficit. The image of a protectionist United States and an open China does not match reality.

Still, the development strategies of many regional states hang on joining regional production networks. These largely operate to satisfy US and European demand using US, Japanese and European foreign direct investment inflows. RCEP and a China-centric regional system could only provide an alternative if it also provides more demand and capital.

But China presents contradictory signals. The long-standing aim to raise domestic consumption should provide market opportunities, but the notion of dual circulation suggests that the onus would be on satisfying it with domestic supply. Participation in the value chains of Chinese technology companies would offer rewards for regional suppliers, yet China also professes technological self-reliance, clouding these prospects. Chinese funding is crucial for regional infrastructure development, yet projects often go awry and capital has recently dried…

Source link

Continue Reading


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

Continue Reading


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

Continue Reading


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

Continue Reading