Consequences for security of European states?

For the past year, Ukraine has been resisting Moscow’s unprecedented excesses of violence. It is supported by NATO member countries, the European Union, and some 20 other states, such as Japan and South Korea. With regard to military aid deliveries to Ukraine, Kiev’s supporter states are repeatedly faced with the same trade-off: How many and what weapons systems does Ukraine need to repel Russian aggression as well as defend its state sovereignty – and what are the risks of further drastic Russian escalation? What are the consequences of Russia’s war against Ukraine for the security of European states – and beyond? These are the main topics that will be discussed at the Security Conference. As always in Munich, on an open stage and in front of the whole world.

Featured Speakers:

Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, European Commission

Katherine Tai, Trade Representative, United States of America

Oliver Zipse, Chairman of the Board of Management, BMW AG

Moderator: Zanny Minton Beddoes, Editor-in-Chief, The Economist

To watch the full conference videos, please click here.

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The core assumption motivating this paper is that multilateralism is intrinsically desirable as a force for economic and sociopolitical harmony and progress. Multilateralism offers the best prospects for coherence and inclusion in international trade relations. However, this does not always have to mean universal participation. The entire community of nations do not need to always work in tandem in all areas of trade-related rule-making under the auspices of the WTO, as long as all interests are appropriately protected.

Twenty-three parties were original signatories to GATT and 164 members now belong to the WTO. The membership is far more contrasted today in terms of preferences and priorities than was the case at the outset in the late 1940s, and for a couple of decades thereafter. A more numerous and diverse membership poses greater challenges in forging agreement. One way of looking at this is to consider where a line can be drawn between convergence and managed co-existence in striking an appropriate balance between rights and obligations among members of the WTO. Absent the capacity of members to identify and work with that balance, negotiating stasis becomes the norm – a state of affairs that most observers consider has drifted ever closer to reality.

the-wto-in-crisis-closing-the-gap-between-conversation-and-action-or-shutting-down-the-conversation

To read the full report from the Cambridge University Press, please click here.

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Today, the trade landscape looks like a battlefield. Protectionist policies are on the rise. Global trade governance has been derailed. The two largest economies in the world remain locked in the most significant trade war in 90 years, while smaller trade spats are breaking out across the globe. We are approaching an inflection point. If we hope to continue to derive transformative benefit in the decades to come, trade relationships will need to be reimagined.

In this essay, Hinrich Foundation Senior Research Fellow Stephen Olson notes that hardheaded pragmatism should point us towards a greater emphasis on broad based mutual benefit in our trade relationships. It would be counterproductive to have idealized expectations about a “Kumbaya moment”, but resorting to protectionism and the ‘blame game’ will do little to secure a sustainable future for workers, consumers, companies, and economies.

To read the full report from The Hinrich Foundation, please click here. 

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2020 may well go down in history as a great global inflection point. It is thus worth looking back to examine what happened and why and to reflect on where we may be headed in the decade ahead. The Avoidable War: The Decade of Living Dangerously, the third volume of ASPI’s annual Avoidable War series, does precisely that. It contains selected essays, articles, and speeches by Asia Society and ASPI President the Hon. Kevin Rudd that provide a series of snapshots as events unfolded over the course of 2020 — from the COVID-19 pandemic, through an implosion of multilateral governance, to the impact on China’s domestic political economy.

Finally, it concludes with a discussion of the growing challenges the world will face as the escalating contest between the United States and China enters a decisive phase in the 2020s. No matter what strategies the two sides pursue or what events unfold, the tension between the United States and China will grow, and competition will intensify; it is inevitable. The Chinese Communist Party is increasingly confident that by the decade’s end, China’s economy will finally and unambiguously surpass that of the United States as the world’s largest, and this will turbocharge Beijing’s self-confidence, assertiveness, and leverage. Increasingly, this will be a “decade of living dangerously” for us all. War, however, is not inevitable. Rudd argues that it remains possible for the two countries to put in place guardrails that can prevent a catastrophe: a joint framework he calls “managed strategic competition” that would reduce the risk of competition escalating into open conflict.

To read the full report by The Asia Society Policy Institute, please click here. 

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To read the full report from the Istituto Affari Internazionali, please click here.

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The onset of the COVID-19 pandemic meant governments faced their second systemic economic crisis in under 15 years. This year policymaking went into overdrive as states rightly took steps to protect public health and to stabilize their national economies. The impact of those steps did not stop at national borders. Once more the world trading system faced a major stress test.

When crises happen, overwhelmed officials and policymakers try stifling concerns about trade fallout with the following knee-jerk arguments:

• Collateral damage to trading partners is inevitable at times like this.

• Crisis policy response is temporary and so poses no long-term threat to the world trading system. • No across-the-border tariff hikes (like those witnessed in the 1930s) have occurred and so trade distortions are under control.

• It is unrealistic to expect trade reform during crises.

• Trade rules should not get in the way of national crisis response.

Having documented and analysed information relating to over 2,000 policy interventions taken during the first 10 months of 2020, in this report we marshal evidence to reject every single one of these points. We also compare the policy response this year to that in 2009, during the dark days of the Global Financial Crisis. Doing so reveals there is no single crisis playbook. Governments have a choice in how they respond to crises. Once again states made dissimilar choices with different repercussions for their trading partners. Collateral damage was not inevitable. In fact, we show the fallout across nations this year was very uneven.

This report provides the most comprehensive account to date of the cross-border commercial fallout from government measures taken to tackle the COVID-19 pandemic. Not every element of pandemic response had consequences for trading partners. Of those that did, not all were harmful. Governments may see themselves as responsible solely for the wellbeing of their own citizens but that doesn’t negate the fact that their actions can harm the health as well as the livelihoods of citizens of trading partners. This year has witnessed policy interventions that both sicken-thy-neighbour and beggarthy-neighbour. There has also been a substantial amount of import reform. Key findings relating to global policy dynamics affecting cross-border commerce include:

• Trade distortions implemented this year cover 13.6% of world goods trade. By contrast, trade reforms cover 8.2%.

• By 31 October 2020, a total of 2,031 policy interventions affecting international commerce were imposed by governments around the world. That total is up 74% over the same period in 2019 and 147% higher than the average for 2015-2017, the years before the United States-China trade war really kicked in.

• Only 27% (or 554) of those 2,031 policy interventions benefited trading partners.

• 37 nations saw their commercial interests benefit from 100 or more reforms in trading partners. Whereas 58 nations saw their interests harmed 100 times or more so far this year.

• This year 43 nations saw 10% or more of their goods exports face worse market access conditions. Only seven nations saw 10% or more of their goods exports enjoy better market access.

• During the first 10 months of 2020, 26 nations saw more of their goods exports exposed to better market access abroad than worse conditions. For the rest–over 170 economies—more of their goods exports faced impaired access to foreign markets than improvements.

• Overall, policy intervention during the first 10 months of this year generated a total of 10,546 positive crossborder effects for trading partners. Meanwhile, policy induced 17,252 negative spillovers.

• 110 export curbs on medical goods and medicines remain in force. 68 such curbs have no phase-out date raising the prospect of long-term scarring.

• This year 106 nations implemented a total of 240 reforms to ease the importation of medical goods and medicines.

As is the case before any G20 Leaders’ Summit, we put the track records of this group’s members under the spotlight. Here the main findings are:

• In the first 10 months of this year, together the G20 members undertook 1,371 policy interventions—1,067 of which harmed trading partners. The harmful total is up 24% on 2019 and 117% higher than the years before the trade war, 2015-2017.

• G20 members were responsible for three-quarters of both the harmful and the beneficial knock-on effects for trading partners witnessed this year.

• Three classes of G20 member can be identified—four nations that implemented over 125 trade-related policies in the first 10 months of this year, three nations that implemented 33 or fewer, and the rest (see Figure).

• The policy mix employed by G20 members varied markedly. For example, Brazil undertook 156 policy interventions this year, 47% of which harmed trading partners. For its part, the UK imposed 155 measures and 80% tilted the playing field in favour of domestic firms. Remarkably, the UK’s percentage was bested by Canada, Germany, Japan, Korea, and Saudi Arabia.

• Resort to time-bound crisis intervention varies a lot too. Russia has already phased out 20% of harmful crisis intervention taken earlier this year. China is scheduled to phase out 29% of its harmful measures by the end of this year—the comparable percentages for Italy and Mexico are 32% and 26%, respectively. Overall, 47% of Mexico’s harmful crisisera intervention is time-bound, just ahead of China (46%). In contrast, over 95% of Canada, Saudi Arabia, and South Africa’s policies imposed this year that harm trading partners are not time-bound.

• This year G20 members undertook 770 General Economic Support measures (WTO terminology that captures inside-the-border policy intervention that can affect global commerce). A total of 679 of such measures involved granting different types of trade-distorting subsidies, either to firms competing in home markets or in foreign markets. The G20 is responsible for substantial subsidy-related trade fallout, affecting competitive conditions for 9.4% of world goods trade this year.

Coming at a time when the prospects for a revival of multilateral trade cooperation are improving, our evidence supports three recommendations to policymakers. First and foremost, a major shift in mindset is needed—away from the prevailing view that the world trade rule book must be effectively suspended for the duration of a crisis. This mindset has deep roots—going back to the origins of the post-war trading regime and manifests itself in what are euphemistically referred to as “flexibilities” in multilateral trade accords. In a world with extensive cross-border commercial ties, the current approach to crisis management is a recipe for the long-term scarring of the world trading system.

Keeping goods—including medical kit, medicines, and hopefully soon vaccines—flowing across borders is essential during a pandemic. More generally, open trading regimes facilitate exports, which speed up national economic recovery. A crisis management protocol should be agreed by governments to shape how they respond to crises in a way that limits harm to trading partners and keeps commerce flowing. Temporary policy intervention should be prioritised and a mechanism included to encourage the unwinding of trade distortions introduced during crises. The World Health Organization has protocols that kick in when crises occur, so why can’t the World Trade Organization?

Second, governments and international organizations need to systematically compare the state responses to this year’s pandemic and to the Global Financial Crisis so as to identify those effective policy actions that inflicted little or no harm on trading partners. Third, developing such best practices requires systematic information collection on public policy responses and their crossborder commercial fallout. The new Director-General of the World Trade Organization should strengthen that body’s monitoring and analysis functions. That monitoring needs to pay particular attention to subsidies and other General Economic Support measures. Other international organisations and independent analysts should contribute too.

Simon J. Evenett is Professor of International Trade and Economic Development, University of St. Gallen, Switzerland; Coordinator, Global Trade Alert; and a former nonresident Senior Fellow, Economic Studies, Brookings.

Johannes Fritz is a research assistant University of St. Gallen, Switzerland.

To read the full report, click here.

© CEPR Press, 2020

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Expanding opportunities for U.S. dairy exports has become extremely important to the U.S. dairy industry as growing sales overseas play an indispensable role in supporting America’s dairy farmers, processors, exporters and a healthy rural economy.

Free trade agreements (FTAs) that reduce or remove tariff and nontariff barriers are integral to creating U.S. dairy jobs and building a brighter future for the industry. USDEC and NMPF submitted detailed comments to the United States Trade Representative (USTR) outlining country-by-country trade barriers and encouraging USTR to resolve these challenges, including through the pursuit of FTAs with key markets. The facts on the growing demand for U.S. dairy and the value of FTAs speak for themselves: 

In 2019, the U.S. exported more than $6 billion in dairy products, equivalent to approximately 15% of total U.S. milk production. In comparison, before NAFTA was implemented in 1993, the U.S. exported just $618 million worth of dairy products.

Dairy exports with FTA partners have helped add the equivalent of $17 billion in revenue for dairy farmers since each FTA was implemented.

That growth is equivalent to 1.4 billion gallons of milk, greater than what Michigan, the sixth largest U.S. milk producing state, produces in one year.

Key Trade Agreements

United States-Mexico-Canada Agreement (USMCA) Careful monitoring and enforcement of USMCA will be necessary to ensure the U.S. dairy industry is able to reap the full benefits of the progress it made to break down trade barriers. Canada, in particular, has a long history of sustained efforts to undermine access to its market. This mandates dedicated enforcement to ensure Canada’s dairy tariff rate quota (TRQ) administration procedures fully comply with USMCA, as the current system risks discouraging full utilization and valuation of the market access quantities by the U.S. In addition, Canada must fully adhere to USMCA’s reforms to its trade-distortive milk pricing programs in order to avoid replicating Class 6 and 7’s harmful impacts. With respect to USMCA’s other trading partner, Mexico is U.S. dairy’s largest export market, making the effective implementation and strong enforcement of USMCA with them key. In particular, the enforcement of safeguards for common name cheese terms is essential as is restoring smooth and dependable regulatory trading conditions.

Phase One Agreement with China

China is the third largest export market for U.S. dairy products, importing more than $373 million in 2019 despite the dire impact of China’s retaliatory tariffs. While a Phase One agreement made critical progress by resolving numerous regulatory impediments for U.S. dairy exports, retaliatory duties still place U.S. exports at a disadvantage and China has to date not prioritized increased dairy purchases to meet its Phase One agriculture purchasing commitments. Targeted tariff relief and a focused pursuit of greater dairy sourcing from the U.S. is necessary moving forward.

Phase One Agreement with Japan

The Phase One agreement made progress to expand market access for U.S. dairy products and secured imported market access parity on various tariff lines. However, a comprehensive FTA is necessary to address remaining market access needs and institute the nontariff commitments necessary to help provide for dependable trading conditions in the future.

To read the full executive summary, click here.

To read the full comments to the USTR, click here

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Initially, many countries responded to the pandemic and increased demand for medical goods—such as face masks and ventilators—with trade measures that restricted the free movement of those products. While many of those measures were eventually removed, they undoubtedly made it more difficult for products to go where they were most needed. Economic recovery discussions in the U.S. and around the world are now focusing on how to prevent such a recession in the future.

While countries may be tempted to close themselves off to the world and international supply chains, doing so will make it more difficult and more costly for their citizens to get what they need. The Heritage Foundation’s Index of Economic Freedom has demonstrated for more than 25 years that economic openness yields better results for individuals around the world. The same is true for countries that reduce barriers to trade and allow individuals to exchange freely with the world. Policymakers around the world should work to eliminate barriers to trade as economies recover from the pandemic.

To read the full issue brief, click here.

Tori K. Smith is a Jay Van Andel Trade Economist for The Heritage Foundation.

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