On October 9, WITA hosted an expert panel to discuss the Biden-Harris Administration’s new measures related to de minimis shipments to the United States, including from online marketplaces. Panelists discussed the White House proposals, its use of executive authorities to address this issue, and proposed legislation.

Featured Speakers:

Ralph Carter, Staff Vice President, Regulatory Affairs, FedEx

Kim Glas, President & CEO, National Council of Textile Organizations; Commissioner, U.S.-China Economic and Security Review Commission 

Melissa Irmen, Director of Advocacy, NAFTZ-National Association of Foreign-Trade Zones

John Pickel, Senior Director, International Supply Chain Policy, National Foreign Trade Council

Felicia Pullam, Executive Director, Office of Trade Relations, U.S. Customs and Border Protection

Moderator: Ana Swanson, Trade and International Economics Reporter, The New York Times

Watch the Full Video Here

10/09/2024 | WITA

Closing the Gap Between Mars and Venus on Trade

On Thursday, October 31, WITA will host Daniel Mullaney on a panel on US-EU Trade & Investment, as part of its hybrid event, The Future of U.S.-EU Trade and Investment. Learn more here.

The bottom line

In early 2025, a new US administration and European Commission will be in place. It will then be more critical than ever that the United States and the European Union (EU) coordinate their approaches to international trade across a wide range of issues. A significant impediment to this coordination is the persistent temptation—by a range of players in transatlantic circles—to articulate and emphasize supposedly fundamental differences between Washington and Brussels in a way that highlights the virtues of one and denigrates the other. As satisfying as that classic conflict narrative is, it has real-world negative consequences for both parties and should be reassessed by all players in favor of the reality that what unites the United States and the EU dwarfs their differences.

State of play and the strategic imperative

Leading into 2025, cascading joint challenges of supply chain vulnerabilities, climate change, deindustrialization, competitiveness, geopolitical crises, and damaging third-country non-market economy policies and practices—coupled with an international rules system designed for another era—will increasingly drive both sides to use unilateral measures to protect and achieve legitimate policy goals. The US tariffs on steel and aluminum and the Inflation Reduction Act are two such examples; the EU Carbon Border Adjustment Mechanism (CBAM) and Deforestation Regulation are two others. Other measures risking transatlantic friction include the EU’s Corporate Sustainability Reporting Directive, the longstanding Boeing-Airbus subsidies dispute, previous tensions over the EU digital services tax, a failure to reach a critical minerals agreement, and US companies’ compliance with the EU’s Digital Markets Act.

The current trend is not abating. Unless the United States and the EU cooperate on those unilateral measures, there is a high risk that they will result in significant bilateral trade clashes. At a minimum, this will undermine achieving generally shared goals; at worst, it could result in spiraling bilateral trade retaliation.

A significant barrier to transatlantic trade cooperation is the persistent underlying narrative—among policymakers, think tankers, and others—that the United States and the EU approach the world from fundamentally different perspectives. In the memorable words of a distinguished commentator twenty years ago, the United States is from Mars, and the EU is from Venus. This can be an attractive narrative, as it allows each to claim virtues that the other supposedly lacks. It allows Washington to take pride that it is tougher and more clear-eyed than a feckless EU; it allows Brussels to claim that it is more law-abiding and multilateral than the “Wild West” United States.

But this narrative is a choice, not a fact. And the strong inclination to triumphantly celebrate supposed fundamental differences has negative real-world impacts. This narrative finds its way into public statements, is sometimes amplified by a press happy to report on big-picture fights, and can end up deeply embedded in the public consciousness, determining whether or not there is public support for US-EU cooperation. And this narrative of fundamental differences between the United States and the EU—each side claiming the higher virtue—undermines US-EU cooperation.

Read the Essay Here

10/07/2024 | L. Daniel Mullaney | Atlantic Council

Rethinking Economic Structure: Dreams, Nightmares, and Threats

The following piece includes excerpts from Angus Deaton’s article, Rethinking Economic Structure: Dreams, Nightmares, and Threats.

Globalization and trade

The benefits of globalization have not been equally distributed. The effects of trade on jobs have been particularly controversial. The losses of jobs have been well documented, especially through exposure to China which accounted for perhaps 2 million lost jobs. Standard economic analysis— the benefits to trade are almost a sine qua non to qualify as an economist—argues that lower tariffs are always in the (net) national interest, with consumers benefiting from lower prices, and new jobs created among exporters to replace those lost by industries exposed to trade. It is also noted that many of the manufacturing jobs that were lost were doomed in any case, and that more jobs were lost to automation than to trade. Beyond that, there is job churn in the US with many jobs lost and gained every year, as many as 2 to 3 million a month, relative to which even 2 million jobs lost over a decade or so is very small. Jobs must be reallocated over time to maintain efficiency and the defenders argue that, rather than preserving jobs through tariffs, the individuals and communities should be compensated for the closures but closed just the same. 

But there are good arguments on the other side. When tariffs are already low, the net gains are smaller than the gross gains and losses, so there is a very large amount of disruption—gainers and losers—for a relatively small net gain. Under such circumstances, trade deals disrupt society for ever smaller net gains. The economic accounting, in terms of income gains and losses, is seriously incomplete because much of the trade not only destroyed jobs, but whole communities. Communities are necessary for people to flourish, and, along with meaningful work, are the loci of what John Rawls called the social bases of self-respect. My argument here is that, at least some of the morbidity and mortality among working Americans must be attributed to trade, something that is not considered in the income-based calculations, and which would not likely be eliminated by compensating the losers in money, not something that tends to happen in any case.

Obviously, there are trade-offs here; no one should argue manufacturing employment can be restored to its previous levels, but it is surely possible to do better calculations for future trade deals. Note too that trade weakens the bargaining position of trade unions and of labor relative to management. The absence of private sector unions means that workers have less say about the direction of technical change and automation than once was the case; history shows that who benefits from technical change depends on how it is implemented, and that the nature of the implementation has always depended on relative power. Finally, I note that democracies are supposed to involve those who are affected in decision-making, something that has been notably absent in recent trade arrangements especially as unions have declined. Globalization and the construction of international rule-making bodies moves decision-making offshore, further weakening national and local democracy. Not content with their domestic rent-seeking, corporations, their lobbyists, and lawyers have become increasingly dominant in US trade negotiations, often bringing harms to people in weaker partner countries around the world.

Read the Full Article Here

06/24/2024 | Angus Deaton | Princeton University

Waging a Global Trade War Alone: The Cost of Blanket Tariffs on Friend and Foe

The following piece includes excerpts from Edward J. Balistreri & Christine McDaniel’s article, Waging a Global Trade War Alone: The Cost of Blanket Tariffs on Friend and Foe.

For good or bad, not all campaign rhetoric converts to policy once it is examined systematically. We consider a 2024 presidential campaign proposal to escalate US tariffs against all trade partners, with exceptionally high tariffs on Chinese goods. With inevitable retaliation, this creates a trade siege of “fortress America,” which disadvantages US exports around the world in favor of trade from other countries. US tariff escalation creates a lucrative set of opportunities for everyone else. For instance, many US manufactured goods would exit European markets as Chinese goods enter, and European consumers and Chinese manufacturers benefit at the expense of US manufacturers. Strengthened trade ties between Europe and China also work in the other direction. China substitutes away from US business services in favor of European service exports. China further entrenches its reliance on agricultural goods from Latin America boosting income in countries like Brazil. Of course, there are costs of the trade war in terms of global efficiency and adverse local impacts on states and agricultural markets. Our new analysis of escalating protection suggests that nearly everyone outside the United States benefits as it moves to isolate itself from global trade. The United States disproportionately bears the global efficiency cost.

We use an advanced model of the global economy to consider a set of scenarios consistent with the proposal to impose a minimum 60% tariff against Chinese imports and blanket minimum 10% tariff against all other US imports…The basis for the tariff rates is a proposal from former President Donald Trump. We consider these scenarios with and without symmetric retaliation by our trade partners. Our central finding is that a global trade war between the United States and the rest of the world at these tariff rates would cost the US economy over $910 billion at a global efficiency loss of $360 billion. Thus, on net, US trade partners gain $550 billion. Canada is the only other country that loses from a US go-it-alone trade war because of its exceptionally close trade relationship with the United States.

We provide context in terms of the current trade conflict, primarily between the United States and China, and enumerate a set of scenarios based on the proposed blanket tariffs. Results suggest the United States is the biggest loser in a comprehensive trade war with the rest of the world. We also consider a potential transatlantic alliance, where Europe joins the United States in tariffs against China. Transatlantic cooperation reduces US losses and leads to sharp losses for China, highlighting the benefits of cooperation relative to the proposed go-it-alone strategy.

Read the Full Article Here

10/02/2024 | Edward J. Balistreri & Christine McDaniel | Yeutter Institute at the University of Nebraska

The post WITA’S FRIDAY FOCUS ON TRADE – OCT 11, 2024 appeared first on WITA.

On October 1, WITA hosted the Trade Around the World – U.S. Trade Initiatives panel as part of the 2024 WITA Academy Virtual Intensive Trade Seminar.

The annual Intensive Trade Seminar, co-hosted with George Washington University, features speakers that help attendees increase their professional knowledge by learning the nuts and bolts of trade policy directly from career trade policy professionals from across government, industry, and law.

To view the full agenda of the 2024 Virtual Intensive Trade Seminar, please click here. Recordings for all sessions are available to purchase. To learn more, please email us at events@wita.org.

Featured Speakers:

Marjorie Chorlins, Senior Vice President, Europe, U.S. Chamber of Commerce

Eric Farnsworth, Head of the Washington Office, Council of the Americas and the Americas Society

Wendy Cutler, Vice President and Managing Director, Asia Society Policy Institute (ASPI) Washington, D.C. Office; former Acting Deputy U.S. Trade Representative, Office of the U.S. Trade Representative

Florizelle Liser, President and CEO, Corporate Council on Africa

Moderator: Penny Naas, Lead, GMF Allied Competitiveness, German Marshall Fund

Watch the Full Video Here

10/01/2024 | WITA Academy

Perspectives: Want Trade Deals? Create Good Atmospherics First

Trade negotiations in recent years have faltered due to an atmosphere of suspicion. Politicians need to start sending more positive signals to allow diplomats and negotiators to start finding ways to seal agreements. 

When the UK-EU Trade and Cooperation Agreement was being negotiated it was seen an exception. Instead of opening up trade, its goal was to ease the transition from the United Kingdom being part of the EU’s single market to a relationship primarily based on World Trade Organization rules. 

Whole policy areas typically included in free trade agreements such as public procurement are largely absent of this agreement. The European Union insisted on extensive level-playing field provisions in the expectation of the UK cheating. 

In retrospect, though, the TCA should perhaps have been seen as warning. Modern trade negotiations increasingly take place with a similar underlying atmosphere of suspicion. 

EU-Mercosur free trade agreement negotiations have for some time been moving in the direction of mutual distrust about what the other parties might do. Sometimes it is hard to recall that this agreement is supposed to increase trade. 

There are many more examples, whether from the EU and Australia, or almost anything the United States has done in trade policy since 2016. 

For businesses seeking a renewed free trade agreement agenda there is a fundamental problem. If you don’t change the mood, what is discussed will be more about market access conditions than openness.  

Any agreement reached in this way is unlikely to deliver much growth. 

What we may see in the UK-EU relationship in the coming years is a return to something more positive. There is every reason to believe deepening ties will lead to better agreements. 

Those seeking openness should heed this lesson. Mutual goodwill must be the basis of the free trade agreement agenda. 

Improving the mood between UK and EU 

In the early weeks of the new UK government there has been a noticeable change in attitudes towards the EU. Most notable were early calls from new ministers to their EU counterparts – which would have been unthinkable under previous governments since 2016. 

New foreign secretary David Lammy visited Poland, Sweden and Germany the weekend after the election. Business and Trade Secretary Jonathan Reynolds spoke with Valdis Dombrovskis on the phone and met at the G7 trade ministers meeting in July. 

The UK successfully hosted the second meeting of the European Political Community. Although there were no concrete deliverables, the EU leaders present spoke positively about London’s approach. 

Labour’s plans for enhancing trade relations with the EU remain formally rather modest. Agreements on sanitary and phytosanitary issues, visas for touring artists and recognition of qualifications are the frequently mentioned items. 

There are internal discussions on going further than that. 

Though evidently an awkward topic for the UK, there is a growing awareness of the need to respond to EU asks on youth mobility.  

Joint work on economic security, regulatory alignment and aligning Emissions Trading Schemes are also under consideration. 

Concrete agreements, even negotiations, may be some time away. Thinking has however started on both sides about what these may contain. 

Allowing officials to think creatively 

At a time when trade agreements were driven by more open attitudes, negotiators were empowered to find ways around problems. 

Through ministerial example, UK civil servants have also been given permission to engage with EU counterparts.  

Before the UK election, many officials in relevant areas could not wait to be allowed to test ideas on progressing particular issues with the EU. Now we can expect them to act on this. 

Formally, the EU line is to wait for proposals from London. In reality, many in Brussels will be equally keen to engage.  

Commission officials are already developing their thinking as to how discussions could be structured.  

This isn’t just about those working in EU institutions. Businesses and other stakeholders will take their signals from governments. 

There is ample opportunity for joint UK and EU industry positions. On past evidence this can be an effective tool to help forge agreements. 

Indeed, the extension of generous rules of origins for electric vehicles in the TCA at the end of last year, was considerably helped by joint pressure by the car industry. 

Goodwill is often infectious. Although the pain of recent UK-EU negotiations won’t be easily forgotten, a new picture can be built over this experience. 

The EU-Switzerland talks are perhaps ahead of the UK in this regard. Two previously troublesome relationships are therefore in recovery. 

Whether this can be transferred to other EU relationships remains however to be seen. 

European Union needs to recover its confidence 

If politicians create the impetus for their officials, there will only be a limited amount that EU negotiators can achieve right now. 

Pressure comes from several directions. Overt protectionism across the political spectrum means prospects for France ratifying any future trade agreements seem remote.  

Meanwhile many MEPs from various member states put pressure on trade from various angles, including with environmental, labour and nationalist arguments. 

Summarising the problem, Ursula von der Leyen’s ‘Political Guidelines’ released in July ahead of her confirmation vote as European Commission president for a second term sees trade as both an opportunity and a problem. Talk of “long-term, mutually beneficial partnerships” is undermined by suspicion. 

Translated into day-to-day operations, such messages are easily received by those at the front line as them not being fully trusted. However much it is claimed that the targets are really the third countries concerned. 

Some time ago, when I discussed Indian resistance to trade agreements with informed observers, lack of public trust in negotiators emerged as an unexpected reason for it. In this specific Indian case, there would be suspicions of corruption if too much was given away.  

In the EU or US, it is more likely that creative officials could be seen as part of the ‘deep state’. This makes productive negotiations extremely difficult. 

To have a renewed trade agreement agenda, negotiators have to feel empowered. To use a particular term disliked by some, a safe space must be created. 

Right now, in most EU negotiations, that is not sufficiently present. Negotiations are thus bound to flounder. 

Atmospherics can change this, as we are starting to see with the UK. Though this has to be sustained if there are to be agreement in the end. 

Tricky though it will be, the most siren political voices need to be quietened for significant progress on trade policy and positive associations built with the idea of openness for workers and consumers.  

That’s outside the political mood of the moment and that’s why we’re struggling. 

Businesses need to seek to change to the mood music before demanding more agreements.

Read the Full Perspective Here

08/28/2024 | David Henig | Borderlex

Mr. Han-koo Yeo on Asia’s Trade & Investment Landscape

ASPI Vice President Wendy Cutler Interview of Former Korean Trade Minister Han-koo Yeo.

Wendy Cutler: Please share with us, from an Asian perspective, why it’s so important for the United States to have an active economic agenda with its Asian trading partners?

Minister Han-koo Yeo: There are many countries in the region that want strong, credible, and also predictable U.S. leadership and economic engagement in the region. Let’s think of this as two categories of countries: first, advanced countries and second, developing countries in the region. First, advanced countries, including Korea, Japan, and Australia, have gone through a paradigm shift in the trade environment and have also experienced supply chain disruption, climate crises, and other challenges. These countries need to tackle these global challenges with a strong partnership with the United States. Additionally, China’s economic ride for the past couple of decades has been phenomenal, and I think the United States could play a constructive role of balancing it out in the region.

When it comes to developing countries in the region, e.g., ASEAN (Association of Southeast Asian Nations) countries, India, they need market access to the United States and they want to be integrated into the U.S.-led global supply chain. In fact, many countries in the region, starting with Japan, Korea, and Singapore, have moved up in the industrial and technology ladder through economic cooperation with the United States. So, from the perspective of both developed and developing countries, U.S. economic leadership in the region is critically important. The current U.S. administration should get credit for returning to the region and resuming its leadership, even if the economic and market access engagement in the region is not as robust as many would have preferred.

Cutler: You mentioned that developing countries in the region welcome becoming part of the U.S.-led supply chain network. But, would this not be at the expense of China?

Yeo: No. These countries are being rapidly integrated into the supply chain led by China. But they realize that if there is too much dependence or too much concentration on one country, that becomes a vulnerability and a risk. It’s a matter of overall overdependence on one partner, especially China. So, developing countries want to expand their trade and supply chain integration with China, while also seeking a more active regional role from the United States and participating in these U.S.-led supply chains as well.

Cutler: Under the Biden administration, the United States has basically retreated from pursuing market-opening agreements or free trade agreements. Is there still a hope in the region that at some point the United States will go back to that model, even if not as robustly as it has in the past? Are countries still interested in pursuing free trade agreements with the United States?

Yeo: Obviously, they woke up to this brutal reality that things have changed in the U.S. political environment. In my view, it’s inconceivable to go back to this previous era where the United States played a leadership role in bilateral, regional, and multilateral trade negotiations. But I also think that there’s wishful thinking that maybe four years or even eight years from now, a return to a market-opening agenda could happen.

Cutler: Let’s discuss the Indo-Pacific Economic Framework (IPEF), the cornerstone of the Biden administration’s economic engagement in the region. Many people, both in the United States and Asia, have been skeptical about this initiative. But I note, Minister Yeo, that you have been supportive and have written a number of pieces pointing to potential benefits and the importance of this initiative. Can you share with us your views on IPEF, and in particular do you think it will be able to deliver concrete outcomes and provide benefits to all its members the way it’s constructed now?

Yeo: Yes. We live in a different world right now. For example, Korea has gone through a series of supply chain shocks and disruptions for the past few years. Like others, we quickly realized the absence of a new template for internal cooperation to cope with these new kinds of global challenges. Korea is one of the most wired countries with its extensive FTA network with countries all around the world, including RCEP, and Korea has been aiming to join CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). But these traditional FTAs weren’t really designed to deal with the new types of challenges that we are facing. That’s why I think that these new types of economic cooperation agreements, such as IPEF, could play a meaningful role to fill the gap left by more conventional types of trade agreements. I believe that we should continue to advance trade liberalization through conventional FTAs (bilateral and plurilateral) but also, we need these new templates for new challenges, such as supply chain resiliency, decarbonization, and so on. Although IPEF is not perfect, it’s a meaningful first step.

Cutler: If Vice President Harris becomes president, there is an assumption that she would continue many of Biden’s policies and initiatives in this space, including IPEF. If you could offer her some words of advice on how to build on the current IPEF to make it more meaningful for Asia, what elements would you suggest could use strengthening?

Yeo: Vice President Harris is known for her strong advocacy on climate change and her environmental agenda. So, for example, the clean energy agreement in IPEF could be a starting point on which to build. The current text creates a cooperative work program, which is a way in which IPEF member countries can launch concrete projects that are of common interest to these countries and then aim to produce tangible outcomes. For example, they launched a regional hydrogen power project, which is a promising new source of clean energy, with new supply chain development and new ways to trade hydrogen. However, there’s a lot of work to do to develop tangible ways to activate this hydrogen power market. I think that this kind of project could show that IPEF could be useful in bringing tangible outcomes and benefits to these member countries through dedicated implementation.

You may also know that a couple of months ago, Singapore hosted an IPEF clean energy investor forum, and it was reported that about $23 billion of potential clean energy investment opportunities were identified. Of course, what matters is how much of these investment pledges can actually materialize into projects; but in order to do that, IPEF members need to work together to resolve investor grievances, including extensive red tape and bureaucratic hurdles.

Cutler: As you know, the United States has put the IPEF trade pillar effectively on hold through the election season. A lot of progress was made, but we also hear that a number of developing country members of IPEF had concerns about the labor provisions, in particular. Do you think if these talks were resumed quickly after the election that they could be swiftly concluded or do you think that there are larger differences in positions between the countries that could necessitate a lengthy negotiation?

Yeo: I think it’s more of a problem on the U.S. side than for other IPEF members. What I’m particularly worried about is the digital trade component. Recently, the WTO (World Trade Organization) e-commerce plurilateral joint statement initiative was concluded with its text “stabilized.” Although there is a shortage of more ambitious outcomes, I still think this is a meaningful achievement. The digital trade and e-commerce market in the region is exploding. These markets have young populations and growing middle classes, and many are interested in joining the Digital Economy Partnership Agreement (DEPA). China is also showing interest in DEPA, so now the United States is falling behind. There are no rules of the road for digital trade and without globally agreed, high-standard, digital trade rules, I think these countries in the region tend to copy and paste the standards and infrastructure available from China. So, I am afraid that the United States is falling behind in developing new global standards and rules for digital trade.

Cutler: Former President Trump has made it clear that if he is elected, he would, early on in his administration, instruct the United States to exit IPEF, calling it “TPP-2” (Trans-Pacific Partnership). How do you think the region would respond to such a move? My sense is that many countries in the region are still trying to get over the U.S. exit from TPP, so how would such an act by President Trump be perceived in the region?

Yeo: First of all, IPEF is not TPP-2 — it’s completely different. U.S. withdrawal from IPEF is a very undesirable scenario that we want to avoid at all costs. I also think if that happens, the credibility of the United States will be damaged severely. And, I think it’s not just short-term fallout but would impact relations in the more medium and long term too. To have a flagship U.S. economic engagement project and make a 180-degree U-turn would be damaging to U.S. credibility and leadership in the region.

Cutler: Trump also has been very vocal about his intention to increase tariffs against China as high as 60%, but he is also advocating for an across-the-board tariff increase of 10% on all products and for all trading partners. While there may be exceptions, that’s his current proposal. How would these actions be viewed in the region?

Yeo: This is very, very worrisome. If you look at the big picture of what is happening in the region, I believe that U.S. industrial policy has been quite effective, at least up to this point, such as the U.S. Inflation Reduction Act (IRA) and the CHIPS and Science Act. Because of these policy actions, many cutting-edge companies from Korea, Japan, and Taiwan are investing massively in the U.S. market for semiconductors, batteries, EVs, etc. This new trend of diversification and “China plus one” business strategies is providing countries like ASEAN members or India with new opportunities to develop their industries. They weren’t really given such opportunities before because everything was concentrated in China, but now they are being integrated into new global supply chains led by the United States. Against this backdrop, if the United States takes a complete opposite turn in its policy direction and imposes tariffs against the products from its friends and allies, it will be very counterproductive to the momentum building in the region and will damage U.S. national interests in the end.

Cutler: A number of countries retaliated against the United States during the first Trump administration, when tariffs were imposed, particularly on steel and aluminum, and China retaliated with its own sizable tariffs on U.S. imports. Are countries in the region likely to try to negotiate a deal to head off tariffs, or do you think that they are already planning retaliation moves against the United States?

Yeo: I think China will definitely retaliate, but it’s a more complicated picture for other countries in the region. In terms of security cooperation, I think many of these countries are under the U.S. “nuclear umbrella” or under some sort of security arrangement, so countries will take into consideration economic aspects as well as security aspects when deciding on the appropriate response.

Cutler: Under the Biden and the Trump administrations, the United States has retreated from its leadership role in the WTO. How do you see the WTO operating in the coming years, particularly as issues like supply chain resiliency, export controls, and advanced technologies become more and more prominent? Do you think the WTO risks becoming sidelined or irrelevant? Or, in light of the recent announcement on a digital trade agreement between many of the participants in the Joint Statement Initiative (JSI) on E-commerce, do you think that there is hope for the WTO to take on some of these challenging issues?

Yeo: Yes, obviously there’s a leadership vacuum at the WTO, and because of all these global challenges that we have discussed, today, more than ever, we need an organization like the WTO. But obviously, the WTO is not living up to the needs of the time. However, what is encouraging, despite overall difficulties that we are facing, is that recently middle-power countries have stepped up and have been playing a constructive leadership role. For example, the negotiations for the Investment Facilitation for Development (IFD) were led by Korea and Chile. The JSI e-commerce agreement that you mentioned, which was concluded recently, was led by Japan, Australia, and Singapore. I think, more and more, these middle-power country groups need to step up to fill the void left by the superpowers at the WTO. I also think that the WTO needs to tackle these newly emerging global challenges. For example, while there are widespread concerns with Chinese export surges and overcapacity issues, there is no global dialogue on this issue. I think the G7 is probably the only dialogue raising its voice on this issue, but its approach is more confrontational than collaborative.

If you look at WTO data on ongoing anti-dumping and countervailing duty investigations which were reported to the WTO after 2020, actions against China have comprised 30% to 40% of the total actions. This means that there is a structural issue, not just a case-by-case temporal matter. This also means we need more evidence-based, objective discussions on the extent and nature of the problem, and how it is impacting not just U.S. and China relations but also third nations including the EU, Korea, Japan, and the Global South. We need to explore global solutions to address these global issues. But there is no such global discussion underway right now. I think the WTO will need to play a more authoritative role as the only global trade body that is supposed to discuss and find solutions to these international trade issues. Also, as you mentioned, we have all of these newly emerging national security arguments regarding export controls, investment screening, and so forth. We have to decide whether to bring these matters into the realm of the WTO.

Cutler: How realistic is it though for the WTO to have a reasonable conversation on the overcapacity issue when top officials from China are denying that there actually is a problem?

Yeo: It is a difficult issue. I understand that some Chinese scholars acknowledge the need to have a global dialogue, but it’s very challenging to expect the WTO to have an effective role in taking up these very sensitive and difficult issues. However, if we were to find any place where we could have these kinds of conversations, I can’t see any other venue than the WTO.

Cutler: My final question is that if you had the opportunity to go into the Oval Office and brief our next president on these issues with very little time, what points would you highlight with respect to policy actions that they should or should not take? As the United States contemplates some of the policy measures we’ve been discussing, how would you urge the president to think about the region?

Yeo: It’s a very difficult question. If I had 30 seconds, I would make three points. First, U.S. trade and industrial policy can have a significant impact on shaping the economies and supply chains in the Indo-Pacific, as we have witnessed for the past few years. Second, nevertheless, sometimes the U.S. policy goal of strengthening U.S. leadership in the region and encouraging diversification and friendshoring of allies and partners doesn’t match its policy actions to achieve that. Third, therefore, it would be critical for the United States to step up its economic engagement in the region by providing tangible incentives for allies and partners with market access, industrial policy benefits such as the IRA tax credits, and digital trade rule-making leadership.

Han-koo Yeo is a Senior Fellow at the Peterson Institute for International Economics and Former Korean Trade Minister.

Wendy Cutler is Vice President at the Asia Society Policy Institute and the managing director of the Washington, D.C. office.

Read the Full Interview Here

10/01/2024 | Wendy Cutler | Asia Society Policy Institute

Brazil’s Ecological Transition Plan: Paving the Way for the EU-Mercosur Agreement and Enhancing Global Perception

Introduction

The global issue of deforestation and its environmental consequences stand at the forefront of Brazil’s agenda as it directs a critical crossroads. In this context, the Brazilian Ecological Transition Plan, an initiative by the Ministry of Economy, emerges as a vital step towards positioning Brazil as a leader in sustainability and environmental responsibility. This plan, currently in progress, addresses urgent ecological challenges and sets the course for a more sustainable and resilient future.

However, Brazil’s path towards sustainability faces challenges, particularly concerning the EU-Mercosur Agreement. This agreement, designed at bolstering cooperation and economic growth, has been met with concerns. Increased trade in agricultural products between Mercosur countries and the EU could potentially aggravate deforestation, raising questions about the compatibility of the agreement with environmental goals.

Therefore, International Law serves as a guiding force in promoting responsible environmental practices. The interrelation of ecosystems transcends national boundaries, necessitating collaborative efforts among countries to mitigate environmental degradation. In this context, Brazil’s ambitious plan aligns with the principles outlined in international agreements such as the Paris Agreement. By adhering to these agreements, Brazil can signal its commitment to global efforts to combat climate change.

As negotiations proceed, finding common ground on environmental commitments is essential for successful ratification and the realization of mutual benefits. Brazil’s Ecological Transition Plan and the EU-Mercosur Agreement offer opportunities to demonstrate global responsibility and sustainability. By navigating these challenges, Brazil can emerge as a steward of the environment, contributing to a greener, more sustainable future.

Context

The Brazilian Ecological Transition Plan, announced by the Ministry of Economy, represents an initiative that seeks to position Brazil as a global leader in sustainability and environmental responsibility. This plan is still in progress and is set to tackle pressing ecological challenges and pave the way for a more sustainable and resilient future.

The Ecological Transition Plan, consisting of six major pillars, presents a comprehensive approach to address key environmental concerns in Brazil. These pillars include sustainable finance, technological densification, bioeconomy, energy transition, circular economy, and climate adaptation infrastructure. Each pillar aims to tackle critical challenges and foster a more sustainable and environmentally responsible future for the country.

The Plan also encompasses a wide range of measures to address key environmental concerns in Brazil. It includes initiatives such as establishing a regulated carbon market, implementing carbon taxes, and launching sustainable bonds to promote sustainable finance. In addition, the plan emphasizes a circular economy model that promotes resource efficiency, waste reduction, and innovation.

The implementation of the Ecological Transition Plan will be executed over the course of President Luiz Inácio Lula da Silva’s period, with some initiatives already starting this semester. Therefore, it is a testament to the government’s commitment to embracing sustainability and transitioning towards a greener and more ecologically responsible economy.

EU-Mercosur Agreement in the Context of Brazil

The EU-Mercosur Trade Agreement stands as a testament to the strengthening ties between the European Union and the Mercosur states, which include Argentina, Brazil, Paraguay, and Uruguay. This landmark agreement was politically finalized on 28 June 2019, marking a significant step towards fostering mutual growth, sustainable development, and increased trade and investment between the two regions.

Key components of the agreement include the reduction or elimination of tariffs on various goods and services, improved access to government procurement opportunities, protection of intellectual property rights, and facilitation of investment flows. By streamlining trade procedures and reducing barriers, the agreement aims to boost economic growth and create new opportunities for businesses in both the EU and Mercosur countries.

The agreement holds strategic importance for both parties. For the EU, it represents an opportunity to expand its market access in the dynamic economies of the Mercosur bloc and gain a competitive edge in sectors like machinery, chemicals, and automotive. On the other hand, Mercosur countries, especially Brazil, stand to benefit from increased export opportunities for their agricultural products, such as beef, soybeans, and poultry, which are vital components of their economies.

From Deforestation to Protection

The EU-Mercosur agreement, while aimed at fostering economic cooperation and trade between the two regions, has been marred by significant concerns surrounding logging in recent years in Brazil. Due to the intensified trade in agricultural commodities, from Brazil to the EU, there is a threat of deforestation being exacerbated. The expansion of agribusiness and the demand for these products could lead to further devastation, as agricultural land is cleared to meet the export demands.

In response to the growing concerns, the EU has sought to impose environmental requirements on Mercosur countries, including Brazil, to ensure adherence to sustainable practices and the Paris Agreement’s environmental goals. However, Brazil has been resistant to these proposals, raising concerns about the agreement’s compatibility with climate and environmental objectives.

Nonetheless, a striking contradiction reveals itself when inspecting the EU’s stance on deforestation. While the EU actively urges Mercosur nations to halt deforestation and embrace sustainable measures, it concurrently remains a potent catalyst for this very degradation due to its robust appetite for agricultural imports. Products like Brazilian soybeans and beef, in high demand in European markets, are frequently associated with the expansive clearing of forests for cultivation.

The EU’s consumption habits, marked by their significant imports, inadvertently fuel the deforestation they are keen to diminish. This juxtaposition not only muddies the agreement’s narrative but also casts a shadow on the EU’s true dedication to sustainability, given their prevailing consumption patterns.

As described by Knox in his exploration of “Imperialism, Hypocrisy and the Politics of International Law,” the contradictions and accusations of hypocrisy are not mere anomalies but rather intrinsic facets of international relations and policy-making. This framework can be aptly applied to the EU’s stance on deforestation. 

While on one hand, the EU guardian environmental sustainability and urges Mercosur nations to halt deforestation, its consumption patterns reveal a contrasting narrative. This duality in the EU’s actions mirrors the broader theme Knox emphasizes: the tension between proclaimed values and actual practices in the realm of international law and relations. 

Additionally, President Luiz Inácio Lula da Silva’s recent speech at the Power Our Planet event in Paris served as a poignant reminder of the complex interplay between environmental responsibility, global consumption, and historical accountability. With resounding applause, Lula stated, “It is not the African people who pollute the world, it is not the Latin American people who pollute the world… they must pay the historical debt they have with planet Earth.” These words resonate as an echo of the concerns arising from the EU’s demand on Brazil to address deforestation while European consumption drives it.

With the return of Luiz Inácio Lula da Silva to the presidency, there has been a significant shift in Brazil’s approach to the Amazon. Data from various sources indicate a substantial decline in deforestation rates since Lula assumed office. According to government satellite data, deforestation in the Amazon dropped by 33.6% during the first six months of Lula’s term. This decline is even more noteworthy when compared to the same period in the previous year.

Several factors contribute to this positive trend. The new administration has emphasized the importance of environmental conservation and has taken proactive measures to protect the Amazon. The government’s efforts, combined with international pressure and increased global awareness about Amazon’s significance, have played a critical role in this decline.

Challenges and Perspectives

The EU-Mercosur Agreement has faced several complications in the ratification process. Some EU member states have expressed objections regarding the environmental aspects of the deal. As of the current context, the agreement remains pending final approval and ratification from all the EU member states.

However, the European Commission President, Ursula von der Leyen, is determined to conclude the long-delayed trade deal between the European Union (EU) and Mercosur countries. With the geopolitical landscape evolving, the EU recognizes the importance of strengthening ties with Latin America and is eager to avoid neglecting the region any further.

During her tour of Latin American countries, von der Leyen, alongside Brazilian President Luiz Inacio Lula da Silva, emphasized the urgency of accelerating negotiations and finalizing the EU-Mercosur agreement. Both leaders expressed their ambition to reach a conclusion as soon as possible, aiming to achieve this milestone by the end of the year.

Nevertheless, even though both European and South American leaders are excited to sign the agreement and tout its potential benefits, authors such as Jason Hickel present a thought-provoking perspective that challenges the conventional notion of sustainable economic growth. 

His argument centers on the assertion that the pursuit of never-ending economic expansion is incompatible with the finite nature of Earth’s resources and the urgent need to mitigate environmental crises. According to this view, achieving genuine sustainability requires more than mere tweaks to existing systems—it demands a profound reevaluation of our societal values and consumption patterns.

At the heart of this perspective is the notion that true environmental resilience necessitates a departure from the relentless cycle of production and consumption that has characterized modern economies. Proponents of this viewpoint argue that focusing solely on increasing GDP and material accumulation exacerbates resource depletion, pollution, and ecological degradation. Instead, they suggest that by reining in production and consumption, we can reduce our collective ecological footprint, allowing ecosystems to regenerate and reducing the strain on vital resources.

The idea isn’t to strip away comforts or advancements, but rather to challenge the prevailing assumption that continual material accumulation equates to progress. By reimagining prosperity and embracing a more holistic perspective, societies can allocate resources more efficiently, reduce waste, and cultivate lifestyles that are both environmentally regenerative and personally fulfilling.

To address the pressing environmental crises, the reevaluation of growth becomes imperative. The view that sustainable economic growth is an oxymoron suggests that we must be willing to question the status quo and explore alternative pathways that prioritize harmony with the planet over unchecked expansion. This approach invites us to consider innovative economic models that prioritize well-being, foster resource equity, and champion ecological restoration.

Despite these issues, analysts remain optimistic about the agreement’s prospects. Trade between the EU and Mercosur countries has been steadily growing over the past two decades, even without a formal agreement. The conclusion of the EU-Mercosur agreement holds immense potential for enhancing trade, economic collaboration, and sustainability between the regions. As the negotiations progress, finding common ground on environmental commitments will be crucial in securing the deal’s successful ratification and realizing the mutual benefits for all parties involved.

Conclusion

The discourse surrounding Brazil’s Ecological Transition Plan, the EU-Mercosur Agreement, and global environmental concerns reveals a nexus of economic interests, sustainability goals, and geopolitical maneuvers. Brazil’s commendable efforts to position itself as an environmental steward are evident in its Ecological Transition Plan, aiming for a sustainable and resilient future. Also, the return of Luiz Inácio Lula da Silva to Brazil’s presidency signals a promising shift in environmental protection, supported by data indicating a reduction in deforestation.

Yet, challenges arise in aligning these intentions with the potential environmental implications of the EU-Mercosur Agreement, especially concerning deforestation. While the EU demands sustainable measures from Mercosur countries, notably Brazil, there exists a dichotomy in its actions, evident in the consumption habits that inadvertently spur deforestation. This discrepancy, exemplified through the EU’s simultaneous advocacy for environmental preservation and its consumption patterns, underscores the complex dynamics of international relations, as highlighted by Knox’s insights.

The arguments presented by thinkers like Jason Hickel provide an alternate perspective, suggesting that true sustainability might necessitate a departure from the traditional economic growth paradigm. Instead, a reconceptualization of prosperity, pivoting towards ecological harmony and well-being, might be the path forward.

The current global landscape, characterized by a heightened awareness of climate change and its ramifications, offers an unprecedented opportunity. Nevertheless, this shared vision for a prosperous and sustainable future requires not just agreements on paper but real-world actions, informed policymaking, and a steadfast commitment from all participants. 

Furthermore, as nations come together in this effort, they also have a single opportunity to lead by example. By successfully navigating these challenges, Brazil, the EU, and Mercosur nations could set a precedent for the world – illustrating how global collaborations can be rooted in both economic ambitions and an unwavering dedication to the environment. The path ahead may be complex, but with unity, innovation, and a shared ethos, they can illuminate the route for others, showcasing a harmonious blend of progress and preservation.

Pedro Serodio holds an LL.M in International and European Law at the Universität des Saarlandes and a Legal Assistant at MarketVector Indexes, in Frankfurt am Main, Germany

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09/24/2024 | Pedro Serodio | OpinioJuris

Africa’s Trade Transformation: The Power of Technology for Sustainability

African countries that understand and embrace these requirements are well on their way to laying the groundwork for sustainable trade practices

In the face of mounting global environmental challenges such as climate change, biodiversity loss, and pollution, and increasing focus on environmental, social and governance (ESG) awareness, sustainable trade practices and supply chains have the potential to radically transform Africa’s economic future.

From green logistics to fair trade and circular economy principles, sustainable trade practices have a significant positive impact on global and local trade. In addition to environmental benefits, they enhance market competitiveness and open access to new markets that value a commitment to sustainability.

However, the transition to eco-friendly and sustainable supply chains is reliant on several factors, not least a significant investment in the infrastructure and technology needed to streamline port and customs operations and ensure a smooth entry of goods into the country in question. An understanding of the importance of digital transformation by governments and regulatory bodies is also a key factor in adopting digital solutions over more traditional manual systems.

African countries that understand and embrace these requirements are well on their way to laying the groundwork for sustainable trade practices.

As an example, the port of Cotonou in the West African country of Benin handles an average of 80 to 90 merchant vessels monthly. According to the African Development Bank, Cotonou deals with 90 percent of the country’s international trade, serving up to 100 million consumers. In 2022, the port handled 12.5 million tonnes of goods, a figure that is predicted to almost double by 2038, reaching 23 million tonnes.

In a gesture of confidence, the recent extension of an €80 million loan by the African Development Bank for significant infrastructure upgrades will expand the port’s operations even further. Yet despite the vast and complicated operations of one of Africa’s busiest ports, Benin has jumped to 66th place on the World Bank’s Logistics Performance Index, an astonishing leap of approximately 100 places in just under a decade, positioning the country as West Africa’s key trade hub.

But this wasn’t always the case. High shipping costs, low efficiency, and poor logistical facilities threatened to stifle any hopes the port had of becoming a key trade route, despite the fact that the country is a crucial transit route for West Africa, connecting millions of people in the landlocked countries of Niger, Mali, Burkina Faso, Chad, and the northern regions of Nigeria.

Technology is revolutionising trade practices
The solution? Leveraging technology to break through the complexities, inefficiencies, and obstacles impeding effective trade, and transform Benin into an economically competitive trade hub.

This is a story that replicates itself in trade ports along Africa’s entire coastline. Operators and customs entities are constantly looking for ways in which to alleviate the backlogs and delays caused by the high volumes flowing through these trade entry points, and digitisation, along with improved physical infrastructure, is proving to be an extremely effective solution. Partnerships and collaborations with specialist service providers hold the key to success.

The Webb Fontaine and Benin story
Backtracking from the current situation, and highlighting the importance of long-term public-private collaborations in modernising and streamlining trade landscapes, Webb Fontaine started working with Benin’s Ministry of Finance and Benin Control in 2017. Implementing a suite of innovative solutions including Webb Single Window, Webb Transit Tracking, Webb Valuation, Webb Ports, and Webb Customs, we are proud to be playing a pivotal role in transforming trade in the country.

Webb Single Window has been a game changer. It forms the basis of GUCE Benin, a digital platform with over 6,500 users in the logistics chain that facilitates import, export, and transit operations, and incorporates electronic payment via Paylican, Webb Fontaine’s official payments partner. Webb Single Window has also automated the processing of key administrative operations like issuing licenses and authorisations, overseeing currency exchange operations, managing exemptions, and communicating with tax services.

In practical terms, this means streamlining the process needed to get containers out of the port. Digitising processes to create efficiencies, using new technologies such as artificial intelligence (AI), reduces the time spent on clearance of goods, for both customs brokers and administrators. Benin now ranks as West Africa’s top port and holds the third-highest rating in Africa behind Egypt and South Africa. Release times have been reduced by 30%, with a remarkable 50% of containers being released within only two days.

Along with operational efficiency at the ports themselves, economic growth is a key benefit. From digital skills development to higher revenues as a result of streamlined operations, technology is playing a crucial role. For example, reducing the clearance time from 47 days to only a few days allows for more cycles of importation, increasing tax revenue and creating a healthy economic cycle. This also attracts foreign direct investment, making the port more attractive for investors and traders.

However, the use of technology in port operations is just one aspect in a larger framework of sustainable trade. The resultant benefits, such as automated systems and data analytics have the potential to lead to more efficient operations, reduced emissions, and less waste, which are all key components of sustainable trade practices. For instance, quicker turnaround times not only reduce the carbon footprint of shipping and logistics operations, but they also reduce the need for extended storage, in turn decreasing energy consumption and waste.

Is Africa ready for sustainable and eco-friendly supply chains?
Despite the challenges faced by African countries, many are making great strides. Togo’s new container platform, Nigeria’s planned green port, Liberia’s green economy reforms – all are notable examples. Yet much still needs to be done to fully embrace the digital transformation journey, while at the same time addressing issues like infrastructure development.

All stakeholders have a role to play in implementing sustainable and eco-friendly trade practices and policies. African governments, for instance, can make a commitment to investing the funds and resources needed to create infrastructure that will support both trade and digital advancements, as well as support sustainability initiatives. The African Continental Free Trade Area can play a crucial role in developing a standardised approach to these issues, based on learnings from other countries on the continent.

Africa is a continent that has immense potential when it comes to creating and maintaining sustainable trade practices that will drive economic growth. The continent’s success stories demonstrate this, and serve as a call to governments, industry stakeholders, policymakers and the private sector to work together to find tangible solutions that will promote further growth and development. Webb Fontaine is already playing a crucial role in supporting Africa’s governments on their trade facilitation journeys, with specialised port technology that is securing customs revenue, mitigating trade fraud, and streamlining clearance times. In the same way, when all stakeholders collaborate and contribute to improvements in their respective areas, Africa’s economies will reap the collective rewards.

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09/04/2024 | Arnaud Bouraima | CIO Africa

The post WITA’S FRIDAY FOCUS ON TRADE – OCT 4, 2024 appeared first on WITA.

The year 2024 marks a global election cycle with over 80 countries, representing more than half of the world’s population casting their votes. In these uncertain times, the world finds itself confronted by a state of “polycrisis”—a complex web of interconnected global challenges that transcends borders. Geopolitics and international trade have a critical role to play in driving solutions to these crises.

As many countries continue to navigate the aftermath of the COVID-19 pandemic, the world contends with other pressing issues such as the increasing urgency of tackling climate change and addressing the fragmentation of traditional geopolitical alliances. As nations confront various stressors, including ongoing conflicts in several regions around the world, these interconnected issues have heightened uncertainties and undermined the previously robust support for open trade.

Consequently, countries are increasingly looking inwards, focusing on reshoring, “friendshoring,” and forming strategic alliances. Amid these shifts, there has been a noticeable backlash against globalization and free market economics, accompanied by a global rise in support for interventionism, a trend showcased by the growing embrace of industrial policy. In this evolving context, trade has emerged as both a strategic instrument and a point of tension, as demonstrated by the simmering trade war between the United States and China, and fragmentation spurred by competition among geopolitical blocs.

These geopolitical maneuvers are reshaping global trade patterns, leading to trade diversion and the formation of new economic relationships. Although the World Trade Organization (WTO) also faces its own crises, it remains a vital platform for promoting international cooperation. For example, to facilitate pathways to cooperation and mitigate economic security risks, the WTO can provide a forum for members to design a mechanism to address economic security concerns while supporting multilateral governance, as one of the report’s authors suggests. At the same time, the focus on securing supply chains and fostering domestic capabilities, particularly in clean technology and critical raw materials (CRMs), underscores the integration of trade and technological advancement. However, alongside a clean tech boom, a wave of protectionism and industrial policy has blossomed in these key industries. The result is a global critical minerals supply chain that discourages responsible actors, presenting security and labor rights concerns.

Ultimately, the promise of a sustainable and interconnected future hinges on international cooperation. The WTO’s current rules on technical barriers to trade can serve as a guide for the development of enforceable mining standards to help mitigate the risks of expanded mining activities while refraining from raising significant trade barriers. Additionally, the organization can take concrete steps to ensure the clean technology boom also leads to clean technology transfer by prioritizing linkages between the trade and climate regimes and their respective technology transfer initiatives. The WTO could also revitalize discussions on reducing barriers to trade for environmental goods (and services), elevating them to top priority.

Across all of these issues, the implications of trade policies for developing countries, particularly workers, remain a critical concern. These countries often face significant challenges in accessing the full benefits of global trade, and are increasingly impacted by unilateral trade measures and trade-related policies. The quest for inclusivity and fairness in trade is crucial for addressing global issues such as climate change, as developing countries often lack the financial resources, infrastructure and technology, and institutional capacity to meet climate targets. Such economic disparity risks the exclusion of developing countries from the benefits of global climate initiatives. Alongside this, re-globalization can leverage trade measures to improve the representation of workers and other groups previously excluded from the design, implementation, and enforcement of trade policies. Addressing gaps in an inclusive trade agenda is essential to ensuring the benefits of trade are more equally distributed across developing countries and vulnerable stakeholders, including women.

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09/09/2024 | María Belén Gracia, Euijin Jung, Inu Manak, Penelope Ridings & Elizabeth Whitsitt | TradeExperettes

Building Resilient Supply Chains: The Case of Semiconductors

After decades of globalization and relative stability, the world is at a turning point. Amidst rising geopolitical tensions, shifting supply chains and states’ embrace of national industrial strategies, policy and corporate decision makers are facing a host of new, challenging questions concerning technologies, markets, and supply chains crucial to economic and national security. These critical and emerging technologies are increasingly and intimately intertwined with geopolitical frictions, if not at their core. Thus, it is important to recognize today’s unique challenges that require innovative thinking and approaches in technology governance to strengthen and build resilient supply chains that are prepared to withstand and can adapt to new geopolitical dynamics.

Interconnected global supply chains based around comparative advantage and lower labor costs linked through complex logistics have proven to be a key component of globalization. However, the interdependence between economies, and the reliance on even geopolitical rivals, has revealed downsides that go beyond pure economic and efficiency considerations. Disruptions, especially during and after the COVID-19 pandemic, have reinforced the need for states to assess risks across a variety of national industries and global market sectors. These domains range from critical food and medical supplies, to automotive, raw materials and other commodity markets, and especially high-tech supply chains, like in the semiconductor ecosystem. To address the issue of supply chain resilience, this assessment evaluates semiconductors as a case study and discusses the risks of disruptions to the supply chain and the measures governments across the globe have taken individually and collectively to strengthen this crucial industry.

Semiconductors, which underpin nearly all current and near-future technology applications in the commercial and military realms, are a key concern for nations’ economic, security, and foreign policies. Governments have chosen to manage dual-use technologies and their supply chains, including semiconductors, comprehensively through new export controls, tariffs, investment screening, and de-risking through investments, subsidies and international cooperation to mitigate risk from growing geopolitical friction. These efforts are primarily driven unilaterally, but collective action and cooperation will be pivotal to ensuring supply chain resilience moving forward for the United States and its allies and partners.

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08/30/2024 | Jeffrey Bean & Andreas Kuehn | Observer Research Foundation America

The Case for a Comprehensive US-EU Economic Agreement

The United States and Europe are currently in political limbo. On one side of the Atlantic, the outcome of the US presidential election in November could go either way. On the other side, the makeup of the new European Commission is yet unclear. But what is certain is that the United States and the European Union (EU) face a range of shared challenges ahead no matter who is at the helm. These challenges include predatory nonmarket economic practices, deindustrialization, supply chain vulnerabilities, the transition to a digital economy, and climate change. Successfully dealing with these issues will require unprecedented transatlantic coordination both to leverage joint power and to avoid causing collateral damage to each other. To that end, policymakers in Washington and in Brussels should begin discussions on the contours of a comprehensive, three-pillar US-EU economic agreement now, so that both sides can hit the ground running in early 2025.

It won’t be easy. Ambitions to broaden and deepen the transatlantic marketplace suffer from past disappointments. The Transatlantic Trade and Investment Partnership foundered in disputes over hormone-treated beef and investor-state dispute settlement. The current EU-US Trade and Technology Council has produced only narrow benefits. In the absence of coordination, both Washington and Brussels have resorted to unilateral measures, such as the US Inflation Reduction Act, national security-related tariffs on steel and aluminum, and the EU’s doubling down on its long-proposed carbon border adjustment mechanism. In the future, the need to take urgent unilateral measures will only increase as the dire consequences of failing to act become clear.

A comprehensive transatlantic economic agreement—not a traditional trade agreement—could avoid relitigating the issues that have sunk past US-EU trade and investment initiatives. Rather, learning from the lessons of past efforts, Washington and Brussels must accept that, despite their shared interests, Europe and the United States have decidedly different economic cultures and polities. And any new comprehensive agreement should accommodate these differences while coordinating parallel approaches to the rapidly evolving global economy.

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09/15/2024 | L. Daniel Mullaney & Bruce Stokes | Atlantic Council

How Trade Agreements Have Enhanced the Freedom and Prosperity of Americans

An essential part of America’s turning away from protectionism since the Great Depression has been the signing of free trade agreements (FTAs) with other nations. Those agreements, while imperfect, have led to lower tariffs and other barriers to trade, in the United States and abroad. They also have provided incentives for compliance through dispute settlement while discouraging mutually damaging trade wars. Although the impact of trade agreements has often been exaggerated by both their advocates and opponents, decades of experience and economic analysis confirm that the benefits for most Americans have been positive. The United States today is a richer and freer nation, and the world is a more hospitable place for economic activity because of those trade agreements.

The most straightforward and preferable path to trade liberalization for any country is the unilateral reduction of trade barriers without regard for other countries’ trade policies. Unilateral liberalization allows a country to realize the gains from openness—mainly lower prices for consumers, lower-cost inputs for businesses, and a more favorable exchange rate for exporters—without the need for complicated negotiations with other countries. Many nations have followed this route with success, from Great Britain in the mid–19th century to China and India and other emerging economies since the 1980s. As discussed in a separate Defending Globalization essay, however, unilateral liberalization is politically difficult, so governments have turned to reciprocal trade agreements, which offer reduced trade barriers at home in exchange for similar liberalization among participating governments abroad. The best approach to trade agreement liberalization is multilateral—the lowering of barriers to goods, services, and investment in a nondiscriminatory way by almost all countries through such forums as the World Trade Organization (WTO). A next-best option is bilateral and regional FTAs among two or several governments, respectively.

The United States is a partner in bilateral and regional FTAs with 20 other nations, including such major trading partners as Canada, Mexico, South Korea, Singapore, and Australia. The United States was a founding member of the General Agreement on Tariffs and Trade after World War II and is a member of its successor institution, the WTO, a multilateral agreement with 165 other countries that covers 98 percent of world trade. The United States is also party to narrower bilateral investment treaties with about 40 other nations that protect American investment assets abroad.

The 20 bilateral and regional FTAs that the United States has signed have virtually eliminated tariffs on US exports to those countries. Those FTAs have achieved what even trade populists claim as a goal: reciprocal tariff rate reductions. By definition, FTAs set virtually all tariffs between the signatory nations at zero. The reductions, as well as liberalizing components (restrictions on nontariff barriers, services, and investment disciplines, for example), can be phased in over time, and a few politically sensitive sectors can be excluded, but substantially all trade under the 20 FTAs that the United States has signed occurs duty-free.

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08/27/2024 | Daniel Griswold & Clark Packard | Cato Institute

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The following is an excerpt from Uri Dadush’s newest book: “Geopolitics, Trade Blocs, and the Fragmentation of World Commerce”. 

Introduction: A Global Emergency

The post-war trading system, which is at the foundation of our prosperity and orderly international relations, may be ending. Instead, ahead of us may lie an indefinite period of fragmentation of world trade and a more fractious and unstable world order. As trade rules embodied in the World Trade Organization (WTO)—which are imperfect and outdated but still constitute the bedrock on which the world trade edifice stands (Wolff, 2023)—become increasingly eroded, trade will be reconfigured inefficiently along regional and “friendship” lines. The global economy will slow, expectations of higher living standards will remain unmet, the poverty reduction of decades past may be reversed, and climate action will be impeded (Georgieva, 2023).

This book seeks to address the questions—uppermost in the minds of policymakers and analysts around the world—why fragmentation is happening, how it might evolve, and what can be done to prevent, or at least mitigate, the economic and political disruption that it will bring. I do not claim to provide a definitive answer, nor—frankly—would I expect anyone to do so. Indeed, uncertainty about what fragmentation will bring is the essence of the challenge it poses for policymakers and firms. I aim, however, to advance our understanding of fragmentation by considering both the politics and economic thinking that drive it, and the economic and security context within which it is occurring. I try to sketch possible outcomes of the fragmentation process and suggest policies that respond robustly to the uncertainty the erosion of trade rules is generating.

Along with a succession of crises—the Global Financial Crisis (GFC), China–U.S. tensions, the pandemic, the war in Ukraine—the prevailing narrative on globalization and trade changed. In many quarters trade is no longer viewed as a source of efficiency, growth, and peaceful relations but as a source of unfair competition, inequality, and a threat to national security. What did not change, however, is a compelling body of theoretical and empirical evidence dating back 250 years which shows that nations gain from international trade. If anything, the evidence continues to accumulate. Countries could not have fought the pandemic without trade in vaccines and medical equipment, and without foreign supply of everything when whole nations went into lockdown at various times. As the effects of climate change became more visible in prolonged droughts and other disasters, so did the need for trade in food, solar panels, and critical materials for batteries. As the world’s climate continues to deteriorate, nations will have to choose between agricultural trade and mass migration, and to choose between trade in environmental goods and use of fossil fuels.

Why did the narrative on globalization become so negative and why is the resurgence of protectionism threatening? One reason is as old as the annals of commerce yet remains fundamental. Nations gain from trade but, in sectors where they do not have comparative advantage, workers and capital invested lose, creating a coalition to resist trade. A sequence of crises which undermined confidence in globalization and discredited the prevailing policy paradigm bolstered the political resistance to free trade by those who lose from it. The “Washington Consensus” became the Washington dissensus.

The resistance to trade found new life in three developments. The first is the intensifying rivalry between China and the United States, the world’s superpowers, and largest economies. The second—and connected—development is a revolution and inward turn in the trade policy of the United States, the architect of the post-war system, which has its roots in its increasingly fractious social and political divisions, and to the rising inequality and macroeconomic instability of recent decades. The third development is the mounting concern that WTO rules are outdated and increasingly getting in the way of sovereign preferences in many areas. While traditional agendas such as differences in labor standards and in industrial policy (e.g., support to infant and declining industries) remain insufficiently addressed, even more pressing and divisive issues, namely climate change and national security took center stage.

Economic efficiency mandates that the right policy response to the mounting tensions is not to close trade but to address the problems at the core—to find a strategic accommodation with China, to mitigate the losses of some workers from trade with adequate social support, and to coordinate decarbonization policies. For all its shortcomings, there is enough flexibility in WTO trade rules to accommodate national preferences and where there is not, the WTO offers a means to achieve better coordination without unduly restricting trade. But however valid these arguments are, trade policy is a balancing act between conflicting interests and views, and the balance is rapidly and decisively shifting toward allowing countries more “policy space.”

It takes time for the world economy to change direction and this book shows that the fragmentation of world trade has barely started: it is not too late to prevent fragmentation. Protectionism and rule-breaking in many quarters have been offset by trade liberalization in others, especially under the growing number and increased depth of regional and mega-regional trade agreements. Global value chains continue to show remarkable resilience. Many companies that once called for protection have either become defunct or are adapting, reorienting toward world markets, importing cheaper inputs, drawing on foreign technology, investing overseas, and calling on equity and debt capital from abroad. Trade continues to grow, technology advances, enormous gaps in wages and productivity across the world persist, and the gains from globalization are far from spent.

Yet, the signs that the trading system is on the cusp—that an avalanche of protectionist measures has begun to roll and is building—are unmistakable. These signs now go well beyond the trade war between China and the United States and the sanctions on Russia and Iran. They include, for example, over thirty WTO trade disputes that remain in limbo after its Appellate Body became disabled, a vast increase in trade concerns expressed in WTO committees, large trade-distorting subsidies in the United States which has newly embarked on import-substituting industrial policy, and a widespread expectation that decarbonization measures will cause a new wave of trade disputes. Donald Trump is the Republican candidate in the 2024 Presidential election and has promised to escalate the trade war with China and impose an additional 10 percent MFN tariff on U.S. imports, which would amount to the United States tearing up the WTO and is bound to prompt retaliation by partners that account for most U.S. exports.

Avoiding fragmentation or, at least mitigating the damage it will cause, is possible. An essential condition is for China and the United States to reach an accommodation on trade. The tension in China–U.S. relations is no longer mainly about trade if it ever was, and nor is reduced trade the most worrying consequence of their rift. The rivalry between a rising China and the incumbent United States has preoccupied eminent American scholars such as Graham Allison (2017), John Ikenberry (2014), Henry Kissinger (2011, 2012), and Joseph Nye (2023). The perspectives they offer are diverse, but they build on the same assumption: the nuclear-armed giants have the means to destroy the other without realistic prospect of defense, and so they will coexist or not exist, and must be constantly wary of the risk of escalation. Others of the self-denominated realist school see a military conflict between the superpowers over supremacy in Asia as highly likely (Mearsheimer, 2006)….”

Read the Book Introduction Here

9/9/2024 | Uri Dadush 

From Rhetoric to Reality: Nearshoring in the Americas

Executive summary

Over the past five years, global shifts have reshaped the world. China’s rise, US-China tensions, COVID-19, and Russia’s 2022 invasion of Ukraine exposed supply chain vulnerabilities, pushing resilience to the top of the agenda. Latin America and the Caribbean (LAC) can seize the opportunity to provide solutions for US companies through nearshoring. With the most US bilateral free trade agreements, geographic proximity, and abundant critical minerals and forms of renewable energy, LAC is perfectly positioned to support the “China+1” strategy while also meeting environmental, social, and governance (ESG) standards. Estimates suggest nearshoring could add an annual US$78 billion in additional exports of goods and services in Latin America and the Caribbean in the near and medium term. Similarly, nearshoring could allow the US government and US companies to diversify supply sources and build resilient supply chains, while boosting inclusive economic growth in the region.

How can nearshoring be transformed from rhetoric to action? How can the United States and regional governments work together to materialize nearshoring opportunities? How can the private sector be included in this endeavor? To answer these questions, the Atlantic Council created the Nearshoring Working Group, a multisectoral group of practitioners and experts from the United States and the region to help advance actionable policies to accelerate economic engagement across the hemisphere. Through numerous consultations with Nearshoring Working Group members and conversations with officials in the United States and across the region, this report identifies three overarching conditions that need to be met to materialize nearshoring, and suggests ten opportunities to achieve the three conditions.

Improving domestic “pull” factors

• Modernizing port and telecommunications infrastructure: Pursue modernization of port infrastructure to reduce transportation costs associated with nearshoring, and expand internet access.
• Improving “soft” infrastructure at border crossings: Leverage regulatory modernization and harmonization of customs processes to improve intraregional trade and coproduction.
• Offering reliable, clean energy sources: Create regulatory frameworks for renewable energies to reduce share of fossil fuel dependency, and update transmission lines to achieve reliable electricity.
• Providing legal certainty and fostering strong institutions: Offer predictable “rules of the game” for investors by strengthening independent regulatory agencies and pursuing digitalization of public services.

Unlocking US “push” factors

• Leveraging existing US trade policy toward the region: Work with partner countries to ensure provisions of current free trade agreements (FTAs) are best utilized in promoting nearshoring and supply chain resilience and sustainability.
• Tailoring development and investment policies to US strategic goals: Investment development policy must be tailored to US strategic goals, by lifting institutional constraints to International Development Finance Corporation (DFC) lending to LAC.
• Leveraging the existing toolbox across the US government: Include the breadth of US government programs and agencies as a tool of intragovernmental, bilateral engagements to catalyze nearshoring.

Enhancing public-private sector collaboration

• Strengthening workforce development: Closer collaboration between the public and private sectors is essential to close the skills gap between jobseekers and employers and improve the region’s human capital.
• Enhancing trade and investment promotion through multisectoral collaboration: Incorporate private-sector input in the decision-making process of investment promotion schemes such as investment promotion agencies (IPAs) and free trade zones (FTZs) to render both tools more effective.
• Supporting industries by following winners: Governments should provide incentives for winning industries to further grow, avoiding the draining of fiscal resources for industries that have yet to prove their yield.

Read the Full Report Here

September 17, 2024 | Adrienne Arsht Latin America Center’s Nearshoring Working Group | Atlantic Council

The CPTPP: a Benefit of Brexit

Britain is now a party to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which includes many of the world’s richest and most dynamic economies. This would have been impossible without Brexit, and it is a very different kind of agreement to being a member state of the EU. This article explains why.

Last week Peru became the sixth country to ratify the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement between 12 countries mostly surrounding the Pacific Ocean or the South China Sea, except for the UK. The agreement will come into effect on the 15th of December this year with the members who have ratified the agreement. So far that is Peru, Japan, Singapore, Chile, New Zealand and Vietnam. Hopefully, the other members (Australia, Brunei, Canada, Malaysia and Mexico) will finish their ratification process shortly.

The CPTPP includes some of the world’s most affluent and rapidly growing countries, with a total GDP of US$15.4 trillion in 2023. 

No doubt the usual suspects will be complaining that the UK has given up its access to the EU for the CPTPP but that isn’t true. EU membership is very different from becoming a party to the CPTPP agreement. And the UK has retained its tariff-free and quota-free trade with the EU.

The CPTPP is focused on promoting market-driven economies and the elimination of tariffs and other trade barriers for manufactured goods, agricultural commodities, and services. It also establishes rules for investment and protection for investors, intellectual property, and communications, as well as transparency in government procurement. The CPTPP requires its parties to establish a committee to identify ways to assist SMEs in taking advantage of the commercial opportunities in the CPTPP and help them grow their exports. The CPTPP trade agreement has a chapter on the Environment, and it sensibly concentrates on achievable goals: protecting the oceans from ship pollution, overfishing, and illegal fishing; protection of wild flora and fauna, endangered species and their habitats; control of toxic chemicals, discharge of pollutants and environmental contaminants and protecting the ozone layer. These protections must be in each party’s legislation and be enforced by the members’ governments.

What the CPTPP is not is a group of countries moving towards a federal union. Unlike the EU, there is no CPTPP Commission, Parliament, Court, Flag or National Anthem and the UK doesn’t have to pay to be a member. The UK can determine its own VAT rates (and keep any money raised) and we are not forced to apply tariffs to goods imported from non-CPTPP countries – as we were when members of the EU. The CPTPP doesn’t even have one President, let alone five (like the EU). And most importantly the CPTPP does not require its members to adopt its regulations nor do UK courts have to defer to CPTPP laws above our own laws. And despite the social media rumours, the CPTPP won’t force the UK to give up its animal welfare regulations. (For the record, Chile does not allow cattle to be treated with hormone implants and it produces enough beef to fill the UK’s very small CPTPP beef quota.)

Quotas and tariff reductions
The usual suspects have also complained that the UK already has trade agreements with many countries in the CPTPP so there is no need to join. However, if these trade agreements were rolled over from the EU, then they will have had small quotas on many products that the UK needs to import but were in competition with other EU producers. When the UK left the EU we were generally given about 14% of the EU’s quotas with the CPTPP countries, this left us with small uneconomic tariff-free import allowances. And most of the EU’s trade agreements skipped over services – even though they are one of the UK’s largest export sectors.

The CPTPP goods liberalisation is generally better for UK consumers although the UK’s farmers have continued to get protection from CPTPP producers, even though they have no protection against EU producers. Inexplicably the UK has also limited rice and banana imports from other CPTPP parties.

But most UK import tariffs will be eliminated in full on CPTPP imports in December, at least from countries that have ratified the treaty. Although UK import tariffs on food that can be produced in the UK will be reduced more slowly. For example, imported beans will have their tariffs eliminated over 5 years, some types of apples will take 10 years, while dairy product tariffs will generally be lowered over 5 years although butter will take 11 years.

However, a lot of the UK’s protection from agricultural competition is unnecessary. The largest food exporters in the CPTPP are either in the southern hemisphere and so produce food in the opposite season to the UK or they are in the tropics and produce foods that cannot be grown in the UK climate. While the CPTPP’s two largest food exporters, Australia and New Zealand, have been limited to the quotas they received in their bilateral trade agreements with the UK so will not be eligible to use the CPTPP quotas.

This will be the UK’s first trade agreement with Malaysia, and it will allow the UK to import refined palm oil tariff-free directly from Malaysia rather than via EU refiners in the Netherlands, which import crude palm oil from Malaysia, refine it and then sell it to us (still!). While Malaysia will lower its 80% tariffs on imports of UK Whisky over 16 years (If you think this is unfair, please see the UK’s tariff reduction for Australia Beef or New Zealand Lamb).

Accumulation
Joining the CPTPP is particularly good news for UK manufacturers and exporters. The CPTPP’s process of accumulation allows imported materials, parts or semi-finished goods from other CPTPP countries to be counted as originating material if the finished product is exported to another CPTPP member.

Despite the delicious food and drink produced in CPTPP countries, they mostly export machinery and parts, electronics, oil and gas, minerals, chemicals, clothing and footwear. These products will probably become part of UK supply chains to benefit from the CPTPP’s process of accumulation. For example, if a UK fashion company uses wool or cotton produced in Australia, or cloth made in Malaysia, or manufactures their goods in a Vietnamese factory, these inputs count towards originating material under CPTPP rules so the finished products can be sold in other CPTPP countries at the CPTPP preferential tariff rate.

Similarly, if UK car manufacturers use Australian bauxite to make aluminium or car parts made in Malaysia, Japan or Mexico, then this will count as local content if the final vehicles are sold within the CPTPP. This is likely, as Brunei, Australia, Chile, Peru and New Zealand have no local vehicle producers and are dependent on imported cars, trucks, and mining vehicles.

Conclusion
It was very encouraging to see the new Trade Minister, The Rt Hon Douglas Alexander, announce the accession of the UK to the CPTPP. This coincided with rumours that the Prime Minister was trying to rejoin the EU by meeting with Chancellor Scholz in Germany and President Macron in France. If this was the aim of the meetings, it is misplaced. UK trade with the EU is doing fine but is hampered by the EU’s sluggish economies – not Brexit. While allowing the UK to fully benefit from increased trade with the dynamic economies of the CPTPP, will help the UK achieve the economic growth the Prime Minister is looking for.

Read the Full Blog Here

9/4/2024 | Catherine McBride | Briefings for Britain

Breaking Barriers: Enhancing Women’s Participation in Trade Across the Indo-Pacific

A gender-inclusive trade agenda will help create better jobs and unlock greater economic potential.

The persistent gap between male and female labour market participation is a trend common to all regions of the world. Across the Indo-Pacific region, research shows that women are not benefiting from job growth in new sectors as much as men.

A missing link in the conversation on improving women’s participation in the Indo-Pacific economies is the role of trade. The region, which has an outsized influence on geopolitics and accounts for nearly half of global trade, can be critical for accelerating women’s economic participation and promoting inclusive growth through trade.

The inextricable link between gender equality and trade has become well established in recent years. Trade directly improves women’s lives, by creating better jobs, increasing women’s wages and welfare, and creating opportunities for women to move into higher-skill work and entrepreneurship. Firms that are part of global value chains demonstrably employ more women in developing countries. Women make up 33% of the workforce of firms that engage in international trade, compared with 24% in firms that do not.

The impact of trade on gender equality is wide-ranging – trade enhances women’s access to education, healthcare and technology.

Despite its potential for improving outcomes for women, gender has received little attention in international trade. Globally, only 15% of firms engaged in international trade are led by women. In OECD countries, 27% of women’s jobs are dependent on exports, compared to 37% for men. International trade is not favourable for women who face a wide range of barriers that include social norms and gender biases, mobility constraints, policy and legal hurdles, and restricted access to finance, technology and information.

However, recent trends in international trade present an opportunity for increasing women’s participation. This includes the overall increase in regional and cross-border trade and the dominance of global value chains, the rise of services in trade, and the expansion of green trade and digital trade.

Together these shifts represent the need for a workforce with upgraded skills, creating space for more women to enter the trade sector.

Governments and multilateral and international organisations have more recently started acknowledging that trade is not gender-neutral and seeking ways to address the global gender gaps in trade. This year’s G20 presidency under Brazil has identified boosting women’s participation in international trade as an organisation priority for the first time.

Gender provisions are also increasingly a part of trade policy and trade agreements. According to the World Trade Organisation, as of September 2022, 101 of the Preferential Trade Agreements out of 353 included an explicit reference to gender issues. Very few of these gender-related commitments, however, are enforceable.

Interestingly, the WTO, which has been advocating for gender-inclusive trade, has its own gender gaps to fill. Only 36% of ambassadors and 30% of ministers in charge of decision-making at WTO are women.

Australia has been seeking to elevate the conversation on gender segregation in trade. It endorsed the WTO’s Buenos Aires Declaration on Trade and Women’s Economic Empowerment in 2017, and in February 2024 became a member of the Global Trade and Gender Agreement. A new International Gender Equality Strategy being developed by the Department of Foreign Affairs and Trade will reflect the commitment to reduce gender gaps in trade.

The Indo-Pacific, which includes some of the world’s largest economies as well as the fastest-growing economies, and “mega-regional” free trade agreements, has the potential to propel inclusive economic growth and improve the economic security of women.

There are several ways for the region to work towards this goal. Established regional forums for economic cooperation such as the Association of Southeast Asian Nations and the Asia-Pacific Economic Cooperation forum can play a critical role in engaging governments, the private sector and businesses to promote inclusive trade in the region.

Gender mainstreaming is integrated into newer initiatives, including the Indo-Pacific Economic Framework for Prosperity (IPEF), a regional initiative of 14 governments to build economic integration in the Indo-Pacific, with Australia, the United States, Japan and India as members. IPEF lists trade as one of its four core pillars, and explicitly underlines the need for inclusivity in trade, removing barriers to economic empowerment and encouraging greater participation by women.

Gender equality must be a critical part of building supply chain resilience in the region. Women are under-represented in global supply chains, work in vulnerable and precarious conditions, and are concentrated in low-skilled employment.

The Supply Chain Resilience Initiative (SCRI) between Australia, India and Japan could be another initiative to promote increased employment and entrepreneurship opportunities for women. IPEF, SCRI and the Quad group each list enhancing the workforce of supply chains in critical sectors as a priority, and could have targeted training and skilling programs with gender quotas.

Trade facilitation directly benefits women and enhances their participation in trade-related services. Countries such as India and Australia, leaders in trade facilitation, can work with countries in South Asia and the Pacific to promote gender-sensitive trade facilitation processes in their neighbourhoods.

The Indo-Pacific region, most often cited as a geopolitical flashpoint for trade, can be at the forefront of advancing a gender-inclusive trade agenda.

The post WITA’S FRIDAY FOCUS ON TRADE – SEP 20, 2024 appeared first on WITA.

On Wednesday, September 11, 2024 WITA held its first ever International Trade Reception at the WTO in Geneva. Guests included diplomats from WTO member countries, WTO officials, and the global business community. At the event, Ambassador Susan Schwab, the former United States Trade Representative and current Chair of the National Foreign Trade Council, presented WITA’s Global Leadership Award to WTO Director General, Dr. Ngozi Okonjo-Iweala.

Featured Remarks:

Kenneth Levinson, CEO, Washington International Trade Association

John W. Miller, Chief Economic Analyst, Trade Data Monitor

Ambassador Susan Schwab, Chair, National Foreign Trade Council

Dr. Ngozi Okonjo-Iweala, WTO Director General

Special thanks to our sponsors for the reception, Trade Data Monitor, National Foreign Trade Council, U.S. Council for International Business, American Chemistry Council, and Silverado Policy Accelerator.

Watch the Full Video Here

09/11/2024 | WITA International

Facilitating a Circular Economy for Critical Minerals – WITA Panel at the WTO Public Forum

On Thursday, September 12, 2024 WITA hosted a panel at the WTO Public Forum in Geneva, Switzerland discussing the impending shortage of critical minerals and how international organizations like the WTO can promote recycling and reusing through trade policy reforms and enhanced reverse supply chains.

Panelists explored how the WTO can help to facilitate reverse supply chains that enhance trade in secondary, used, and reusable goods and materials. Discussants also looked at how the WTO, World Customs Organization, and Basel Agreement can work together on customs nomenclature that supports trade in reusable and recyclable materials rather than simply classifying them as “waste.”

Featured Speakers:

Jason Bernstein, Director of International Trade and Supply Chain, American Chemistry Council

Aik Hoe Lim, Director, Trade and Environment, World Trade Organization

Ana Laura Lizano, Minister Counsellor, Permanent Mission of Costa Rica to the WTO

Kelly Milton, Assistant USTR for Environment and Natural Resources, Office of the U.S. Trade Representative

Moderator: Maureen Hinman, Co-Founder and Chairman, Silverado Policy Accelerator

Watch the Full Video Here

09/12/2024 | WITA International

World Trade Report 2024 — Trade and Inclusiveness: How to Make Trade Work for All

Over the past 30 years, the world has witnessed a period of income convergence, as the gap in income levels between economies has narrowed. Economic growth has improved living conditions for many people around the world but not all individuals and economies have benefited equally from the changes brought about by more open trade. This year’s Report explores the interlinkages of trade and inclusiveness across and within economies, discussing how trade policies need to be complemented by domestic policies to make the benefits of trade more inclusive.

The Report underlines that diversifying global value chains, reducing trade costs through digitalization, and transitioning to a low-carbon economy can create new opportunities for low- and middle-income economies. Furthermore, when trade policies are complemented by domestic measures, such as labour, education and competition policies, the gains from trade can more easily flow to workers and consumers. Enhanced WTO cooperation with other international organizations can magnify their combined action to increase inclusiveness across and within economies.

Read the Full Report Here

09/10/2024 | World Trade Organization

30 Years On: A Call to Action to Restore Economic Cooperation at the WTO

“Opportunity.” That was the word that Peter Sutherland, the first WTO Director-General, used to describe the creation of the new global framework to govern trade in goods and services, back in 1994. He specifically referred to “opportunities to expand trade, economic growth and employment … opportunities to promote sustainable development… And an opportunity — the most significant we have had for fifty years — to build a new basis for global economic cooperation”.

Fast-forward to today: the WTO and its rules are still crucial in helping nations to tap into new opportunities for trade growth, to harness trade to tackle global challenges and de-escalate trade tensions. But amid heightened geopolitical tensions, some key players’ commitment to economic interdependence has waned, chipping away at some of the fundamental principles of global trade governance and making it harder to achieve sustainable economic convergence, particularly for those still at the periphery of economic development — whether they are people, businesses or entire countries.

Thirty years after the inception of the WTO, it is time to reignite the spirit of economic cooperation that inspired its formation — this time to support so called re-globalization to make trade more inclusive and more equitable. Inaction, complacency, or waiting for a sudden change of heart among those unconvinced by the multilateral trade system will not do the trick. Restoring the practice of collaboration among WTO members requires bold measures: first, the role of trade policy as a catalyst for growth and development must be emphasized; second, national security concerns must be recalibrated; and third, a tangible commitment is needed to rebuild trust among economies and to update the WTO rulebook so that it aligns more closely with today’s realities.

Read the Full Blog Here

09/11/2024 | Anabel González | World Trade Organization

The post WITA’s Friday Focus on Trade – Sep 13, 2024 appeared first on WITA.

Antimony: The Hidden Metal Fueling Global Competition

The EU’s Critical Raw Materials Strategy: Engaging with the World to Achieve Self-Sufficiency

Navigating Barriers to Reverse Logistics Adoption in Circular Economy: An Integrated Approach for Sustainable Development

WITA – We put the community in trade community.

Information about upcoming WITA and trade community events

TRADE COMMUNITY EVENTS CALENDAR

The post WITA’s Friday Focus on Trade – Sep 6, 2024 appeared first on WITA.

Following are excerpts from a piece published by the Asia Pacific Foundation of Canada.

Global trade is changing. It is buffeted by international and domestic pressures, from security tensions to climate burdens and technological innovation. Security competition is intensifying trade between ‘blocs’ and recalibrating long-standing trade dynamics. Conflicts in Europe and the Middle East are roiling supply chains already waylaid by the COVID-19 pandemic. Countries are using environmental measures to restructure production and trade. And technological shifts are accelerating trade facilitation while creating new challenges for countries that have not effectively regulated their digital economies.

Such challenges pose obligations, burdens, and expectations for countries like Canada that rely greatly on global trade for their economic growth and prosperity. Canada must prepare for an increasingly contested, complicated, and fractious global trade landscape that will only become more onerous to engage, negotiate, and leverage.

Four megatrends are dominating global trade:

First, U.S.-China security competition continues to cast a shadow over the trading system, affecting and rewiring regional economic partnerships. This seemingly persistent rivalry is compounded by muscular industrial policies from both countries and other powers (such as the European Union), further distorting trade patterns. Both ‘friend-shoring’ and ‘near-shoring’ could accelerate, despite constraints, with countries such as Mexico, South Korea, Thailand, and Vietnam benefiting disproportionately…

…Second, besides U.S.-China competition, other geopolitical fault lines (in Ukraine, the Middle East, and the South China Sea) will further stress world trade. Trade between regions is slowing as intra-regional trade grows. Southeast Asia, in particular, continues to benefit from this dynamic, at least for now. U.S. tariffs and export controls are pushing multinational firms to relocate manufacturing from China to Southeast Asia, boosting foreign direct investment and creating more jobs…

…Third, trade patterns, tensions, and preferences intersect, drive, and occasionally conflict with the unfolding energy transition as countries craft policies to mitigate climate change. Climate change is already affecting trade. Firms have to adopt low-carbon business models to become and/or remain globally competitive. Increasingly, sustainability will be commercially priced and included in the cost of doing business. New investment opportunities accompany climate mitigation. Some developed countries are strategically using trade-related environmental policies, littered with requirements to measure and verify the environmental footprint of imports…

…Fourth, technology is both enabling and constraining global trade. Although digital technologies are a key driver of trade, most countries have yet to effectively regulate their domestic and external effects. Digital trade measures have to be aligned across borders; this issue will become more important as countries pass laws on issues like data, AI, cybersecurity, and digital competition, which could affect digital trade.

Read the Full Dispatch Summary Here

08/21/2024 | Karthik Nachiappan | Asia Pacific Foundation of Canada

China’s Investigation Into EU Dairy: Careful What You Wish For

Night really does follow day! On Tuesday (20 August) the European Union announced its planned anti-subsidy tariffs on Chinese electric vehicles, a hefty 36.3%.  

On Wednesday (21 August), China retaliated by opening an investigation into EU subsidies for cheese. Affected parties – the European Union, EU member states, dairy producers exporting to China – have twenty days to respond. 

Clever move? 

This move by China is either very clever or very stupid. Or possibly both. Let’s unpick it.  

The first observation to make is that the EU will not have been taken by surprise by the opening of this cheese subsidy case. China invariably retaliates when its trading partners impose restrictions on its exports. In its announcement of the investigation China in fact refers to consultations having taken place with the Commission two weeks ago.  

It is not impossible that it was even choreographed between China and the Commission, so that the Commission can demonstrate to EU member states that there will be a high price to pay if in November the EU imposes definitive duties on electric vehicles.

EU dairy producers in many member states pay the price for a trade spat in a wholly unrelated sector.  

Why cheese? European wine and charcuterie producers must be heaving a sigh of relief as I write, as they were assuming they would yet again be the target of the obligatory retaliation.  

China chose its target carefully. Cheese is a politically high-profile product in European eyes, it comes from a large range of member states – “there’s a cow in every member state” the saying goes. So, the pain will be distributed across the whole of the EU.  

Yet at the same time exports to China – that famously lactose intolerant nation – are limited. In 2023 the EU sent to China just € 190 million worth of cheese. That figure pales in comparison with China’s € 20 billion of electric vehicle sales in Europe now to be hit with a up to 36.3% extra duty.  

This means that the eventual imposition of anti-subsidy duties on Gouda and Pecorino Romano is unlikely to sway member states when they are called on in November to agree definitive duties on Chinese cars.  

China’s announcement is above all political and symbolic, aimed at creating a bit of leverage over the EU but calibrated so as not to represent the opening salvo in a real trade war. 

Read the Full Commentary Here

08/22/2024 | John Clarke | Borderlex

Does the EU’s Exit From the Energy Charter Treaty Foreshadow the Demise of ISDS?

Worldwide support for investor-state dispute settlement (ISDS) — a legal mechanism that permits foreign investors to pursue binding, third-party arbitration against a country over actions that harm their investments — has been under attack from Western democracies since at least 1998, when opposition by the U.S., Canada, and France led to the termination of negotiations toward a Multilateral Agreement on Investment (MAI). However, for more than two decades following this step, the EU and U.S. continued to negotiate bilateral investment treaties (BITs) and free trade agreements (FTAs) with ISDS provisions, including the 2015 Trans-Pacific Partnership (TPP) between the U.S. and 11 other nations and the 2016 Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada. 

More recently, indications that new ISDS agreements may be coming to an end have proliferated, at least with the EU and U.S., as discussed in this report. But the most recent and, perhaps, clearest sign of ISDS losing its appeal for the largest capital exporting jurisdictions is the EU’s unanimous decision in April 2024, effective in May 2024, to withdraw from the 1994 50-plus member European Union Energy Charter Treaty (ECT). The fact that the ECT had been renegotiated in 2022 because of concerns about its inconsistency with government responses to climate change were apparently not decisive. For the EU, the ECT is essentially abandoned. The future of ISDS, even with substantial reforms, such as those being discussed by the seemingly endless United Nations Conference on Trade and Development’s (UNCTAD) Working Group III, remains uncertain, although many developing countries, such as Mexico, still see it as a valuable stimulus for foreign investment despite reservations.

The U.S. had concluded multiple FTAs and a few BITs as late as 2007. More recent agreements were the TPP and the United States-Mexico-Canada Agreement (USMCA). The U.S., under former President Obama, was among the principal supporters of the TPP in 2015 — an agreement that incorporated then-traditional ISDS provisions. However, the U.S. withdrew under the Trump administration in January 2017, and the TPP became the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The 2018 USMCA saw a radical reduction in the scope of investor protection, with ISDS eliminated between the U.S. and Canada entirely and circumscribed between the U.S. and Mexico, with the full range of enforceable protections limited to a handful of government concession agreements…

That being said, the investment law bar and young lawyers who wish to join should take note: ISDS will be a feature of the international legal and investment world for decades to come. ISDS will still be of importance even if the U.S. avoids new agreements and withdraws from existing ones — the latter being difficult and, in my view, very unlikely, as discussed below — and if the EU and its members avoid new commitments. Why? Because worldwide, there are a total of about 2,222 BITs in force and 388 investment provisions in FTAs. Although a few International Centre for Settlement of Investment Disputes (ICSID) member countries, such as Bolivia, Ecuador, and Venezuela, have withdrawn from the ICSID Convention and terminated some of their BITs, the vast majority of ICSID members remain party.

Read the Full Report Here

08/20/2024 | David A. Gantz | Rice University’s Baker Institute for Public Policy

Why We Need an OPEC for Critical Mineral Producing Nations

On Thursday, September 12, WITA will host a panel event at the WTO Public Forum in Geneva, Switzerland to explore how the WTO can help foster a circular economy for critical minerals. Find more information here and below.

The most important UN panel you’ve never heard of will agree on a set of principles that could make or break the low carbon transition this week.

At stake is the future ownership of the world’s critical raw mineral supply chains that the renewable energy revolution will need to break free of our fossil fuel dependency.

The UN’s panel on critical energy transition minerals aims to inject justice, environmental standards and human rights into the sector’s supply chains. To do so, it must intervene in the international trade, investment and tax systems.

At present, the rich world wants to ensure that it – and it alone – controls critical mineral supply chains. The US Inflation Reduction Act dished out tax advantages to electric vehicle manufacturers which source, process or recycle in the US or its free trade agreement (FTA)-partners. The EU has also set a goal of processing 40% of the critical minerals that it consumes within its borders by 2030. The UK is following a similar path. But resource-rich countries aspire to process and transform more of their minerals so that they can see some of the economic rewards.

Of the ten countries which dominate the ownership of minerals via companies domiciled within their borders, eight are among the world’s richest Top 20.

While China is a major source of minerals like gallium, graphite, magnesium and tungsten, other countries including Brazil (niobium), Congo (cobalt), India (barite), Indonesia (nickel), Peru (arsenic), Russia (palladium) and South Africa (platinum and Manganese) are also significant players, and rarely talked about.

Critical minerals offer developing countries like these a “critical opportunity,” as the UN chief Antonio Guterres put it, when announcing the panel in April. “But only if they are managed properly,” he cautioned. “The race to net zero cannot trample over the poor.”

If that happens, the poor will understandably resist – and we will all suffer. To avoid this, we need a World Trade Organisation-level waiver of trade disputes in the climate realm preventing states from being challenged over policy tools crucial to sustainable industrialisation.

Read the Full Blog Post Here

08/23/2024 | Ketakandriana Rafitoson & Nick Dearde | Publish What You Pay

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The post WITA’s Friday Focus on Trade – Aug 30, 2024 appeared first on WITA.

A rising tide of antitrade sentiment has dominated trade policy since the turn of the century. Long- standing trade principles such as national treatment and most- favored-nation status (MFN) are becoming secondary to national security and values-based policies related to climate and labor priorities. No longer is it considered a given that domestic policy goals should be implemented in the ways least restrictive to trade.

These policy shifts occur amid parallel and intensifying pressure points in the global trading system. Meanwhile, the unanimous consent required by the World Trade Organization (WTO) for all major decisions has left the organization paralyzed. Geopolitical tensions continue to rise as does discontent with China’s participation in the WTO, with downstream impacts on supply chains. The global pandemic and the transition away from carbon- based energy additionally challenge the global trade framework in different ways.

The question now is whether the WTO system and its members can create a pragmatic framework for cross-border economic cooperation—one in which countries can work toward domestic policy goals in the way least restrictive to trade. We believe the near-term answer involves a recommitment to core principles and the pursuit of plurilateral agreements. Plurilateral agreements involve side agreements among a subset of WTO members. They operate in parallel with the multilateral trade infrastructure. When designed properly, they can complement and expand growth-enhancing cross-border trade.

The two main core principles are (a) national treatment, which means countries treat imported goods no better and no worse than domestically produced goods, and (b) most favored nation or MFN, which means each country grants the same trade advantages to one nation as it does to all other nations. The goal should be to choose the least-trade-restrictive mechanisms to achieve domestic policy priorities.

Read the Full Research Summary Here

08/07/2024 | Christine McDaniel & Barbara Matthews | Mercatus Center

How ‘Economic Security’ is Re-shaping Presidential Power

The Biden administration’s recent decision to raise tariffs on Chinese goods ranging from electric vehicles and advanced batteries to medical equipment came as little surprise in an election year. The White House described the move as one that would create “good jobs in key sectors that are vital for America’s economic future and national security.” This latest development followed the Trump administration’s original imposition of tariffs on other products from China in an effort to stop Beijing’s theft of sensitive technologies and intellectual property. Now, several years on, it is clear that imposing tariffs was only one exercise of the executive branch’s foreign commercial power – and one of an increasing number of tools that the executive branch justifies by linking foreign commerce issues to U.S. security.

Indeed, officials from both the Trump and Biden administrations have invoked economic security as a reason for action across a wide range of policy issues. In addition to tariffs on goods from China and on steel and aluminum, take the proposed outbound investment screening mechanism, the Trump administration’s efforts to force a sale of TikTok, or the extensive new export controls, as obvious examples. The justifications reflect a broader conversation on security that is now pervasive in trade policy circles. Compare the U.S. Trade Representative’s Annual Report published in 2016 to the version published this March. The 2016 report mentioned security 25 times, frequently in the context of food security. The 2024 report mentioned security 129 times. And the 2024 Report added a section on “enhancing economic security,” just one example of the securitization of U.S. foreign affairs, especially in Washington’s relationship with Beijing.

In a forthcoming article, we argue that this linking of “foreign commerce” to “economic security” in U.S. policymaking has had the effect of dangerously, and often erroneously, intermingling authority that Congress has delegated to the executive branch with the president’s constitutional powers to oversee foreign affairs. The Constitution assigns plenary authority over taxes, tariffs, and commerce – including, explicitly, foreign commerce – to Congress. The Constitution assigns other kinds of foreign affairs powers, such as the role of commander-in-chief of the armed forces or the power to negotiate treaties, to the president. The executive branch’s authority over foreign commerce began as a statutory authority, but over time the executive, with some backing from the courts, has increasingly claimed that such authority has constitutional dimensions. Constitutional claims over the president’s non-commercial foreign affairs authority have begun to engulf understandings of Congress’s plenary authority over the regulation of commerce with foreign nations – from the perspective of both the executive branch as well as the courts.

Assertions of Executive Branch Power in Foreign Commerce

Officials from both the Biden and Trump administrations have advanced novel arguments before the courts asserting this point: foreign commerce is part of security, and therefore the president has his own constitutional foundations for action in the domain of commerce. In a case concerning the Trump administration’s tariffs on steel and aluminum, the government argued that “[t]he President’s coexistent constitutional foreign affairs and national security responsibilities compel the conclusion that Congress did not enact an unconstitutional statute.” In the context of a case about tariffs, this claim is extraordinary. The text of the Constitution expressly allocates the power to tax, as well as the power to regulate foreign commerce, to Congress exclusively. It makes no difference that the statute in question – Section 232 of the Trade Expansion Act of 1962 – invites the president to evaluate a threat to national security as a predicate to exercising purely delegated power to impose taxes. Such an exercise of delegated power does not open the door to his constitutional authority; rather, it draws on his expertise. 

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07/16/2024 | Kathleen Claussen & Timothy Meyer | Just Security

The IRA Two Years On: A Signpost of the New Economic Policy Consensus

Signed into law on August 16, 2022, the Inflation Reduction Act was a legislative Rorschach test: It looked like different things to different people. To some, it was a climate bill. To others, it was a health care bill. And to others still—in fact, to the member of Congress who was perhaps most instrumental in achieving its passage, Senator Joe Manchin of West Virginia—it was an energy and national security bill. The legacy of the IRA will surely be closely tied to these annotations, and indeed, its contribution to achieving domestic and global net-zero greenhouse gas emissions targets is monumental.

However, two years on it is becoming increasingly clear that the legacy of the IRA is tethered to a renewed pact between government and the US economy, with key implications for trade, technological competition with China, and foreign policy writ large.

Since the early 1980s, the prevailing dogma on both sides of the aisle regarding US economic policy has largely been one of skepticism about direct government intervention in the economy. Trade and domestic market liberalization have been features of Republican and Democratic rhetoric since at least the Reagan administration. Of course, US government spending did increase over this period, and Washington did often step in with, for example, countercyclical spending during economic downturns. Nonetheless, most US politicians took as axiomatic that the government should not be “picking winners and losers” in the economy. The IRA has ushered in a new era in which this reflexive aversion to economic intervention may be vanishing.

Industrial policy has risen from the gutter

The IRA’s subsidies and grants for low-carbon electricity generation and technology manufacturing, along with its capitalization of the US Department of Energy’s Loan Programs Office, represent a divergence from the once-dominant economic policy consensus. The IRA is among the most significant government investments in the US economy since President Franklin D. Roosevelt’s New Deal. In fact, it is rivaled only by primarily demand-side stimulus packages, such as the American Recovery and Reinvestment Act (ARRA) of 2009 and the CARES Act of 2020.

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08/15/2024 | William Tobin | Atlantic Council

Does EU’s Tariff Regime On Chinese Electric Vehicles Reflect Paradoxes In Its Environmental Sustainability Goals?

Following are excerpts from a report published by Eurasia Review:

The European Union has been established itself as an international leader in the field of environmental sustainability, showcasing a steadfast dedication to tackle the environmental protection climate change through a range of ambitious policies and programmes. The organization is dedicated to promoting electric vehicles (EVs) as a crucial solution in combating carbon emissions and the development of a greener future. However, the European Union’s tariff regime on electric vehicles from China has sparked a significant narratives and debates…

Paradoxes of EU’s Environmental Policy

The EU’s tariff regime on Chinese EVs brings attention to certain contradictions within its environmental protection policies. Although the tariffs have been implemented to protect European manufacturers from unfair competition resulting from Chinese subsidies, there is a potential conflict with the EU’s environmental protection goals. The imposition of tariffs on electric vehicles could potentially impede their widespread adoption and hinder the overall progress in reducing emissions.

This short-term protection of domestic industries could potentially hinder the long-term shift towards cleaner technologies. In addition, it is important to consider the broader impacts of making EVs more affordable, as this can greatly contribute to global climate efforts. The tariffs fail to adequately acknowledge the environmental consequences of EV production materials or take into account the wider advantages of higher EV adoption, which could undermine the EU’s overarching environmental sustainability goals.

Read the Full Analysis Here

08/20/2024 | Dr. Bawa Singh | Eurasia Review

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Meet Kate Wandsnider, a rising senior at the University of Nebraska-Lincoln majoring in Global Studies. Kate was this year’s recipient of the Steve Nelson Yeutter Institute International Trade Internship Award, which sends students to spend the summer interning at the Washington International Trade Association (WITA). Stay tuned for more information on the Husker Trade Talk Kate will host in the fall! Read more about Kate’s experience with WITA below.

Q&A with Kate Wandsnider

Tell us a little bit about yourself and your background.

I am a born and raised Nebraskan from Lincoln. I have always been interested in learning about and experiencing other cultures, so I chose to major in Global Studies, a highly interdisciplinary field that allows you to create a unique professional track. Later, I added two minors: Arabic Studies and Human Rights and Humanitarian Affairs. Last summer, I studied abroad in Amman, Jordan, where I worked on my Arabic language skills. This experience solidified my interest in working abroad in the future. I became interested in international trade when I learned about its role in global development. My internship this summer has shown me the many opportunities available through the trade community, and I am eager to explore those options.

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08/12/2024 | Clayton Yeutter Institute | University of Nebraska–Lincoln

The Use of Economic Statecraft to Achieve Geopolitical Ends

On Thursday, September 12, WITA will host a panel event at this year’s WTO Public Forum in Geneva, Switzerland. The panel will explore how the WTO can help foster a circular economy for critical minerals. Find more information here and below.

The circular economy ‒ reusing materials and reducing waste ‒ is a critical strategy for delivering a lower-emission, more sustainable future. It’s the goal of countless regulatory initiatives, not least the United Nations Plastic Treaty currently under negotiation, and has been adopted as a key part of the business vernacular. However, despite this rising tide of corporate commitments and regulatory targets, the global economy remains wedded to an extractive, rather than circular, model.

Businesses have been slow to fully embrace circularity for multiple reasons, not least economics. There is money to be made from circularity, but allocating margins fairly across fragmented value chains is difficult. As the biggest beasts in the value chain – with the greatest capital and capability ‒ there is a compelling responsibility on commodity-producing companies to take a lead. However, corporate targets today remain stubbornly focused on individual companies, rather than on measures that would enable the entire circular value chain to thrive.

Companies need to explore different ways of building relationships across industries for circularity to flourish. In this report, we focus on three key initiatives across different industries – electronics, plastics and biofuels ‒ where companies have come together in precisely this manner, pointing a way forward for other sectors too. Through joined-up thinking, a pathway to increased circularity remains open.

Stuck in a loop: barriers to progress

A circular value chain is only as strong as its weakest link. If one company has no incentive to participate, the whole value chain can break down. In established, commoditised markets (such as gasoline), value allocation is coordinated by the price signal. However, in nascent, pre-commoditised markets typical of circular value chains (such as biofuels), transparency is lacking, presenting commercial challenges to businesses trying to make progress on circularity… 

Read the Full White Paper Here

07/15/2024 | Guy Bailey & Husam Taha | Wood Mackenzie

The European Union’s Proposed Duties on Chinese Electric Vehicles and Their Implications

European Union countervailing duties (CVD) on certain types of electric vehicles (EVs) from China went into effect provisionally on 5 July. The duties are being imposed based on a European Commission finding that China’s EV subsidies represent potential injury to EU industry as it transitions away from the internal combustion engine. EU imports of EVs from China are surging, but still represent a small share of EU car sales. Most imports from China originate from joint ventures of EU and Chinese manufacturers, and from Tesla, which is the largest importer. 

In the meantime, China is starting its own investigation into some EU exports, such as cognac. The EU has initiated consultations with the government of China to resolve the dispute, as it must do under the World Trade Organisation Subsidies and Countervailing Measures Agreement. Under WTO rules, China cannot retaliate unless it challenges the EU measure and a dispute settlement panel rules in its favour.

The CVDs range from 17.4 percent to 37.6 percent of the import price, on top of the EU’s 10 percent tariff on imported vehicles. They represent a formidable barrier in an industry where average profit margins are typically in the range of 4 percent to 8 percent. The CVDs will affect all EVs imported from China regardless of whether the original equipment manufacturer (OEM) is Chinese, American or European. Here, we offer an economic and political (as opposed to legal) analysis of the CVDs.

Methodology behind the CVDs

The Commission methodology for identifying subsidies and countervailing them is well established. Reflecting the importance of the EV sector, the regulation implementing the CVDs is the result of a comprehensive investigation, encompassing extensive consultations with Chinese firms, EU firms, the Chinese government and Chinese trade associations. Identifying subsidisation in China’s opaque system is challenging, especially since, as the regulation documents repeatedly, the Chinese government and several of the Chinese entities covered were uncooperative. 

Read the Full Analysis Here

07/17/2024 | Uri Dadush & Conor McCaffrey | Bruegel

The Use of Economic Statecraft to Achieve Geopolitical Ends

With headlines dominated by geopolitical events, policymakers overlook the true threat to US success—the dollar as the world’s global reserve currency. As the anchor of the global economic order, America’s command over the world-reserve currency and dollar-denominated assets is unrivaled. The US dollar is the basis of international trade and investment, which gives America enormous global influence, promoting US commercial interests and universal principles like democratization and human rights.

American economic strength and dynamism allow the United States to extend its global influence through non-kinetic means, while also accruing additive benefits. The United States, despite its debt and political turmoil, remains attractive for foreign direct investment, immigration, and as a business partner. The United States has a well-earned reputation for a laissez-faire approach to private capital that has made it a global financial hub, sometimes to the chagrin of Congress as it seeks to ban some Chinese companies from listing in US markets.

In the current world order, capital moves across borders with few limitations. Steps taken to slow the flow of capital starve countries of investment and inflict costs on economic growth, employment, tourism, tech transfer, and global opportunities. The same would be true for the United States unless policymakers take economic statecraft seriously. The dollar provides America with a unique competitive advantage that the euro, yen, and yuan have yet to displace. That status is not a given though as domestic polarization (playing on fear) and financial and corporate interests (playing on greed) have the potential to erode USD status.

Policymakers are taking notice.

National Security Advisor Jake Sullivan’s April 27, 2023 speech provided a broad framework for economic statecraft as the avenue for renewal of America’s economic leadership. Unfortunately, it also led to concerns that poorly crafted or blunt-tool economic statecraft are likely to lead to bad policy, which ultimately serve to undermine the greenback and lead to further acceleration of de-dollarization. Concerns about de-dollarization in the near term are overblown, but that does not mean that those concerns shouldn’t be heeded. There are significant dollar shortages in African, South Asian, and South American emerging markets, leading them to trade in non-USD currencies.

Read the Full Analysis Here

08/14/2024 | Janine Stouse | Foreign Policy Research Institute

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The post WITA’s Friday Focus on Trade – Aug 16, 2024 appeared first on WITA.

On Wednesday, September 11, WITA will be hosting its first International Trade Reception at the Public Forum in Geneva. The reception will be held at the World Trade Organization headquarters. More information can be found here.

On Thursday, September 12, WITA will also host a panel event at this year’s WTO Public Forum in Geneva, Switzerland. The panel will explore how the WTO can help foster a circular economy for critical minerals. Find more information here and below.

The dispute mechanism and the appeal process are not fully functioning

The World Trade Organization’s (WTO) dispute settlement mechanism has not been fully functioning since December 2019. A viable alternative has emerged, but it will need more countries to sign on to help prevent cycles of tariffs and retaliation. 

The United States started blocking the appointment of new judges to the WTO Appellate Body in 2017. Once the Appellate Body fell below three members in December 2019 it could no longer hear new appeals. The United States has cited concerns regarding judicial activism and sovereignty as reasons for the block. With no functioning appeals process, decisions can be appealed without resolution, making it difficult for WTO members to resolve disputes. 

A temporary solution has emerged: arbitration and a speedy appeals process

Simple arbitration has always been an option. Article 25 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes allows WTO members to use arbitration if the parties agree to a set of rules. But the case record shows that most countries have preferred the full dispute and appeal process. In fact, before the Appellate Body collapsed, the arbitration option was only used once and that was for an EU copyright case against the US involving Irish country music.

In April 2020, once it became clear the Appellate Body was no longer functional, the European Union led an effort to set up an alternative system called the Multi-Party Interim Appeal-Arbitration Arrangement (MPIA). The agreement offers members access to an independent arbitration and appeal process for dispute settlement once the panel report is complete. So far 53 members have signed up, including Australia, Brazil, Canada, China, Japan, Mexico, and New Zealand, among others. The United States is noticeably absent.

Read the Full Blog Post Here

07/30/2024 | Christine McDaniel | Yeutter Institute

Using Trade to Tackle Climate Challenges

Annual temperatures are at the warmest levels since record keeping began, bringing urgency to government, business, and individual efforts to stem the climate crisis. At the same time, the transition away from fossil fuels and towards more sustainable and renewable sources of energy is upending economies, requiring transformations of manufacturing industries and investments in new industries such as batteries and other “green” technologies. Against these trends, policymakers are juggling their climate mitigation efforts while still encouraging current and future economic growth.

As the U.S. government advances its goals at home using a range of domestic economic tools, trade policy provides an avenue to expand decarbonization efforts globally. John Podesta, President Biden’s climate envoy, spoke at Columbia University earlier this year and acknowledged the fundamental nexus between trade and the environment, calling for the creation of a task force to look at how trade policies can contribute to solving urgent climate challenges. “The stakes couldn’t be higher,” Podesta said. “But I believe if we make the right choices, we can create and maintain millions of good-paying jobs in the clean energy economy of the future. We can mobilize billions in private investment in countries around the world. We can accelerate technological innovation and position nations to overcome the challenges of today and tomorrow. And we can do it while protecting our planet for ourselves and our children.”

Since 2020, the World Trade Organization (WTO) has also taken a more expansive view on the range of topics where trade could help address climate and environmental challenges. On July 4th, WTO Deputy Director General Paugam stated, ”…(W)e are at a crossroads in the multilateral system, with an opportunity to shape a global win-win approach for trade and the environment. We can combine green transition, green industrialization and trade cooperation. This is what “reglobalization” is about. And the time to act is now.”

The U.S.’s most ambitious environmental trade commitments are in the U.S.-Mexico Canada Agreement (USMCA), which allows countries to continue with domestic climate initiatives while encouraging cooperation on environmental goals and calling for a level playing field in these efforts. The work is ongoing, but separate and siloed from the other aspects of USMCA. Moving forward, there is an opportunity to incorporate climate as a core consideration in all aspects of future agreements, adding an additional priority to the existing goals of reducing barriers to U.S. exports, protecting U.S. interests competing abroad, and enhancing the rule of law.

Read the Full Paper Here

07/17/2024 | Penelope Naas | American Leadership Initiative

If Chinese Industrial Capacity is a Problem the US Has Better Measures to Deal With It

Overcapacity in China’s green industries is now said by the United States and others to be a major problem in international trade. Subsidy and dumping practices are well defined in the WTO rulebook, which spells out remedies to compensate aggrieved producers. But ‘overcapacity’ has never been defined by the World Trade Organization, nor have remedial measures ever been articulated to deal with it.

In one sense, overcapacity could be said to characterise Swiss exports of financial services, French exports of champagne and US exports of civil aircraft. Yet overcapacity has become a negative buzzword solely with respect to China. An old complaint is China’s huge steel industry which accounts for about half of world production and about a quarter of world exports. More recently critics have pinned the label on China’s green industries — electric vehicles, batteries and solar panels. Chinese policies are denounced for encouraging plant investment far ahead of domestic demand, leading to exports at bargain prices and discouraging industries abroad.

The US Tariff Act of 1890 and the Antidumping Act of 1916 launched countervailing duties (CVD) and antidumping duties (ADD) — both additional import duties that aim to provide relief to affected domestic industries — on their way to becoming fixtures of world trade law.

Why do critics add overcapacity to the basket of unfair trade practices when CVD and ADD remedies are readily available, widely accepted, and could in principle address the unfair component of Chinese exports? The main reason for this is that only with careful analysis can the extent of subsidisation or dumping be determined and corresponding penalty duties be justified.

By contrast, once the ‘overcapacity’ label is invoked, no calculation is needed to justify a penalty duty. Since Chinese subsidies are often opaque, this is convenient. As US practice has shown, under Section 301 of the Trade Act of 1974, a penalty duty of any magnitude can be imposed against unfair trade practices, and the target importer has no effective recourse to the dysfunctional WTO dispute system.

US trade remedies under Section 301 were invoked long before Chinese overcapacity became an issue. Section 301 tariffs against China respond both to opaque subsidies and technology theft. Legal engineering has made current declarations of overcapacity equally immune to challenge as a finding of national security threat. The saga of penalty duties against Chinese exports of solar panels and electric vehicles illustrates the new landscape of trade remedies.

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08/04/2024 | Gary Hufbauer | East Asia Forum

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The post WITA’s Friday Focus on Trade – Aug 9, 2024 appeared first on WITA.